July 22, 2017
7 near-monopolies that are perfectly legal in America
True monopolies were outlawed in 1890 in the U.S. after Congress passed the Sherman Antitrust Act. This law was designed to protect consumers from large companies that sought to use their dominant market position to engage in anticompetitive business practices. The bill also gave the federal government the power to step in and take action when necessary.
While this law is still in place today, that hasn’t prevented a handful of very powerful companies from gaining a huge amount of market share in their industries. Below we’ll take a closer look at seven companies that could easily be considered near-monopolies today.
1. Anheuser-Busch InBev NV
Anheuser-Busch InBev (BUD) has long enjoyed top-dog status in the U.S. thanks to its ownership of a number of best-selling beer brands such as Budweiser, Michelob Ultra, Beck’s, Stella Artois, Bass, and more. However, the company’s market dominance was brought to a whole new level last year after it spent over $100 billion to swallow SABMiller — the industry’s second-largest player — whole. This megamerger was so large that AB InBev is now estimated to control about 46% of global beer profits and produce about 27% of the world’s total beer supply.
On the bright side (for consumers), getting this deal past regulators wasn’t easy. The two companies were forced to sell off some brands to appease competition concerns. AB InBev is also prohibited from using its power to restrict the distribution of beer from rivals. However, even with these concessions the company still commands a dominant market share in the U.S. of about 45%.
Looking ahead, AB InBev growth plans call for it to continue to increase its presence in international markets and to realize the synergies Opens a New Window.of its massive acquisition. With so many top-selling brands under its wing, AB InBev looks well-positioned to retain its near-monopoly status.
The cost to sequence an entire human genome has plummeted over the last decade. One company that deserves high praise for driving those costs lower is Illumina (ILMN). Throughout its history, Illumina has consistently brought to market new products that have significantly driven down the cost curve of genetic testing by an order of magnitude. A good example of this is the company’s HiSeq machines line. These products were introduced years ago and enable researchers to sequence an entire genome for as little as $1,000. That’s a price point that rivals have had trouble matching, which is a big reason why Illumina’s market share regularly hovers around 90%.
Illumina looks poised to continue its dominance of the genetic-testing market thanks to the recent launch of its NovaSeq Series Opens a New Window.. The company believes that this new product line will one day enable researchers to sequence a genome for as little as $100. That could be a low enough price to attract interest from insurers and consumers alike, and should go a long way toward helping Illumina to maintain its industry-leading position.
3. Intuitive Surgical
In 1999 Intuitive Surgical (ISRG) launched its da Vinci robotic surgical system to market. This new tool was approved to assist surgeons with general laparoscopic procedures. Intuitive sold the device on the promise that it enabled smaller incisions and led to less blood loss, both of which helped patients to recover faster. Over time surgeons found more ways to use the system and the demand for robotic surgery grew. That greatly benefited Intuitive, since it faced virtually no competition at all for years on end, providing the company with a monopoly-like stranglehold on the industry.
Fast forward to today and the company now has more than 4,000 da Vinci systems in use around the world. What’s more, Intuitive recently launched its next-generation system, called the da Vinci X, which is designed to appeal to cost-conscious Opens a New Window.hospitals and physicians. Given the company’s massive install base and technological capabilities, potential competitors Opens a New Window. certainly have their work cut out for them if they have any hope of catching up.
4. Sirius XM Holdings
If you subscribe to a satellite radio service then you are likely aware that you basically only have one choice — Sirius XM Holdings (SIRI). The company’s stranglehold on the market came about when XM and Sirius merged, in 2008, to form the juggernaut that we know today. This move was truly a match made in heaven as it costs a pretty penny to launch and maintain satellites in orbit. In addition, signing content deals with Howard Stern and the NFL isn’t exactly cheap Opens a New Window.. Operating as two stand-alone businesses made little economic sense, so joining forces seemed like a win-win proposition for both companies.
However, while Sirius XM holds a monopoly-like position in satellite radio, it would be laughable to say that the company is free of competition. Consumers can choose to listen to their local radio stations, stream music through services like Pandora or Spotify, or even download podcasts Opens a New Window. whenever they want. This variety means that the battle over a consumer’s listening time remains quite fierce.