# Is Wal-Mart functioning as a monopoly? **URL:** \ **Category:** Great Debates\ **Created:** [December 23, 2003, 3:21pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653 "2003-12-23T15:21:51Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [December 23, 2003, 3:21pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/1 "2003-12-23T15:21:51Z")
[From here it may appear so.](http://fastcompany.com/magazine/77/walmart.html) Now I’m normally a free-market supporter, and to some extent I don’t see a real problem with most of what’s defined in the article. If anything I see it as efficiency in action…though when efficient is too efficient is always in play with me. Clearly, through the requirement for absolute efficiency (both in price and business practices) can bring about a loss of competing companies is the marketplace. And if we’re left with only one firm (the one most able to meet Wal-Mart’s efficiency goals) wouldn’t that, in the long run, be anti-competitive? And the market pressures Wal-Mart bring to bear that cause (or at least encourage) firms to move manufacturing jobs overseas. Is that healthy for our long term prospects of the American worker? Anyway? If Microsoft behaves in a monopolistic manner and can get slammed by the Department of Justice why not Wal-Mart? ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [December 23, 2003, 3:38pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/2 "2003-12-23T15:38:38Z")
From your cite, it appears that this is the main issue (my bolding): > [@](#): > > To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of **outsourcing products from overseas.** Switching from a domestic to a foreign supplier can’t in any way shape or form be considered a monopolistic practice. In Microsoft’s case, there was an issue of market share. What share of the market does Walmart have for any given product? Walmart may (and I emphasize may) become a monopoly at some point, but unless you can produce Microsoft-like market share numbers, I’d say they’re not even close right now. I suppose if you can demonstrate that Walmart is engaged in dumping practices, there might be a case. But what I see is that they are essentially acting like a broker for the consumer, getting us the lowest price possible. ---
**Author:** ![minty\_green](https://avatars.discourse-cdn.com/v4/letter/m/f6c823/32.png) [@minty\_green](https://boards.straightdope.com/u/minty_green)\ **Post date:** [December 23, 2003, 4:13pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/3 "2003-12-23T16:13:55Z")
I read the article, and did not see anything at all that can reasonably be described as “monopolistic,” i.e., intended to lead to monopoly power in the market in which it is engaged, and with the intent of wielding that monopoly power by charging monopolistic prices. Wal Mart plays hardball with its suppliers, that is true. And thank goodness, because it’s good for consumers. Take the opening example, in which Wal Mart prices a gallon jar of Vlasic pickles at $2.97. What’s wrong with that? Well, according to the article, that’s bad because: > [@](#): > > By selling a gallon of kosher dills for less than most grocers sell a quart, Wal-Mart may have provided a service for its customers. But what did it do for Vlasic? The pickle maker had spent decades convincing customers that they should pay a premium for its brand. Now Wal-Mart was practically giving them away. And the fevered buying spree that resulted distorted every aspect of Vlasic’s operations, from farm field to factory to financial statement. In other words, Wal Mart’s pricing strategy prevented Vlasic from jacking up the market price of pickles for consumers. To hell with Vlasic, and god bless the free market. NB: I almost never shop at Wal Mart. Dirty, disorganized hellholes. Give me a Target any day. But I’ve got no problem whatsoever with Wal Mart pounding its suppliers for the sake of lower consumer prices. ---
**Author:** ![gobear](https://avatars.discourse-cdn.com/v4/letter/g/8dc957/32.png) [@gobear](https://boards.straightdope.com/u/gobear)\ **Post date:** [December 23, 2003, 4:26pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/4 "2003-12-23T16:26:10Z")
> [@](#): > > NB: I almost never shop at Wal Mart. Dirty, disorganized hellholes. Give me a Target any day. But I’ve got no problem whatsoever with Wal Mart pounding its suppliers for the sake of lower consumer prices. Good for consumers in the short term, but ultimately it leads to jobs being outsourced to countries that pay their workers a pittance, further contributing to the Bangladeshization of America. ---
