This study explores the effects of product market power of firms and industry competitiveness on the degree of real activity manipulation. The empirical results, from U.S. listed corporations data, show that the real activity manipulation is associated with not only product market power but also industry competitiveness. Especially, we find evidence suggesting that firms with inferior product market pricing power appear more manipulations of sales and discretionary expenditures. Our empirical result, on the other hand, also provides the evidence that firms in more competitive industries engaged in greater manipulations on sales and overproduction. The evidence that abnormal activities are significantly associated with product market power and industry competitiveness emphasizes the direct implication of real earnings management.