New monopolies could spell higher prices and worse service, but here’s how to sidestep them

By | March 27th, 2017

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.)

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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The lowest-scoring industries:

    • Internet service providers (63/100)
    • Municipal utilities (68/100)
    • Fixed-line telephones (70/100)
    • Wireless phones (71/100)
    • Airlines (72/100)

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.

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:

They get big — you get bigger
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 ten thousand little guys asking for a discount or for them to honor the terms of their own warranties — that can’t be ignored.

Don’t buy
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.

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Complain to the part of the government that still listens
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.



  • sirwired

    It is incorrect to say that “here’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.)

    If history were to repeat itself, Ma Bell could still rise today, or during any administration. It is perfectly legal for monopolies to exist and “organically” form. (As in, AT&T didn’t gain a monopoly on telephone service in the US by buying up competitors, they gained a monopoly by simply building a nationwide telephone network, and like any utility, that formed a “natural’ monopoly.)

    Where anti-trust law comes in is that having a monopoly imposes certain restrictions on behavior. And anti-trust law also applies for mergers/acquisitions, and in agreements between nominal competitors. But a large business having sole rights to [thing], and making a mint off of it? That’s ok.

    Now, if you HAVE a monopoly, and engage in certain restricted behaviors, that’s when the government can act to break you up, although I can’t remember the last time that happened.

    (And yeah, E-Z Pass is a bad example; it’s not a “company” at all… it’s an organization that facilitates transactions between various government toll authorities; according to the website, they have a staff consisting of three people. They don’t actually issue transponders, collect tolls, or maintain individual accounts. They don’t even have contact information on the website, probably to keep from being inundated with customer service requests from individuals; their customers are toll authorities, not drivers.)

  • PsyGuy

    First you can ignore 1000, or even 10000 little guys. Monopolistic companies like airlines and network providers do this all the time. Really, you aren’t an issue until you have double digit percentages of a population (your ground represent 10% of whatever population you are talking about). raw member counts mean very little.

    Second, it’s easier to vote with your wallet and your feet when you have options. As much as survival is certainly a standard, it’s not a very realistic standard. I don’t need mobile service to survive biologically but in this culture and society I do, as losing it would certainly effect my productivity and without it my job, and ultimately my ability to physically survive. Even the homeless have phones.

    Third, I generally find state agencies much more responsive to individual concerns and complaints than federal agencies. federal agencies. I get way more assistance from my state insurance regulator or Banking regulator than I do the FTC or the CPB. Even in Japan the ward office is much more helpful and responsive than any of the national government agencies.

  • PsyGuy

    I don’t know if Ma Bell would rise today. Google might beat them. Technology companies are generally bad examples because the infrastructure Ma Bell built is pretty much outdated. Not saying we don’t make use of it, because it’s after all an infrastructure and it’s there, but if it wasn’t, laying all that copper wire probably wouldn’t happen today.

    The other issue is that while I agree you can have a monopoly you just can’t behave in certain restricted ways asa monopoly, the point being maybe we should relook at those rules and maybe come to the conclusion that monopolies in of themselves are inherently bad and we should restrict them to.

  • Byron Cooper

    As for EZPass, I live in DC which does not issue them. I got mine through Virginia after comparing the fees to Maryland’s which were higher. So there is consumer choice and competition. Washington DC does not have any toll roads, so there would be no reason for the government to issue these devices. I had no problem using my DC address, along with our cars that are registered in DC.

  • sirwired

    I was speaking more of a legal basis, not a technical one. The law hasn’t changed since Ma Bell started that would prevent them from existing. Really, I’m not sure what Bell splitting into Baby Bells actually accomplished. Freeing the tie between long-distance and local, and eliminating the equipment monopoly? Sure, that was effective, but I don’t know what splitting local up into tiny chunks was supposed to accomplish, since, by definition, there was no competition between them. (And, indeed, many of those tiny chunks have re-combined into large regional utilities.)

