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Welcome to the world of monopsony!

Carole Sloan -- Home Textiles Today, February 2, 2004

You don't know what it is — and neither did I till I read The Wall Street Journal last week and found out that many of the things we've been writing about in recent years actually had a name that sounds like a disease.

It seems that with all the things confronting the home textiles' world — we've been calling it the Wal-Mart disease, aka reverse auctions, retailer abuses, chargebacks as profit centers and the like — are just a bad case of monopsony.

Monopsony, according to WSJ, is the business disease that takes place when one company gains enough power to push suppliers' prices down. Sound like anyone we know?

But hear this. There's a related disease called oligopsony.

This is when there is more than one company that has the muscle to push down suppliers' prices. There's a bunch that could join the fellows from you-know-where in this scenario.

Basically, this mouthful of a disease takes place when market players' ranks shrink for any number of reasons — and one or a few players can control the prices for specific products.

In the WSJ analysis, the folks from Bentonville are acknowledged to have enormous price-pressure influence, but apparently the company is immune from joining the monopsony club because it doesn't control the retail marketplace.

Apparently, there's a barely distinguishable difference between controlling market prices and helping consumers with lower prices.

The impact of monopsony also is related to the mergers and acquisitions arena where the FTC gets involved in determining the impact of mergers on pricing in a specific marketplace.

Heck. Here we thought the home textiles' world was singularly special. And after all that angst, it turns out the industry is just another cog in the price pushdown machine.

All together now — let's pronounce the word ... monopsony.

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