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Oligopolies in plain sight


A judge blocked the merger of two book publishing companies after the US regulators objected to the merger on the grounds of it being anti-competitive and harmful. While that’s probably true, it strikes me like your kid eating two Big Macs, fries, pecan pie with ice cream and one potato chip – and you complain about chip being unhealthy.

In many important segments of our economy, a handful of companies control the market.  Cloud computing has only three players, who just so happen to be three of the largest companies in America: Amazon, Microsoft and Google. Six oil companies control 75% of the world market.  Two ground delivery companies dominate the US market for deliveries to homes.  Six grocers have fifty percent of the US market.  Similar concentration exists in many other markets central to our economy. Oligopolies bring some advantages for those outside the oligopoly.  Great companies like UPS and Amazon make our lives better. Building cloud computing infrastructure or drilling for oil require massive capital spending, investment which makes products and services available to many. But there are downsides too. We are experiencing harmful and frustrating inflation of the past few years. Pricing power exercised by oligopolies is every bit as big of a driver of inflation as supply chain constraints and excess stimulus. Oligopolies also tend to choke off innovation. Free markets and competition serve us all well.  But extreme concentration in the hands of a very few companies is not a free market. Regulators fail to inspire confidence in their grasp of reality when they fight a merger in the niche book publishing market while remaining oblivious to the very big and real concentrations going on in major segments of our economy.


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