    Monopolies are, in many cases, inevitable, simply because it is impractical for competition to exist in many case. More than one electric utility? Impractical. And copyrights/patents are also natural monopolies. Is it fair for anybody but the owner to say how much licensing a copyright/patent should cost? Should Chris be required to rent space on elliott.org to anybody who asks?

  • Donald Filiault

    “And, of course, you can always pay for your toll with cash”.
    Not necessarily. The trend in Florida is to convert many toll to unmanned status, so if you don’t have a Sunpass or similar, you’re going to have to pay the toll later with a service charge added to it.

  • gpx21dlr

    I buy generic whenever I can. No name gas has served me well, my Chevy is 19 yrs old and gets 20mpg. I buy store brands, use coupons and a friend lets me buy at costco using her card.

  • Jeff W.

    The article somewhat meanders a little, and not sure what the overall point is. Poor customer service does not necessarily equate to monopolistic practices. Take the five industries listed in the article.

    What they all share in common is that there is high cost of entry for these industries.

    * There is plenty of competition for ISPs in most markets. But usually only one cable company, one phone company, and some high-density areas have other choices.
    * Municipal utilities. Unless you are suggesting that each electric, phone, gas, water, and/or sewer company gets to run its own lines through everyone’s neighborhood, it will be a monopoly. Some states have deregulated some aspects of this.
    * Land-Lines. A dying industry.
    * Wireless telephones. Hardly a monopoly. Sure, there are two dominate players, put plenty of competition
    * Airlines. Not a monopoly either. Many airlines in this country. Maybe not to your airport, but in this country there is. Plus not all cities can support multiple airlines.

    P&G is an interesting case study. It is certainly a dominate player in the market. But there are other options if you do not like their brands or that company.

    Poor customer service can happen in a monopoly or in an industry where there are many players. Think of some of the airlines before the latest rounds of consolidation. Management and labor differences certainly played a part. if the employees are not happy, customer service will tank.

  • Jeff W.

    Generic and store brands are sometimes manufactured by the same big-name companies. The differences could be quality or certain ingredients. Or sometimes there is no difference.

    As for Costco, one way to buy things at Costco without membership is via gift cards. (I know how this site feels about those!) Costco will let you redeem your gift cards, even if you are not a member.

  • JewelEyed

    Sunpass. Ugh. Florida should be EZPass compatible by now (last year, actually), but they still haven’t done it.

  • PsyGuy

    Maybe we should look at changing those laws. Personally, I’d like options for my power. I’d pay more for green electricity actually.

  • sirwired

    There ARE places where you can pay a different company for your kWh. Then that company is responsible for either generating or buying the power. (It’s a bit of an abstraction, of course, since all those watts end up in the same grid.)

    But multiple retail-level power utilities are quite impractical. Setting up the duplicate infrastructure would be both expensive and disruptive.

  • Jeff W.

    Where I live, electric and gas are deregulated. Each of the legacy utilities are now in the distribution business. They maintain the wires and pipes. You can then buy the electric/gas from them if you wish or from an additional provider. Sometimes it is cheaper, sometimes not. Often you are locked into a contract of a year or two.

    It is a complicated setup, but for us, it has worked. We get an electric rate that was negotiated by the village, which was fixed and is now below market rates.

  • Harvey-6-3.5

    Though for some, home solar is possible with battery backup to avoid the grid. That would be distributed power that a consumer could use to avoid the electric company.

  • michael anthony

    Airlines are really one of the “kings” when it comes to monopolies. Like when they all charge the same fare. Or how certain carriers control certain cities, with Delta in MSP a prime example. It’s only going to get worse, since Trump proposes massive cuts to cities with subsidized air travel. Guess they don’t need the ability to fly for business or pleasure.

  • Fishplate

    “Guess they don’t need the ability to fly for business or pleasure.”

    My city is one of those begging for government-subsidized air travel. And yet, we are 80 miles (1.5 hours) from a major hub airport, and there’s a private shuttle van service that runs reliably every hour, 19 hours a day. And their fare is cheaper than any subsidized service. (The subsidy worked out to about $400 per passenger, if I recall correctly).

    I can still fly, I just have to go to the airport to do it.

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