Monopolization Threatens America or Does It?

Monopolization threatens America by creating gigantic companies that stifle competition and creativity. That is the scary new mantra from pundits like The New York TimesDavid Leonhardt.

Disturbingly the data supports Leonhardt’s frightening thesis that monopolization threatens America. For example, four companies; J.M. Smucker, Supermarket Brand, Nestle, and Mars make 97% of America’s dry cat food. Moreover, Nestle a Swiss company controls 57% of the cat food market, The Verge reports.

Hence, Nestle can decide what America’s cats eat and what their owners pay for that food. Cat food is far from the only market dominated by a few corporate behemoths.

Big Beer Shows How Monopolization Threatens America

In fact, three companies Anheuser-Busch InBev or AB InBev (NYSE: BUD), MillerCoors, and Constellation control 75% of the beer market. Moreover, escaping the monopolization of consumer goods is getting harder.

Want to escape Big Beer’s monopoly by reaching for a microbrew? You’ll have a tough time because AB InBev owns scores of microbreweries. In detail, AB InBev owns Breckenridge Brewery (my favorite), Goose Island Brewery, Blue Point, Four Points Brewing Company, and even Devil’s Backbone Brewing Company.

Nor will buying imported ales or lagers help you escape Big Beer’s monopoly. AB InBev’s “imports” include Becks, Corona, Aguila, Modelo, Stella Artois, and Keith’s.

Thus three companies can determine what you pay for beer. Additionally, the Big Three can determine what beers get to market and how much alcohol they contain.

Finally, if they wish the Big Three can even define the whole concept of beer. For example, they could decide porter is not beer.

Monopolization Threatens America with an illusion of Free Choice

The beer situation demonstration shows how monopolization threatens America with an illusion of free choice. That is the inescapable conclusion made by the Open Markets Institute.

Notably, the Institute collected the data upon which Leonhardt and The Verge base their arguments. In fact, the Institute’s deputy director Sarah Miller is even more scathing than the pundits.

“Competition is an illusion, and choice is an illusion,” Miller says of today’s marketplace. She even goes as far to label America a “scam economy.”

The Scam Economy of Monopolization threatens America

The scam economy offers consumers hundreds of choices made by the same suppliers and sold through the same retailers. For example, there are more brands of cat food and beer around than ever before.

Yet, just a handful of companies owns those brands. Moreover, an increasing number of Americans have just one place to buy those brands.

For example, three companies; Walmart (NYSE: WMT), Kroger (NYSE KR), and Albertsons controlled 41.4% of America’s grocery market in 2017, Statista calculates.

Competition is an illusion, and choice is an illusion

Nor is technology offering Americans more choice. Instead, data from the Open Markets Institute shows monopolization is the norm for Big Tech.

For instance, four companies AT&T, Verizon, Sprint, and T-Mobile control 98% of the market for wireless phone service, the Institute calculates. Likewise, in e-commerce two companies Amazon (NASDAQ: AMZN) and eBay (NASDAQ: EBAY) control 56% of the market.

Additionally, three companies, Facebook (NASDAQ: FB), Microsoft (NASDAQ: MSFT) owner of LinkedIn, and Twitter (NYSE: TWTR) control 89% of social networks in America. Furthermore, one company, Facebook controls 72% of the social media market.

Finally, one of the most monopolized markets is for washing machines and dryers. The Open Markets Institute estimates three companies; Whirlpool, Haier, and Samsung control 100% of the laundry machine market.

How the Scam Economy Works and threatens America

Therefore, it could be impossible for an inventor who creates a better washing machine to enter the market. The big three own the market and have the power to crush any upstart. For example, the Big Three could tell Home Depot “if you want washing machines keep such-and-such a brand out of your stores.”

The washing machine market shows how the illusion of free choice works. Whirlpool and Haier sell their products under several brands. In addition, Haier, a Chinese company with a German-sounding name, owns two historic American brands GE and Hotpoint.

Moreover, Whirlpool owns Maytag and Amana. Thus consumers think they have several choices when there is no choice. Instead, they get several different labels from the same manufacturers.

Under those circumstances there is no incentive to improve the technology, or design. Conversely, the manufacturers have a strong incentive to stifle innovation, to control costs and prices.

General Motors Shows How Monopolization Threatens America

Strangely, history gave America a great lesson in the dangers of monopolization just as the Open Markets Institute report appeared. The report appeared just as General Motors (NYSE: GM) revealed plans to close several factories, eliminate six models, and lay off 14,000 workers.

In its heyday, General Motors was a textbook monopoly dominating the market and using several brands to fool customers with the illusion of choice. Today, however, General Motors is a textbook example of an inefficient, technologically backward, and uncompetitive company.

General Motors is uncompetitive today because it did not need to compete for generations. GM did not need to build or design better vehicles or adopt better technologies because it controlled the market.

Instead, GM could force any clunker it wanted on drivers and often did. When effective competition finally arrived from Japan, GM could not cope.

Monopolization Threatens America with Big Government Bailouts

Thus the true danger from monopolization will saddle America with dozens of GMs. That is uncreative, uninnovative, and uncompetitive behemoths requiring bigger and bigger government bailouts to stay in operation.

Remember General Motors was the company that received a $17.4 billion bailout from Uncle Sam in 2008. Yet, 10 years later in 2018, GM is just as uncompetitive as ever.

Debacles like the GM bailout occur because monopolists can unleash economic havoc if politicians do not “rescue” them. For example, GM threatened to throw tens of thousands of people out of work and devastate dozens of communities if it received no bailout.

Notably, that scenario is unfolding 10 years later despite politicians’ largess. Hence, bailing out monopolies only postpones the inevitable crackup.

Moreover, GM proves monopolies are as a big threat to taxpayers as consumers. Monopolies hurt consumers by stifling choice and taxpayers by requiring Big Bailouts to survive.

The General Motors catastrophe shows why America needs a new conversation about monopolization. Moreover, General Motors shows why America needs an aggressive anti-trust policy to break up the big new monopolies.

The choice before Americans is clear; we can invest in anti-trust enforcement now or future Big Bailouts. If Americans want capitalism; and choice in products, monopolization has to end–now.