How to Avoid the New Monopolies That Doom Consumers

Christopher Elliott

The term "monopoly" gets thrown around a lot by frustrated consumers, but never positively and rarely accurately.

For example, Roger DeKock, who had several erroneous transactions on his Virginia E-ZPass account, recently contacted me to complain. Angry about the runaround, DeKock, a retired chemist from Grand Rapids, Mich., described E-ZPass as a "monopoly." Technically, it isn't. Many states offer E-ZPass transponders, often at different rates. And, of course, you can always pay for your toll with cash or avoid the toll road altogether. But to the consumer, E-ZPass sure seems like a monopoly.

Maybe it would be more accurate to say that E-ZPass and other businesses behave monopolistically, which is to say, they act as if they're the only game in town. That is becoming an increasingly common problem. The Federal Trade Commission recently took measures against a pharmaceutical company that, it claimed, was trying to maintain a monopoly on a drug. (Don't get too excited; this happened before the new FTC commissioner assumed power.)

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There's a sense that while classic, textbook-definition monopolies like American Tobacco, AT&T and Standard Oil are still not allowed (illegal under the Sherman Anti-Trust Act), under the current, business-friendly administration, monopolistic practices are tolerable—as long as consumers don't complain too much.

So where are the de facto monopolies? Which of them are getting more, well, monopolistic? And what, if anything, can be done about them?

Finding a monopolistic industry is pretty easy, actually. You just follow the bad customer service, and there you will also find an industry with little competition. A good place to start is the American Customer Satisfaction Index's industry benchmark scores.

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An internet service provider like Verizon Wireless is an example of a business that feels like a monopoly to many consumers although it technically is not. Reuters

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The lowest-scoring industries:

  • Internet service providers;
  • Municipal utilities;
  • Fixed-line telephones;
  • Wireless phones;
  • Airlines.

If you look at all of those industries, you'll find they have a few things in common. Consumers have few choices, which puts the businesses in an excellent position to do whatever they want. Prices are generally high. Customer service is awful.

Monopolistic companies can pop up anywhere, even when service isn't factored in. One of the most frequently cited examples of a dominant business is Procter & Gamble, which took over Gillette back in 2005. As a result, it controls:• More than 75 percent of men’s razors

  •  About 60 percent of laundry detergent;
  • Nearly 60 percent of dishwasher detergent;
  •  More than 50 percent of feminine pads;
  •  About 50 percent of toothbrushes.

Those figures are courtesy of Barry Lynn, author of Cornered: The New Monopoly Capitalism and the Economics of Destruction. How we got here, I'll leave to experts like Lynn to explain. How to avoid being trapped by high prices and shoddy service—that's a concern we're all facing now more than ever.

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The current administration is dead set on dismantling vital consumer protections that would prevent a monopolistic company from becoming even more so. It isn't a question of "if" but "when" a new proposed merger in the airline, cellular phone, or internet service provider space will take place. With no government to protect you, what do you do?

Here are three strategies to counter a monopolistic industry:

  • Join a membership organization or trade group that represents thousands of other consumers and is able to use its clout to negotiate a lower price. Big, monopolistic corporations might sneer at the little guy trying to find a better price, but a thousand or 10,000 little guys asking for a discount or for them to honor the terms of their own warranties—that can't be ignored.
  • As my free-market friends will correctly point out, most of the monopolistic industries offer products that are not needed for survival, except perhaps the municipal utilities. On the other side of that coin is the realization that consumers have the ultimate power. If enough of them decide to stop doing business with a monopolistic wireless provider or air carrier, that will force it to change its ways. The only thing that's missing is a collective resolve. But we'll get there.
  • So the federal government has turned its back on consumer protection. But not the entire government. Some state governments, such as California's, continue to stand up for the rights of consumers. If a company's behavior is so out of line, you can still take the matter to your state attorney general or to an appropriate state regulatory agency.

Of course, in the end the only solution may be to invoke the appropriate federal antitrust laws to prevent an industry with only a few dominant players from having its way with you, the customer. That day may be a long way off, at least in the current political climate, but it will come. Mark my words.

Consumer advocate Christopher Elliott's latest book is How To Be The World’s Smartest Traveler (National Geographic). You can get real-time answers to any consumer question on his new forum, elliott.org/forum, or by emailing him at chris@elliott.org.

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