When Love Live Local became a nonprofit organization in early 2020, we dedicated ourselves to communicating the importance of supporting small business and adopted the mission of fostering an economically sustainable future for Cape Cod. Our aim is to work with local businesses to achieve their economic goals and communicate their importance to the Cape Cod community. Since then, we have produced research that definitively shows that Cape Cod local businesses contribute much more to our community than their corporate counterparts. Yet, despite their proven importance to local economies and community vitality, small businesses across the country face challenges to their survival, not the least of which is corporate concentration in most economic sectors; now most industries are dominated by a handful of corporations.
Our region is dominated by small businesses – 90 percent of businesses on Cape Cod have 1-19 employees – so this year we embarked on an investigation examining what type of impact this pervasive corporate consolidation, concentration and power has on our local businesses right here at home.
According to the Open Markets Institute, despite the illusion of too many choices when buying office supplies, deciding on a rental car, and even choosing Halloween candy nearly every marketplace in America is vastly more consolidated than a generation ago. Today, two firms control 69 percent of the entire office supplies market; three corporations now dominate the rental car business; and two companies control 75 percent of the candy market in America.
This type of corporate concentration doesn’t stop there. You see it online as Google and Yahoo capture 82 percent of internet searches, and in travel search companies where there are two independent travel search companies – Expedia and Priceline.
In transportation, recent mergers have left four airline carriers in the United States with control over 80 percent of the market and seven large railroads control much of that industry (there used to be over 30). In healthcare, three companies dominate the health insurance market, three large firms produce most of the pacemaker supply, and one company, Luxottica, dominates manufacturing of and retail for eyeglasses for the U.S. market. Many products from diapers to soda to lightbulbs to tires to refrigerators, glass bottles, mattresses, lab equipment, cowboy boots and champagne are dominated by large players that essentially control the market.
A report on the impacts of monopoly power by the Institute for Local Self Reliance states “this type of concentrated economic power has reconfigured multiple sectors in ways that have both weakened the broader U.S. economy, by stifling investment and innovation, and harmed working people and communities.” Matt Stoller, the Director of Research at the American Economic Liberties Project, says “the consolidation of power over supply chains in the hands of Wall Street, and the thinning out of how we make and produce things over forty years in the name of efficiency, has made our economy much less resilient to shocks.” And in an Atlantic article David Dayen writes, “the number of start-up businesses has plummeted since the late 1970s. Products and services grow worse, and companies with little competition have no incentive to improve them. Concentrated supply chains are more vulnerable to disruption, as the coronavirus crisis has shown. Fewer firms shovel more economic gains to smaller groups of executives. Politics becomes unbalanced as monopolists bend lawmakers and regulators to their will.”
Recent economic research has shown that corporate concentration makes it almost impossible for new companies to enter and compete in many markets and is one of the reasons for stagnant wage growth. With many industries now dominated by just a few giant companies, and fewer new businesses starting, there’s less competition for labor, which allows companies to hold down wages.
The research has also shown that in a concentrated market companies can and will manipulate prices, reduce supply, and do everything they can to remove smaller competitors. Take Uber. The company came to most major cities around 2012, and charged prices far below those of local taxis, which they were able to do because they were subsidized by investors (they lost $11billion in the last three years). They were able to lure customers in with cheap prices, put taxicab companies out of business, and make people even more dependent on them. Nationally, Uber prices are up 92% over the last year and a half.
Studies estimate that corporate concentration costs the average household between$5000-$50,000 a year in lost purchasing power due to lower wages and higher prices.
Our research focus was on the consolidation in eight different industries: pharmacies, news, waste removal, banking, restaurants, food, retail and broadband. We looked at pharmacy benefit managers, which oversee the sale and administration of drugs like the one owned by CVS, and how they manipulate prices on pharmaceutical drugs, and at the control that Google and Facebook have over the internet advertising business, negatively impacting local newspapers. We also wrote about the impact that vertical integration has had on small waste hauling companies as they try to compete with those who also own the landfills. We looked at how the loss of local banks has led to fewer startups, how corporate third-party delivery apps are price gouging independent restaurants, and how consolidation in food and farming can lead to price increases, as well as how the dominance of retailers like Wal-Mart, Amazon, Home Depot and Lowe’s has costs many small businesses their livelihoods and stifled innovation. Finally, we explored the detrimental impacts of two corporations controlling the broadband market and our access to the internet (poor connections, anyone?).
We then connected with local business owners and community members for their input and experience in each of these sectors to gauge the impact the past four decades corporate consolidation has had right here on Cape Cod. A full analysis of this research is forthcoming, but for now, you can view all of our work on this up until now on our website.
This article is part of a year-long investigative series performed by CEO Amanda Converse that will explore how corporate concentration has affected various industries across the country and what impact that can and does have on Cape Cod’s local economy.