**Author:** ![Master\_Wang-Ka](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/master_wang-ka/32/3325_2.png) [@Master\_Wang-Ka](https://boards.straightdope.com/u/Master_Wang-Ka)\ **Post date:** [December 23, 2003, 4:43pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/5 "2003-12-23T16:43:52Z")
The high school textbook from which I taught Economics this past year defines monopoly as follows: (lifted from my lesson plan) 1. SINGLE-SELLER MARKET. The only game in town. Give examples (postal service). 2. BARRIERS TO ENTRY. Other firms have trouble getting in. Give examples, and ask for examples (postal service, aluminum). 3. NO GOOD SUBSTITUTE. There can’t be an easy substitute for the material or service in question. Ask for examples. (food) 4. CONTROL OF MARKET PRICE. Discuss gouging for profit, etc. Don’t forget the angle that as price rises, demand will fall. 5. NO NONPRICE COMPETITION. Therefore, no need for advertising, except for PR. Give examples. 6. SINGLE-SELLER MARKET: This is debatable. It’s not true in many places, but it is quite true in others, particularly considering Wal-Mart’s habit of actively gunning for competition. Rural areas often have the choice of dealing with Wal-Mart or driving loooong distances to deal with non-WM retailers whose prices are usually higher. 7. BARRIERS TO ENTRY. Hm. Again, debatable. Theoretically, you or I could go open a department store, right now, but we’d have a tough time competing with Wal-Mart, particularly considering startup costs, reputation, and so on… and I have no doubts that if Wal-Mart considered me a serious threat, they’d either try to buy me out … or simply focus on crushing me like a bug by price-warring me out of existence. This is exactly what they’re doing this holiday season, by the way – selling hot toys and large volume Christmassy items UNDER COST, with the idea being, “sure, we’ll lose money, but it’ll hurt the competition more than it hurts us, and gets us customer goodwill to boot.” 8. NO GOOD SUBSTITUTE. This basically means that you cannot boycott Wal-Mart and seek similar products elsewhere. This is emphatically not the case; it is possible to obtain most of the goods Wal-Mart sells elsewhere, except for its house brands, and those same goods are obtainable under other brands. 9. CONTROL OF MARKET PRICE. Wal-Mart is getting big enough that it CAN, to some extent, control market prices for some goods, and very much so on the retail level – the big toys this year are sold at prices Wal-Mart sets, or they are not sold. By anyone other than Wal-Mart, that is. And they’re famous for forcing wholesalers to give them rock bottom prices by cutting off access to large market segments otherwise… (“If you want access to the BIG market, you will meet Wal-Mart’s terms!”) 10. NO NON-PRICE COMPETITION. This means that NOBODY else sells the goods or services in question, period. You deal with the monopoly, or not at all. Plainly this is not the case in the current argument … but this characteristic is kind of optional, a sort of hallmark of “true monopoly,” like the old Ma Bell or Standard Oil trusts, where the goods and services were simply not available, at any price, except through that one dealer. So, as far as monopoly goes, Wal-Mart gets the following scores: 1. SINGLE-SELLER MARKET. :dubious: 2. BARRIERS TO ENTRY. :dubious: 3. NO GOOD SUBSTITUTE. 🙂 4. CONTROL OF MARKET PRICE. :dubious: 5. NO NONPRICE COMPETITION. 🙂 Three out of five ain’t bad. But it ain’t real good, either… ---
**Author:** ![minty\_green](https://avatars.discourse-cdn.com/v4/letter/m/f6c823/32.png) [@minty\_green](https://boards.straightdope.com/u/minty_green)\ **Post date:** [December 23, 2003, 4:44pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/6 "2003-12-23T16:44:20Z")
Please don’t think that I am in any way opposed to international competition in the labor market. Not that that has anything to do with the charge of monopolistic behavior, but just so you know where I stand on that one. ---
**Author:** ![AZCowboy](https://avatars.discourse-cdn.com/v4/letter/a/97f17d/32.png) [@AZCowboy](https://boards.straightdope.com/u/AZCowboy)\ **Post date:** [December 23, 2003, 4:44pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/7 "2003-12-23T16:44:45Z")
> [@](#): > > _From the OP:_ > Clearly, through the requirement for absolute efficiency (both in price and business practices) can bring about a loss of competing companies is the marketplace. And if we’re left with only one firm (the one most able to meet Wal-Mart’s efficiency goals) wouldn’t that, in the long run, be anti-competitive? Not necessarily. The process that would lead to only one firm able to meet the requirements is the ultimate in free market competition. Only if the one firm is then able to exert control over the market does it move into the territory of being anti-competitive. And the linked article fails to provide even a single example of such an end result. Indeed, the pressure that WalMart puts one suppliers is only possible in a competitive environment. But the “one supplier threat” is hedged by WalMart’s business practice to consider developing its own private label product. And then the only threat is if WalMart itself is not just the retailer, but the only supplier as well. Again, no evidence to suggest this is the case. > [@](#): > > _From the OP:_ > And the market pressures Wal-Mart bring to bear that cause (or at least encourage) firms to move manufacturing jobs overseas. Is that healthy for our long term