Document Type

Presentation

Publication Date

March 2017

Abstract

Market concentration measures the extent to which market shares are concentrated between a small number of firms. It is often taken as a proxy for the intensity of competition. Indeed, in recent years changes in concentration have increasingly been used to argue that the intensity of competition is falling, that the growth of large firms with high market shares is driving up profits, damaging innovation and productivity, and increasing inequality. Some have argued that the competition rules need to be rewritten and a crackdown by overly antitrust agencies is required. The simplicity of this framing has found supporters across the political spectrum. But does it survive scrutiny? Has concentration increased in OECD countries? How is concentration measured? Does fewer competitors necessarily mean less intense competition? What has the impact of any change in concentration been? What might be driving these changes? and what (if anything) should competition agencies do about it?In June 2018, the OECD heard from a range of experts during a discussion that explored whether fewer competitors necessarily means less competition. _______________________________The U.S. economy has a “market power” problem, notwithstanding our strong and extensive antitrust institutions. The surprising conjunction of the exercise of market power with well established antitrust norms, precedents, and enforcement institutions is the central paradox of U.S. competition policy today. As this policy brief explains, the harms from the exercise of firms’ market power may extend beyond individual markets affected to include slower overall economic growth and increased economic inequality. The implications for future economic productivity and welfare are troubling, but before detailing these consequences, it is necessary to understand why market power is a major issue despite well-established antitrust enforcement institutions and legal precedents.

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