Small companies are struggling now more than ever to defeat their own personal Goliaths. The imbalance of power and resources between the two groups only grows farther apart, and the little guys are the only ones to take the hits.
It feels like we’ve gone back to the Middle Ages in the current state of affairs. The business principles within democracy seem overshadowed by the influence of select industry leaders. Instead of functioning like a true democracy, we’re more like an oligarchy, with power concentrated in the hands of a select few. Who those few are, we don’t know.
These kings and queens of big corporations hide amongst their nobles, their peasants, trying their best to chameleon into our environment and never be caught. While hiding their identities behind successful companies and stacks of monopoly money, they’ve mastered the art of sneak attack and silently, but mercilessly, take out smaller competition.
What was once an American dream is now an American nightmare.
Table of Contents
What is a Small and Big Business?
Before diving into this article, it’s important to note what large and small companies are and how they drastically differ from one another.
A small business is typically defined as companies with fewer employees. This includes sole proprietorships, partnerships, and limited liability companies (LLCs). They can either be privately owned or publicly traded on the stock market.
These businesses often start off as a passion project for one or a small group of individuals, intending to provide a service or product to their community. They tend to have a more personal touch, with the owners often being involved in day-to-day operations and interacting directly with customers.
On the other hand, big businesses are typically defined as companies with 500 or more employees. These are usually publicly traded on the stock market and have multiple layers of management and hierarchy. They often have a larger reach and more resources, allowing them to compete with global corporations.
Small Business vs Big Corporations
While there are significant differences, the main differences between large and small companies lie in their size and resources. Many small businesses often struggle with limited budgets and manpower, while big businesses have the financial means to invest in advanced technology, marketing strategies, and larger teams of employees. This gives big businesses certain advantages over small businesses in terms of expanding their reach and influence.
Another key difference is the level of flexibility and adaptability. A small business is typically more agile and able to pivot quickly in response to market changes, while big businesses may be slower to adjust due to their size and bureaucracy. This gives small businesses an edge in innovation and meeting the changing demands of consumers.
No matter how cutting-edge this advantage could be, however, larger companies are changing the rules of the game without giving their opposing team a fair chance to review the rulebook. The big companies monopolize numerous industries from grocery stores and office spaces to innocent cul-de-sacs, leaving small businesses along with landlords and average Joe’s struggling to keep up.
I guess you could say the last takeaway from these groups is that one side is struggling to stay afloat while the other is doing just fine. But this isn’t a story about winners and losers. It’s about the importance of balance in business, and how the actions of large businesses can have severe consequences for small businesses.
Big Corporations Monopolizing and Taking Over
The rules of Monopoly are simple. The goal of the game is to bankrupt your opponents and be the last person standing. Fun game, right? Until you realize it’s not just a fun family board game anymore. It’s a reality for small businesses trying to compete with big corporations.
In today’s world, big corporations are playing the role of the monopolist, buying up smaller businesses and dominating entire industries. This not only limits competition but also allows these big corporations to control prices and consumer choices.
Since corporations have the power to dominate entire industries, this leaves little room for smaller competitors to grow and thrive. They use tactics like mergers and acquisitions, aggressive marketing strategies, and exclusive contracts to solidify their control over the market. And while these actions may not be illegal, they can still have a devastating impact on a small business.
Big Fish, Big Pond: Grocery Stores Merge
To emphasize a couple of real-world examples, let’s talk about Albertson’s and Kroger’s plan to merge. In October of 2022, these two chains announced a major game-changer by deciding to come together as one organization and spread their reach. This merger includes the parent company of Albertson’s, Cerberus Capital Management, acquiring all shares of Kroger Co., the owner of Ralph’s and Smith’s chains.
These two supermarket chains are already giants on their own, and this merger would mean the two companies will control nearly 15% of the grocery market in the US, falling second behind Walmart with 27%, according to Forbes analysts. This would be like if Godzilla and King Kong morphed into one body. They’d double their strength and take over the town, leaving the small businesses to fend for themselves and take cover.
