Whether you realize it or not, monopolies control a large part of our lives. Monopolies control every part of our lives ranging from the products we buy to the food we eat. Tech products like Fitbit watches, Android phone software, and Nest systems are all owned by Alphabet Inc. AKA Google. Procter & Gamble brands include Pampers, Tide, Bounty, Gillette and Old Spice. Companies like Kellogg’s and Pepsico own brands like Cheez-it, Pop-Tarts, Doritos, Lays, Quaker Oats, and Gatorade just to name a few.
Concerning, right?
Monopolies have been the subject of scrutiny for a very long time. Monopolies are formed when a single company or entity controls most of the market share for certain goods or services. This limits consumer’s options while also making it harder for competitors to succeed.
Monopolies have operated in the United States since the discovery of the Americas. Back then, they were very beneficial to the development of the nation because their large infrastructure was needed for a rapidly growing economy. In 1890, the Sherman Antitrust Act was passed due to concerns of monopolies charging unfair prices. However, this is not always the case. The large-scale efficiency of monopolies can allow for cheaper, more consistent prices, which benefit both the consumers and business owners. Sometimes, the government will allow the monopoly to exist (with regulation) if it is considered “good”.
Just because a monopoly has low costs, does not mean it is inherently “good”. Monopolies can abuse what is known as monopsony power. Monopsony power occurs when there is one buyer and multiple suppliers, or one employer and multiple workers. The monopoly with this power can lower their costs by always looking to the cheaper supplier, and lower wages by hiring whoever will work for less money.
Say there was a company called Metal Tables that manufactured metal tables and had a 50% market share in that industry. They need both steel and workers to make the tables. They will buy from the company who is selling steel at the lowest price, forcing every company to lower their prices, hurting the economy. They can do the same thing to workers by hiring ones who will accept bad working conditions and wages. This often happens in companies that have factories in places with relaxed labor laws and low minimum wages.
While monopolies can be both good and bad, this often depends on who is running the monopoly and the surrounding market. Firms like Google have a search engine monopoly but face competition from companies like Microsoft and Apple, so they are constantly pushed to be better and innovate. Drug companies, on the other hand, are incentivized to keep prices high and not focus on cheaper options for the consumer.
It is important to be aware of the monopolies, good and bad, that are present in our lives. Oftentimes we think we are supporting a variety of businesses, when in reality we are giving our money to the same few companies. This lets them control prices, reduce options, and limit local competition: it hurts you.
The next time you go to a store, keep track of how many items you buy that are made by the same companies. What you find may surprise you.