prospects of the American worker? Probably not. But is that the appropriate measure? Is your support for free market forces only when they are consistent with the best interests of the American worker? I can only suggest that the pressure applied by WalMart to supplier is in the best interests of workers across the globe. While it could result in the US losing some of its relative affluence and financial dominance, it will also likely cause the rest of the world to be brought into the global marketplace on more equal footing. > [@](#): > > _From the OP:_ > Anyway? If Microsoft behaves in a monopolistic manner and can get slammed by the Department of Justice why not Wal-Mart? It could. But earning a monopoly is not illegal. Having an exceptionally high market share is not illegal. What is illegal is using the market power of a monopoly to control market prices - normally indicated by increasing prices - not decreasing prices (note: it is also anti-competitive for a monopoly to sell products below cost, because the presumed reason to do so is to run competitors out of business, and eventually result in price increases). Microsoft did not get in trouble because it had high market share. It got in trouble because it used its market power to lock out competitor’s access to distribution channels. > [@](#): > > _From the article linked in the OP:_ > The giant retailer’s low prices often come with a high cost. Wal-Mart’s relentless pressure can crush the companies it does business with and force them to send jobs overseas. Are we shopping our way straight to the unemployment line? IMO, the linked article fails to make its case. The low prices benefit consumers - the article clearly admits that. It fails to address what those consumers do with those savings. It admits that WalMart deals honestly with suppliers, and always with integrity. It would be fair to say that WalMart only cares about lower prices and not about the welfare of its supplier’s employees. And that is entirely appropriate - WalMart isn’t a charity. WalMart isn’t holding a gun to suppliers heads, indeed, suppliers are lined up outside Bentonville trying to get their products on WalMarts shelves. If you have a problem with way WalMart conducts business (at least as described in this article - there are other problems with WalMart not addressed here), then you should rethink your support for free market forces. WalMart simply represents the ultimate in free market competition. ---
**Author:** ![minty\_green](https://avatars.discourse-cdn.com/v4/letter/m/f6c823/32.png) [@minty\_green](https://boards.straightdope.com/u/minty_green)\ **Post date:** [December 23, 2003, 6:05pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/8 "2003-12-23T18:05:19Z")
**Wang-Ka** : Your basic list of monoply indicators is actually fairly good, but I wanted to respond to the two items where you thought Wal Mart might be showing signs of monoply. Keep in mind that I’m coming from a legal standpoint here as much as an economic one. > [@](#): > > \*Originally posted by Master Wang-Ka \* > > 1. SINGLE-SELLER MARKET: This is debatable. It’s not true in many places, but it is quite true in others, particularly considering Wal-Mart’s habit of actively gunning for competition. Rural areas often have the choice of dealing with Wal-Mart or driving loooong distances to deal with non-WM retailers whose prices are usually higher. It would be rare indeed for Wal Mart to be the _only_ retailer in a relavant geographic market. But even assuming that Wal Mart was the only retailer for 40 miles around, you still have to ask . . . is Wal Mart _behaving_ monopolistically? That is, is it charging monopolistic prices? I have never seen any credible evidence that this is the case in any of those rural communities where Wal Mart is alleged to be such a bad thing. > [@](#): > > 1. BARRIERS TO ENTRY. Hm. Again, debatable. Theoretically, you or I could go open a department store, right now, but we’d have a tough time competing with Wal-Mart, particularly considering startup costs, reputation, and so on… and I have no doubts that if Wal-Mart considered me a serious threat, they’d either try to buy me out … or simply focus on crushing me like a bug by price-warring me out of existence. This is exactly what they’re doing this holiday season, by the way – selling hot toys and large volume Christmassy items UNDER COST, with the idea being, “sure, we’ll lose money, but it’ll hurt the competition more than it hurts us, and gets us customer goodwill to boot.” First, you’re conflating two things. Selling items at or under cost as a “loss leader” is not a barrier to entry, nor is it per se an attempt to monopolize. Retailers do it all the time, under the theory that if you get buyers in the store for one low-cost item, they will alos purchase additional items where you can recoup the loss and make a profit. Second, a barrier to entry is not determined simply by whether you or me can write a big enough check to open a competitor. Given the free flow of capital, the question is