Analyzing the Impact of Antitrust Laws and Enforcement 

on Small Business

Innovation & Information Consultants, Inc, Concord, MA 01742 

2008. [43] pages. Under contract SBAHQ-06-M-0476

This report was developed under a contract with the Small Business Administration, Office of Advocacy, and contains information 

and analysis that was reviewed and edited by officials of the Office of Advocacy. However, the final conclusions of the report do not 

necessarily reflect the views of the Office of Advocacy.

Purpose

The study investigates how antitrust laws and 

enforcement in the retail grocery and timber industries affect small firms.

Overall Findings

Looking at two industries (retail grocery and timber), 

the researchers find that, independent of the type of 

enforcement activity, the number of small grocery 

retailers declined over time. In the timber industry, 

the vertically integrated dominant firm hoarded the 

input of its small competitors downstream, forcing 

their exit.

Highlights

• In retail grocery markets where merger and 

acquisition activity prompted antitrust enforcement, 

the number of small firms declined regardless of the 

type of enforcement activity.

• Small retail grocery firms did not benefit in 

markets when the FTC required a divestiture of 

stores to offset large increases in post-merger concentration.

• Small firm success or lack thereof in the retail 

grocery industry was less a function of mergers and 

acquisitions and more the result of the entry and 

growth of mass merchandisers and the efficiency 

of large supermarket chains, even in markets where 

divestiture was targeted to benefit small firms. 

• Anticompetitive behavior by a vertically integrated timber industry monopsonist contributed to a 

decline in small business sustainability in the Pacific 

Northwest sawmill industry; however, industry-wide 

trends support the conclusion that macroeconomic 

factors were equally important in reducing the net 

number of small firms operating in the industry.

• The decline in the number of small timber 

industry firms was also attributable to efficiency 

gains and the vertical integration of the dominant 

firm.

• The uncertainty over ongoing anticompetitive behavior and antitrust litigation in the Pacific 

Northwest sawmill industry did not deter new entry, 

although the net number of small firms declined.

Scope and Methodology

The researchers used a case study approach to analyze the impact of antitrust activity on small business. They looked at businesses in NAICS 445110 

(retail grocery), NAICS 113000 (forestry and logging), and NAICS 321000 (sawmills). They measure market concentration using firm market share, 

expressed by the Herfindhal-Hirshmann Index 

(HHI), in either a four-firm ratio or an eight-firm 

one. They compare concentration before and after 

the activity, allowing for some lag.

This report was peer-reviewed consistent with 

Advocacy’s data quality guidelines. More information on this process can be obtained by contacting 

the director of economic research at advocacy @sba.

gov or (202) 205-6533.

Ordering Information

The full text of this report and summaries of other 

studies performed under contract with the U.S. Small 

Business Administration’s Office of Advocacy are 

available on the Internet at www.sba.gov/advo/

research. Copies are available for purchase from:

July 2008 No. 329
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