The Obama administration has a new economic worry: competition or, allegedly, the lack of it. America’s businesses, the indictment goes, merge too often, innovate too little and bilk consumers too much. The open question is whether this argument is shrewd politics, shrewd economics – or both. No doubt, the politics are enticing. In this election season, criticizing big, impersonal firms has a strong populist appeal. And Americans venerate competition, at least in the abstract, as a check on companies’ market power. So the White House’s pitch is familiar. “The President is launching a new initiative to stoke competition,” the White House announced. “No corporation [will] unfairly squeeze their competitors, their workers, or their customers.” Strong stuff. Backing the words with deeds, the president supported a proposal from the Federal Communications Commission “to open up set-top cable boxes to competition.” Renting the set-top boxes (at a reported average annual cost of $231) is a rip-off, the White House suggested. If cable companies faced competition, consumers could buy boxes with more digital features at less cost. The president also asked departments and agencies to report back in two months on “pro-competitive executive actions” they could take to empower “consumers, workers and entrepreneurs.” As the administration sees it, many US firms are engaging in an orgy of anti-competitive behavior. Testifying recently before a congressional committee, Bill Baer, the assistant attorney general of the Antitrust Division, reported that in fiscal 2015, there were 67 proposed mergers valued at more than $10 billion – more than twice the number in fiscal 2014. To the administration, many mega-mergers are motivated by the quest for greater market power: the ability to raise prices. Not surprisingly, the administration has rejected many of these deals: the merger between cellphone firms AT&T and T-Mobile; Comcast’s proposed merger with Time Warner Cable; appliance-maker Electrolux’s acquisition of General Electric’s appliance division; the proposed merger of two large makers of semiconductor manufacturing equipment, Applied Materials and Tokyo Electron. More pending major mergers may face administration opposition. The Justice Department has already announced it would fight the proposed merger of two large oil service firms, Halliburton and Baker Hughes. Also, there are two mergers of big health insurers that require government approval: Aetna and Humana, and Anthem and Cigna. The White House’s Council of Economic Advisers finds other evidence of diminishing competition. In an array of industries from retail stores to hospitals, total revenue became increasingly concentrated among the top 50 firms from 1997 to 2012. Likewise, the rate of new start-up businesses has declined, perhaps indicating more barriers to entry. The administration’s case is strong but not airtight. Generally, there are two types of competition: one named after Adam Smith (1723-1790), involving price and quality competition among firms producing similar products (think steel, groceries or clothes); and the other named after Joseph Schumpeter (1883-1950), emphasizing the clash between new products and production techniques and the old (think jet travel vs. railroads, big box stores vs. local merchants or the Internet vs. newspapers). Do we have a competition deficit? It depends on the form of competition. If it’s Schumpeter’s competition, the answer is almost certainly no – and this is the most disruptive type of competition and the hardest to defend against. Dozens of industries are making fundamental adjustments to the Internet and its side effects. Companies that built their business models based on one set of products and strategies have difficulty coping with circumstances largely outside their experience or competence. Unfortunately, one response to this intensifying competition is to try to limit Adam Smith’s traditional competition by merging with major competitors. That’s what seems to be happening now. Facing slow growth, increasing IT costs and greater uncertainty, companies are trying to create growth, cut costs and reduce uncertainty by getting bigger. It’s a baffling mixture that does not sit well with traditional antitrust thinking. The jury is still out on who’s right.