Just 4 Percent of US Industries Are Highly Concentrated, ITIF Finds in Analysis of New Census Data, Contradicting Antitrust Alarmists

WASHINGTON—Many antitrust scholars, pundits, and policymakers have sounded alarms in recent years, claiming that market concentration has been rising across the U.S. economy to the detriment of competition. These claims have served as a pretext for a push to radically restructuring U.S. antitrust policies. But the latest Census data on industry concentration paints a very different picture, according to a new report from the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy. In fact, just 4 percent of U.S. industries are highly concentrated—and 45 percent have become less concentrated since 2002.

“It has become an article of faith that market concentration has increased to problematic levels, such that we need wholesale changes in antitrust policy to limit mergers and break up big companies. The latest Census data puts the lie to that argument,” said ITIF President Robert D. Atkinson, who co-authored the report. “Some industries have seen increased concentration in recent years, but most of those had low concentration to start with—and the bigger story is that the share of industries with low concentration has risen by about 25 percent. So, the antimonopoly doomsayers don’t have much evidence to stand on.”

ITIF examined C4 industry concentration ratios—which represent the share of sales that the top four firms capture in an industry—using granular data from the newly released edition of the Census Bureau’s quinquennial economic census, which covers the period through 2017.

Analyzing the data at the 6-digit level of industry classifications in the North American Industry Classification System (NAICS), ITIF found:

• Just 35 of 851 industries (4 percent) were highly concentrated, defined as having a C4 ratio greater than 80 percent.
• In 2017, 80 percent of U.S. business output was from industries with low levels of concentration, up from 62 percent in 2002.
• Industry concentration increased in 55 percent of industries between 2002 and 2017 and decreased in 45 percent.
• Overall, the average C4 ratio increased by just 1 percentage point between 2002 and 2017—from 34.3 percent to 35.3 percent—while the average C8 ratio increased even less, from 44.1 percent to 44.7 percent.
• There was a slight negative correlation between the C4 level in 2002 and the percentage-point change in C4 between 2002 and 2017.
• Among the industries with increases in concentration, only one-third increased by more than 10 percentage points.
• Of the 20 industries showing the greatest increase in C4 ratio from 2002 to 2017, only 30 percent had C4 ratios above 80 percent in 2017.
• Of the 115 industries with a C4 ratio of 60 percent or more in 2002, the majority were less concentrated by 2012. The average C4 declined 4 percentage points.
• For every advanced technology industry with a C4 ratio over 80 percent, there were 10 with a C4 ratio below 50 percent.
• Producer prices rose less in industries with higher levels of concentration than prices rose in the rest of the economy from 2002 to 2017.

“It is safe to conclude that virtually all sectors of the U.S. economy have high levels of competition, which is driving more investments in R&D and innovation, and producing wide varieties of high-quality goods and services for consumers,” said Filipe Lage de Sousa, a senior economic policy analyst at ITIF, who co-authored the report. “It is unlikely that this data will convince neo-Brandeisian, anti-corporate advocates to modify their Cassandra-like warnings of the monopolization of the U.S. economy. But hopefully it will provide a helpful contribution to the debate over concentration for pragmatic individuals who are guided by facts.”

Read the report.