countervailing power


Also found in: Encyclopedia, Wikipedia.

countervailing power

the ability of large buyers to offset the market power of huge suppliers as in BILATERAL OLIGOPOLY. Large buyers usually have the upper hand in a vertical market chain (for example, multiple retailers buying from food manufacturers) because, unless suppliers collude (see COLLUSION), a large buyer is able to play one supplier off against another and obtain favourable discounts on bulk purchases. Provided that competition is strong in final selling markets, countervailing power can play an important role in checking monopolistic abuse.

The economist J. K. GALBRAITH uses the phrase ‘countervailing power’ in a slightly different way to refer to the growth of trade unions and consumer groups in response to the growth of large firms.