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Sheeraz Ullah


10 ways firms maintain oligarchies while giving the appearance of an open market


    1. Open Banking: Unbundle => Acquire => Integrate

    1. Open access to banking data: The established big banks allow third-party companies and new entrants to access banking data through standardized APIs (Application Programming Interfaces). This gives the impression of an open market with opportunities for innovation and competition.
    2. New entrants create open banking products: With open access to data, new companies and startups enter the market and develop innovative open banking products and services, such as peer-to-peer lending platforms, data analytics tools, and automated financial advisory services.
    3. Big banks acquire entrants: As the new entrants gain traction and pose a potential threat to the established big banks, the big banks start acquiring these promising companies. This process may not be publicly disclosed to maintain the appearance of a diverse and competitive market.
    4. Turn into subsidiaries: Once the acquisitions are completed, the acquired companies are integrated into the big banks' operations as subsidiaries. From an external perspective, it may still seem like multiple players are present in the market. However, behind the scenes, the big banks control and consolidate the market.

    2. Telcomm Industry: Deregulate => Acquire => Integrate

    1. Deregulation to open spectrum: The government or regulatory bodies relax restrictions and open up the telecommunication spectrum to encourage competition and the entry of new players into the market. This move creates an impression of increased competition and a more open and dynamic market.
    2. New entrants: With the barriers to entry lowered, new telecom companies and startups enter the market, offering innovative services and products to compete with the established telecom giants.
    3. Acquire new entrants: As the new entrants start gaining subscribers and market share, the incumbent telecom giants initiate discussions to acquire these smaller companies. These negotiations are often kept confidential to maintain the illusion of a competitive landscape.
    4. Turn into subsidiaries: After successful acquisitions, the new entrants become subsidiaries of the incumbent telecom giants. The subsidiaries may continue to operate under their original brand names, preserving the appearance of a diverse market, while the larger telecom companies exert control behind the scenes.

    3. Platform Ecosystems

    Dominant companies create platform ecosystems that allow third-party developers and businesses to build and offer products or services on top of their platforms. While this can foster innovation and diversity, the dominant company still controls access to the platform and can use data and insights from third-party developers to strengthen its position.

    Apple app store / Social Media Platforms

    4. Exclusive Partnerships

    Dominant companies form exclusive partnerships with smaller players, giving the appearance of collaboration and openness. However, these partnerships may come with terms and conditions that restrict the smaller player's ability to compete independently or collaborate with competitors.

    Nvidia has multiple partners dedicated to synthetic data services and delivery.

    5. Regulatory Capture

    Dominant players may use their influence to shape regulations and industry standards in a way that benefits them. By doing so, they can limit competition and maintain control while still appearing to comply with industry regulations.

    You can see this being played out by OpenAI on AI regulation.

    6. Marketplace Model

    Companies create marketplace platforms where multiple sellers and service providers can participate. While this model can offer a wide variety of options to consumers, the dominant company can manipulate search results, pricing, and visibility to favor their products or preferred partners.

    7. Collusion / Predatory Pricing

    Dominant companies may engage in predatory pricing, temporarily lowering prices to a level that smaller competitors cannot match. This can drive competitors out of the market, allowing the dominant company to raise prices again once competition decreases.

    8. Backroom Deal and Bailouts

    Too big to fail. The government will bail you out of all your bad decisions. Reduce the fines and convert them into donations. Use the donation to fund government causes.

    9. Data Advantage

    Companies with significant data assets can use this advantage to offer personalized services and products. While it may seem like a customer-centric approach, it can also create high entry barriers for competitors who lack access to the same volume of data.

    10. Brand and Marketing Influence

    A strong brand and extensive marketing efforts can create the illusion of a competitive market even if the majority of the market is controlled by a few dominant players. Consumers may perceive many choices, but in reality, a few companies with significant market power control the majority of the market share.

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