Antitrust Enforcement May Not Help Small Firms

July 21, 2008

In a study by the Office of Advocacy of the U.S. Small Business Administration recently released, it was found that federal antitrust enforcement has little impact on small firms. The study observed two industries—retail groceries and timber—which have incurred significant Federal Trade Commission (FTC) enforcement activity in recent years. The study found that in cases where the FTC required divestiture to offset industry concentration, the small firms in the retail grocery market did not benefit.

In their report for the Office of Advocacy, “Analyzing the Impact of Antitrust Laws and Enforcement on Small Business,” Innovation & Information Consultants concluded that, in many markets investigated, small retail groceries declined in both number and market share, regardless of whether there was FTC antitrust enforcement activity. Furthermore, the entry of mass merchandisers and efficiency of large supermarkets contributed more to the closure of small groceries than increased market concentration due to mergers.

Monopolistic behaviors contributed more to the decrease of small timber firms in the Pacific Northwest than they did to the grocery industry, however other factors were also cited as causing the decrease in small firms for the timber industry.

Chief Economist for the Office of Advocacy, Dr. Chad Moutray said, “Federal antitrust policy has always centered on protecting competition as a whole, and not small competitors” he went on to say, “As the report’s case studies make clear, vigorous FTC enforcement of antitrust legislation may not necessarily be helpful for small competitors in affected geographic areas.”

To view the full report, please click here.