Why concentration worries people

Adam Smith, the most famous defender of free markets, did not trust businessmen to stay competitive on their own. In 1776 he wrote: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." In other words, their meetings tend to end in schemes to raise prices. A firm that faces no rivals can charge more, produce less and innovate slowly, because customers have nowhere else to go.

There is also a political worry. A company that dominates a nation's railways, oil or banking has power over legislators, towns and workers that no private citizen holds. During the American debate of 1890, Senator John Sherman put it in republican terms: "If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life."

The American laws

The law that bears Sherman's name passed in 1890. The Sherman Act bans restraints of trade and monopolization: agreements among competitors to fix prices or divide markets, and attempts by a single firm to seize or keep a monopoly by unfair means. In 1904, in the Northern Securities case, the Supreme Court dissolved a railroad holding company formed by J. P. Morgan, James J. Hill and their allies to control rival lines.

In 1914 Congress added the Clayton Act and created the Federal Trade Commission. The Clayton Act targets mergers that may substantially lessen competition, so regulators can stop a monopoly before it forms rather than only after. That same year the lawyer Louis Brandeis, soon to join the Supreme Court, published Other People's Money, with a chapter called "A Curse of Bigness." For Brandeis, great size itself threatened liberty and democracy, not just prices.

The consumer welfare turn

By the 1970s many economists thought antitrust had become muddled, sometimes protecting inefficient small firms from better rivals. In 1978 the legal scholar Robert Bork argued in an influential book that antitrust should pursue one goal: consumer welfare, judged mainly by prices and output. A firm that grew big by being efficient helped consumers and should be left alone. Courts and agencies largely adopted this approach from the 1980s on. Supporters credit it with making antitrust predictable and grounded in evidence. Critics say it let mergers through that slowly concentrated industry after industry.

Breaking up and holding back

Two famous cases show what enforcement can and cannot do. For most of the twentieth century AT&T ran nearly the whole American telephone system. After a government lawsuit, it agreed to a breakup that took effect in 1984, splitting off seven regional phone companies. Long-distance prices fell and new equipment makers flourished, though over the next two decades many of the pieces merged back together.

In 1998 the government sued Microsoft, which controlled the market for personal computer operating systems, for tactics used to crush the Netscape web browser. A trial judge ordered the company split in two. In 2001 the appeals court upheld the monopoly finding but reversed the breakup, and the case ended in a settlement with conduct rules. Many observers believe the long case made Microsoft more cautious just as new rivals such as Google were growing.

The new debate

In 2017 a law student named Lina Khan published an article arguing that Bork's framework could not see the danger of companies like Amazon. Such firms can keep prices low for years while building control over the market itself, collecting data on rivals who depend on their platforms. Her point was that a focus on prices can miss growing market power. This revival of Brandeis's concerns, often called the neo-Brandeisian movement, shaped American enforcement in the early 2020s, when Khan led the Federal Trade Commission. Critics reply that it risks punishing success, gives regulators vague powers and could make products worse or more expensive. Europe, meanwhile, has long had rules against abuse of a dominant position, and in 2024 its highest court upheld a fine of 2.42 billion euros against Google for favoring its own shopping service in search results.

Worked example

The only two hospitals in a city of 300,000 people propose to merge. They say combining will save money on equipment and administration, let them invest in a new cancer center and improve care through shared records. Regulators must decide whether to challenge the deal.

A Bork-style analysis asks about prices and output. Studies of hospital mergers in the United States have often found that prices rise afterward, especially when the merging hospitals were close rivals. If insurers and patients would pay more and the savings are speculative, the deal fails the consumer welfare test, and regulators would sue under the Clayton Act. If the savings are real and passed on, it might pass. A Brandeisian analysis adds further questions. A single hospital employer can hold down nurses' wages, since they have nowhere else to work locally. Both approaches might reach the same answer here. They differ in which harms count and how much proof the hospitals must offer that bigness will serve the public.