Corporate Despotism

Without over simplifying, despotism is total control, and applying it in a corporate sense and landscape is to achieve total dominance of the market. Corporate despotism is not as of yet unlawful, but it poses more than just a challenge to ethical and moral standards. It arrest entrepreneurial dynamism, diverse economic growth, innovation, free market play and consequently, healthy competition. Growing and promising medium sized enterprises that turned out to be formidable competitor were assimilated by corporate giants through buyouts, mergers and consolidations. Take the case of Jollibee Corporation, the largest fast-food chain in the Philippines, which over the years was able to acquire Chowking, Greenwich Pizza, Red Ribbon Bakeshop, Mang Inasal, and Burger King. Imagine the consumer market that these well known food companies were serving that is now under Jollibee's domain. Consequently, just like other corporate despot such as the Philippine Long Distance Company (PLDT) who acquired Smart Telecoms and Sun Cellular, Jollibee after those buyouts, can standardized to higher prices (ever notice increases in the price of Jollibee burger before and after the stated acquisitions?) and to higher profit that otherwise would not be possible under a competitive market.  This will be coupled with a reduction of a per unit cost and eventually total cost thereby enlarging profit as a benefit from economies of scale, e.g. One corporate and finance support group. Well that is for Jollibee and other companies that is similarly footed. Not dissimilar are SM and Robinson's chain of department stores that allocated a large portion of their facilities through leaseholds with possible competitors like the retailers that sell signature items. Somehow it enables them to directly influence the lessee's cost through the lease price and indirectly the lessee's store policy via lease conditionality, e.g. store hours, etc.. The entailing advantage is that the lessor partially recovers the mall's building construction and appurtenant cost from the lease payments as well. These are some of the modes available to a corporate despot to restrain possible competitors towards achieving market dominance.

All too good for some of these corporate despot, but looking from the consumer point of view, the latter maybe paying prices higher than what a competitive market could otherwise have provided. The resulting decrease in consumer surplus that is, paying more than what the consumers are willing to pay diminishes consumer purchasing power and eventually took a toll by jeopardizing any remaining market share of other gestating middle enterprises that otherwise would have contributed to the nations economy. Monopoly may likewise encourage employment of predatory pricing that is, driving prices to  a very low level to demonstrate power, thus forcing potential rivals out of business. Monopoly may become so large that it has acquired power over the common suppliers forcing the latter to submit to the monopoly's condition/s like a contract prohibition preventing the supplier to deliver other than to the corporate giants who already has the monopoly of the market, causing possible new entrants to grope for sustainability, and eventually to opt for withdrawal. More so, new entrants will be discouraged due to dis-economies of scale that would impact on micro-business level. These factors could wipe out competition and in the absence of competition;  the progressive rise in prices, innovations and consumer incentives may suffer, poor quality and inefficiency may likely be tolerated to the detriment of the buying public. 

Free enterprise is free enterprise. It should encourage participation not domination. True competition is the only consumer's protection from corporate dictatorship. Hence, government agencies like the Department of Trade and Industry (DTI) and the Securities and Exchange Commission (SEC) must device certain means to save the consumers from corporate tyranny, especially from those whose market are commodities like food. Regulators must impose limitations on acquisitions or mergers that is tilt towards corporate monopoly, similar to the United Kingdom’s 1998 Competition Act which among others provides that if two firms combine to create a market share of 25% or more of a specific market, the merger maybe prohibited. The consumers themselves can take a more radical action by patronizing gestating business more over the conglomerates to help the former to rise into the level of a competitor which of course should ultimately benefit the same consumers.

Let us help alleviate poverty by taking the initial, yet a larger step away from it. Remember that the word consumer includes you and me.


Update:

http://www.gov.ph/2015/07/21/republic-act-no-10667/