From Standard Oil to Ticketmaster: The Tales of the World’s Greatest Monopolies of All Time

What is a monopoly?

Let's face it: we've all played Monopoly in one of those long, often boring family dinners. So you’re probably familiar with the concept. It’s defined as a ‘market structure where a single entity is the sole supplier of a specific product or service, facing no competition’. A frequent example is the water system of a specific area or region. These are normally controlled by a single company because of the high cost of construction of these sites, which makes it more effective to have a single funder rather than many small ones.

What are not to be confused as monopolies?

A company that has a big presence in an industry without engaging in practices to eliminate competition or naturally having no competition. For example, if Nike suddenly became so popular everybody ditched other companies like Adidas, Puma, Asics, Lululemon, etc to buy their shoes, so that they would reach 90% of the total sales of trainers, would that make them a monopoly? Of course not. There are many substitutes and choices, and Nike in this hypothetical situation is not impeding its competition from, well, competing, in any way.

Advantages of monopolies

Companies can benefit from economies of scale, which means that the more products they buy, the lower the cost of each individual product. They are also able to fund large projects that other smaller companies wouldn’t be able to. But above all, the biggest advantage of being a monopoly for the company itself is market power: the ability to influence wages, prices, competitors, infrastructure…If there is few to no competition, who cares if you charge 50€ or 200€? They are still likely to buy it, especially if they need it. 

For the consumer, there are also some benefits. If the company benefits from economies of scale, this means the product costs less to make, so the prices should be lower. Unfortunately, as stated in the paragraph above, most businesses only use economies of scale to set higher profit margins. Another benefit monopolies could bring are consistent standards. This means that there is a stable supply of crucial services like water, natural gas and electricity, which could avoid disruptions (like frequently changing infrastructure). These disruptions could overall worsen customer satisfaction.

Disadvantages of monopolies

Because they have great or complete control over the industry, they can set higher prices. Not only that, but innovation and quality worsen, as there is no struggle to keep secure a place within the industry. If, let’s say, a thousand people in a small town in Montana are going to pay for your water system, as there is no other choice, why bother to invest money in offering the best service possible? They’re going to pay for it anyway, right? And, as always, there’s something related to entrepreneurs. In this case, they find themselves at a disadvantage because it’s harder for them to enter the specific industry. For instance, if that same company owns water supply systems in 300 small towns in Montana, how can that one brave entrepreneur start its own water supply company in that state?

Standard Oil

Founded in 1870 by John D Rockefeller, who I’m sure you’ve heard of, Standard Oil refined 90% of American oil at its peak. But it didn’t stop here. It controlled the whole process, from drilling to delivery. This made its founder an even richer and more influential man. 

But how did John D Rockefeller achieve this? Standard Oil bought or beat the competition, which confirms the affirmation that the truly rich don’t compete–that’s for ‘losers’. They just eliminate the competition. This is also true of LVMH, the mega company behind some of the biggest designer brands, like Dior, Louis Vuitton, Givenchy, Fendi, Marc Jacobs,... the list goes on. 

Another reason why Standard Oil was so successful were secret railroad deals. These helped them pay less when transporting the oil, which increased their profit margins compared to other companies which paid the standard price with no secret negotiations. Despite it being unregulated at the time, it was later outlawed as it gave them an unfair advantage over other similar oil businesses. 

Last but not least, another policy that led Standard Oil to the top was predatory pricing, which is currently illegal in over 130 countries. Predatory pricing enables a brand to sell their products or services at dangerously low prices, until other companies lose their customers and cannot compete. 

Because of all the unethical–though unregulated–policies it pursued, Standard Oil was broken down into smaller companies in 1911 under the Sherman Antitrust Act, which stated they had illegally restrained competition. Some of the smaller companies include Exxon, Mobil (which merged in 1999), Chevron and Amoco, among others.

But was Standard Oil all big and bad? There is never black and white in business. There are many different shades of grey, and in this case, although Standard Oil restrained competition and followed unethical practices, it also expanded availability and improved infrastructure that is still used today.

If you’d like to request an article on John D Rockefeller, or any other business topic, we’d love to hear your suggestions! Please let us know by filling in the information and writing a message below.

Ticketmaster

Ticketmaster, which merged with Live Nation Entertainment in 2010, has recently headlined many newspapers and scandalized thousands with ideas that they are arguably beginning to become a monopoly. According to CBC, ‘the jury found Ticketmaster and Live Nation liable on multiple accounts, including operating an anti-competitive monopoly and unlawfully tying together tour promotions, ticketing and operation of venues’. To read the complete article, please visit https://www.cbc.ca/news/investigates/live-nation-executive-exclusive-9.7191295. 

So how did Ticketmaster get here anyway? 

Have you ever tried to buy tickets for a Bad Bunny concert? Or Tate McRae? Or basically any artist that you like? You’ve probably done it through Ticketmaster. How do I know? I’m not  a fortune-teller…yet. It’s because Ticketmaster has contracts with all the world’s most famous superstars, and if you wanna be there, Ticketmaster’s going to be there too. Think of them as that one friend who sticks around for all the hang outs…even if you want to be alone with your other friends from time to time. You just can’t get rid of them!

For them, it’s one, fraud prevention, and two, many singers that equal millions of loyal customers, that have led them to the top. The system is already established, and it’s almost impossible to compete or even try to do so.

Other examples

Although crucial to understand the issue of monopolies, Standard Oil and Ticketmaster are not the only ones out there. In fact, they’re all around us. For instance, the search engine you are currently using is Google…right? Told you. And, although it has become more antiquated recently, I’m sure you’ve used Microsoft Windows at least once. A few examples of the past may include ‘DeBeers’, which controlled most diamonds from the 1930s to the 1980s, or AT&T, dominating the US telephone service throughout the 20th century.

Personal opinion

On one hand, monopolies often pose a threat to other smaller companies as many businesses that engage in unethical policies try to maximize control and profits over an industry. 

On the other hand, monopolies are sometimes a more effective way of handling services like water, electricity or natural gas, as they are extremely costly and fundamental to communities all around the world. 

Either way, it’s crucial for legal systems in each country as well as internationally to control the growth and power of these potential monopolies to ensure a fair system is achieved. After all, isn’t the whole idea of capitalism that competition enables the consumers to choose the best option? 

Overall, at The Curious Entrepreneur, we believe it’s never one thing or another, but a combination of factors, and that’s why it’s important to always stay informed on business topics to have the ability to form your own opinions based on the whole picture with all the data on the table.