The financial sector has a special relationship with monopoly power. It is both heavily monopolised, but it also acts as a monopolising force in other parts of the economy. This article lays out the various interconnections. How finance drives monopoly power.

Yes, monopolies are generally more corrupt than firms in genuinely competitive markets. They corrupt politics, they corrupt academic research, and they corrupt markets, for several reasons.

First, in truly competitive markets surplus profits may be ‘competed away’ to the minimum required to stay in business, as any surplus attracts new competitors into the market, for example, perhaps offering lower prices. Firms need to spend surplus profits on investing to innovate, to stay ahead of competitors. Monopolists, by contrast, can raise prices or squeeze suppliers or workers with relative impunity, potentially making immense surplus profits, with less worry that competitors can outdo them.

This usually gives monopolits far more surplus funds to invest than firms in competitive markets, available for corrupt activities. A lawyer who launched a class action suit against Facebook/Meta in the U.K, explained how pervasive it is.

“When I went around after I raised money for this litigation, to get any economists to help me on this case, I could get none. Because they all worked for the defendant [Facebook]. Nobody wanted to work for the claimant, i.e. for me. Big tech goes around, and they give them all a little bit of money every year, so they are conflicted in anything. It was next to impossible to get anybody to help.” [Click 1:41:45]

(See also: Big Tech’s Web of Influence in the EU – LobbyControl / Corporate Europe Observatory.)

Second, if a monopolist spends money on lobbying or corruption, the fruits of that ‘political investment’ will accrue largely to the monopolist, depending on how dominant they are. A firm in a competitive market, by contrast, may not benefit at all from lobbying, as any additional profits may well be competed away.

So in terms of greasing the wheels of politics with lobbying, bribery, sponsoring think tanks, and so on, monopolists have both more ability, and more incentive, to be corrupt.

But there is a third reason why monopolies are more corrupt: they corrupt markets. This happens in many ways. For example, Amazon hosts sellers on its platform, but it also sells its own products in competition with them, while harvesting massive data from its competitors, which it can use against them. So it has a massive, corrupting conflict of interest when hosting other firms on its platform, which it exploits. This is just one example.

No. At least, it shouldn’t – but the current ideology of competition law does create problems.

First, enforcing competition laws prevents firms from colluding to suppress environmentally friendly innovations.

Second, removing the narrow constraints imposed by price-focused ideology could allow regulators to consider other types of harms, including environmental harms. (Ideally, such considerations would be built into up-front market structure rules, rather than used to justify an expanded role for speculative economics).

Some targeted changes to competition laws might be appropriate to facilitate truly beneficial cooperation between firms on environmental goals. However, we must tread cautiously. Firms are strongly incentivised to exaggerate how much they are actually constrained by existing laws, hide their own culpability in the problems they claim coordination will solve (e.g. is fashion industry waste a form of price fixing?), and exploit well-intentioned loopholes to collude in undesirable ways in addition to beneficial ways.

Read more: Tackling Monopoly Power and the Climate Crisis – Together.