Weird Monopolies and Roll-Ups: Horse Shows, School Spirit, Settlers of Catan, and Jigsaw Puzzles

Market power is everywhere. Really. It's getting strange out there.


Welcome to BIG, a newsletter about the politics of monopoly and finance. If you’d like to sign up, you can do so here. Or just read on…

Last week, after I described a land of monopolists, so many of you got in touch with me about your experiences with private equity and monopolies that I realized I’d have to do another issue about market power in niche areas. I’m going beyond just private equity this time, adding areas with just regular old monopolies as well.

First some house-keeping. I’ll be presenting next week on a web event put on by the American Sustainable Business Council on the relationship between small business and monopolies. It’s on Thursday at 1pm and it’s public, so feel free to join. I’ll be talking about political fights over chain stores in the 1920s and 1930s.

Also, I’d like help from those of you who know how to build infrastructure or who have knowledge of construction/procurement law. A reader told me about a trend in consolidation of civil engineering and construction firms, and in particular the emergence of some form of market power among those who do program management work for public agencies in America, the largest ones being AECom, WSP, and Jacobs Engineering (though with lots of regional players).

I found this area tantalizing because building infrastructure in the U.S. is fantastically and ridiculously expensive. But after doing a bunch of interviews and research, I’m still a bit stuck. I suspect there were legal changes that shifted the practice of buying public infrastructure away from engineering experts and to financiers, but I am having trouble understanding what exactly happened. If you know anything about design-build contracts, the reason for the rise of program management as a specialty in the early 2000s, or major changes in construction law in the 1980s/1990s, let me know. Readers of this newsletter are some of the best sources I have.

A Nation of Weird Monopolies

Last week, I went into how private equity is consolidating fragmented industries using a strategy called a ‘roll-up.’ The sectors I profiled included portable toilets, mixed martial arts, prison phone services, dentistry, and mail sorting software. After I published it, I got notes from people involved in current and past roll-ups, as well as hobbyists who noticed consolidation in everything from tools to hearing clinics.

Inevitably, I also notes from people who assert that financier domination is just capitalism in America, and always has been. Some (usually on the right) like this model of development, others (usually on the left) find it dystopian, but they are unified in a pervasive view that such market structures are both inevitable and long-standing. I find such an attitude bizarre, not for any philosophical reason, but because concentrating wealth and power in monopolized markets was just not accepted as a legitimate way to do business for most of American history.

From the 1600s to the 1970s, asking the question of how to constrain wealth and regulate prices was a core part of our tradition and ideology. Here is, for example, something from a 1779 pamphlet passed out in Philadelphia against profiteering during the Revolutionary War: “You that have money, and you that have none, down with your prices, or down with yourselves.… We have turned out against the enemy and we will not be eaten up by monopolizers and forestallers [aka speculators].”

That legacy, hundreds of years old, is why Americans are mad when we are mistreated or overcharged. We aren’t cynics and never have been, and we don’t believe that our corporations and governing institutions should be corrupt. We know at one point they weren’t. And that populist sentiment is bubbling up, in every nook and cranny of our society, because we know something about how we do business today is very wrong.

In the 1980s, most of our elites on the right and left were persuaded that monopolies were natural and, good or bad, simply the American Way. They changed policy accordingly, which is why most of the monopolies we know about were formed during or after that decade. But corruption and monopolization isn’t natural, or inevitable. It’s a choice we’ve made, and a choice we can always undo. Remember that.

With that in mind, here are a few more sectors that have been monopolized. At the end, I’ll offer ideas for what we can do about this problem (which isn’t actually that difficult to address.)

1. Horse Shows

The stereotype of people who ride horses is not that of populist agitators, but there’s increasing anger at the monopolist that organizes horse shows. “I sent an email to the United States Equestrian Foundation,” wrote KB Sportshorses in a post on Facebook complaining about horse show prices, “telling them this is outrageous and it’s time we (USEF and riders) had a conversation about the costs and what can be done or changed in order to bring down the price of horse shows.”

