Among the most notable U.S. monopolies in history are Andrew Carnegie’s Steel Company (now U.S. Steel), John D. Rockefeller’s Standard Oil Company, and the American Tobacco Company.
American monopolies date back to colonial administrators who awarded large companies exclusive contracts to help build the New World. From the late 19th to the early 20th century, these companies maintained singular control over the supply of their respective commodities. Without free-market competition, they could keep the prices of steel, oil, and tobacco high.
Key Takeaways
- Until the early 20th century, a single large company could completely control some major U.S. industries, like steel and oil.
- The passage of the Sherman Anti-Trust Act in 1890 eventually saw major U.S. monopolies, such as Standard Oil and American Tobacco, break up.
- In 1982, AT&T was deemed a monopoly, and forced by the U.S. government to spin off most of its assets.
- A type of limited monopoly that still exists worldwide can be found in the form of nationalized major assets in the energy and transportation sectors.
What Are Examples of Early American Monopolies?
Many of the most significant U.S. monopolies emerged during America's Gilded Age at a time of rapid industrial growth.
One of the leading monopolies was U.S. Steel, which had a market capitalization of $1.4 billion in 1901, equivalent to roughly $51.4 billion today. U.S. Steel was established through the merger of many major steel firms by financier J.P. Morgan. At the time, it was the world's largest company.
Standard Oil, which controlled a 90% of American oil refineries in the late 1880s, is another notable juggernaut. During the oil boom, Standard Oil acquired several competitors, which allowed it to create a bottleneck in the petroleum industry supply chain. Along with this, the company negotiated favorable contracts with railroads, which further propelled its growth.
Yet another significant monopoly at the time was American Tobacco. In 1890, five major tobacco firms merged to create the monopoly, which allowed it to create economies of scale in a highly lucrative industry. Between 1890 and 1907, the company acquired an estimated 250 firms.
At the time, government regulation of early American monopolies was initially absent. However, the creation of antitrust regulation in the United States, in the form of the 1890 Sherman Antitrust Act, led to the eventual dismantling and restructuring of Standard Oil and American Tobacco by 1911. Like many antitrust cases brought against companies even today, it took several years for these first cases to navigate through the court system.
Unlike Standard Oil and American Tobacco, U.S. Steel was challenged, but not found to be the sole supplier of steel to the U.S. market. However, it continued to possess a considerable market share for many years. In 2022, U.S. Steel was the 27th-largest producer of steel in the world, according to the World Steel Association.
The AT&T Monopoly and Antitrust Regulation
A more recent monopoly to have experienced the same fate as Standard Oil and American Tobacco is the American Telephone and Telegraph Company (AT&T).
Subject to many lawsuits spanning back to the 19th century, AT&T became entangled in one it no longer could escape. In 1974, the U.S. Department of Justice brought suit against the telecommunications giant, citing it had violated antitrust laws. Specifically, AT&T was accused of monopolizing the American telecommunications industry, preventing fair competition.
In 1982, AT&T finally settled with the government. It was required to divest 23 of its local telephone companies, 67% of its assets. The company split into seven regional companies, known as Baby Bells. In return, AT&T was allowed to enter the computer business.
Modern Day Monopolies
A good example of a near-monopoly from very recent history is the De Beers Group, perhaps the best-known diamond mining,production, and retail company in the world. For almost a century, De Beers monopolized the diamond industry. However, market and regulatory factors diminished its market share from approximately 85% in the late 1980s to around 29% in 2022.
As part of the regulatory crackdown on the company, De Beers pleaded guilty to conspiring to fix industrial diamond prices and was ordered to pay $10 million in the 2004 U.S. Department of Justice vs. De Beers case.
Like De Beers, Big Tech companies have faced scrutiny for having monopolies over their respective markets. Google, for instance, has faced antitrust lawsuits that allege that the company uses anticompetitive practices by giving an unfair advantage to its search platform. Similarly, Amazon has been accused of locking out its competitors through tactics that penalize sellers from setting lower prices on different sites.
As recently as 2024, Apple faces allegations of monopolizing the smartphone market in a landmark suit, with regulators claiming that the company engages in anti-competitive behavior.
The U.S. Justice Department accused Apple of monopolizing the smartphone market in March 2024, alleging that it restricts competitor products by making them perform worse on Apple devices.
While several U.S. companies in sectors like technology, consumer products, and food and beverage manufacturing have been accused of being monopolies in the media and some in courts, it rarely has been proven.
What Is the Role of Nationalization?
Most monopolies that exist today do not necessarily dominate an entire global industry. Rather, they control major assets in one country or region. This process is called nationalization, which occurs most often in the energy, transportation, and banking sectors.
The largest such example of a nationalized major asset is Saudi Aramco, also known as the Saudi Arabian Oil Company. Headquartered in Dhahran, Aramco is Saudi Arabia's state-owned oil and natural gas company.
Founded in 1933 by the Standard Oil Company of California, Aramco was taken over by the Saudi Arabian government in the 1970s. Today, most of the government's budget revenues come from Aramco's revenues.
In 2019, Aramco set a record with the world's largest IPO, raising more than $25 billion from 3 billion shares sold. Continuing its success, Aramco's market capitalization places it among the largest companies in the world, alongside giants such as Apple and Microsoft.
What Are Some Examples of Monopolies?
AT&T once controlled the telecommunications industry in the United States until divested in 1982. A monopoly that exists today is the United States Postal Service (USPS), which exclusively controls the delivery of mail in the U.S. Congress provided USPS with monopolies to deliver letter mail and access mailboxes to protect its revenues.
Are Natural Gas and Electricity Companies Examples of a Type of Monopoly?
Natural gas, electricity companies, and other utility companies are examples of natural monopolies. They exist as monopolies because the cost to enter the industry is high and new entrants are unable to provide the same services at lower prices and in quantities comparable to the existing firm.
What Are Natural Monopolies and Why Do They Arise?
Natural monopolies exist when the barriers to entry are too great for competitors to enter the industry. Mostly, start-up costs are extraordinarily high and the existing firm has achieved economies of scale, making rivals less able to compete.
What Is a Single-Price Monopoly?
A single-price monopoly is a company that does not practice price discrimination. The firm sells each unit at the same price for all its customers.
The Bottom Line
In many cases, monopolies have gained significant market power in sectors that have high barriers to entry and steep fixed-costs, such as steel, oil, and telecommunications industries.
Monopolies often can help a country or region build or shore up its infrastructure quickly, efficiently, and effectively. But when any company becomes too dominant, leaving little room for competition, service, quality, and consumer wallets can suffer. Historically, antitrust regulation has played a key role in breaking up monopolies, although these instances have proven to be quite rare.
