Is corporate concentration strangling the U.S. economy, stifling innovation, and harming consumers? A closer look at the data suggests otherwise: competition, it turns out, is thriving in many sectors.
Over recent years, politicians and regulators have embraced a narrative of declining competition, prompting the Biden administration to pursue aggressive antitrust enforcement. The Federal Trade Commission (FTC) and the Department of Justice (DOJ) have launched high-profile cases against tech giants like Google, Apple, and Amazon. But new research from Stanford Graduate School of Business challenges this “competition-in-decline” story.
Outperforming the market
The study instead supports a “competition-in-action” view, arguing that most U.S. firms succeed by outperforming rivals, not by engaging in anticompetitive practices. This nuance is often missed in broad economic studies, which lack the detail needed to distinguish between harmful monopolies and firms thriving through efficiency and innovation.
Many policymakers rely heavily on “at-scale” studies, which analyze broad market categories—like the entire transportation sector—rather than focusing on specific industries such as cars or bicycles. These studies, while useful in some contexts, oversimplify complex markets and rely on indirect estimates, such as markup calculations based on incomplete cost data.
Such limitations obscure the reasons behind market concentration. A rise in revenue ratios, for example, could result from firms exploiting monopolistic dominance—or from efficient companies expanding because they offer better products at lower costs. Without granular data, it’s hard to tell.
Overstating the case
The researchers argue that much of the evidence for declining competition is overstated. Take rising corporate profits: while often cited as proof of monopolistic pricing, much of this growth stems from foreign sales, not domestic price hikes. Apple, for instance, isn’t raising iPhone prices in the U.S. to exploit market power; it’s selling more iPhones globally.
Calls for tougher merger enforcement have grown louder, with critics pointing to deals like Facebook’s 2012 acquisition of Instagram as examples of regulatory failure. Yet even here, the evidence is murky. Retrospective analyses struggle to separate the effects of mergers from broader industry trends, particularly in fast-evolving sectors like tech.
The solution, the researchers suggest, is not sweeping antitrust reforms but more targeted studies that zero in on specific markets. Only by identifying where and why competition is faltering can policymakers craft effective interventions.
For now, the economic data offers a less bleak picture than many believe. Competition, while imperfect, remains a powerful force in the U.S. economy. The challenge is to separate genuine concerns from misplaced fears—and to act where the evidence is clear.
