Regulations Equals Monopoly?

Independent gas stations are facing one of the hardest crisis since 1970s. In California, Philip Elder, the gas station manager, claimed that regulations squeezing him too hard. Gasoline sales down, economic down term and new regulations almost push his Independent gas stations out of business. Under the new regulations, Philip Elder need to invest $11,000 per pump to meet the air-resources agency requirement before May 15.

Gas station industry has a similar market structure as beer industry. Beer industry looks like a perfect competition but actually it isn’t. Few big firms control more than half market share. Market power is highly concentrated into few big firms. Under the new regulations, independent gas stations will be hurt and they will become victims. Probably, big firms are the winners under this regulation because big firms can keep expanding their business and they have less competition. In short, regulations have tendency to push small firms out of business and push industry closer to monopoly side.

In this case, government has the responsibility to correct the side effect from the regulations. As Philip Elder pointed out, loans only the things they request.

Ka Wa Chan