The prices included hosts of charges (stalling fees, manure fees, schooling fees, trailer parking and hook-up fees, etc), the horse show equivalent of administrative fees tacked onto your cell phone bill, just for showing up with your horse. It makes it much more expensive to train a horse in the U.S. than in Europe, because you need to enter young horses in these contests to get show miles. The backstory here is that the governing body of the sport, the United States Equestrian Federation, doles out monopoly privileges to horse show promoters, which means horse jumping and dressage shows are ridiculously overpriced.

The USEF has something called the “mileage rule” which says that show managers aren’t allowed to put on contests on the same date within 250 miles of one another in most states. This rule creates local monopolies, including allegations that show owners “illegally buy and sell show dates they aren’t using,” which is a cartel-like behavior that allows show managers to charge high prices and ticky tack fees.

As usual, there’s a law behind this problem. The mileage rule has been in place since 1975, but the the the United States Olympic Committee gave USEF official monopoly power in 2004 by appointing it the sole national governing body for the sport under the Ted Stevens Olympic and Amateur Sports Act. So the USEF tightened its control over the mileage rule in the mid-2000s. Show managers sued the USEF for antitrust violations over the mileage rule, but in 2006, the U.S. Court of Appeals ruled that the USEF could essentially do whatever it wanted as a sports federation because its appointment as a national governing body gave it implied immunity to the antitrust laws.

High prices and the exclusion of the middle class from the sport these prices imply have generated an increasingly populist spirit among horse lovers. The North American Riders Group, as well as other reformers within the sport, have engaged in longstanding campaign to eliminate the mileage rule; there’s even a petition with a few thousand signatures. As one rider put it, “Honestly I think it's time we create our own foundation and bring affordability back to common Equestrians.”

2. The School Spirit Market (Class Rings, High School Athletic and Band Gear, Yearbooks, Graduation Materials)

In May, I wrote up a corporation called Varsity Brands, the Bain Capital-owned firm that dominates the cheerleading market, using anti-competitive tactics to control cheerleading contests, as well as sell cheerleading outfits and gear.

But Varsity’s business goes far beyond cheerleading, and the corporation has tried to use its position in selling to schools for cheerleading to build out control over a host of other school-related markets. Through its Herff Jones and BSN sports divisions, the corporation is involved in signet rings, yearbooks, graduation materials, school bands, athletic uniforms, and and even school branding/construction. Varsity has bought up athletic equipment distributors, band-related companies, and so on and so forth. It also does consulting work for schools on branding.

The strategy seems to be to become a monopoly supplier to everything a school does that isn’t classroom-related. Education is a very community-oriented activity, and it’s funded and regulated at a local level for that reason. The attempt to centralize branding and school spirit style activities by Bain Capital is just… creepy. If you want to watch a YouTube video that captures this level of corporate weirdness, look no further.

3. Tabletop Games

A few years ago, French board and card game publisher Asmodee bought the popular tabletop game Settlers of Catan. Asmodee was owned by private equity shop Eurazeo, and was engaging in an aggressive strategy to roll up the industry. According to one of their executives, "Over recent years Asmodee has been a consolidator in the board game market. As investors we want to continue to support the company to consolidate this highly fragmented market."

Tabletop game business strategy is based on having intellectual property, because buyers of games are an affinity group with allegiances to specific games. Under Eurazeo, Asmodee bought 20 different companies, and Asmodee now publishes dozens of popular games 7 Wonders, Dead of WinterDixitSplendorStar Wars: The X-Wing Miniatures GamePandemic and Ticket to Ride, and “distributes Magic: The Gathering, Pokemon and Yu-Gi-Oh! in some European countries.” Asmodee’s strategy is is to acquire intellectual property via merger or licensing and then it use to control distribution to stores, and then raise prices accordingly. Fans of these games have been complaining about price hikes for years.

In 2018, Eurazeo sold Asmodee to another private equity firm, PAI Partners.

