Monopoly Examples in Real Life

Monopoly Examples in Real Life

Imagine a scenario, your father is sick and no drug or treatment is improving his condition. The doctor tells you that only one drug may cure your father and it is needed as early as possible. You urgently need the drug, but that drug is not available in any of the nearby medical stores. After hours of searching, you find that only one medical store in your city has that drug. You went to that medical store and ask for the drug. Shockingly, the supplier is asking you to pay double the amount of the original price of the drug. You ask him to give you the drug at its original price but the supplier is not ready to give you the drug at that price as he/she knows that this particular drug is not available in any other nearby store. Now, what would you do? More probably you will buy that product as you need it urgently for your father and that drug is not available in any other nearby medical store. Well, you were forced to pay double the original amount of the drug due to the monopoly. In this article, we will learn about the monopoly and some famous real-life monopoly examples.

What is Monopoly?

Monopoly refers to the dominance of a particular sector or industry by a single company. Due to monopoly, the customers depend only on one company for any specific product or service as there is no other company, which provides that product or service at that price range or quality. Monopolies are bad in the free market as it leads to the accumulation of most of the power, and wealth to one or a few major companies rather than nearly equal distributorship of wealth and power among the various companies. Monopoly can lead to a burden on the customers due to high product prices, cheap quality products, and other unfair business practices used by the companies that hold monopolies.

Monopoly

How does Monopoly Works?

The company hold the monopoly in the market primarily by using two strategies, i.e., vertical integration and horizontal integration. In the vertical integration strategy, only one company say company X controls more than one stage of the manufacturing and distributorship of the particular product, hence control over the entire supply chain of that product, which eventually gives the monopoly power to the company X. In the horizontal integration technique, company X keeps on buying the other companies that manufacture the same product until no other competitors are left in the market. Once the company X acquires the monopoly it increases the product price as much as it desires as the customers have no other option to buy the product apart from the company that holds the monopoly, and they also lower the price if the new company tries to sell the same goods or the services at the reasonable price. Once the new competitor is acquired by company X the losses due to selling the product or services at lower prices are recouped by again raising the selling price. The monopoly is not the latest concept, its presence can be seen throughout history, wherein one company used to exploit the customers by raising the price of the products or the services. Here we discuss some of the most popular examples of the monopoly.

Vertical Integration and Horizontal Integration

Monopoly Examples in Real Life

1. Luxottica

You must have heard about popular eyewear brands like Ray-Ban, Costa del Mar, Oakley, and Giorgio Armani. Well, do you know who own these brands? All these famous brands are acquired by the Luxottica Group, which is the largest eyewear company in the world with nearly 80 per cent of the worldwide market share in eyewear manufacturing. This company was established in Milan, Italy in the year 1961. Later in the early ’80s, the company started operating at the international level, it became so big that it took over almost every eyewear company at that time. Hence, the Luxottica company is also a great real-life example of a monopoly.

PUT YOUR GLASSES ON, THE NEW CLASS OF 2016 IS READY TO START! | Luxottica

2. Microsoft

The top software and computer manufacturing company, Microsoft holds over the 75 per cent market share in the tech industry. In the year 1980, Microsoft was one of the most successful software companies in the world. The company’s increasing dominance in the software industry draws the attention of the federal authorities. In the early 1990s, an investigation the check the monopoly by Microsoft was launched by the Federal Trade Commission (FTC). However, this investigation was closed due to the lack of evidence. Later, the Department of Justice (DoJ) took the investigation, and on 18 May 1998, antitrust charges were filed against the Microsft by the Department of Justice along with attorney generals of different states. Microsoft was accused of making it hard for customers to install any other rival computer software on the windows operated computers, customers used to face difficulty in installing any other web browser apart from Internet Explorer, which is the product of the Microsoft company. This example shows that how the use of ‘vertical integration’ (discussed earlier) can help the company to achieve the monopoly.

