Let’s start with a definition: a monopoly is an exclusive control over the trade or supply, which gives a business a huge advantage over any other enterprise that is trying to provide the market with a similar service or good.
Being the only providers on the market, monopolies don’t have competitions or price restrictions. To prevent the market from new entries and to dominate, these businesses use merges, patents, and acquisitions. However, sometimes having monopolies is efficient because it ensures quality delivery of particular products or services. For example, water or electric utilities. These industries are regulated by governments to protect people. So are monopolies as bad as they are described? We tried to answer this question using the brightest examples.
Examples of global monopolies
We are living in the world of monopolies because the biggest part of the economy is owned by several companies, which don’t have any competition. Let’s take the US as an example:
- Three companies control over 80% of the mobile telecommunication;
- Three companies control 95% of credit cards;
- Four – 70% of airline flights;
- Four countries control more than 85% of the corn seed sales.
Let’s take one step further and have a look at the entertainment industry. The Walt Disney Company has acquired the Fox properties and has issued the ‘Disney Vault’ policy. These two features make the company a monopoly – they have access to a huge number of films and no one is allowed to make screenings or re-releases unless the Walt Disney Company agrees.
Do you think that this happens only in the US market? Well, allow us to tell you about a gambling market in Scandinavia, where a monopoly protects the Swedish online gambling market and it is impossible to enter the niche unnoticed. The market belongs to three companies: Unibet, Bet365, and Leovegas even though they have around 60 competitors.
And what about natural resources? Norway extracts over 120 billion cubic meters of natural gas every year. The market is monopolized by the Equinor state-owned giant, which extracts over 65% of oil and 75% of gas. However, government representatives claim that the oil and gas market remains highly competitive and has enough space for new companies.
Norway is also known for the alcoholic beverages state monopoly. Beverages with more than 4,75% alcohol can be purchased only in The Wine Monopoly, government stores, or in restaurants, bars, hotels, and pubs.
Consequences of monopolies
If you were asked to name a single business monopoly, which one would it be? We bet that most of you would say Microsoft. Yes, at first it was the biggest global monopolist that no one was able to defeat. But even though their operating systems still dominate the market, Microsoft has to share it with competitors.
Due to the high-speed Internet and cloud computing, it is not important whether you are using Windows, Linux, or OS X. And considering that more and more customers choose smartphones and tablets over personal computers, Microsoft has to give way to Google and Apple.
As we see from the examples above, monopolies not always last long and sometimes can be good for people and the economy. So evaluation of the benefits and drawbacks of a monopoly should depend on whether the market allows competition or not, whether the ownership structure is efficient, and of course, whether the management is able to cope with such a massive structure.
Some sectors need monopolization for positive performance. For example, doctors or policemen don’t need a competitive market to do their job. In addition, a monopoly can beneficially impact the environment by lowering the consumption of resources. And, of course, domestic monopolies still need to face international rivals and this may lead both to negative and positive consequences.
Business monopoly: final thoughts
Monopolies can be found almost in every niche and market: they set trends, dictate terms, and get rid of competitors using all possible tools and instruments. However, in some cases, monopolies are justified and are the only way to protect customers. Thus, the government should keep an eye on business monopolies and carefully regulate their activity.