This not only limits competition and gives them more power over prices, but it also affects smaller suppliers who may struggle to negotiate with such a large entity.
Overall, it’s bad news for small mom-and-pop grocery stores. Albertson-Kroger would have crazy buying power and could squeeze suppliers big time, even if they sold off some stores to dodge anti-monopoly rules. With over 5,000 stores in 48 states, this deadly duo will hold a lot of power in terms of who and what they put on their shelves.
Subway Bought Out By Roark Capital
Subway, the popular sandwich company, was recently bought out by Roark Capital, a private equity firm. The deal was announced in late August, and Subway entered into a definitive agreement to be acquired by affiliates of Roark Capital.
Roark Capital offered $9.6 billion for the sale, slightly lower than the original listing price of $10 billion back in February. This acquisition makes Roark Capital one of the world’s largest restaurant owners, adding Subway to its portfolio, which already includes multiple chains.
The sale officially marks the end of Subway’s six-month-long search for a buyer as well as over five decades of family ownership for the sandwich chain. This may not seem like a big deal, but it’s another example of large companies expanding their monopoly and controlling a significant portion of an industry.
While these mergers may bring benefits to the companies involved, they can have a detrimental impact on most small businesses. The consolidation of larger companies gives them more control, making it difficult for a small business environment to survive and thrive in the market.
Monopolies Also Happen Within The Internet
It’s not just physical industries like grocery stores and restaurants where monopolies occur. The internet is also a battlefield where large companies compete to conquer the digital space. Giant tech companies have faced scrutiny for their monopolistic practices, stifling competition and limiting consumer choices.
One example of this is Google’s dominance in the e-commerce world. With over 90% of internet searches, Google holds strong control of what products customers see and buy. However, Google has recently been accused of playing against the search engine rules.
Earlier this year, the Justice Department and states like California, New York, Colorado, and Virginia began the process of suing Google, claiming the company illegally controls the online marketplace. The lawsuit accuses Google of self-dealing, making anticompetitive acquisitions, and pressuring businesses to use their products.
Small companies view this as a major issue because of the high demand for digital ad space in today’s world. The plaintiffs in the lawsuit mention how website publishers in the United States sell over 5 trillion digital display ads on the open web every year, accumulating more than 13 billion ads per day. That’s more than the number of daily stocks traded on the New York Stock Exchange.
Essentially, Google eliminated any competition it could possibly have by doing two things: (1) neutralizing ad tech competitors, and (2) removing non-Google products from the equation by making it mandatory for publishers and advertisers to use their products.
While the lawsuit is still pending, the New York Post experimented with Google’s own chat AI, Bard, by asking what Bard thinks of the case. After feeding the software all of the facts, Bard sided with the plaintiffs, stating Google is abusing its power and monopolizing digital ad space – talk about a rebellious child. The fact Google’s artificial intelligence, essentially its baby, recognizes the issue with the amount of power Google holds speaks volumes.
The potential consequences of this lawsuit could lead to Google breaking up its empire, making room for small companies to enter the market and compete fairly. This would ultimately benefit consumers by providing them with more choices and potentially lower prices.
Whether it’s in the physical world or the digital one, monopolies can hurt businesses and consumers alike.
Where Did the Free Market Supply and Demand Principles Go?
The rise of monopolies and the dominance of large companies in various industries raises questions about the principles of supply and demand in a free market economy. With fewer competition, these companies can manipulate prices and control supply to their advantage, ultimately hurting consumers and small businesses.
In the case of Kroger and Albertsons merging, the consolidation of their buying power allows them to dictate prices to suppliers and potentially raise prices for consumers. This goes against the basic principles of supply and demand, where competition drives down prices.
Similarly, in Google’s case, their dominance in the digital ad space gives them control over pricing and supply, making it difficult for small companies to compete.
