A monopoly is a market structure characterized by the presence of a single, dominant individual or enterprise that is the sole supplier of a product or service. Monopolies are associated with a lack of competition and an absence of viable product substitutes. As a consequence, the company can sell products and services at prices that result in substantial profits.
These market conditions can arise by themselves or be instituted by the government to build infrastructure or encourage economic growth. Vertical integration can also encourage a monopoly to form. In short, this occurs when the supply chain of a company is integrated with and owned by that company.
Not all monopolies are illegal, with many businesses cornering the market simply because they offer a superior product. A firm will only attract the attention of regulators if it attained monopoly status via predatory or exclusionary conduct.
With that said, let’s take look at some of the many historic and modern monopoly examples.
Standard Oil was an American producer, transporter, and refiner of oil founded by John D. Rockefeller in 1870.
Rockefeller used a variety of tactics to purchase as many competitor refineries as he could and entered into secret deals with railroad companies to reduce shipping costs. These efforts resulted in Standard Oil controlling 90% of the oil refining market in the United States after little more than a decade in operation.
Standard Oil’s rise to prominence made it the first great industrial company in the world to become a monopoly. However, it was ultimately sued by the U.S. Justice Department in 1909 under antitrust laws and was ordered to break up into 34 independent entities two years later.
De Beers Group
De Beers Group is a corporation that specializes in the mining and trading of diamonds. It is also a manufacturer of diamonds for industrial purposes. It was founded by British politician and mining magnate Cecil Rhodes in 1888.
The company had a monopoly in the diamond trade for almost 100 years before excess supply from Australian, Canadian, and Russian mines increased competition. From a peak of around 85%, De Beers is now the second-largest distributor at a more meager 30%.
Luxottica, formally Luxottica Group PIVA, is a vertically-integrated Italian eyewear manufacturer and designer that was founded by Leonard Del Vecchio in 1961.
Luxottica merged with French optics company Essilor in January 2017, with the resultant entity from the $50 billion deal controlling more than 25% of global eyewear sales.
Brands under the Luxottica banner include Ray-Ban, Armani Exchange, Chanel, Versace, Prada, and Ralph Lauren. The company also owns multiple insurance companies and related optical departments at department stores such as Target and Sears. It has been criticized for monopolistic practices with price markups approaching 1000%.
The YKK Group is a Japanese conglomerate founded by Tadao Yoshida in 1934.
The group is the world’s largest manufacturer of zippers, which are used in products such as dresses, jeans, jackets, camping equipment, and boating equipment.
After the Second World War, the conglomerate purchased an automated zipper manufacturing machine from the United States. Over time, it continued to innovate and took steps to control every aspect of the manufacturing process itself. In a 1998 Los Angeles Times article, it was explained that The YKK Group “smelts its own brass, concocts its own polyester, weaves and color-dyes cloth for its zipper tapes…” and so forth.
Despite the presence of hundreds of cheaper Chinese manufacturers, YKK produces around 50% of all zippers sold globally. This equates to about 7 billion units.
Saudi Aramco is a petroleum and natural gas company founded in 1933 and is the operator of the world’s most extensive hydrocarbon network. The company also owns the largest onshore and offshore oil fields in addition to a colossal natural gas reserve.
Saudi Aramco has a monopoly on oil production in Saudi Arabia and the company is also a significant exporter of the commodity. Having said that, the company’s dominant presence in the oil industry has been eroded to some extent by the COVID-19 pandemic and the shift toward renewable energy sources.
- A monopoly is a market structure characterized by the presence of a single, dominant individual or enterprise that is the sole supplier of a product or service.
- Standard Oil was the world’s first great industrial monopoly, at one point controlling 90% of the oil market in the United States. De Beers Group had a similar stranglehold on diamonds for almost a century before excess supply reduced its market share.
- Luxottica is an Italian vertically-integrated eyewear brand that controls more than a quarter of global eyewear sales. The YKK Group and Saudi Aramco have monopolies in fossil fuel production and zipper sales respectively.
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