whether there are barriers that would prevent investors in general from entering the market. For instance, AT&T benefitted from huge barriers to entry back before deregulation of the telephone industry because it controlled every inch of line in the telephone system, right up to the jack in your wall. Any competitor would have had to install its own nationwide network of phone lines, including every house and business in the country, in order to effectively compete with AT&T. _That_ is a barrier to entry, not just the necessity of raising a substantial amount of capital. > [@](#): > > 1. CONTROL OF MARKET PRICE. Wal-Mart is getting big enough that it CAN, to some extent, control market prices for some goods, and very much so on the retail level – the big toys this year are sold at prices Wal-Mart sets, or they are not sold. By anyone other than Wal-Mart, that is. And they’re famous for forcing wholesalers to give them rock bottom prices by cutting off access to large market segments otherwise… (“If you want access to the BIG market, you will meet Wal-Mart’s terms!”) This formulation again misses the fundamental question of whether the influence on retail prices results in _monopolistic_ pricing–that is, prices that are higher than they would otherwise be in a competitive market, enabling the firm to increase its profits to the optimum monopolistic level. Lowering market prices is the _opposite_ of monopolistic pricing. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [December 23, 2003, 6:31pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/9 "2003-12-23T18:31:57Z")
OK, I concede that ‘monopoly’ was wrongly used (though I think that’s the target they’re shooting for) but take a look at this one: > **[Wal-Mart, Toys 'R' Us rivalry 'a little more cutthroat'](https://www.seattlepi.com/business/article/Wal-Mart-Toys-R-Us-rivalry-a-little-more-1130845.php)** > > Wal-Mart Stores Inc. and Toys > [@](#): > > From Paragraph 2 > > In a move that took Toys “R” Us – and the rest of the industry – by surprise, Wal-Mart cut prices on more than a dozen hot toys in mid-October, a month earlier than normal. **By selling some items below cost** , the discounter is using toys as a loss leader to woo shoppers to other aisles elsewhere in the store, analysts observed. Emphasis mine. ---
**Author:** ![minty\_green](https://avatars.discourse-cdn.com/v4/letter/m/f6c823/32.png) [@minty\_green](https://boards.straightdope.com/u/minty_green)\ **Post date:** [December 23, 2003, 6:52pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/10 "2003-12-23T18:52:31Z")
So what? Loss leaders are perfectly ordinary in the retail sales market. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [December 23, 2003, 6:54pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/11 "2003-12-23T18:54:52Z")
> [@](#): > > \*Originally posted by minty green \* > \*\*So what? Loss leaders are perfectly ordinary in the retail sales market. \*\* How do you differentiate between “loss leader” and “lowering prices to put competitors out of business”. Does it just boil down to establishing intent? ---
**Author:** ![erislover](https://avatars.discourse-cdn.com/v4/letter/e/71e660/32.png) [@erislover](https://boards.straightdope.com/u/erislover)\ **Post date:** [December 23, 2003, 7:06pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/12 "2003-12-23T19:06:41Z")
> [@](#): > > How do you differentiate between “loss leader” and “lowering prices to put competitors out of business”. Does it just boil down to establishing intent? Well one ill-placed memo would indicate something. You might also show that Wal-Mart isn’t making any profit in the short term. That’s a fairly aggressive move. ---
**Author:** ![Master\_Wang-Ka](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/master_wang-ka/32/3325_2.png) [@Master\_Wang-Ka](https://boards.straightdope.com/u/Master_Wang-Ka)\ **Post date:** [December 23, 2003, 7:06pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/13 "2003-12-23T19:06:44Z")
…an excellent point, and the whole reason I labeled the points “debatable.” Not saying Wal-Mart is a monopoly. A case could be made that they engage in “unfair business practice,” but if they’ve broken any laws, I am unaware of it. I just thought that the basic points that MAKE a monopoly a monopoly ought to have a place in this thread. ---
