In August 2022, the California legislature enacted ACR 95, a bill directing the California Law Revision Commission (CLRC) to study “new prescribed topics relating to antitrust law and its enforcement.” Based on this mandate, the CLRC identified seven topics for study and appointed panels to submit reports on each topic. The instructions provided to the panels ask each group to “[d]escribe any deficiencies in the [current] law that have been identified” and “[d]escribe possible reforms that have been identified.” Thus, it is widely anticipated that policymakers in California are evaluating making substantive changes to state antitrust law and that these reports will inform the policies that are proposed and, potentially, enacted.

Although the CLRC specifically charged the panel studying concentration to prepare “an empirically-based description of the degree and effect of business concentration in California,” the paper produced by the panel, Concentration and Competition in California: A Focus on Critical Sectors and Labor Markets (the CLRC Concentration Report), did not provide an empirical analysis of trends in concentration in California or the United States. Furthermore, the report also failed to provide background on the use and interpretation of industrial concentration data as a benchmark to guide antitrust policy.

Therefore, NERA’s paper attempts to fill the gaps left by the CLRC Concentration Report. Specifically, the authors evaluate three crucial questions regarding industrial concentration:

1. Does the evidence suggest concentration in the US has risen to “excessive” or “harmful” levels?
2. Is industrial concentration a useful benchmark of monopoly power?
3. Is it empirically feasible to study trends in industrial concentration in California?

The authors show the answer to each question is an unambiguous no. Thus, they conclude that trends in industrial concentration should play no role in guiding antitrust policy in California, any other state, or the United States and that basing policy decisions on unfounded claims of increasing and excessive concentration has the potential to do serious harm to the California and US economies.