ACI has been operating under monopoly conditions in the Australian marketplace for many years now. It has been able to do so because of sufficient barriers to entry which have blocked other competitors from entering the marketplace. It is interesting to note that although ACI still holds a monopoly position in the Australian glass bottle manufacturing industry there has been a marked decrease in the monopoly power it displays. This decrease in monopoly power is the result of the few large consumers banding together and lobbying against the company in the form of collective bargaining. This collective barraging has resulted in creating a bi-lateral monopoly since the sole supplier ACI is forced to negotiate with one collective group.
A key indicator of ACI’s monopoly presence is its long history of being the sole supplier of glass bottles to the Australian market due to the substantial entry barriers precluding other firms from entering the market. The geographic isolation of Australia has meant that ACI has been able to retain market dominance because the glass market is not sufficient to support another competitor in the marketplace. Australia is also very large and flat, which results in high domestic transport costs which must be added to the cost of production. The high sunk costs of establishing a business in this market also acts as an entry barrier, and since ACI is such a large producer it has the benefits of economies of scale. If a competitor was to enter the market ACI would be able to afford short term losses in order to run the competing firm out of business, thus retaining its market dominance. It is the combinations of these factors which have resulted in precluding the entry of other firms into the Australian glass production industry.
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