U.S. Economy is Competitive, Innovative and Dynamic: 10 Reasons the Data Does Not Support Calls to Rewrite Antitrust Laws
For more than 40 years, the United States has enjoyed broad bipartisan support for market-based competition and antitrust enforcement guided by the consumer welfare standard and sound economic analysis. Beginning during the Carter and Reagan administrations, the U.S. adopted a light touch approach to the market that embraced private-sector competition over a government-knows-best approach to picking winners and losers in our economy.
The result? The modern American economy is defined by vigorous competition, innovation, and dynamism that we see on display across the country. And globally, the U.S. is known for cultivating a society that supports and encourages entrepreneurship, which encourages innovation and, in turn, leads to greater economic growth.
However, the administration and some in Congress would have you believe that our economy is stagnant, over-concentrated, and anticompetitive. They contort the facts to push a social-economic vision, through bills like S. 2992, the "American Innovation and Choice Online Act," and S. 2710, the "Open App Markets Act," that place government at the center of deciding market outcomes.
However, the economic facts do not support these claims nor the need for rewriting America's antitrust laws. Here are 10 reasons why.
1- Competition is Vibrant, Concentration is Declining
U.S. industrial concentration has been declining since 2007. Average concentration in the U.S. economy declined by approximately two percent from 2007 to 2017 (latest available Economic Census Data).
2- Robust M&A Activity is an Economic Strength Not a Weakness
In any given year, thousands of mergers occur, strengthening our economy, boosting global competitiveness, improving products and services, and fueling efficiencies that benefit consumers. In 2021, the U.S. was the global leader in mergers and acquisitions, accounting for nearly half of the $5.8 trillion in deals globally. Economies with robust M&A activity are vibrant; economies with little activity are static. It's that simple.
3- Less Regulation has Led to Lower Prices
Telecom: After the government stopped pricing long-distance calls, competition grew and rates plummeted. Before that, calls were priced in minutes at very costly rates.
Trucking: Trucking deregulation resulted in increased competition and lower rates, benefiting consumers and creating the ability to purchase almost anything and have it delivered directly to their doorstep.
Airlines: Beginning in 1978, airline deregulation and mergers created efficiency that brought air travel to the broader public with the cost of travel steadily falling in inflation-adjusted dollars.
4- Average Tenure on S&P 500 Declining
The average length of time businesses spend on the S&P 500 has decreased by more than 40% since 1970 (from around 35 years then to around 20 years today). Large businesses have always emerged, but companies typically cycle in and out—a sure sign of dynamism in our economy.
5- Churn at the Top
Among the 10 largest companies by market capitalization in 2020, only one was on the top 10 list in 2000 and only four were on the list in 2010. And today’s #1 company, Apple, wasn’t even in the top 10 just 20 years ago.
6- American Companies Lead the World
Thanks to our free enterprise system and current approach to antitrust, big is not always bad. American companies compete globally, making the American economy more competitive. In 2020, American companies held 7 of the top 10 spots in terms of market capitalization. American companies lead the world because they have the freedom to invest, innovate, scale, and successfully compete.
7- America's Entrepreneurial Spirit Remains Strong
The U.S. had a record number of new business starts in the last two years with 5.4 million new business applications filed in 2021, surpassing the record set in 2020 of 4.4 million. Additionally, 8% of people who were employed by someone else pre-pandemic have since started their own business.
8- U.S. Drives Global Innovations
The U.S. is a global leader in patent applications. This growth has been supported by policy implementation and a framework developed to protect intellectual property (IP). Ownership of patents is widely seen as an important sign of a country’s economic strength and industrial know-how.
9- U.S. Companies Make Huge Investments in R&D
The U.S. has a rich history of scientific innovation and leadership, powered by investments in research and development. Successful innovation requires a legal framework that rewards risk-taking with exclusive rights.
10- U.S. Among World’s Most Innovative Economies
According to the Global Innovation Index (GII) — a global innovation ranking of 132 economies relying on 81 different indicators—the U.S. has the third most innovative economy, behind only Switzerland and Sweden.