Monopolies:
Monopolies have been a huge topic of conversation, with many large corporations reporting billions in profits this past year. Many people think monopolies are a bad thing, as if one company is taking away the possibility for competition in that particular market. However, Dr. Per Bylund disagrees in his lecture “Monopoly Power: What Should We Fear”. In his lecture, Dr. Bylund defines monopolies as a single seller. The Merriam Webster Dictionary defines monopoly as, “complete ownership or control of the entire supply of goods or a service in a certain market.” This means that only one person or group has control over an industry or market. In his lecture, Dr. Bylund argues for monopolies and their benefit to the economy. He even states that, at some point, everyone can be considered a monopolist during their time as an entrepreneur. While his lecture was thorough in its explanation, there were a couple key points that needed to be discussed in more detail, such as: monopoly power, the role of parent companies, and idea depreciation.
Monopoly Power:
Monopoly power is defined by the U.S Department of Justice as, “[a company’s] ability to charge prices high enough to earn a supernormal return on its investment.” Dr. Bylund had a very unique viewpoint, claiming that there really isn’t any proof that monopoly power exists. He claimed that, as long as there are no barriers to entry, when a company tries to inflate its prices, it opens the market to competition. As a result, the market becomes more competitive and the monopoly in place may fall. As a result, the monopoly would lose profits to other companies who can sell the same product at a lower price. However, this is not always the case in every industry. For example, pharmaceuticals is an extremely regulated industry with few companies controlling the production of medication. In the instance of insulin, many pharmaceutical companies work together to inflate the price of insulin to unethical heights. Insulin is not something that the average person can produce and sell to buyers easily. Therefore, when the pharmaceutical companies inflate the price of insulin to extremes, it leaves many people without their life saving medication – simply because they cannot afford it. This is not only unethical but life-threatening to diabetics and other people who need external sources of insulin to maintain their blood sugar levels. This is a perfect example of how industries with barriers to entry can work together to inflate prices and control their consumers purchasing power. This is monopoly power, plain and simple, and it exists in our markets today.
Parent Companies:
One major topic that I wish Dr. Bylund has discussed further is the idea of parent companies. A parent company is a corporation that owns a multitude of subsidiary brands in a particular industry. There are many examples of parent companies today, such as Disney, General Motors, Facebook, Coca-Cola, Pepsico, Unilever, and many others. One of Dr. Bylund’s arguments for monopolies was that the true power lies with the consumer, when they compare, contrast, and eventually choose from a large variety of purchasing options. When one corporation owns many brands that consumers believe are competing, it completely destroys the idea that consumers have a large variety of companies to pick from. For example, General Motors is a car company that owns Buick, Cadillac, Chevy, Hummer, and GMC. Most people would view these subsidiaries as competing brands; however, knowing that they are all owned by a larger corporation changes the way the consumer would view each brand. While General Motors doesn’t necessarily have a monopoly over the automotive industry, there are other examples in which the parent company in an industry does have a monopoly, one of which, being Google. Google owns many different search engines and companies such as YouTube, Waze, Nest, etc. Particularly in the search engine industry, Google dominates the market with over 86% market share of desktop searches in December of 2021. How could any other company compete with the labor force, funding and market power that Google has? Although Google doesn’t charge for its services, it would be extremely difficult for any start-up to acquire the capital and reputation that Google competes with. This is a dignified example of monopoly power as well as the power that parent companies have over consumer’s choices in the market.
Idea Depreciation and Monopolies:
In his lecture, Dr. Bylund discussed how innovation can produce monopolies in and of itself. The idea that an innovative invention can make an old invention obsolete is called “idea depreciation.” Idea depreciation is not a new concept, and can be seen in nearly every industry. Dr. Bylund’s example was how Apple made flip phones obsolete when Steve Jobs announced the first smartphone. Dr. Bylund stated that by innovating and creating new technology, the entrepreneur with the new technology is actually a monopolist, because they are the only one who can sell that product (single seller). However, this may not actually make that entrepreneur a monopolist. Monopolies pertain to an industry as a whole, not a singular innovation or product. A good example of this is actually found in the water bottle industry. Before Hydro Flask and other thermal water bottles, Nalgene was the preferred water bottle by many hikers and outdoorsmen. Although Nalgene did not sell insulated water bottles, they had a considerable hold on their market. Once Hydro Flask released its insulated water bottle, they started to grab the attention of their industry. However, Hydro Flask did not gain considerable control of the market overnight. Even though they sold a unique product that had “innovative insulation technology,” it still took them years to garner the attention and cult following that they have today. Therefore, the industry did not automatically shift to Hydro Flask once their technology was revealed. Since monopolies pertain to industries as a whole, Hydro Flask could not be considered a monopoly, even in the ‘insulated water bottles' industry (Thermos created insulated water bottles long before Hydro Flask). Although this is not a great example of a monopoly, per say, it puts into perspective how an entrepreneur cannot be considered a monopoly simply because they have a new product. They are selling a new product to compete in that industry, not creating an entirely new industry based around their product.
Conclusion:
Although there are some benefits to monopolies, there are other issues with monopolies that Dr. Bylund overlooked in his lecture. Unfortunately, his argument that monopoly power doesn’t exist is simply incorrect, and his definition of monopolies as a whole, is not nearly specific enough. However, until action is taken by powers strong enough to influence the economy and corporations, monopolies will reign supreme and bully other companies into selling out so they cannot compete.
Works Cited:
Chaffey, Dave. “Search Engine Marketing Statistics 2022.” Smart Insights, Smart Insights, 26 Jan. 2022, https://www.smartinsights.com/search-engine-marketing/search-engine-statistics/#:~:text=Google%20continues%20to%20dominate%20search,searches%20as%20of%20December%202021.
“Competition and Monopoly: Single-Firm Conduct under Section 2 of the Sherman Act : Chapter 2.” The United States Department of Justice, 18 Mar. 2022, https://www.justice.gov/archives/atr/competition-and-monopoly-single-firm-conduct-under-section-2-sherman-act-chapter-2#:~:text=section%202%20cases.-,As%20a%20practical%20matter%2C%20a%20market%20share%20of%20greater%20than,the%20existence%20of%20monopoly%20power.