The reality of monopoly power in the USA


Yesterday I commented on Thomas Frank’s interview with Barry Lynn, author of Cornered, an important new book about business monopoly in the USA.   I intend to read the book and review it on this web log, but, in the meantime, here are some highlights of the interview, touching on the surprising (to me) extent of monopoly power.


Amazon now essentially governs business within the book industry.  Amazon has so much power that it virtually gets to tell really big companies like Hachette, the French publisher, what to do.

You’re gonna sell this book at this price. You’re gonna sell that book at that price. That means Amazon pretty much has the power to determine how many copies of a book a publisher might sell.

That’s not citizens trading with one another in an open market setting those prices, that’s a giant corporation setting those prices.  Which means what we are witnessing in the U.S. book industry, I think, is a form of top-down government.


Some years back a company named Tyco decided to take over the business of making plastic clothes hangers. It went out and bought at least four companies, and that gave it the power to jack up prices to clothing retailers. That’s the pattern in pretty much every industrial activity in America.


The Supreme Court [in the mid-1960s] forced Pabst to unwind a merger with Blatz because their combined market share [of beer sales] would have been 4.49 percent.  … …

Well, now there’s two foreign companies, Anheuser-Busch InBev, which is controlled out of Brazil, and MillerCoors, which is controlled out of London.   And those companies control about 80% of the US market.  And until recently they controlled about 90% of the market.


It’s not all that hard to manufacture eyeglasses. But there’s a single company, Luxottica, an Italian company, that controls most of the business in America. You go shopping for eyeglasses.

You go to a place called Lenscrafters. You go to a place called Sunglass Hut. You go to a place called Pearle Vision.  You go to Target Optical.  You go to Sears Optical. You go to Macy’s Optical.

You’re comparing quality, comparing prices, imagining you live in an open and competitive market.  And yet all of these stores and most of the product in them are controlled by Luxottica.


Toothpaste, there’s really just two companies.  You stand there and you look at all the different products. … … It’s just Colgate and Crest. 

And there’s this practice called category management where a retailer like Wal-Mart basically outsources the task of stocking shelves and setting prices to one company, say Colgate, which then sets prices for both.


If you’re in the business of growing chickens in this country, you mainly just sell to one company. … … Tyson’s or Pilgrim’s Pride or a few others.  There are still a few companies.  But it’s not like the individual farmer can simply pick up his business and move it from one company to the next. … …

The key thing we have to understand is that the processor-farmer relationship has nothing to do with any sort of market system.  It is a relationship based entirely on arbitrary power.

The company may say it is pitting these farmers against one another in some sort of carefully engineered competition designed to increase efficiency.

But there is absolutely no regulation of the quality of the feed provided the farmers.  And there is no regulation of the quality of the chicks.  And there is no auditing whatsoever of the measurement of the final weight.  It’s arbitrary.  So these guys have all the power…

Yes, the foreman of the processing plant basically gets to determine whether a particular farm lives or dies.  Whether a particular farmer gets to pay off his bank note or not.

As one of my farmer friends says, “It’s a kiss-ass economy.”  Which means if you kiss the foreman’s ass they might let you live.

And if you stand up to them, they will crush you.  And they can do it at will.  This is America in the year 2014.


The problem of monopoly in the United States is not new.  It is as old as the Boston Tea Party, which was a protest against the government-enforced monopoly the British East India Company.

And there is an array of solutions that have worked well in the past.  So it is not necessary to do anything that is new or untried to deal with monopoly power.   Just enforce existing law as it has been enforced in the past, as during the early years of the Woodrow Wilson administration before the outbreak of World War One.


Wilson and [Louis] Brandeis, like the New Dealers twenty years later, took three basic approaches to anti-monopoly policy, which were:

If you had a natural monopoly, railroads, telephony, your business would be regulated for the public good.

If you ran a big industrial firm like U.S. Steel, the goal was to provide you with as much competition as possible, but not break up your business into inefficient bits.  The goal was not to create a whole bunch of backyard steel furnaces, but to create some kind of real competition for U.S. Steel.

Third, there are areas where you don’t need efficiency, or where efficiency is much harder to measure.  This includes activities like farming and retail.  The idea here was to try to keep the market as open as possible, and ownership as local as possible.  Practically, this meant using the law to protect against the use by capital of the chain store and the combine to roll over the small business person and the small farmer.

Click on Free markets killed capitalism: Ayn Rand, Ronald Reagan, Wal-Mart, Amazon and the 1 percent’s sick triumph over us all to read the full interview. Strongly recommended.

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