The Application of an Entropy Theory of Concentration to the Clayton Act

Section 7 of the Clayton Act prohibits mergers whose effect "may be substantially to lessen competition, or to tend to create a monopoly," in any line of commerce. 1In applying this Act, the Supreme Court has seemed to give judicial recognition to the economic view that "the relative size distribution of firms in particular markets is an important clue, often the single most important one, to the nature of the competitive process in them." 2 Both the Court and the Federal Trade Commission have come to rely increasingly on numerical measures of concentration in appraising the competitive character of an industry A standard for measuring economic concentration has thus emerged as a first requirement of a rational anti-merger policy.