Microsoft St GIF - Microsoft ST Ford - Discover & Share GIFs

3. Railways

Government-owned transport services, for example, railways are a great example of monopoly. If the railway system is shut down even for a day it can cause a burden to thousands of migrants who transport through railways on a daily basis. Private companies are not allowed to start their own railway services, if they wanted to do so, they are required to take permission from the government. Consider the example of one of the biggest railways in the world, i.e., the Indian railway company ‘IRCTC’ (public sector undertaking), established in 1845. It is the only company that dominates the whole Indian transportation market, i.e., holding a monopoly in Indian road transportation. However, like some other western countries like the united kingdom, India too has planned to open the railway sector to private players.

4. AB InBev

Company Ab InBev is one of the biggest beer companies in the world. It was formed after the acquisition of Anheuser-Bush by InBev. According to recent data this company holds around 28 per cent global market share. It manufactures more than 200 types of beer, which includes most selling beers like Budweiser, Beck’s, and Corona. Consumers may think that they are buying different beers, but all these popular beers are manufactured by a single company, i.e., AB InBev. It is operating in nearly 150 countries with more than 600 brands. Hence this company is also a great example of a monopoly in the companies that manufacture beer.

AB InBev Monopoly

5. Google

Whenever we talk about the internet, Google is the first thing that comes to our mind. Google is the biggest web browser that holds over 70 per cent of the total market share. Google has the ability to make any small business a success or a failure with the help of its secret algorithms. Remember, when you search on google for a particular item to buy, it shows you a number of options from the various e-commerce websites. Now, the item you’ll get to see on the top of your screen can easily be manipulated by google. Google generates most of the revenues from the advertisements, in fact around 60 per cent of the advertising revenue is controlled by google globally. Google stores each and every activity of its users and then show them the relevant advertisements based on their web browser history and the location. Other small advertising companies lag behind because they do not have the large amount of users data that google have. All these examples show that Google is the largest monopoly in the world of the Internet. Google is also condemned by the United States government for the involvement of the company in the US elections by manipulating the articles related to the candidates standing for elections. Google has launched several other services like Gmail, Google meets, and Google maps that are widely used by people. The company with its latest innovations has left its rival companies including Microsoft far behind. According to some experts, Google is going to become much more powerful in the coming years due to the amount of users data that it stores.

Google Monopoly

6. De Beers Group

De Beers Group was founded in the year 1888. This company deals with the various processes related to the mining and the manufacturing of the diamond. It controls all the processes involved in the selling of diamonds such as mining, exploitation, retailing, and trading. The company deals in diamonds in over 35 countries and has diamond mines in several countries like Canada, Botswana, Nambia, Australia, and South Africa. It holds around 85 per cent of the net diamond trade worldwide during its peak of success in the late 1980s, and it became one of the largest monopolies in history. The company was solely responsible for setting the price of the diamonds. Later, the decline of the company started and began to lose its monopoly. The company does not hold that much power now but it still holds nearly 30 per cent of the global market share.

De Beers Group Monopoly

7. Patents

The patent refers to an exclusive legal right granted to a company or an individual for its own invention of a particular product that forbids any other company or individual from manufacturing or supplying that product for a certain period of time. Hence, a patent legally provides the monopoly to a single company for a fixed amount of time. One of the famous examples of the monopoly acquired by the patent is about a casino located in the famous Malaysian hill station Genting Highlands. hence, this casino holds a legal monopoly for years due to the patent rights.

Patent Monopoly

8. AT&T

You might have had heard about the Bell Telephone Company, established by Alexander Graham Bell. Well, today’s biggest telecommunication company in the world, AT&T is the subsidiary of Alexander’s Bell Telephone Company. As per the data, AT&T was the only telephone service provider company in the whole United States in the year 1982. This company was found to be involved in monopolistic activities that leads to the ‘US vs AT&T antitrust lawsuit.’ The company was found guilty of violating the antitrust laws and eventually split into various subsidiaries, these subsidiaries are known as Baby Bells.

AT&T Monopoly

9. Facebook

In today’s digital era, social media emerged as the new market, where the companies earn through advertisements by providing some free services to the users. Facebook is a great example of a monopoly in the social media market. Instagram and WhatsApp were the two big competitors of Facebook, but these two were also acquired by Facebook in the year 2009 and 2014 respectively. Hence, Facebook holds the majority of the social media market share.

