Private equity and monopolies: lessons from The Isle of Wight
Hello and welcome to the latest edition of The Counterbalance. Today, we’re taking a fresh look at the relationship between private equity and monopolies.
A storm has been brewing across the Solent, and no, it’s not the weather this time. It’s a grassroots petition gathering momentum for the last year pleading for a government-sponsored investigation into the cost of travel to and from the Isle of Wight, an island off the UK coast.
“Islanders, particularly those travelling on foot, have no alternatives and are at the mercy of the unregulated ferry operators for getting off the island,” the “Competition 4 IOW Ferries” petition reads.
On the surface, the petition is simply about ferry service, price hikes and dwindling service. But beneath all of that, the petition shines a harsh light on something much more troubling.
The Isle of Wight, an island and English county nestled in the English Channel, has since become one of the clearest examples of private equity’s ability to strangle vital industries and otherwise healthy markets.
The Isle of Wight’s citizens depend on ferry services. There is no bridge or tunnel linking the island with the rest of the United Kingdom. To describe the ferry service as vital would frankly be an understatement.
“I go every year to the Isle of Wight. It’s a lovely place for a break…but the price is a killer not just for myself but my family who live on the Isle of Wight, so we don’t see them much because of the price,” one signatory from London said.
But the sector is dominated by two companies, Wightlink and Red Funnel, both of which are owned by private equity firms that thrive on consolidation and squeezing a sector for as much profit as possible.
Wightlink — owned by Basalt Infrastructure Partners and Fiera Infrastructure — and Red Funnel — owned by a consortium of institutional investors including the West Midlands Pension Fund — dominate the sector over few other smaller service providers.
The private equity ownership of these services is a point of concern, contributing to residents’ frustration over reduced competition and higher fares. It’s also a good reminder that a variety of other sectors that are buckling under the weight of private equity.
One such example is the veterinary sector. In the UK, the veterinary sector has experienced major consolidation over the past decade. How finance monopolises veterinary services is an issue the Balanced Economy Project has covered before with this piece by Nicholas Shaxson.
Last year, the Competition and Markets Authority published a review outlining its concerns about the sector. The review revealed that only 10% of vet practices belonged to large groups in 2013, yet that figure increased to an eye-popping near-60% by 2024.
In other words, in the last decade, 1,500 of the 5,000 vet practices in the UK had been acquired by the six large corporate groups involved in the sector, including CVS, IVC and VetPartners.
“This may reduce the number of business models in locations where most or all of the first opinion practices are owned by one large corporate group, giving less choice to consumers because they tend to choose practices close to home,” the review reads.
A piece in the Financial Times from earlier this month also shows that vet service costs rose by 60% between 2015 and 2023.
The care home sector has faced similar issues. A University of Oxford study revealed that almost every care home in the UK that was forced to close by the Care Quality Commission since 2011 were run on a for-profit basis. Public Services International in a report in 2022 demonstrates how finance extracts wealth from the care sector.
So while a petition for cheaper ferries to and from the Isle of Wight isn’t going to wind up on the BBC anytime soon, it is a useful reminder for us — involved in the fight against monopoly power — that a host of vital sectors can fall victim to private equity consolidating markets and damaging them virtually beyond repair.
To be clear, these sectors are not like airlines, restaurants or coffee shops, where a bad experience can drive customers elsewhere. People need transport. They need healthcare for their pets. They need care homes for their loved ones. These services the essentials of life and should never be beholden to such jeopardy.
Private equity knows this, and uses that dependency to its advantage. The Isle of Wight’s fight for cheaper ferries should remind everyone in the anti-monopoly space what’s at stake: basic services should never be handed over to profit-maximising machines hidden behind complex corporate ownership.
Weekly highlights: A victory for Microsoft
Microsoft won an important appeal against an FTC challenge to the $69 billion Activision Blizzard deal this week. The legal challenge, filed by the competition watchdog, sought to block Microsoft’s $69 billion purchase of Activision Blizzard, the American video game giant behind the globally popular Call of Duty series. Meanwhile, Microsoft is raising prices on consoles, controllers and games worldwide.
European tech industrialists are calling on the EU to reduce the bloc’s dependence on US technology. In an open letter to the Commission, defendants of the EuroStack initiative push for European governments and institutions to remember their “obligation to invest in Europe’s economic future.” You can read the letter here.
Soundbite of the week: Andrew Ferguson slams the spirit of regulation
Chair of the Federal Trade Commission Andrew Ferguson delivered a keynote address at the International Competition Network (ICN) conference in Edinburgh, Scotland this week.
In his speech, the chairman dug his heels in on Europe’s renewed approach to competition — spearheaded by the new Digital Markets Act — and adds yet another indication that a widening ideological shift is separating the United States from many of its peers:
“Regulation, whether intended to or not, can lead to the same kind of threat to human flourishing as the abuse of private power…even when the regulator believes he is doing the right thing, he is often damaging competition in ways he does not understand.”
Spotted in London: Remove Big Tech from the internet
The last section of The Counterbalance is typically reserved for a data set that tells readers something interesting about the state of monopoly power over the course of a week.
But today, we would like to take a slightly different approach. The Counterbalance — like the rest of the Balanced Economy Project’s work — is focused on changing the terms of the discussion relating to monopolies in wider society.
It’s worth pointing out when an example of that changing discourse reaches the London Underground. Spotted this week by our very own Scott Chipolina:
The Counterbalance is published every Thursday. Please send any thoughts and feedback to scott@balancedeconomy.org.