10 Greatest Monopolies

Some used shrewd business decisions, some illegal practices. In some instances, states sponsored it, in some, the nature of the market promulgated it. No matter how they rose (and fell), these monopolies gained more than money. They achieved something some governments dare not dream: power, influence and enduring legacy:

1. Standard Oil

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History’s richest man, John D. Rockefeller, presided over an oil monopoly a century before the Middle East sheiks do. Formed in 1870 mainly by John D., who had already made a substantial fortune by commodities trade during the Civil War, Stanford Oil incorporated oil producing, transporting, refining, and marketing into one single behemoth which grew both vertically and horizontally (purchase of producers and distributors). In 1882, all of Standard Oil’s properties were merged into the Standard Oil Trust, and by the end of the decade (1890), it controlled 88% of the refined oil flows in the United States. That same year, the Congress passed the Sherman Antitrust Act — the source of all American anti-monopoly laws – which was used two years later against Standard Oil. In 1911, the corporate behemoth was divided into smaller companies (which included many currently famous oil companies Amoco, Texco, Exxon, Chevron) but the monopoly wasn’t broken because the old John D. still controlled all those smaller companies. The real competition began only years later when Rockefeller’s heirs sold the inherited shares.

2. Salt Commission

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In Tang China, (618-907 AD), the Salt Commission is one of the most influential agencies. After a peasant revolution, the land tax revenues fell in China and salt commission was created in 758 (based on Guanzi, a book written in 3rd century BC book which proposes various salt taxation methods) to intensify the taxation of salt. Salt was essential for its nutritional and preservational values. Since the government controlled all major salt productions, the Tang dynasty was able to maintain th virtual monopoly on the salt trade, and benefited greatly from allocating licensed producers and licensed merchants. The enfranchising of licensed merchants enabled the imposition of the policy even to the further reaches of the nation. The revenues from salt taxation of salt slowly exceeded half of tax revenues within a few years of its inception, and by 1300 AD, it was creating 80% of all tax revenues in China. Although the salt commission began and ended with the Tang dynasty, the state monopoly on salt in China existed from sometime in 1st century BC to the end of Imperial China in early 20th century, making it the most enduring monopoly of all time.

3. De Beers

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For a firm that started out by renting water pumps to miners during a diamond rush, De Beers succeeded beyond the wildest dreams of its founder, Cecil Rhodes. In 1888, De Beers Consolidated Mines was formed with the sole purpose to be the owner of all diamond mining operations in South Africa. Using his colonial influences, Rhodes negotiated a strategic agreement with the London-based Diamond Syndicate in 1889, which fixed diamond prices. Whenever a new mine is discovered, it is absorbed into the De Beers cartel. At its height in the middle of the 20th century, De Beers controlled 80% of the diamond market. Discovery of new mines in Russia, Canada, and Australia ended De Beers monopoly but De Beers is now more profitable today with a 40% market share than when it maintained an 80% market share.

4. Dutch East India Company

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Vereenigde Oost-Indische Compagnie (VOC), established in 1602, was the world’s first multinational and mega- corporation, which possessed quasi-governmental powers, including the ability to wage war, negotiate treaties, coin money, and establish colonies. It is only natural that it also coined the standards for monopolies. To counter English and Portuguese colonial expansions, the Dutch government in 1602 sponsored “United East Indies Company” that was granted a monopoly over the Asian trade. The charter of the new company empowered it to build forts, maintain armies, and conclude treaties with Asian rulers. To establish its monopoly for the spice trade, the entire native populations in Indonesia were deported, decimated or enslaved in the Dutch plantations that replaced them. Although by 1669, the VOC was the richest private company the world had ever seen, a series of mismanagements and colonial encroachments by other great powers bankrupted the VOC in 1800.

5. Thurn and Taxis Mail

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In 1489, Jeannetto de Tassis was appointed Chief Master of Postal Services in Italy. From that moment on to the early years of the 19th century, his descendants, Thurn and Taxis family held its virtual monopoly on mail and postal services through a letters of grant and nobility given by Holy Roman Emperors Frederick III, Maximilian I and Charles V. In 1615, the position, Imperial Postmaster General was made hereditary. In its heydays at the end of the 18th century, it took only forty hours to a letter from Paris to reach Brussels. The family’s horse relay system that connected nearly all of European capitals was the gold standard in communication. However, the French Revolution and Napoleonic Wars greatly disrupted the family business. In 1867, postal monopoly was nationalized. By then, the family had diversified into a various other enterprises from foodstuffs to banking to to railroads and to this day, the family is one of the richest families in Europe.

