The world’s top companies are using their monopoly power in their markets to hike prices and keep them high amid inflation and a cost of living crisis, according to a new report by Global Justice Now.
In the five years to 2022, for the world’s top 20 companies, the average “markup” has risen to around 50 per cent.
This is double the 25% average markup for the bottom 50% of firms studied. Of these 20 companies, 14 are partners of the World Economic Forum, which says it is committed to improving the state of the world.
The findings are part of a new report, Taken, not earned: How monopolists drive the world’s power and wealth divide, released to coincide with the Davos gathering, by four non-governmental organisations: the Balanced Economy Project, SOMO, Global Justice Now and LobbyControl.
The research focuses on the 20 biggest firms by market capitalisation in the world – many of which are owned or controlled by the top 20 billionaires on the Forbes Rich List. Of the world’s top 20 firms, at least 14 are WEF partners, meaning they sponsor the event and are involved in shaping the debates at the annual meeting in Davos, which in turn have wider ramifications for society.
These WEF partners are Apple, Microsoft, Alphabet/Google, Amazon, Meta/Facebook, Eli Lilly, Visa, Novo Nordisk, Walmart, ExxonMobil, JP Morgan Chase, Johnson and Johnson, LVMH Moët Hennessy Louis Vuitton and Saudi Basic Industries (SABIC). Behind these companies are many of the world’s wealthiest and most powerful monopolist billionaires, including Bernard Arnault, Elon Musk and Jeff Bezos.
The research also shows the rising lobbying power of these firms, which rely on a lobby network of 236 organisations, confederations, business associations and think tanks in Europe. Of this, they spend €118.3 million in the US and €36.9 million in the EU annually. Big Tech is by far the biggest spender on lobbying among the world’s top 20 corporations, making up 82 percent of the total (€30.3 million) in the EU, and 58% (€61.1 million) in the US.
But these numbers underestimate the scale of spending on political influence by the world’s 20 biggest corporations. The structural power of monopolies adds to their political influence, as they can exert great pressure on politicians due to their position in the economy and society, even without direct advocacy work. In spite of the severity of the world’s monopoly problem, regulators across the world have been mostly unwilling to tackle the root of it.
Nicholas Shaxson, a director at the Balanced Economy Project and a co-author of the report, said:
“The new data reveals how some of the world’s richest billionaires use their power to profiteer off society. Monopoly is pivotal to the enduring and extreme power and wealth of the world’s billionaires and biggest companies. These firms are able to set sale prices in the markets they dominate significantly higher than the bottom 50% of companies. Our governments have let this power grow almost unchecked for decades: this report shows how we can turn the tide.”
The Taken, not earned report exposes how the biggest companies charge the highest markups while many smaller firms struggle to eke out any profit. Markups for the top 100 averaged 43 percent since 1995 versus 24 percent for the smallest 50 percent of firms studied. In the past three pandemic-hit years, markups rose to almost exactly 50 per cent for the biggest companies versus 25 per cent for the smallest.
Nick Dearden, director of Global Justice Now, said:
“The extreme wealth of the multi-billionaires meeting at Davos is bad for us all. These robber barons have subverted our democracy, making decisions about the food we eat, medicines we use and information we receive. Meanwhile, the public effectively pays a private tax to these billionaires through the excessive profits they demand, even amid a devastating cost of living crisis. Billionaires’ wealth is not built on brilliant entrepreneurship, but rather on having too much power over society – it’s time we regulate them and their monopolies out of existence.”
The report’s authors found that the average markups of the biggest companies have seen a steady rise over the period of 1995 to 2022, while the average markups of smaller companies have barely changed. Beyond higher prices, the research exposes how monopolists hurt small businesses, affect people’s fundamental rights and distort democratic processes.
Margarida Silva, SOMO researcher, said:
“The world’s richest individuals and their companies have built positions of market and strategic dominance where they’ve become too big to fail, ‘too big to care’, and too big to trust. Tech billionaires, like Jeff Bezos and Mark Zuckberg, are the poster boys of it. As Amazon, Meta, and others descend upon Davos to clean up their image and shore up their power, we must not forget their wealth is built through monopolisation without really caring about who it hurts – whether it be workers, users or democracy itself.”
The report also shows the different dimensions of the harms caused by monopoly beyond higher prices, as well as how far monopoly power extends across the world economy, the tricks monopolists use, the hidden ‘system of monopoly’ that protects billionaire power, and what can be done about it.
Max Bank, researcher and campaigner at LobbyControl, said:
“The world’s top 20 corporations spend more than €155 million annually on lobbying to influence political institutions in the US and the EU. The structural power of monopolies adds to their political influence. The combination of monopoly and lobby power undermines the democratic process.”
Laws, such as competition policy, can be used to challenge harmful monopoly power by breaking dominant firms up, or by enforcing tighter merger controls. The Balanced Economy Project, SOMO, Global Justice Now, and LobbyControl are also calling on governments to use public interest regulation, such as nationalising dominant firms that provide a public good or essential service, and treat them as a public utility; rewriting international trade, investment and finance regimes to curb excess concentrations of corporate power and associated harms; and, restricting corporate monopolies’ lobbying influence by strengthening conflict of interest rules and by enhancing transparency of political institutions.