4. Jigsaw Puzzles

Yup, there seems to be private equity activity engaging in financial engineering in the jigsaw puzzle market as well, which is similar to the tabletop game market. in 2015, private equity giant Mason Wells bought Buffalo Games, which has 45% of the jigsaw puzzle market. As with tabletop games, the main point is intellectual property. Corporations like Disney simply license their IP to Buffalo Games, which handles all the production and distribution. The leverage for Buffalo Games is its large basket of intellectual property, as well as distribution power to toy stores, and control over the supply chain (which is now at least partially in China).

5. Pharmacy Management System Software

As if there weren’t enough problems for independent pharmacists, there appears to be the beginnings of a roll-up in the software that pharmacists use to fill and bill prescriptions. It’s still a competitive market, with competitors like Computer Rx, Pioneer Rx, QS/1, Best Rx, Foundation Systems, Liberty Software, Prime Rx, Win Rx, etc still operating independently. But the roll-ups are starting, and private equity is coming. In an adjacent market, Tabula Rasa HealthCare (TRHC) is a roll-up whose strategy is to acquire many of the bolt-on technologies for pharmacies, like analytics, billing software for medical services, medication therapy platforms, and so forth.

6. Veterinary Clinics

As Bloomberg noted in 2017, “Pet care is undergoing the same sort of consolidation that transformed human health care in the 1990s.” And the story is global. From a reader:

Veterinary services are undergoing a global roll-up, I presume along the same lines and using the same arguments as for dentistry. I say global, because here at the other end of the world in New Zealand we're starting to see problems with every little vet clinic getting gobbled up by US firms funded by PE, and that is leading to ridiculous unnecessary bureaucracy and failures of basic office-keeping processes and administration.

Operations are "streamlined" after acquisition, and processes put in place based on what the owners think is best practice or more profitable, and usually it doesn't fit local operations and regulations at all and is actively counterproductive. There is of course no alternative according to the new owners.

So we've got unhappy overworked vets forced to work longer hours following unproductive processes, and I've got to assume less profitable branches than the independent practices that were there before. But because NZ is just as in love with laissez-faire as the rest of the western world, nothing can be done about it.

I don’t agree nothing can be done, but there we go. There are so many more roll-ups and monopolizers making life gradually more annoying. I haven’t even gotten into most of the business software space, which seems designed to make the lives of white collar workers miserable. One of my colleagues complained to me about Cision public relations software, and of course, living in a coastal city with friends who do yoga, before the pandemic I constantly heard rants about MindBody.

The way to address this monopolization isn’t conceptually difficult. Congress or state legislatures should just dramatically lower the burden of bringing an antitrust suit, and make it much easier for private litigants to do so. Then competitors, suppliers, and customers will file a blizzard of suits wherever there is monopolization, and markets will be cleaned up quickly.

At any rate, if you have examples of monopolies or roll-ups, leave them in the comments.

Leave a comment

Thanks for reading. Send me tips, stories I’ve missed, or comment by clicking on the title of this newsletter. And if you liked this issue of BIG, you can sign up here for more issues of BIG, a newsletter on how to restore fair commerce, innovation and democracy. If you really liked it, read my book, Goliath: The 100-Year War Between Monopoly Power and Democracy.


Matt Stoller

P.S. In researching horse shows, I found one particular antitrust case too weird not to mention. There is now controversy around whether trade associations specializing in registries of animal breeds can ban cloning, or whether barring clones from their registries is an antitrust violation. Animal breed registries control who can enter horse racing, dog shows, and so forth. Shortly after cloning became a viability breeding strategy, the American Quarter Horse Association banned cloned animals for their registries, meaning clones couldn’t be entered into various contests dependent on AQHA standards. Breeders brought an antitrust suit in Texas, and the district court ruled this ban was illegal. AQHA appealed, and circuit court judge Edith Jones, who is quite hostile to antitrust law, wrote an opinion overturning the decision.

The AQHA was the defendant in this case, but the Jockey Club (which does thoroughbreds), the American Paint Horse Association and the American Kennel Club also ban clones in their registries. I didn’t include animal breeding in the main part of this issue because there are questions here I don’t know how to answer. But the judge, Edith Jones, solidified the power of animal breeding registries to set standards.