The United States has a Market Concentration Problem

By Adil Abdela, Marshall Steinbaum |

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Since the 1970s, America’s antitrust policy regime has been weakening and market power has been on the rise. High market concentration—in which few firms compete in a given market—is one indicator of market power. From 1985 to 2017, the number of mergers completed annually rose from 2,308 to 15,361 (IMAA 2017).

Recently, policymakers, academics, and journalists have questioned whether the ongoing merger wave, and lax antitrust enforcement more generally, is indeed contributing to rising concentration, and in turn, whether concentration really portends a market power crisis in the economy. In this issue brief, we review the estimates of market concentration that have been conducted in a number of industries since 2000 as part of merger retrospectives and other empirical investigations. The result of that survey is clear: Market concentration in the U.S. economy is high, according to the thresholds adopted by the antitrust agencies themselves in the Horizontal Merger Guidelines.

Given the sparsity of studies that document market concentration in a given sector and in antitrust markets within that sector, there is indeed insufficient evidence to conclude that concentration in antitrust markets is rising. But the antitrust enforcement agencies themselves are in the best position to investigate that question, and so we hope they will do so—rather than publicly criticize outside attempts to shed light on the issue. The start of any policy to rectify the economy’s market power problem must be a recognition by antitrust enforcers that it exists.

View our previous issue brief on market concentration here.

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Adil Abdela is a Research Associate at the Roosevelt Institute, where he researches market power and financialization. He assists Marshall Steinbaum, Lenore Palladino, and Mike Konczal in their research of financial reform, antitrust and competition policy, and the labor market. Prior to working at the Roosevelt Institute, he interned at the Department of the Treasury for the Office of Financial Stability. He earned his B.A in Economics at the University of Maryland, and is currently obtaining his M.P.S in Applied Economics there.

Marshall Steinbaum is a Fellow and Research Director at the Roosevelt Institute, where he researches market power and inequality. He works on tax policy, antitrust and competition policy, and the labor market, in particular declining entrepreneurship and labor mobility as well as credentialization and its result: the student debt crisis. He is a co-editor of After Piketty: The Agenda for Economics and Inequality (Harvard University Press 2017), and his work has appeared in Democracy, Boston Review, New Republic, American Prospect, Industrial and Labor Relations Review, and ProMarket. He has a Ph.D. in economics from the University of Chicago.