In a truly free market, there should be fair competition and no one company should hold too much power over an industry. However, with the rise of monopolies, this fundamental principle begins to bend, and what was once a strong, straight line is now a wave of double standards.
Empty Office Spaces
The pandemic led to a rise in empty office spaces as many companies shifted to remote work. This would hypothetically create opportunities for smaller businesses and startups to afford office space they couldn’t before, allowing them to thrive in a competitive market. However, these smaller businesses face another challenge as big corporations snatch up the empty office spaces and rent them for higher prices.
Because of the inflated prices, the amount of empty office spaces is starting to become a national problem. According to Cushman and Wakefield, a commercial real estate firm, around 20% of office spaces are currently empty nationwide. That’s a significant milestone, surpassing the vacancy rates seen during the 2008 recession. Some cities are facing even worse numbers. Take San Francisco, for instance, where the city’s vacancy rate is currently around 30%.
So, why are large companies leaving these spaces empty and not bringing down the prices? Well, it all comes down to money and power.
These companies can financially afford to hold on to vacant spaces, waiting for the market to drive up prices again. Meanwhile, small business owners struggle to compete with high office rental prices, especially in a post-pandemic world. By keeping the prices high, these corporations are essentially controlling the market and preventing a small company from accessing affordable office spaces. Once again, the competition in the market becomes limited, ultimately benefiting the top players.
This brings us back to the game of Monopoly, where small businesses are the players and large businesses are the high-rise hotels on the Boardwalk. Landing on their space bankrupts the player and before you know it, game over.
Monopolizing office spaces is just another example of how large businesses can use their power and resources to limit competition, making it difficult for small companies to survive.
In the end, it’s evident monopolies not only have a direct impact on a small company but also indirectly affect different aspects of our economy.
Housing Market Corrupt
Monopolies happen in our market, and that’s a pretty clear picture. But most don’t realize how far some monopolies can reach. It’s not just limited to businesses and office spaces, it also reaches the housing market.
Rental Groups Buying Out Home Offers
In recent years, there has been an increase in corporate landlords buying up single-family homes and renting them out for high prices. This trend is known as “Wall Street Landlords” and it poses a significant threat to regular homebuyers and small-scale landlords.
With these large companies buying up single-family homes, it creates a shortage of available homes for regular homebuyers, driving up prices and making it difficult for them to enter the housing market. MetLife Investment Company found 40% of U.S. single-family homes may be controlled by institutional investors by 2030. This means more and more people will be forced to rent from these corporations, creating a monopoly in the rental market.
Companies like Tricon Residential, Progress Residential, American Homes 4 Rent, and Invitation Homes are all guilty of buying tens of thousands of homes all across America, leaving many families to postpone their dream of homeownership.
The white-picket fences and ginormous backyards don’t get sold to deserving or trying families anymore. Instead, they’re being sold to companies who only want the property to rent it out and upsell its value. It’s becoming impossible for families to find their dream home in the perfect town all while competing with outside companies.
Home Buyers Out Bid by Investors
It’s become impossible for homeowners to escape corporate greed on a national level. Even if you can’t afford to buy a home, you’re still at risk of being outbid by investors who see value in your home. Indianapolis, Indiana is one of the many cities currently battling this issue.
The Fair Housing Center of Central Indiana revealed that Marion County has over 6,000 homes owned by 10 of the largest real estate investment companies. That’s more than 5% of the total homes in the county. Only two of those 10 are companies based in Indiana, the rest are out-of-state companies. So, the people who live in Indianapolis are forced to rent from these companies that don’t even reside in that actual state. Families wanting to settle down in Indianapolis fall runner-up.
When these corporations buy homes, they never go and see the property. All they care about is the price and the potential it has to bring in revenue through rent. This allows them to outbid actual families who can’t compete with that kind of money and resources.
Paying Cash Hurting Home-Buyers
One of the biggest problems that arises from investors buying out these homes is how they’re able to pay for them with cash. It’s a huge leg-up compared to other buyers because it doesn’t require mortgage loans.
