Monopoly Everywhere

Extreme market concentration goes beyond Big Tech.

By Armağan Gezici | January/February 2020

This article is from Dollars & Sense: Real World Economics, available at

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This article is from the January/February 2020 issue.

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In October 2019, 47 attorneys general joined a New York-led antitrust investigation of Facebook with the concern that, according to New York’s attorney general, “Facebook may have put consumer data at risk, reduced the quality of consumers’ choices, and increased the price of advertising.” Earlier the same year, a similar state investigation was launched into Google’s advertising practices. At the federal level, the Justice Department is now investigating Facebook and Google, while the Federal Trade Commission is reported to have started an investigation of Facebook and Amazon.

However, concerns about tech companies’ market power go beyond issues of data privacy and the way they handle disinformation and hate speech. The increased market power of tech companies and corporations in many other industries have also recently received great attention.

Many U.S. markets and industries are dominated by large corporations. According to data released in 2019 by the Open Markets Institute, Amazon dominates e-commerce, which was a $525.9 billion market in 2018 (around 10% of all retail sales in the U.S.). Google’s Android and Apple’s iOS hold a 99% share of the market for smart phone operating systems. In retail, Walmart controls 72% of all warehouse clubs and supercenters in the United States. The market shares of Home Depot and Lowe’s in home improvement stores add up to a whopping 81%. Combined, Walgreens and CVS comprise 67% of all pharmacy sales.

Many large corporations have international operations and sizeable global market shares. In a world of high mobility for capital, large corporations are multinational. The locations of their headquarters seem irrelevant to their activities, except for regulatory and tax purposes. Global markets for agricultural seeds and chemicals, for instance, have long been dominated by three companies: Germany’s Bayer, which bought U.S. giant Monsanto in 2018; DowDupont, which was the biggest chemical conglomerate in the world until 2019; and Syngenta, a Swiss-based company, which bought agricultural branches of two other global companies, Novartis and Zeneca, in the last decade, and is currently owned by a Chinese state-owned enterprise. Even in industries with a large variety of brands that seem to offer consumers a choice of many companies, many of those brands can be owned by just one company. For example, Anheuser-Busch Inbev, a holding company that was created in 2008 through the mergers of various American, Brazilian, British, and Belgian beer companies, holds a 41% share of the beer market in the United States and owns 55 different brands.

That capitalism would be dominated by monopolies has long been viewed as inevitable. But the process of monopolization has accelerated in the last couple of decades. Recent research shows that more than 75% of U.S. industries have become more concentrated and the average size of publicly traded firms has tripled since the mid-1990s. Studies also find that, during this period, profitability has risen for firms in industries that have experienced increases in concentration levels. Many of these larger and more profitable firms, such as those mentioned above, are found to be in the retail, information, transportation, and warehousing sectors of the economy. Thanks to their dominant positions in their respective markets, these companies can easily increase the prices of products or reduce the cost of production. Before giving examples of how they achieve higher price-cost margins and profitability, let us first take a look at one big change that allowed the current monopolization in the U.S. economy to occur.

Drivers Behind the Recent Wave of Monopolization

An increased number of mergers and acquisitions are visible in almost all industries. The lax enforcement of antitrust laws has much to do with the uptick in mergers and acquisitions. The Sherman Antitrust Act of 1890 and other legislation in the decades that followed outlawed any “restraints of trade” that reduce competition and any concentrations of market power that restrict interstate commerce. The Clayton Antitrust Act of 1914, for instance, explicitly blocked mergers that would result in more consolidated industries, and it also forbade interlocking directorates (membership on the board of directors of two or more firms by the same individual). Until the 1980s, these two acts and other industry-specific regulatory laws continued to keep the monopolization of U.S. industries in relative control.

