Monopolization of Gambling Markets

  • Post comments:0 Comments

What Is a Gambling Monopoly?

The term ‘monopoly’ essentially applies to a business practice whereby one company or corporation is able to establish and retain dominance over a market share. In simple terms, a monopoly is a situation whereby only one seller has exclusive right to market and supply their products or services within a specific market niche.

Under normal market conditions, it is not possible to sustain a monopoly perpetually. This is because government regulatory bodies have the mandate to ensure that market conditions are fair to all concerned parties. In the ideal market place, governments regulators are tasked with insuring conditions are favorable to the formation of new businesses. This way the local market gets to grow organically, as it should.

Monopolization of Gambling Markets

However, governments from around the world do grant certain businesses licenses to establish monopolies but in a few market niches. Most of these niche markets revolve around the provision of social amenities. Many water, electricity, fuel and gas companies, all over the world, are government established monopolies.

Telecommunication service providers are part of another common niche market. This is a fact that is easy to prove. If you take a keen look at the market shares of leading telecommunication companies from around the globe, you are bound realize one interesting fact. In the majority of countries, the leading telecom provider will tend to have over 35% of market share.

Even if a company were to have 25% market share, attaining a whole quarter is still a remarkable feat in a truly fair market. The only way these companies are able to retain such a sizeable proportion of market share is through a government-sanctioned monopoly.

There are other monopolies that governments can establish if it suits the interest of the regime. Monopolies include mining companies, oil companies, transport companies and even, yes, gambling and gaming companies. The ways various governments establish monopolies are discussed next.

Ways of Creating Gambling Monopolies

In today’s resource-starved world, casino owners are keen on finding ways to accumulate resources in terms of revenue. As mentioned earlier, government have created monopolies in order realize a viable revenue stream in the form of gambling taxes. The annual $160 billion revenue from gambling taxes is certainly enough incentive for the U.S. government. The government has state-run ticket lotteries all over the country.  However, there are no gambling monopolies in the U.S.

Unlike in the U.S., the gambling markets in many countries are dominated by government-sanction monopolies. This feat is accomplished by uses a combination of methods. These methods have been used by a number of countries to create gambling monopolies. These countries include Sweden, Finland, North Korea, Japan, Singapore and Cambodia.

The methods discussed below are the four principal ways of creating a gambling monopoly. 

  • Regulation and Tariffs

The legislature in a government can create regulations that make it favorable to a particular entrant into the gambling market. Gambling-related taxes and pre-qualification regulations are the main tools in this approach. Potential new entrants into the market encounter monumental legal barriers that make it difficult to operate in the market.  Thus the favored company achieves the status of a monopoly.

  • Subsidies

A government grants a particular gambling establishment, tax waivers thus availing the necessary revenue for additional investment. The government can even grant cash strapped company a revenue boosts, which are popularly known as ‘government bail-out’. The waivers and bail-out are part of various private-public partnerships programs.

  • Nationalizations

The most straight-forward approach that a government can use to establish a gambling monopoly is by making a company part of the law. This is how all government corporations and parastatals have come into being. The government thus passes an edict that declares no other company has the right to operate in the market. Any attempt to supply or provide similar products and services, by a new entrant, thus becomes a legal offense.

  • Intellectual Property

This a significant way in which a small portion of multi-national corporations have been formed. A government has the power to grant and enforce the exclusive rights to supply a specific product or service. For example, if a company introduces a modified version of an existing product or service, the government can create a monopoly around that product or service. All a gambling establishment has to do is apply for a patent on a ‘new’ gambling product. The government then determines the length of time the patent will last.

Disadvantages of Gambling monopolies 

There are a number of significant disadvantages that gambling monopolies can pose to a country. What follows is a brief discussion of the main counter-productive aspects of gambling monopolies;

An established gambling monopoly has the economic power to keep out competitors from the market. The monopoly would only need to provide its game offerings to consumers at a low and affordable price. By limiting the profit margin for gambling product, it becomes impossible for a new entrant to acquire revenue for expanding.

A monopoly in gambling would have the power to fix the prices of gambling products and services at any price point. A gambling monopoly can just decide to charge higher rates for its products and services. The customer has no other choice but to pay-up.

Gambling monopolies are not only able to grow in size, but they also amass substantial political clout. Through lobby groups, the monopoly thus is able to influence policies within the gambling industry. Any new entrant has to overcome costly legal barriers in order to operate in the gambling market

Finally, establishing a gambling usually lowers the job security of employees working in the industry. This situation arises as the monopolies enlarges and attains the status of a large government corporation. It is hard, even with good intentions, for a government to effectively manage huge corporations. Giant corporations usually collapse or break-up. This leads results to massive lay-offs. 

Conclusion

The trend towards the formation of gambling monopolies, as witnessed in many countries, is not the best approach for the gambling industry. Monopolies in gambling are precursors to a grim future for the global gambling industry.

Leave a Reply