When an individual or family pays for a home with a mortgage, there are inspections done to see if it’s worth the value. However, since these cash buyers aren’t borrowing any money, they don’t need approval. Buying in cash also doesn’t require a down payment, making their offers even more attractive to sellers. This puts regular homebuyers at an even bigger disadvantage.
Mortgage loans also take at least two months to be approved and finalized, whereas cash offers can close within two weeks. This means investors can swoop in with their cash offers and beat out potential homebuyers before they even have a chance to make an offer.
In Indianapolis, cash was used for 42% of residential sales recorded in Marion County. Out-of-state investors paid in cash for over 70% of their real estate transactions, while only a third of Indianapolis-based homebuyers paid in cash. This shows how cash is becoming the preferred method of payment in the real estate market, creating an unfair advantage for investors and monopolizing the housing market even further.
The housing market has become a competition between regular families and corporations with deep pockets, leaving many feeling hopeless in the search for their dream home.
Upward Trend of Cash Sales in Neighborhood of Charlotte, North Carolina
Charlotte, North Carolina is another city experiencing a surge in cash buyers for real estate. From 2020 to 2022, there was a significant increase in cash sales, rising from 10% to 17%, driven by investors engaging in home-buying activities.
One of the family-oriented neighborhoods in this city, Bradfield Farms, has seen a drastic change in homeownership. In Bradfield Farms, the average home price significantly increased to 48 percent, reaching $374,165, from January 2021 to January 2023, according to New York Times.
Not only have these prices shot upward in this two-year gap, but over 50 percent of homes in this neighborhood were bought out by these large investors using, you guessed it, cash. This left few options for regular homebuyers and even forced some families to move out of the neighborhood due to rising prices.
Being a homeowner in this charming neighborhood is like hoping investors will bail on their deals, which is about as likely as winning the lottery.
Los Angeles Homes Still Sit Empty During Housing Crisis
With all the homes being bought out by large corporations, you’d think there wouldn’t be a shortage of rental properties. However, that’s not the case in Los Angeles, California.
Los Angeles has a housing crisis with over 75,518 homeless individuals residing within the city limits. Yet many houses sit empty throughout Los Angeles County, including 115 homes owned by the State Highway Authority in the northeastern area of Los Angeles.
The State Highway Authority, also known as Caltrans, bought these homes in the 1960s to tear down this neighborhood and make room to extend Interstate 710. As this purchase was made over 60 years ago, these houses still sit empty today and the project was later canceled not too long ago in 2018.
Caltrans currently owns more than 330 homes in Southern California that have remained vacant for several years amidst the city’s housing crisis. This raises serious questions about the motives behind buying up these properties and leaving them empty while thousands of individuals sleep on the streets. It’s a clear example of how corporate greed is prioritized over the well-being of the community.
What This Looks Like in the Chicagoland Area
Similar to Indianapolis, Charlotte, and Los Angeles, Chicago has also seen a surge of empty office spaces.
According to a report by real estate firm CBRE Group Inc., Chicago ranked as the second lowest among 11 US cities for office leasing activity in the first quarter, just behind San Francisco.
Unfortunately, the commercial real estate market doesn’t seem to be getting any better, as the city’s office vacancy rate hit a record high of 22.4%. Even tech companies, once seen as a promising opportunity for Chicago’s future, are scaling back.
For example, Salesforce Inc. and Meta Platforms Inc. are giving up almost 240,000 square feet (22,300 square meters) of office space. The future of Chicago’s finance and trading empire looks uncertain as its empty towers cast a shadow over the city.
Chicago’s housing market is also not doing too well. Chicago is currently leading the nation in home growth prices standing over 5% and has currently ranked number one on this list for the past two months.
What’s Been Done About This?
Corporate greed in the housing market has made it difficult for regular homebuyers to achieve their dream of homeownership. With more and more homes being bought by large corporations, the rental market becomes monopolized, making it difficult for families to find affordable housing options.