**Author:** ![minty\_green](https://avatars.discourse-cdn.com/v4/letter/m/f6c823/32.png) [@minty\_green](https://boards.straightdope.com/u/minty_green)\ **Post date:** [December 23, 2003, 7:14pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/14 "2003-12-23T19:14:03Z")
When it comes to loss leaders, I don’t really care about intent. Wal Mart can intend to crush Toys R Us like a bug for all I care, and it still cannot be monopolistic. Here’s why. First, loss leaders only work if you’re able to make up the lost revenue through additional customer purchases of other goods at higher prices. Best Buy has done it for years with their CD sales, where new releases and bestsellers were sold very near to cost as a means to get people into the store. Consumers come for the CDs, and then they buy computers and televisions and appliances with higher profit margins. If the retailer is not able to make up the difference by charging more for other items, then the retailer loses money. Second, there’s the old predatory pricing theory, that says a seller might be willing to take a loss now if it can undersell its competitors, put them out of business, and charge higher prices later. But that only works if (a) you drive all your competitors in the marketplace out of business, enabling you to charge higher than market prices, and (b) there are barriers to entry in the market that prevent new competitors from entering and undercutting your higher, monopolistic prices. Simply put, it’s next to impossible to make up the loss involved in predatory pricing through later sales at higher prices. Say that Wal Mart drives Toys R Us into bankruptcy and out of business forever. Will Wal Mary then be able to charge monopolistic prices for its Barbie dolls? Of course not, because there are all kinds of other places where consumers can purchase toys at competitive prices. The end result is that Wal Mart may siphon off some additional sales for itself, but consumers will still pay a competitive market price for their product, plus they’ve even benefitted by buying at lower costs during the time the product was sold as a loss leader. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [December 23, 2003, 7:17pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/15 "2003-12-23T19:17:04Z")
Here’s another story I dug up: [http://www.nytimes.com/2003/12/23/business/23toys.html?pagewanted=1&ei=5062&en=6e4bdec49813be51&ex=1072760400&partner=GOOGLE](http://www.nytimes.com/2003/12/23/business/23toys.html?pagewanted=1&ei=5062&en=6e4bdec49813be51&ex=1072760400&partner=GOOGLE) > [@](#): > > Both Target and Wal-Mart have lowered prices to the point where they may be losing money on individual toys, some analysts said, but do so because they expect toy shoppers to buy less heavily discounted products in other departments as well. > > “From Toys “R” Us’s perspective, how do you compete when your nearest two competitors don’t have to be profitable?” Mr. Sims said. ---
**Author:** ![minty\_green](https://avatars.discourse-cdn.com/v4/letter/m/f6c823/32.png) [@minty\_green](https://boards.straightdope.com/u/minty_green)\ **Post date:** [December 23, 2003, 7:22pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/16 "2003-12-23T19:22:45Z")
Mr. Sims is a twit. Of course Target and Wal Mart have to be profitable. They are simply able to do it by making sales of other products at higher profit margins. Smart consumers can avoid purchasing those overpriced items at Wal Mart and still take advantage of the loss leaders. If enough consumers do so, retailers will not be able to profit from the loss leader strategy. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [December 23, 2003, 8:36pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/17 "2003-12-23T20:36:40Z")
**Minty** : What about “dumping”? Is that only applicable to foreign companies selling into the US market? Back in the 80s there were anti-Dumping actions taken against Asian manufacturers of DRAMs. And since this action was taken against several companies, it was not a monopolisitic issue per se. BTW, my question is in reference to the legal status, and if this isn’t your area of expertise, don’t feel obligated to answer. ---
**Author:** ![mhendo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mhendo/32/3159_2.png) [@mhendo](https://boards.straightdope.com/u/mhendo)\ **Post date:** [December 23, 2003, 8:53pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/18 "2003-12-23T20:53:04Z")
This thread demonstrates perfectly the rather uneasy relationship between Americans and the notions of efficiency, competition, and monopoly. When asked their opinion on any one of these issues, most people can give a fairly straightforward answer. The problem arises because there are, in many cases, contradictions (or, at the very least, tensions) between these areas that can make it difficult for them to coexist. For example, if competition (which most people agree is a good thing) leads to greater efficiency among some firms (which people generally also see as a good thing), the result is often that the least efficient firm/s are forced out of the market (again, many people have no complaint about this). However, if competition acts continually to force the least efficient firm/s out of play, the end result is often an oligopoly or a monopoly (which most people seem to think is a bad thing). Of course, this doesn’t always happen, but it is a rather strong tendency in a competition-driven market. The problem for many people, then, is how to ensure competition and increased efficiency without resulting in monopoly. Some call for greater government oversight to maintain competition; others believe that if the free market results in an oligopoly or monopoly, then that is fine. The problem