The Control of Monopoly and Restrictive Practices

The previous chapter has shown how technical and other economies of scale favour large enterprises in a number of industries; and where the size of the market is given or cannot expand proportionately, this implies concentration of output amongst a few firms. If that sort of situation prevails, it frequently gives rise to near monopoly with price leadership, where one firm practically controls the market; or it may give rise to the existence of oligopoly, where a few sellers are in a position to determine price or output. During the severe slump of the 1930s, when the unemployment rate was high and there was much excess capacity, firms would amalgamate and merge with the object of closing down at least part of the excess capacity. This process had the result of increasing the degree of concentration of output in several industries into the hands of a smaller number of producers, and led in turn to an organised decrease in competition. While this applied to most industries, it did not apply to all. Where economies of scale are not overriding, concentration would be less. Overall, however, it has been found that between 1935 and 1951 an increase in principal product concentration occurred in more trades than did a decrease. (1) It is also probable that the period saw a decrease in the amount of competition in the economy as a whole, but more especially in manufacturing industry.