The Council of Economic Advisors, a White House agency charged with advising the president on economic policy, recently issued a report, Benefits of Competition and Indicators of Market Power, addressing the state of competition in the United States economy. The report expresses concern that competition is being eroded in many industries across the U.S. economy, and recommends reversing that trend through government action, including increased enforcement action by the Department of Justice and Federal Trade Commission.

The report also identifies several emerging issues the Council believes may require antitrust enforcement or other governmental action to address competitive concerns.

Economic Data Showing Increasing Market Concentration

The Council cited three economic trends it believes threaten competition across the U.S. economy: increasing industry concentration, increased return on investment capital for top firms, and decreased market dynamism.

Increasing Industry Concentration. The Council cites Census Bureau data from 1997 and 2012 to support its claim that several key industries have increasingly consolidated over the past 20 years. In particular, the report relied on data showing, for the majority of industries measured, increased shares of overall revenue earned by the 50 largest firms in each sector:


Industry Revenue Earned by 50 Largest Firms, 2012
(Billions $)
Revenue Share Earned by 50 Largest Firms, 2012


Percentage Change, 1997-2012
Transportation and Warehousing 307.9 42.1 11.4
Retail Trade 1,555.8 36.9 11.2
Finance and Insurance 1,762.7 48.5 9.9
Wholesale Trade 2,183.1 27.6 7.3
Real Estate Rental and Leasing 121.6 24.9 5.4
Utilities 367.7 69.1 4.6
Educational Services 12.1 22.7 3.1
Professional, Scientific, and Technical Services 278.2 18.8 2.6
Administrative/Support 159.2 23.7 1.6
Accommodation and Food Services 149.8 21.2 0.1
Other Services, Nonpublic Admin 46.7 10.9 -1.9
Arts, Entertainment, and Recreation 39.5 19.6 -2.2
Health Care and Assistance 350.2 17.2 -1.6


The Census Bureau’s data comports with other governmental and academic studies finding increasing concentration across broad industries in the U.S. economy.

Of course, increased revenue earned by the top 50 firms in any industry does not mean any one firm possesses, or may acquire, market power for any particular product or service. Indeed, the Council concedes that “an increase in revenue at the national level is neither a necessary or sufficient condition to indicate an increase in market power.” Nevertheless, the Council views increased concentration as potentially injurious to competition in those markets.

Increased Return on Invested Capital. The Council’s report also found that “[r]eturns on invested capital for publicly traded U.S. nonfinancial firms have also become increasingly concentrated within a smaller segment of the market.” Since 2000, the top decile of firms earned increasingly large returns on invested capital, going from approximately 40 percent in 2000 to over 100 percent in the past few years. Thus, the most successful firms earn a return on investment almost five times the median return, up from approximately double the median approximately 25 years ago.

According to the report, excessive returns on investment “may reflect economic rents, which are returns to the factors of production in excess of what would be necessary to keep them in production.” Those rents “can divert resources from consumers, distort investment and employment decisions, and encourage firms to engage in wasteful rent-seeking activities.” Although the Council recommended no specific action to reduce returns on investment, it found such returns potentially harmful to competition.

Decreased Market Dynamism. Finally, the report finds that industries are increasingly less dynamic on two fronts: lower market entry and exit rates, and lower labor mobility. With regard to market entry and exit, market exit has remained steady throughout the overall economy since 1977, but firm entry slowly declined over that same period. Similarly, labor movement has declined steadily since the 1970s. Decreased competition among firms for labor can lead to collusion or artificially low wages.

The Council concludes that “[t]he fact that both business and labor market dynamism have been in decline since the 1970s could suggest that competition may be on the wane as well.”

Emerging Areas of Concern

The Council also identifies four specific areas it believes may in the future threaten competition, and recommends further study and potential regulatory action.

Big Data. Firms routinely collect and trade information on customers, such as Internet browsing history and purchases, which allows firms to tailor their prices and product offerings to customers. The Council’s report posits that big data poses a potential threat to competition because it may be a critical resource for new market entrants.

Price Transparency. The Council also suggests research or governmental action to increase price transparency in both online and traditional markets. According to the report, increased price transparency impedes firms’ ability to collude with one another.

Common Ownership. Large institutional investors increasingly own multiple firms in the same industry. The Council states those institutional investors “implicitly encourage firms they own not to compete with each other, thereby raising profits,” particularly in industries controlled by oligopolies.

Supply Chain Consolidation. Finally, the Council warns that increased consolidation at different levels of the supply chain threatens competition in an industry. By consolidating one level of the supply chain, the firm or firms can extract supracompetitive profits through increased bargaining power over upstream suppliers or downstream buyers.


The Council’s report does not identify any particular firm or industry that must or should be targeted for antitrust enforcement or other regulatory action. But the report clearly favors increased governmental involvement, including antitrust enforcement by the DOJ and FTC, to increase competition in the overall economy. If the president heeds the report, firms should expect antitrust enforcement actions, as well as other regulatory action intended to increase competition, to continue or increase.