However, after the 1980s, the Department of Justice adopted an entirely new framework for evaluating mergers and acquisitions: instead of considering the effects on smaller businesses and entrepreneurship, the focus solely shifted to whether a deal would promote “efficiency” and “consumer welfare,” with a promise of lower prices. Yet, as seen in the figure above, it was not until the “new economy” boom” of the mid-1990s that the current spate of mergers and acquisitions took off. Over the last two decades, the number of mergers and acquisitions nearly tripled, surpassing the merger wave of the late 1960s and early 1970s. Rising pressures from shareholders in a rapidly financializing economy, coupled with low interest rates and high stock market valuations for mergers and acquisitions, were also responsible for creating the conditions for this expansion. Over the same period, the lack of intervention from regulatory agencies created incentives for firms to engage in mergers and acquisitions, which further reduced competition. A Supreme Court case in 2004 on Verizon’s refusal to share its telephone network with its competitor, AT&T, was the perfect example of this paradigm shift. The court unanimously ruled in favor of Verizon, holding that the telecommunications company’s “monopoly power” was “an important element of the free-market system,” a display of “business acumen,” and resulted in “the incentive to innovate.”

Figure 1: Mergers and Acquisitions, North America, 1985-2018

Dire Consequences of Monopsony and Monopoly Power

As antitrust legislation became more focused on pricing and consumer welfare, the regulatory control over monopolies has become further irrelevant for certain industries due to globalization. For the last two decades, the availability of cheap imports and the opportunity to produce globally in low-cost locations has allowed large companies to keep consumer prices relatively low. In particular, retail giants like Walmart have been able to dictate their own terms and prices with suppliers, acting as monopsonies (as one of few buyers) as well as monopolies (one of few sellers).

Monopolies, Monopsonies, Oligopolies, Oligopsonies: A Note on Terminology

In a perfectly competitive marketplace, no single participant can influence prices because there are so many buyers and sellers, each of which represents only a very small portion of the total marketplace.

By contrast, a monopoly is a type of uncompetitive market in which there is only one seller. The classic textbook example is the post-World War II diamond monopoly held by the DeBeers company.

A monopsony is a type of uncompetitive market in which there is only one buyer. The classic example is a labor market in a one-factory town; the relationship Walmart has with many of its suppliers is another good example.

An oligopoly is an uncompetitive market with only a few sellers (like the U.S. markets for airline tickets), while an oligopsony is an uncompetitive market with only a few buyers (like the U.S. market for published books which is dominated by Amazon and Barnes & Noble, or the global market for unroasted coffee beans).

As a shorthand, I refer to all of types of uncompetitive markets as “monopolies,” and those companies that enjoy market power as “monopolists.” Some economics textbooks technically define an “oligopoly” as a market in which the 50% of the market is controlled by four or fewer firms, while others employ the looser definition noted above.

—Sasha Breger Bush

This sidebar is excerpted from Sasha Breger Bush’s “No Friendship in Trade,” from the March/April 2015 issue of Dollars & Sense and also appears in the 18th edition of Real World Globalization.

The dire consequences of monopsony power (see sidebar for a definition of “monopsony”) have been particularly noticeable in labor markets. Since Walmart stores and Amazon warehouses are typically the largest employers in local labor markets for low-skilled labor, employees in these areas can be forced into low-paying jobs or precarious working conditions because they don’t have any alternatives. In high-tech industries that rely on relatively high-skilled labor, non-compete agreements, where employers contractually constrain employees from joining competing companies for some period of time after they leave, are an important component of the U.S. labor market. It is true that monopsony cannot always be equated with monopoly power. Yet, especially in industries with low consumer prices, the monopsony power of these large companies in the labor market is as important as the use of cheap foreign inputs in keeping their prices low. While specific monopsonistic practices in the labor market vary greatly across industries, recent studies find that industries with a growing concentration of large firms are also those that pay a lower share of industry incomes to their employees.

A stronger case can be made for antitrust regulation in industries with monopolies that can charge extraordinarily high prices. The U.S. pharmaceutical industry is a case in point. Americans spend more on prescription drugs—average costs are about $1,200 per person per year—than anyone else in the world. What really sets the United States apart from most other countries is high prices. Unlike other nations, the United States doesn’t directly regulate medicine prices. In Europe, the second-largest pharmaceutical market after the United States, governments negotiate directly with drug manufacturers to limit what their state-funded health systems pay. The U.S. pharmaceutical industry’s response to demands for price regulation has been that it will kill innovation. U.S. drug companies claim that they need higher prices than those that prevail elsewhere so that the extra profits can be used to augment research and development (R&D) spending to continue to innovate and patent new drugs. This is far from the reality. A recent academic study shows 18 big pharmaceutical companies listed in the S&P 500 spent more on share buybacks and dividends ($516 billion) in a recent 10-year period than they did on R&D ($465 billion). As these companies spend their profits on boosting their stock performance, there has been a prominent productivity decline in drug discovery in the U.S. pharmaceutical industry. According to a working paper by William Lazonick for the Institute for New Economic Thinking, the overall clinical approval success rate declined from approximately one-in-five to approximately one-in-eight during the 2000s. In addition to allocating their profits to activities that maximize shareholder value, pharmaceutical companies also contribute to the decline in the diversity of ideas and research potential through mergers and acquisitions, since there are increasingly fewer companies to carry out research.