sometimes reduces to moral arguments over whether big or small businesses are “better” in some (not necessarily economic) way. This was one of the key arguments during the Depression, when some, like Louis Brandeis, argued for the role of small business in America and believed that, even if large, centralized businesses were more efficient they should not me encouraged at the expense of small concerns. This sort of attitude has roots in Jeffersonain ideas of a small-producer society. If anyone wants to read a really interesting book on how these debates played out during the Depression, may i suggest the classic study by Ellis Hawley, appropriately titled _The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence_. As Rupert Murdoch once said: “Monopoly is a terrible thing until you have one.” ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [December 23, 2003, 9:14pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/19 "2003-12-23T21:14:46Z")
> [@](#): > > \*Originally posted by minty green \* > Mr. Sims is a twit. Of course Target and Wal Mart have to be profitable. They are simply able to do it by making sales of other products at higher profit margins. In that, you’ve confirmed Sims’ point: while Target and Wallyworld may have to be profitable overall, _they don’t share Toys R Us’ need to be a profitable seller of toys._ > [@](#): > > Smart consumers can avoid purchasing those overpriced items at Wal Mart and still take advantage of the loss leaders. If enough consumers do so, retailers will not be able to profit from the loss leader strategy. But it’s not the consumer who’s at risk here - it’s the competing retailer, in this case. Expecting the consumers to strategize to the benefit of Toys R Us while shopping at WalMart is a bit much. Besides, the time and energy dimensions come into play: unless there’s a lot of money to be saved, it just isn’t worth it to the consumer to stop at several stores. But I think **Wang-Ka** has opened up a key point: > [@](#): > > I just thought that the basic points that MAKE a monopoly a monopoly ought to have a place in this thread. Wal-Mart is doing something new - at least, new to this generation. (Maybe A&P played the same game when my grandparents were young, but that was in another lifetime.) They are taking advantage of their market dominance not by squeezing the consumer - the traditional monopolistic approach - but by squeezing their suppliers. Wal-Mart may be making enough profit off its non-toy sales to compensate for what it’s losing on a handful of high-profile toys. But it’s not making that profit by gouging the consumer; it’s making that profit by gouging the supplier. (Yes, ‘gouging’ is a prejudicial word. But I think it’s accurate in both cases or neither, and we take its use for granted in the ‘gouging the consumer’ context.) So the consumer probably isn’t going to gain anything by buying the loss leaders from Wal-Mart, then shopping elsewhere for other items, simply because she’s not the one that Wal-Mart is making the profit off of, on those other items. So a retailer whose core business is just one of Wal-Mart’s lines (such as toys) really has a problem, if Wal-Mart decides to go after it by predatory pricing. ---
**Author:** ![5cents](https://avatars.discourse-cdn.com/v4/letter/5/46a35a/32.png) [@5cents](https://boards.straightdope.com/u/5cents)\ **Post date:** [December 23, 2003, 9:18pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/20 "2003-12-23T21:18:26Z")
Maybe not a monopoly, but due to market share Walmart does have the power to beat up suppliers to the extent that other stores cannot, and some beatings can be fatal. One example, but I can’t name the supplier: XYZ inc makes goods that have a consumable component where they lose money on the main product but make it all up in the consumable part (think of video game consoles and game cartridges, or printers and ink cartridges). That’s 90% of their business. They also supply a few low-margin commodity products that they don’t produce themselves, but package it under their own label for whatever reason (does Kodak really make their own blank CDs?). So Walmart says “we’ll stock your main product and consumable stuff, but you’ll also have to supply that commodity item, too. We’ll beat you up on price, and sometimes we’ll put your commodity up on end-of-aisle with no notice, and you’ll be penalized if the shelves are ever empty”. It is a lose-lose situation for the supplier. If they say no to walmart, there goes 25% of the market (and growing). If they say yes, they have to stockpile tons of the low-margin commodity around the country so they don’t get whacked with penalties or have to fly 747’s from Malaysia with their commodity product. How does the consumer lose? They get lower prices, right? Of course, until XYZ goes out of business, at which point consumers still own the product, but can’t get consumables. Alternative suppliers might pop up, but then again they might not. [Next page](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653.md?page=2)