Competition, Concentration, and California

Sean Heather
Senior Vice President, International Regulatory Affairs & Antitrust, U.S. Chamber of Commerce

Published

October 28, 2024

A new study should reassure California’s policymakers about the state of competition in the Golden State. In Antitrust and Industrial Concentration in California: A Misleading and Unworkable Benchmark, economists examine and ultimately debunk the progressive narrative that California’s economy, as well as the overall U.S. economy, suffers from overconcentration. The study’s results strongly suggest that California should maintain its existing antitrust regime.

In 2022, California’s legislature directed the California Law Revision Commission (CLRC) to study the state’s antitrust laws and to evaluate proposals for change. The legislature’s concern stemmed from progressive advocates who suggested that the U.S. suffers from overconcentration.

As the paper explains, the data debunks the overconcentration narrative. Based on the latest official data from the U.S. Census Bureau, there is no general national trend towards excessive concentration -- to the contrary, overall concentration levels are on par with those from the early 2000s. Moreover, there is no reason to believe that concentration is rising in California; census data on concentration is not available at the state level and there is no systematic empirical research on state-level trends in industrial concentration.

In any event, industrial concentration is a misleading and unworkable benchmark of competition levels or monopoly power. As the authors discuss, industries are not economic markets, which must be defined in terms of consumer substitution patterns to assess competitive conditions. Accordingly, industrial concentration trends should play no role in guiding antitrust policy in California, any other state, or the United States.

This economic analysis reinforces the central message of the U.S. Chamber’s submission to the CLRC, namely, that the evidence belies any need for California to revise its antitrust laws in significant ways. As we explain, a state should revise its antitrust laws only if the evidence shows that the marketplace is producing poor results for consumers and that existing laws and enforcement tools cannot resolve those problems.

None of these conditions exist in California. The evidence shows that the U.S. economy is flush with competition, but to the extent that any competitive problems may exist, California’s Attorney General and private citizens have multiple avenues to seek appropriate redress, both through California’s existing state laws and through their ability to bring suit under federal law. Significant legal changes, however, could harm California’s consumers and businesses by raising costs, reducing the availability of goods and services, and decreasing the incentive of companies to invest in California.