With Verizon, AT&T, T-Mobile, and Sprint as the only operators, the industry of wireless carriers in the United States is another distinctly high-price industry. U.S. mobile data pricing has been found to be four times more expensive than prices in many European Union countries, which have four wireless carriers instead of three. Economics textbooks tell us about how utilities, such as telecommunications, are “natural monopolies,” yet the striking difference between the United States and the European Union can only be understood by differences in regulatory policy. While E.U. governments have forced companies to lease their networks to competitors at cost, U.S. regulators have not done so, allowing a formidable barrier against competitors. In October 2019, the U.S. Federal Communications Commission approved a merger between Sprint (owned by the Japanese conglomerate Softbank) and T-Mobile (owned by Germany's Deutsche Telekom), suggesting that the merger would “enhance competition.” Those in opposition to this move estimate that the merger will result in the loss of potentially thousands of jobs in the short term and in the long term, according FCC commissioner Geoffrey Starks, “it will establish a market of three giant wireless carriers with every incentive to divide up the market, increase prices, and compete only for the most lucrative customers.” When it comes to shopping for internet services, most Americans typically have just two choices. The first choice is internet providers, many of which—including CenturyLink, Frontier, and AT&T—started out as, or bought, phone companies, giving them control of one of the only physical lines that serve each household. Typically, the second is cable TV providers who, in turn, own the cables that enter almost every home. It appears that the telecommunications companies carve up territory to avoid competing with more than one other provider, effectively creating local monopolies.

Companies gaining market power through mergers and acquisitions claim they benefit consumers by providing better technologies and higher quality products at lower prices thanks to the synergies expected of mergers and acquisitions. This argument fits perfectly within the paradigm of neoliberal economics, which tends to see rising market power as the inevitable result of top firms gaining market share by adopting new technologies that increase their efficiency. In this view, monopolistic companies are “super-star firms” competing either on the merits of their innovations or superior efficiency; the important driver of the monopolization is technological change, not anticompetitive practices. These claims are hard to reconcile with the aggregate economic trends of the last two decades. Since the beginning of the 2000s, despite relatively high corporate profits, the U.S. economy has been in a period of slower capital accumulation marked by weak investment, declining labor share of income, and lower aggregate productivity growth, signaling a slowing down in technological progress and dynamism. This is the same period where a considerable rise of market concentration has occurred in most U.S. industries.

While the causes of increasing concentration and monopolization might be different across industries, there is good reason to doubt the claims of corporations and their advocates, and to look deeper into the negative consequences of increasing monopoly power for workers, suppliers, and consumers in the United States and across the globe.

is an associate professor of economics at Keene State College and is co-editor of the 18th edition of the Dollars & Sense textbook Real World Globalization.

New York State Office of the Attorney General, “Attorney General James Gives Update On Facebook Antitrust Investigation,” Oct. 22, 2019 (; Gustavo Grullon, Yelena Larkin, and Roni Michaely, “Are U.S. Industries Becoming More Concentrated?,” Review of Finance, July 2019; William Lazonick et al., “U.S. Pharma’s Financialized Business Model,” Institute for New Economic Thinking Working Paper, July 13, 2017; Standish Fleming, “Pharma’s Innovation Crisis, Part 2: How to Fix It,” Forbes, Sept. 11, 2018 (; Richard Gonzales, “FCC Clears T-Mobile/Sprint Merger Deal,” NPR, Nov. 5, 2019 (; Chris Zubak-Skees and Allan Holmes, “How Broadband Providers Seem to Avoid Competition,” The Center for Public Integrity, April 1, 2015 (

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