We have all played monopoly. We all know what its like to buy or be bought out by another player. This doesn’t just happen in board games, this happens 24 hours a day, everyday, all year long. It’s just big companies buying up smaller companies. Sounds like simple capitalism right? But would you be surprised if I told you in more than 15 major domestic industries only 3 or 4 companies make up over 80% of the marketplace.
The Law Dictionary defines Corporate Consolidation as The union or merger into one corporate body of two or more corporations which had been separately created for similar or connected purposes. Corporate Consolidation has both positive and negative effects on society’s economic status quo and its consumers. These effects further develop into political and social issues.
This past June mega media company AT&T received court approval for the acquisition of Time Warner. The Euronews reported on this acquisition from a perspective we don’t tend to see in the states -a European perspective. Although AT&T and Time Warner are international companies we tend to see them solely through domestic mediums.
The Euronews draws the political notion that this approval was a “blow to the Trump administration’s attempts to block the deal.” This acquisition is seen as both a way to boost revenue in the marketplace and an decrease in marketplace concentration.
John Oliver as a British comedian with a politically left-leaning HBO talk show discusses why corporate consolidation is a major complication in our economy citing multiple news outlets and reports on the decrease in small business and the increase in M&As (Mergers and Acquisitions) between super-corporations.
Oliver uses his comedic persona to string together every aspect that goes into these M&As in layman’s terms to appeal to and entertain his audience. He even mentions this topic of corporate consolidation is a tricky one to report on because his own parent company Time Warner was just recently bought by AT&T “The top tele-company around alphabetically, but nothing else”. John moves on to explain that the small companies we think we are supporting actually have multinational owners. He rattles off multiple examples such as Burt’s Bees being run by Clorox instead of a guy named Burt and Goose Island IPA, a seemingly small brewery, run by Budweiser.
Oliver moves to the aspect of oligopolies among industries using airlines, an industry run by 4 corporations, as a prime example.
John uses the quote “Consolidation has… allowed the industry to do things like ancillary revenues…” to emphasize the what this can do to the consumer. He explains that these ‘ancillary revenues’ can be seen in fees such as those for checking bags (see graph). Bag fees have been increasing in the past decade in the airline industries generating over 4.2 billion dollars each year in revenue alone. These small changes in price are seen across all 4 airlines that control the industry. This in turn hurts us as consumers because we are forced to pay these fees if we wish to fly. Remember that we only have four choices of airline to fly on. Since there are only four options, airlines don’t need to care about what the consumers think. They know they people will use their services regardless of its quality (with regards to the extremes). This is just one example of an oligopoly that negatively impacts consumers.
Disney, one of the largest media shells, is launching their very own streaming service. Like many other networks and companies, Disney is acknowledging the transition away from cable and is leaping into this new era of streaming.
Now this may seem great for Disney lovers but it will actually force other streaming services to change for the worse. For example when Netflix’s contracted rights to stream Disney produced films and TV shows runs out, Disney will pull their content off of Netflix. This shouldn’t be a surprise that Disney wants to show their content, but what’s surprising is what content they actually own.
As previously mentioned, Disney is one of the largest companies on the media market in terms of entertainment owning over 40 entertainment sub-industries. Consumers are losing a lot more than they think. It’s not just a few movies and some kids shows. Disney would be removing everything they own pulling network content such as those appearing on A&E, ABC, ESPN, Fox, FX networks -along with many other assets- from third party providers.
This is bad news for us as consumers. In the beginning there were only a few third party streaming services. This meant that you could pay a set price to access a wide array on content.
Now studios and corporations are creating their own streaming services while pulling their content from these third party options. As the streaming industry grows increasing linear consumers will find themselves paying more for less content. If you want to watch Game of Thrones or Westworld you will need to pay for HBO Go (an AT&T asset). Say you want to watch TV shows like Always Sunny In Philadelphia or Saturday Night Live. You will soon have to pay for a subscription to each shows website or network owner instead of one third party option for all your entertainment needs.
Derek Thompson, while being an economic writer for The Atlantic, addresses the growth of companies within the restraints set by the federal trade commission. He reports on the effects of antitrust law on the mergers that are taking place across multiple industries by billion dollar companies.
Big companies have risen from the decline of entrepreneurship from the 1970s to the present in the form of enormously large firms masking the resemblance of monopolies and oligopolies through means of social responsibility.
Thompson uses the thought experiment of “How long does it take[an average American] to interact with a market that isn’t nearly monopolized.”
Once the average person wakes up, they move to browse social media sites such as FaceBook, Twitter and Instagram. Internet access, as many may not know, is sold through a local monopoly. Maybe they may need to make a grocery run leading them to superstores like Walmart, who happens to own a quarter of the grocery industry. If they want to go out for a drink with friends, the average person will find that the beer industry is controlled by only two companies.
This problem isn’t just discussed on the news, talk shows, and economically grounded reports. This topics finds its way into classrooms, social media and online forums.
We see this conversation continued on mediums like reddit. The post author references an article written by Matt Phillips, an economic reporter for the New York Times, that addresses the shear power these “super-corporations” hold. Phillips writes that multiple domestic industries are controlled by a handful of these super-corporations citing the tech, banking, and airline industry.
Articles like these spark an online debate on the positive and negative effects of corporate consolidation. Forums like reddit are substantial fuel sources for areas of discourse. This is great as it brings more attention to the otherwise very monotonous subject that it is while imploring for other perspectives and ideals on the topic.
Daniel Hanley, a University of Connecticut law student, breaks consolidation down to layman’s terms for a TedxTalk. He explains that companies merge to access new markets previously unreachable. Hanley goes on to show the economic consequences- growing income of the economic elites and decline in income for the middle class.
Research shows that favorability of policy change in the middle class is unchanged when put in congress. While if the economic upper class puts forth ideas along the spectrum of policy, congress is drastically more willing to accept it.
Hanley introduces another consequence; the stifling of economic growth. Companies overall spend less on development and more on market concentration/control. This habit of corporations has declined the economy’s ability to rebound from its lowest low.
Hanley wraps up with the idea that the economy is like an environment. You need a lot of biodiversity and competition to build a strong environment. The same should be said for the marketplace.
We see the dialogue of corporate consolidation move from platform to platform as the effects of this issue are disseminated throughout today’s society. Normally, people view this topic as very boring and not something they need to take part in debating. Soon enough our marketplace will be ran by just a handful of multibillion dollar corporations. As consumers we have no choice but to support these mega-companies. Monopolies and Oligopolies surround us in the international and domestic economy leaving us with no where else to turn.