A key part of the description of capitalism in orthodox (neoclassical) economics, and our political rhetoric, is the role competition between companies plays in keeping the automatic self-regulation of markets humming for the most efficient and effective production at optimal prices. Competition is also regularly touted as a great driver of innovation. Leaving aside the persistent questions about the veracity of this model of markets, competition has been dead in the US for decades. Oh, for sure there is competition at the level of your local pizza shop, barbershop, and more small businesses that we frequent. But, they don’t amount to a hill of beans in the context of an economy that produces more than $27 trillion (27,000,000,000,000) in goods and services per year.
The real story of the death of competition is that virtually every market segment in our economy is controlled by a handful of companies. One of the earliest points that I began to understand this was David Leonhardt’s piece, “The Monopolization of America – In one industry after another, big companies have become more dominant over the past 15 years, new data show.”1 in the NYTimes from 11.25.2018. It contained this chart:
After doing a bit more research, I discovered that market concentration is defined by economists and Federal anti-trust regulators as a market in which 3 or 4 companies control 50% or more of the market. At this level of concentration, the monopolist2 companies can affect prices, wages, prices paid to suppliers, and suppress innovation and competition. That lead me to this summary chart.
A Survey of Concentration in the US Economy
Here are some examples of economic sectors that are concentrated:[note]Data from https://concentrationcrisis.openmarketsinstitute.org/ accessed 3/6/2022 except as noted[/note]
Beer (2018)
- Anheuser-Busch – 42%
- MillerCoors – 24%
- Consolidated Brands – 9%
Total market share – 75%
Meat Processing (2018)
- Tyson – 16%
- JBS SA – 19%
- Cargill – 11%
- Smithfield – 7%
Total market share – 53%
Baby Formula (2018)
- Abbott – 40%
- Reckitt Benckhiser – 29%
- Perrigo – 11%
- Nestle – 9%
Total market share – 89%
Eye Glasses – Contact Lenses (2019)
Home Improvement (2017)
- Home Depot – 45%
- Lowe’s – 36%
Total market share – 81%
Pharmacies-Drug Stores (2017)
Cell Phone Providers (2019)
- Verizon – 35%
- AT&T – 34%
- T-Mobile – 17%
- Sprint – 12%
Total market share – 98%
Grocery Stores (2023)4
- Walmart – 24%
- Kroger – 10%
- Costco – 9%
- Albertsons – 7%
Total market share – 50%
Hearing Aid Manufacturing (2018)
Cars (2023)
- GM – 17%
- Toyota – 14%
- Ford – 13%
- Hyundai Kia – 11 %
Total market share – 55%
Cigarettes-Tobacco (2019)
- Altria – 54%
- Reynolds American – 29%
- Imperial Brands – 8%
Total market share – 91%
Car Rental (2018)
Airlines (2018)
- Delta – 22%
- American – 21%
- United – 1 Southwest – 15%
Total market share – 76%
Off to the Grocery Store
Here are a few examples of individual product monopolization in the grocery store in 2021:5
- Single-serve yogurt/yogurt drinks – 4 companies = 97% of market
- Carbonated soft drinks – 3 companies = 93%
- Canned tuna – 4 companies = 85%
- Baby formula (liquid concentrate) – 3 companies = 85%
- Mayonnaise – 3 companies = 83%
- Baby food – 3 companies = 82%
- Beer – 3 companies = 79%
- Bagels – 4 companies = 77%
- Canned soup – 4 companies = 70%
- Canned tomatoes – 4 companies =58%
- Turkey products – 4 companies = 58%
Finally, one of my favorite images of an apparently competitive market is the toothpaste aisle. All those different brands! Proctor & Gamble, Colgate Palmolive, and Glaxo Smith Kline, three companies, command 89% of this $3.19 billion market.
Central Planning or Monopoly Planning?
One can easily see that the competitive forces of the marketplace are substantially absent from the highly concentrated sectors of the economy. Here, monopolist companies plan the sector’s direction. This is the much-maligned central planning of a socialist economy, but it is in the hands of private interests.
A study by researchers from the U. of Chicago, Harvard, and Leibniz Institute, “100 Years of Rising Corporate Concentration,” 6 found that as of 2018, 97% of all business assets (plant, equipment, etc.) in the US are owned by just 1% of corporations. Further, the top 0.1% of corporations owned 88% of these assets. With this in mind, we can posit that the planning for developing our economy is in no way the sum of some idealized competitive struggle. This is centralized planning by monopolists.
Just to close this post out before exhaustion sets in, keep in mind that concentrated markets provide the dominant companies with opportunities to (1) their own prices for customers, (2) suppress wages because of a non-competitive labor market, (3) force prices down for products and services provided by their suppliers, and (4) eliminate or suppress competition and innovation by competitors. I will explore each of these strategies in the future.
Footnotes
- https://www.nytimes.com/2018/11/25/opinion/monopolies-in-the-us.html
- Note that we continue to use the term ‘monopoly’ and all its cousins to refer to concentrated markets. ‘Oligopoly’ is also used. All of these terms are synonymous with concentrated markets.
- From https://www.statista.com/statistics/242549/digital-ad-market-share-of-major-ad-selling-companies-in-the-us-by-revenue/ accessed 3.12.2022
- https://www.supermarketnews.com/independents-regional-grocers/walmart-kroger-costco-make-top-three-grocery-retailers-list
- https://www.theguardian.com/environment/ng-interactive/2021/jul/14/food-monopoly-meals-profits-data-investigation accessed 6.23.2024
- Spencer Kwon, Yueran Ma, and Kaspar Zimmerman, “100 Years of Rising Corporate Concentration” (BusinessConcentration.com), accessed June 6, 2024, https://businessconcentration.com/.
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