This issue needs to be addressed, as it not only weakens competition but also affects individuals and families who are just trying to find a place to call home. So, when we think about monopolies, it’s important to realize its impact goes beyond business operations and can have real consequences for everyday people.
It’s important to implement measures to stop corporations from exploiting their power and to make sure we have a fair and competitive housing market for everyone.
Stop Wall Street Landlords Act 2022
In response to the housing crisis, a proposed bill, introduced by a California US representative member Rohit Khanna from the 17th district, called the Stop Wall Street Landlords Act 2022. This would limit corporate purchases of residential properties and prevent them from buying any additional homes for a period of two years as well.
This bill has some important implications for large investors looking to invest in single-family housing. If their assets exceed $100 million in a taxable year, they won’t be eligible for certain tax benefits. Specifically, they won’t be able to claim a tax deduction for interest paid on a single-family home mortgage, for insuring those homes, and for the depreciation of those homes.
In short, this bill aims to limit the tax benefits, impose an excise tax, and restrict federal mortgage assistance for large investors involved in single-family housing investment.
Unfortunately, in November of this year, the bill was not passed. However, it serves as an important milestone in addressing the growing issue of corporate greed in the housing market and taking steps towards creating a more competitive and fair market for all individuals.
Initiatives in Indianapolis and Bradfield Farms, NC
Since the government hasn’t made much progress, the local community of Indianapolis decided to take matters into their own hands and work to tackle the problem of corporate greed in the housing market.
For example, the city has put in place strategies to prevent displacement and help people age in their homes. This includes a pilot program in Riverside, Indiana that offers a property tax break. While this pilot program is only enacted in the Riverside area, it has hopes of expanding and being adopted in other places.
Also in the works is a city community land trust, a novel idea in which home resale prices are kept permanently affordable. Some homeowner associations have even decided to take matters into their own hands by putting rental restrictions in place. This helps to prevent investment companies from buying homes in the neighborhood. However, this solution only works for specific neighborhoods that have those associations and aren’t already swamped with rentals.
Similarly, in Bradfield Farms, North Carolina, residents are also fighting against the impact of corporate greed in their community. They have formed a neighborhood group called Save Bradfield Farms to push for regulations on rental property ownership and management.
In this close-knit community, residents passionately protested for an important amendment that aimed to preserve the neighborhood’s character and sense of community. The amendment, which received overwhelming support, advocated for capping 25% of the homes in the community as rentals and mandated that homeowners must reside in their houses for at least a year before considering renting them out.
This significant development highlighted the community’s commitment to maintaining a vibrant and engaged neighborhood for the benefit of all residents. This amendment was ultimately approved in April of this year.
Rescue Restoration: A Small Business Here to Stay
Small businesses tend to face many challenges in the corporate world, but one of the biggest struggles is simply surviving against large business competition. These large corporations have the financial means to outspend and out-market smaller companies, making it difficult for them to gain a foothold in the market.
But here at Rescue Restoration, we want to assure you that we are a local business and not going anywhere. Our small company serves the community, providing top-quality water, fire, and mold restoration services for homes and businesses alike. Our team includes skilled technicians who are passionate about their work and dedicated to restoring your property back to its pre-loss condition.
Our commitment to the community is evident in our partnerships with local businesses and organizations. We understand the importance of supporting small businesses, which is why we prioritize working with local suppliers and vendors whenever possible.
So when it comes to choosing a restoration company, remember Rescue Restoration is here for you. Not only are we equipped with the latest technology and techniques, but we also have a deep understanding of the unique needs and challenges facing small businesses in today’s competitive market. Trust us to be your partner in restoration services and support local businesses while doing so.
So let’s continue supporting each other and working towards a more equitable marketplace for all. Let’s stand against corporate greed and preserve the vitality of our communities. Together, we can make a difference. Stay local, support local, and choose Rescue Restoration for all your restoration needs.