6. Pan Am Airways

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Thurn and Taxis monopoly may be broken, but the importance of communication and transportation (and monopoly producing power of it) was not. For the better part of the 20th century, Pan American Airways dominated the airmail and transportation not only of the United States but also of both Americas. Founded in 1927, Pan Am greatly expended under Juan Trippe who bought out many independent carriers in the Caribbean, the Atlantic, and in South America. To counter the competition from foreign companies, the U.S. government itself endorsed the airline as the “chosen instrument” for U.S. air routes. After the World War II, however, despite its enormous lobbying campaign in the Congress, Pan Am gradually lost its status as America’s international airline to various American and foreign carriers. By 1991, “World’s Most Experienced Airline,” was broke.

7. U.S. Steel

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U.S. Steel’s alumni were who’s who of America industrialists. J. P. Morgan and Elbert H. Gary founded it in 1901. The steel operations were owned by Andrew Carnegie. Its first president was Charles M. Schwab. Within five years of its founding, the corporation had become the largest steel producer and largest corporation in the world (as well as the world’s first billion-dollar corporation). During WWII, the U.S. Steel spearheaded American war efforts, employing over 300,000 employees and producing 20-30 million tons of steel every year. However, after the war, the Corporation (as it was famously known) has become a leviathan that had outlived its usefulness. As early as 1911, the federal government tried to break up the corporate goliath (which initially controlled 67% of all the steel produced in America), but it was the American steel industry’s own lack of innovation and efficiency that doomed U.S. Steel. It now produces less than 10 percent of the steel used in America and employs less than 50,000 people.

8. Caviar

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Caviar lined the Soviet coffers with gold during the Cold War. However, the Bolsheviks and the Communists are not the first in imposing the state monopoly on caviar. Although sturgeon and their eggs have been eaten by the Russians as early as the 8th century BC, it was not until Ivan the Terrible’s time that sturgeon producing Northern Caspian region was annexed from Muslim Tatars. Caviar monopoly was enforced by Tsar Peter the Great, who also tried to introduce the delicacy to the fashionable French court (without much success). However, by the time it was reintroduced to the Western Europe in 1860, caviar had already became the symbol of Russian luxury, and the Tsarist state had slowly relaxed its monopoly laws. However, after the Bolshevik Revolution, the powerful Soviet Ministry of Fisheries reintroduced tight measures to conserve sturgeons and to maintain the high caviar prices. The collapse of the Soviet Union killed the state monopoly, but also opened the Pandora’s box of overfishing, pollution and caviar smuggling.

9. American Telephone and Telegraph

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Originally founded by Alexander Graham Bell and his financiers, the American Telephone and Telegraph Company managed to corner the telecommunications market of the United States even though Bell’s patent on the telephone expired in 1894. Since it was expensive to place copper wires all over the country (for different companies) the U.S. government itself agreed to this natural monopoly of having one telephone company for the nation. In 1907, AT&T president Theodore Vail announced “One Policy, One System, Universal Service.”–a guideline which AT&T used to purchase competitors. In 1918, the federal government’s nationalization of telecommunication industry profited AT&T which won the contract for the laying out of a coast-to-coast telephone system (potential competitors were forbidden from installing new lines to compete, with state governments wishing to avoid “duplication.”) The ‘natural monopoly’ was broken in 1970s with new technologies slowly replacing copper wires approach. Upon the settlement of United States v. AT&T, AT&T was split into seven companies and the monopoly was ended.

10. HBC

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The Hudson’s Bay Company (Compagnie de la Baie d’Hudson) is the oldest commercial corporation in North America and is one of the oldest in the world. Once the de facto government of North America and later its largest landowner, the company controlled nearly all of fur trade in the New World from its headquarters at York Factory on Hudson Bay. Although the company’s monopoly on fur trade (chartered by England’s King Charles II) was never complete due to the small competitions from independent fur traders, its trade covered 3 million square miles (where settlements are forbidden by its monopoly rules ) and employed 1,500 traders. Its network of trading posts formed the nucleus for later official authority in many areas of Western Canada and the United States. The decline of the fur trade and a high-profile illegal fur trade trial in 1849 broke the monopoly, but the company evolved into a mercantile business selling vital goods to settlers in the Canadian West. Today the company is best known for its department stores throughout Canada.

Afterthought:

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