What is a monopoly? Well, imagine there is a game that everyone wants to play, but you're the only one who owns all the pieces needed to play it. Therefore, you get to decide how much to charge people to get the pieces to play. Since they have no other choice, they have to pay your price, and you make a lot of money. That's what it means to be a monopoly.
A monopoly happens when a company or person becomes the only seller of a product or service, with no competition. This isn't good for consumers because they have no other options and might end up paying more or getting lower-quality products or services. Governments are supposed to prevent or regulate monopolies to ensure fair competition and better choices for us.
But, guess what? That’s not always the case. There are many monopolies that exist in British Columbia (BC) today. Let's discuss three monopolies in BC and how they can impact you.
Why do monopolies exist?
Before we discuss the three monopolies in BC, let's talk about why monopolies exist in a country like Canada. There are two main reasons for their existence:
1- Economies of scale
Don’t worry, it's actually a pretty easy concept. Economies of scale are the benefits you get from making your production more efficient.
Imagine you're a big company with lots of money and resources. You can produce a huge amount of stuff really quickly and at a low cost. That means you can offer cheap prices, fast delivery, and a wide range of products, just like Amazon. Other companies find it hard to compete because it would cost them more to provide the same level of service and variety of products.
So, when a company has these advantages, they can expand and dominate the market. They become the go-to choice for consumers because they offer better prices, convenience, and a wide selection. Smaller companies struggle to keep up because they can't match the resources and efficiency of the big player.
This is why some companies, like Amazon, end up becoming monopolies in certain markets. They have the power to control prices and set the rules because they're the dominant player, and it's tough for others to compete.
2- Legal barriers
Okay, let's break it down in simple terms. Legal barriers are basically rules and laws created by the government that stop or limit competition in certain industries. These rules can give one company special privileges or exclusive rights, which lets them become a monopoly.
For example, imagine there's a law that says only one company can provide electricity in a specific area. No other company is allowed to enter the market and compete. The government gives that company a special license or permit to be the only provider of electricity there.
These two reasons are pretty common in most countries. You can probably think of a company or two in your own country that have become monopolies because of these legal barriers or by dominating the market.
The 3 monopolies in BC
Cineplex, ICBC, and BC Liquor Store are examples of monopolies that surprised us when we arrived here. While it makes sense that BC Hydro is a monopoly as it's a government-owned electricity provider, the cases of Cineplex, ICBC, and BC Liquor Store are not as straightforward.
Cineplex
Technically, Cineplex isn't a total monopoly in BC because there are independent indie theatres like Rio Theatre. But let's face it, Cineplex is a big player. They own about 75% of screens in Canada, with over 160 locations and 1,687 screens nationwide. Because they dominate the market, indie theatres often can't get their hands on the latest blockbusters.
How it affects you: You can only go to their theatres to watch the most recent movies, you have to pay whatever price they have or wait until the movie is available on streaming platforms, and you will have to wait for them to improve the theatres until they decide to do so.
There's a whole controversy between Cineplex and indie theatres, but we will not dive into that rabbit hole right now. Despite all the bad stuff, Cineplex has good things, like half-price Tuesdays and Scene points through Scotiabank. It's nice to save some cash! But if their prices start skyrocketing (going up too fast), we don't have other options to choose from.
Remember, though, you can still catch old movies like Grease and Star Wars at indie theatres like Rio Theatre. Going there for a unique movie date can be a fantastic experience. So, keep them in mind for some variety and a fun twist on your movie nights!
ICBC
Insurance Corporation of British Columbia (ICBC) is a Crown corporation. This is a fancy term for companies owned by the BC government. ICBC has been around since 1973, and guess what? They've got a monopoly on car insurance here. It's not exactly easy on the wallet. If you want to own a car, you don't have the freedom to shop around for the best insurance deal. Nope, you're stuck with just one option. And if that option doesn't fit your budget you can’t own a car.
Now, if you're a young driver or an international student with a fresh Canadian license. You're looking at paying between $223 and $250 every month, and hey, it can even be higher than that!
But here's the interesting part: Despite the hefty costs, it seems that car insurance in BC is actually among the cheapest in the whole country. Can you believe that?
So, here's a question for you: Do you think having more competition in the car insurance market would bring down those prices? It's definitely something worth thinking about.
BC Liquor Store
A lot of students get surprised when they find out that there is no alcohol in the supermarket or convenience stores. You can only buy alcohol in BC Liquor Stores 😱.
Did you know that the very first government liquor store opened its doors on June 15, 1921, right after the 3-year prohibition? Since then, it has become the one and only liquor distributor in the entire province. This means they have the power to set the prices and choose the brands that other stores can sell. Sure, you can still visit other liquor stores, but be prepared to pay a bit more. They often try to make a profit by charging higher prices than the ones set by the BC Liquor Store.
Now, here's the kicker. With 196 BC Liquor stores scattered across the province, you might not always find one conveniently located near you. This could leave you with no choice but to opt for the more expensive options available elsewhere.
So, what do you think about these monopolies? Do you know any other monopolies in BC? We'd love to hear your thoughts. Join us on Slack to continue the conversation. Hope you enjoyed this little economic lesson!