Are FedEx and UPS too dominant?

A duopoly exists when a pair of businesses divide up the entire industry for specific services or goods. A monopoly is where one corporation controls the entire market. Before AT&T was split up in the mid-1980s it was known as The Phone Company. It was a classic monopoly, and was broken up after an anti-trust lawsuit.

Both monopolies and duopolies pose like threats to free markets. If you’re a true monopoly, you‘re not incentivized toward competence or, more importantly, to keep prices low. If there is no competitor to worry about, why fret over abilities and rates? The consumer has no choice. This happens also, much less often, in a duopoly. Each of the significant players simply have to see what the additional guy is doing to determine if they are doing enough to keep share of the market.

In America, the issue comes up whether delivery services United Parcel Service (UPS) and Federal Express (FedEx) maintain or are becoming a duopoly.

In 2003, the competitor DHL, owned by a German parent company, tried to expand its American parcel delivery services by buying the domestic shipping conglomerate Airborne, Inc. It didn’t work out very well. After reorganizing in 2008, the company published a loss of almost $10 billion. DHL now focuses on foreign markets and recognizes that the big players are clearly too large to wrestle with on the American market.

But the two giants do have one very large competitor, the United States Postal Service. FedEx and UPS hold almost half of American deliveries with the USPS significantly making up the rest. But the USPS suffers from tremendous issues, and they are not expected to go away any time soon. A number of analysts foresee that the United States Post Office will eventually fold.

The USPS suffers from a business model of a long gone era—dispatches and ads on paper instead of by web. The web and email constituted a paradigm shift for the Postal Service. With an institution dedicated to delivering first class mail in a timely fashion, the changeover to electronic communications took the rug out from under the model the USPS used. The USPS is trying to come back, but its prospects look troubling. It generated a roughtly $5 billion loss for the fiscal year 2011.

So is there a cartel between FedEx and UPS? Not yet. If the USPS falters or alters into an institution that doesn’t resemble what it is now, the industry of domestic shipping will remain among a pair of remaining players, save local delivery and courier services. If they do become such an entity, the efficacies and pricing of normal market forces will erode.

Tayna A. Willis breeds hens by evening and advances her web to print software in the Munfordville, KY office at home. She became the leader of her highschool volley ball group.