Facebook Monopoly

10. Salt Commission

In China, around 1,200 years back, an organization named Salt Commission was founded by the state. This organization used to collect the salt tax from the traders. Salt commission is said to be the world’s oldest monopoly. An interesting fact is that this monopoly lasted for the longest period of time and ended up only in the year 2014 by the government.

Salt Commission

11. Thurn and Taxis Postal Service

In the 1800s, Thurn and Taxis company was the only postal service, which hold a monopoly in the westerns and central Europe. The company issued its postage stamps for the mails in the year 1852. After the victory of the Prussians in the Austro-Prussian war, the contracts of the Thurn and Taxis were sold to the new government of Prussian, which ended the monopoly of the Thurn and Taxis post and the foundation of the Universal Postal Union.

Thurn and Taxis Postal Service

12. Hudson’s Bay Company

Hudson’s Bay Company was established in the year 1670 in London, UK. The monopoly was granted by the king of England, Charles II for the fur trade (sale and acquisition of animal fur) to this company. This company is now owned by America, but this company hold the monopoly till the year 1849.

Hudson's Bay Company

13. Dutch East India Company

Dutch East India Company was a charter company, established in the year 1602 when the Dutch government granted a monopoly of 21 years for the trade of spices in Asia. However, the company started using the trade rights for its own benefits and by using various tactics such as violence, colonialism and slavery the company holds strong control over the Asian country, India.

Dutch East India Company Monopoly

14. Pan American World Airways

Pan American World Airways was founded in 1927, it was the principal and the biggest air carrier and unofficial flag carrier of the US. It invented several modern aircraft such as Jet aircraft and Jumbo jets, and it is the first airline to fly globally. It retains its monopoly till 1991 as it went bankrupt after it sell most of its international flying routes.

Pan American World Airways

15. American Tobacco Company

Earlier the government regulations on the monopoly were not present. The famous 1890 established company named ‘American Tobacco Company’ was the fast-growing tobacco company. After acquiring its biggest competitor, Lucky Strike, it became the single company that used to control all of the tobacco markets. Later it acquired over 200 rival companies. later in 1907, Due to these activities, the antitrust trials were started on this company, which result in the dismantling of the American Tobacco Company after 17 years, i.e., in 1911. Nowadays, Philip Morris International and British American Tobacco are the two of the biggest cigarette companies.

American Tobacco Company

16. Andrew Carnegie’s Steel Company

Andrew Carnegie’s steel company (now US Steel Company) was the first-ever billion-dollar company in the world with a value of 1.4 billion dollars. There may be many billion-dollar companies nowadays, but becoming a billion-dollar company at that time was a huge deal. The company dominated the whole steel market from the late 19’s to the early ’20s. As there was no other competitor and lesser rules and regulations over monopoly by the government, so the company was free to set the steel prices as per its own benefits. The creator of the company, Andrew Carnegie hold the monopoly over the steel market until the company was owned by J.P Morgen, which J.P Morgen later named the U.S Steel Company. This company made Andrew Carnegie, the second richest person of that time after the then richest man J.D. Rockefeller. Reports showed that during its monopoly days, this company was responsible for around 60 per cent total manufacturing of steel in the United States; however, later in 2001, this number shifted to only six per cent. After J.P Morgen took possession, the supreme court tried to dissolve the company through antitrust laws but failed to do so. This company is the most famous example of a monopoly.

Andrew Carnegie's Steel Company

17. Standard Oil Company

As the natural resources say coal, petroleum and oil are available in a limited amount, the founder of the Standard Oil Company, John D Rockefeller took this advantage and created a monopoly (natural monopoly). Earlier, the oil manufacturing companies were not much conscious of the impact of the oil mining processes on the environment, and they usually used to through the waste products in the water bodies. The pipelines that these companies were used were built of cheap quality and were more prone to leakage. Standard Oil Company recognised these drawbacks and started developing high infrastructure for the oil mining process. This company gained the trust of many investors for its high-quality oil mining techniques and emerged as the largest monopoly in the oil mining sector.

Add Comment