Start with a simple fact: 17,000 jobs were lost when Spirit Airlines went under. Then, connect the dots: JetBlue offered to rescue Spirit, but former President Joe Biden’s Administration rejected the offer based on the belief that bigger companies are bad for workers and for consumers. Despite the evidence, much of Washington embraces this theory. And it’s wrong.
For years, government officials, academics, and journalists have repeated a simple story. Antitrust enforcement weakened beginning in the 1980s, mergers surged, industries consolidated, and competition declined. That story now underpins much of antitrust.
Former President Barack Obama embraced it. His Council of Economic Advisers warned of rising concentration and declining competition. Biden went further, declaring decades of evidence-based antitrust policy a failed “experiment” that allowed large firms to accumulate excessive power. His adviser Tim Wu explicitly called for turning the page on the consumer-welfare framework associated with the Chicago School.
Even business journalism has echoed the theme. Reporting in The Wall Street Journal and elsewhere has frequently treated the mantra of rising concentration as established fact—sometimes suggesting that mergers, even small ones, are quietly eroding competition.
But there’s a problem: The empirical foundation for this narrative is deeply flawed.
One flaw is the use of the wrong data. Widely cited studies purported to demonstrate rising concentration often rely on census or other data that was never designed to measure competition. These studies group firms by production categories. But competition occurs in markets, not categories.
That distinction is not simply academic. As economist Carl Shapiro points out, under census definitions, all metal cans are grouped together, regardless of use. Yet paint cans and soda cans do not compete with one another. Meanwhile, glass and plastic soda bottles are placed in entirely different industries, even though they are direct substitutes. The result is a measure of “concentration” that often bears little relation to reality. Resulting studies treat shifts in firm size as evidence of market power, even when those shifts reflect efficiency gains and productivity growth.
Once these problems are corrected, the picture changes dramatically.
New research using data structured around actual markets—not broad categories—finds that concentration is not rising across the economy. If anything, it has been declining. Median concentration, measured by an antitrust favorite, the Herfindahl-Hirschman Index, fell significantly from the mid-1990s through Trump’s first term. Even more striking, concentration declined most in the areas that were previously the most concentrated.
The share of industries considered to be the most concentrated dropped substantially over that period. Local and national trends move together, suggesting that these results are not driven by geographic quirks. And contrary to popular belief, mergers play only a small role, if any, in these changes. Entry, exit and shifts in market shares matter far more.
The evidence points not to an economy dominated by entrenched monopolies, but to one shaped by competition, innovation, and the rise of more efficient firms.
The second pillar of the conventional narrative—that antitrust enforcement has grown lax—is equally unsound.
A recent study examining nearly 85,000 mergers reported under the Hart-Scott-Rodino Antitrust Improvement Act finds that enforcement has, if anything, become more stringent over time. Courts have grown more receptive to government challenges, and agencies have become more willing to litigate. The legal standards governing mergers have evolved in a direction that favors enforcement, not permissiveness.
In other words, both halves of the prevailing story—that concentration is rising and enforcement is weakening—are not just on shaky ground; they are in quicksand. As are jobs.
This matters. In populist circles, antitrust policy is being directed on the assumption that markets are failing on a broad scale. That diagnosis is wrong, and the supposed cure is now the cause of the disease: Creating competitive businesses is discouraged and even penalized. And people lose their jobs through no fault of their own.
The lesson is not that businesses are perfect or that antitrust enforcement is unnecessary. It is that regulation should be guided by careful analysis, not by narratives that collapse when put to the test. Before filing their cases against companies, antitrust enforcers should make sure they understand the economy we actually have—not the one they imagine.
