The Monopolist's Playbook
How big corporations capture markets and threaten society
Hello,
If you’ve been following the business landscape, you’d have noticed an alarming trend.
Every sector in the world is slowly getting dominated by a handful of players that start controlling the market. All industries, from slippers to sofas and bubble gums to bra hooks, are getting captured by a handful of players that are crowding out all competition and reigning supreme.
This is the interminable rise of monopolies all over the world- a phenomenon that has gained pace in the last few decades, putting consumers and employees in a precarious state.
Why is this happening and how do these mega-corporations reach such eye-watering levels of market dominance?
To understand this trend, we have to take a look at the tricks that companies have perfected to reach this state of dominance.
Here’s the monopolist’s playbook, and the process they follow to ensure they keep getting bigger.
The 4-Step Process
There’s a tried-and-tested process that every potential monopoly follows. This is how shit goes down:
a) A business raises tremendous amounts of capital with the promise of monopoly status and the unreal gains that can be derived from exploiting such a position.
b) They then use the never-ending stream of capital to engage in predatory pricing that kills competitors who can’t match their cash burn (think of Uber and Amazon’s rise)
c) Having razed the playing field and with just a few giant players around, the monopolists can use their clout to buy political favors- tax breaks, concessions, and modifications of the law that make it harder for anyone- consumers, competitors, or other organizations to rise up against them, in the market or in the court.
d) With the law and political power on their side, they can engage in even more monopolistic behavior, increase margins, and own larger swathes of the market.
With the toxic collusion of big business and politics, we have a deadly dynamic.
The average Joe isn’t always aware of all the shady things happening in the background until things reach the tipping point. For instance, many of us are already aware of Facebook’s abuse of data or Google’s anti-competitive practices.
But because these businesses invest billions in creating a brand, which creates positive associations in the consumer’s mind and adroitly glosses over all the ugly stuff they do behind the scenes, we fail to realize the extent of the damage caused by these companies.
Let’s look at some specific techniques that companies use to further cement their market position. These behind-the-scenes shenanigans are often carried out in a covert, clandestine manner, which is why it is so important to open our eyes and see what’s really happening.
Tricks of the trade
Here are 5 techniques in the monopolist's playbook:
Arbitration: What do big businesses do when they want to prevent consumers from fighting them in courts and engaging in public proceedings with state-appointed judges? Create a parallel system, where the decision of the case is made by an arbitrator privately appointed by the parties. Arbitrators have no reason to show precedent for their decisions unlike judges in public courts, and the process can be carried out privately. Add to this the fact that the arbitrator has often had a working relationship with the company in the past, which makes them more likely to rule in favor of the company and totally subvert the process of seeking justice. When big businesses can toy around with the legal process, there’s little that prevents them from doing whatever the hell they want to, regardless of how badly it hurts consumers…or animals, trees, and the planet for that matter.
Preventing collective consumer action: Thousands of disgruntled consumers banding together to go after a company that screwed up with its product/service has been a major headache for businesses. To prevent this possibility, companies make consumers agree to the fact that they’d only be able to take up legal action against them individually, and never as a group. What a shrwed gambit! If I’m all alone, I can’t pool resources with thousands of others to fight against Goliath, and I’d be much more likely to forget all about it and move on without even trying. And even if I’m a rich dude who can go alone, I’d go back to point #1- fighting in a parallel system where the odds are sorely stacked against me. Next time you renew your Prime membership, be sure to read the clause on representative/class action suits- and you’ll know how slyly they manage to neuter all possibilities of joint consumer action. You may think that you’re well within your rights to say no to Amazon’s T&Cs- but where else are you going to go? When the market is dominated by 2 or 3 players, all of whom use the same terms, do you really have an option?
Waging war on worker unions: It’s highly likely that at least some of the brands you love are guilty of treating their workers in a horrible manner- making them toil in sweatshops, subjecting them to surveillance, and denying them fundamental rights and privileges. But what can the troubled worker do? She can’t quit because the other dominant players in the market also offer the same terrible working conditions. You may walk out of the warehouse of 1 pathetic e-commerce giant only to realize that the other company is worse. You can’t protest their policies because you’d get fired- a situation you just can’t afford. You could think of banding together with other suffering workers, but companies take great pains to nip these activities in the bud. Walmart has a hotline for managers to call if they detect any organizing and have special delta teams to stop such efforts. Amazon had a training program for managers to bust such efforts. Lockheed Martin created a tool to spy on workers to detect if they were planning to organize. The list goes on.
Horizontal ownership: The same set of investors own stakes in all airline companies in the US. This allows them to have a direct line with the CEOs of these companies so they can keep prices up and collude in a way such that a disgruntled customer- upset either with the service or the pricing, has nowhere to go. The capture of entire industries by a small set of shareholders is great for them and pathetic for everyone else. Many push back against this criticism with the “If you don’t want it, go somewhere else” logic. But what can a consumer possibly do when there literally are no other options and she’s caught in a market that has been captured by a handful of monopolists?
Evergreening & Pay-To-Delay: Perhaps the best examples of strategies for market domination come from the pharma industry. Players are known to engage in a practice called evergreening, where companies make slight tweaks to products just so they can claim that they’re new and extend the patent duration, thereby maintaining their monopoly profits for much longer. This not only keeps important drugs out of reach for patients but also results in companies focusing less on new innovations when they know they can keep making money by cornering the market for long durations. Another tactic from the pharma playbook is pay to delay, where companies offer manufacturers of generics (cheaper versions of medicines that make them accessible once the patent has expired) a cut of their profits so they can delay their entry: a clear-cut case of collusion to keep the profit machine churning while those in need continue to find these essential drugs inaccessible.
Many of the companies we love, invest in, and depend upon, are increasingly operating in anti-competitive ways.
This poses a fundamental threat not just to the well-being of workers and consumers, but also attacks the very foundations of society by clamping down on fundamental rights and freedoms.
If we have to begin the process of change, it is of cardinal importance for people to confront the rot that has set in and see it for what it is.
But the situation isn’t really hopeless. Humans have a long history of overthrowing unjust regimes that threaten the livelihoods of the masses- and there are various actions we can collectively take to improve the world we live in. What exactly those actions are will be covered in a subsequent piece.
Till then, share this article widely. Awareness is the first step toward radical change.
Thanks for reading! If you enjoyed this, here are a few related pieces you may enjoy:
Again, a master piece Sahil! It's very disturbing and eye-opening to think about these tactics being deployed by the companies we rely so much upon. What can be done to curb this other than awareness? Would you please make a post on it next time please?