Tue Jan 24th, 2006 at 11:29:20 AM EST
The short answer is no, it is a monopsony.
Walmart does not control the national retail market, although it does have a big part of it. It may be an effective monopoly in certain locales where it is the only big box store. But, even then alternatives exist, mail order, shopping further away, using specialty stores, etc.
An explanation below:
As a monopsony it becomes the single buyer in a market. This term is usually associated with a labor market, but also can be applied to products as well. So in a company coal mining town, for example, the company is a monopsony in the local labor market. In pro baseball, "Major League Baseball" has a monopsony in the ball player market. Much of agriculture is run by monopsonies, companies like Cargill and ADM contract with farmers to buy the entire crop at prices determined by the firm. Oil companies operate similarly with respect to drillers and refiners.
In the case of Walmart it has effective control of the production of many of the items it buys. The example of the Chilean salmon farming is the perfect example. Without Walmart the business would not have been created. It is also probable that there are contracts in place which prevent the fish farmers from selling to other suppliers. There are many other stories of companies being forced to change their business practices by Walmart even when the firm only purchased twenty or thirty percent of the total output. Recent stories have concerned Rubbermaid, Haynes, Snapper, and Vlasic, just to name a few.
This economic behavior is occurring more frequently as we move to industrial consolidation and transnational companies. For example the major auto companies are monopsonies with regard to their parts suppliers. Thus, as Ford and GM do poorly their suppliers (Visteon and Delphi) are forced into reorganization. Similarly the cable and satellite TV companies are monopsonies with respect to the channels they carry. Just today the Lifetime channel was forced to take a full page newspaper ad to complain about their being dropped by Dish Network.
Monopsonies produce the same economic distortions as do monopolies, just at the other end of the supply chain. Instead of overcharging customers, they under pay suppliers. This eventually forces the suppliers into uneconomic behavior which leads to poorer working conditions, outsourcing or off-shoring, poor capital utilization and supplier failures.
The US has stopped enforcing the monopoly laws, so pursuing companies like Walmart under them is not only unlikely, but would be the wrong remedy. What is needed is a new series of controls on monopsony power, both domestically and as part of international trade agreements.
This has international impact as well. In the days of United Fruit it was a monopsony with respect to the "banana republics" that it did business with. Today we see the same pattern in the oil business. The relationship between Nigeria and Shell Oil is a good example. As recent social unrest in the region indicates this can have political repercussions as well. When the monopsonies are big enough they can pressure their home countries into helping enforce the firms economic interests. This used to be called "gunboat diplomacy", but now it seems to have been replaced by the IMF, World Bank and invasions as a final resort.