Economic Competition Scrutinized

"One sign of a firm's power in a marketplace is its ability to charge prices above its own costs for producing the product, known as a markup. In 1980, markups averaged 21%, according to research by economists Jan de Loecker, Jan Eeckhout and Gabriel Unger. Over the past four decades, the average markup has risen to more than 54%.

Overall consumer-price inflation was largely subdued during this period, but the cost of producing consumer goods and services was even more subdued, leading to big gains in profits for firms and diminishing the gains to workers and consumers, the research showed.

With the rise of a few big companies, jobs also have become concentrated there. John Haltiwanger, a University of Maryland professor, finds that the share of U.S. jobs at young, small firms declined to 16% in 2018 from 26% in 1987. During the same period, the share of jobs in older, larger firms rose from 41% to more than half.

Mr. Haltiwanger's research shows that the U.S. economy became less dynamic during this period, with fewer new jobs created by startup firms, less job-hopping by workers seeking out new opportunities and slower worker productivity growth.

A wide range of industries shows large concentrations of dominant firms. In candy, two firms control 60% of U.S. sales, according to the Open Markets Institute, a research organization focused on combating monopoly power. In mobile-phone services, four firms control 98% of market share; in airlines, four firms control 76% of the market; in hearing aids, four firms control 84% of the market; in eyeglasses, three firms have a 61% share, according to Open Markets.

In an earlier era, the federal government and U.S. courts sought to stop large concentration in industries, in part to protect small businesses. In 1966, for example, the Supreme Court upheld a federal government action blocking the merger of two Los Angeles grocers, Von's Grocery Company and Shopping Bag Food Stores, that would have given the firms a combined 7.5% of local market share. Courts later began veering away from aggressive restrictions on concentration in industries as economists saw benefits, such as lower consumer prices, to firms having dominant footprints in markets." [1]

1. U.S. News: Economic Competition Scrutinized --- Biden sides with view that big players harm marketplace even as they keep prices low
Hilsenrath, Jon. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]12 July 2021: A.4.