What happens when one company or a group of them take control of the market?

A monopoly typically occurs in a free market where competition is encouraged, and in essence, happens when a company has a large enough market share in that particular field that it can control that market, and this means they can force out competing businesses by raising the barriers to entry to that specific industry. Barriers to entry are basically how difficult it is to enter a market as a competitive business. For example, a barrier to entry to enter the fitness industry would be the expensive costs of buying and maintaining exercise equipment. So if one company owned a significant market share in gym equipment, they would control a monopoly where only they would be able to successfully compete in the gym industry by raising the price of machines, which would mean that other companies would not be able to afford them or would be unable to generate a profit. An oligopoly is similar, but instead of one entity, multiple companies dominate the market and own all or almost all shares in it. This makes the barriers to entry even higher, as new companies wanting to succeed in the market would have to compete with not just one but multiple very powerful organisations working together. Some companies attempt to form monopolies or oligopolies because it allows them to inflate the prices of their products beyond proportion without worrying about any competition selling at low or everyday prices. So, they receive massive amounts of profit at the cost of the customer who has to pay much more for the same product. One example of an oligopoly occurring globally is the OPEC group, also known as the Organisation of the Petroleum Exporting Countries. Some of its members include Iran, Iraq and Saudi Arabia, and it has in total 13 member countries. The countries in this organisation own most of the world’s oil fields, with major oil reserves found in all. So they hold an oligopoly on the petroleum industry as they are the only countries with access to enough petroleum resources to compete in the market. They have joined forces to ensure that they get the best possible prices for their petroleum.

However, larger companies can force out smaller ones through predatory pricing, where they set their prices extremely low to the point where there is no profit. This means the smaller companies also have to do the same, but unlike the large businesses, they cannot survive the losses induced, which pushes them out of the market. Oligopolies can form out of these scenarios, where a handful of large companies control the market, or even monopolies, where one massive business owns the entire market. In turn, price gouging occurs, where prices are raised unreasonably high to maximise profit, and consumers are forced to pay these large sums as all the cheaper alternatives have been forced out. A prominent case of an oligopoly and price gouging is in America, with ‘Big Pharma’ mentioned previously, also known as the few powerful pharmaceutical companies that have driven prices of necessary medicine extremely high as they have no other competition. This has led to many losing their lives or suffering in pain because they cannot afford the treatment they need. For example, insulin is vital for diabetes patients to allow their bodies to manage glucose levels properly. It can be fatal if they cannot do so, yet the average price for 1 mL of Humulin (short-acting insulin) is $39.63 in America, but only $0.36 in India, and it is available for free in the UK. This shows the scale of the situation –  a necessary product that is free or at the very least very cheap in some countries is sold for almost $40 per mL. 

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