Corporate Concentration, Mergers, and Antitrust Enforcement in the Current Political Climate
Attacking the vigor and effectiveness of antitrust enforcement has become increasingly popular political subject. Just last week, Senator Cory Booker released a letter to the FTC and DOJ urging them to consider the interests of workers as they evaluate the potential anticompetitive effects of a merger. In the letter, Booker warned about growth of employer “monopsony” power—in which one or more employers become such dominant players in a region or sector that they have the power to limit worker mobility and depress wages. In addition, Senator Amy Klobuchar recently introduced legislation designed to make it easier for the antitrust agencies to challenge mergers as anticompetitive. Senator Klobuchar has also proposed legislation that would require companies to pay higher fees when filing for antitrust review. And Senator Elizabeth Warren has raised significant concerns about increasing concentration in many industries and even delayed confirmation of an otherwise noncontroversial nominee to head the DOJ’s Antitrust Division to draw attention to these concerns.
A significant part of what is driving this recent interest is the release of recent research concerning growing concentration in many industries. The Economist, for instance, published a chart illustrating the “creep of consolidation across America’s corporate landscape.” The chart shows that many U.S. industries became more concentrated since 1997.
A prominent antitrust economist, Carl Shapiro of the University of California, Berkeley, recently took a closer look at the data on which the recent expressions of concerns about antitrust enforcement are based. Although he shares concerns about rising corporate political power, Professor Shapiro is less concerned about the degree of economic power of firms in supposedly concentrating industries and remains largely confident that existing antitrust laws and antitrust enforcers can ensure that increases in market concentration do not lead to higher prices or other harm to consumers. Shapiro posits that much of what is written on the topic assumes that an increase in concentration indicates a decline in competition. However, he suggests, consider that an increase in concentration actually reflects the forces of competition at work—that firms gaining market share are relying on economies of scale and providing better value to consumers. After assessing potential policy responses to the consolidation issue, Shapiro expresses hope that the increased attention to antitrust issues will bring a continuation of strong antitrust enforcement and increased vigilance in preventing dominant firms with durable market power from engaging in business practices that exclude actual and potential competitors.
While it is not clear at this time what the political solution will be to rising corporate concentration in many industries, if any is even necessary at all, it is clear that these issues are not going away as a subject of political debate. And it is worth considering all of the facts before attempting to fix a system that may not even be broken.