When you hear the word monopoly, what is the first thing that comes to your mind? Perhaps Monopoly the game. Perhaps you think of these giant companies that seem untouchable. Whether or not you know the definition of the word is irrelevant for this article, as there is so much more than taking it at face value. Together, we will delve into not only the definition, but also the types of monopolies and examples that you should know.
WHAT IS IT?
A monopoly arises when a company or person has exclusive or near-exclusive control of a market, thereby becoming the only large producer and seller of their product or service.
If the government doesn’t intervene, a monopoly can set its prices to have the highest returns possible, as they control the whole market.
This does not only impact consumers, but also workers. Since there is no competition, companies can drive salaries into the ground with little to no problems. This is when government intervention is needed.
THE TYPES OF MONOPOLIES
There are many different forms that a monopoly can take. Some of them are,
- Natural Monopoly:
This happens when a single company or firm can provide a lower cost of service than all other companies in the same sector, creating a nearly impossible route into the market. - Government Monopoly
This is a monopoly owned by the government, hence the name. This can range from issues such as public transportation and postal services across the country to public utilities. This is used to ensure essential services remain accessible and affordable to everyone. - Technology Monopoly
A company owns or has created a technology that dominates the entire market. A perfect example of this would be Google, as they were deemed to own over 90% of the global search engine market. - Geographic Monopoly
A company is dominant in a specific geographic location. A Canadian example would be BC Hydro. This is not only a geographic monopoly, but also a natural and government monopoly.
EXAMPLES OF MONOPOLIES
If you look at the top businesses in the world, you will find many monopolies, whether that is NVIDIA, Amazon or Alphabet.
Looking back in history, we see a unique example. This was the monopoly over US sugar. Owned by the American Sugar Refining Company, they held a staggering 98% of the total market and were actually taken to court against the US government. Funnily enough, the court ruled that they were not a monopoly, which begs the question of how much influence that they really had.
Just because you see the word monopoly doesn’t mean that these companies are immediately breaking the law and require immediate government intervention. In Canada and many other places in the world, monopolies are legal as long as they act within the Country’s act related to free trade. In Canada, this is named the Competition Act.
Hopefully, from reading this, you have learnt something new.
If you are further interested, I urge you to research further into it, as the history of monopolies is very closely intertwined with politics, and that still hasn’t changed. You will not be disappointed by going down this rabbit hole.
