Legal Definitions - cornering the market

Cornering the market describes a situation where an individual, group, or company acquires ownership or control over a very large portion of the available supply of a specific product, raw material, or financial asset. This dominant control then allows them to manipulate or dictate the price of that item, often to their own advantage, because other buyers have few or no alternative sources.

Here are some examples to illustrate this concept:

• Imagine a powerful investment group that secretly buys up 80% of all publicly traded shares of a relatively small but promising biotechnology company. By holding such a significant majority of the company's stock, this group effectively controls its market price. They could then artificially inflate the stock's value before selling their shares for a substantial profit, or use their control to influence company decisions, demonstrating how they have cornered the market on that particular security.

• Consider a scenario where a single trading firm manages to purchase nearly all of the global harvest of a specific, rare spice that is essential for a popular new food trend. With almost complete control over the supply of this spice, the firm can then demand exceptionally high prices from food manufacturers and retailers, who have no other viable source to meet consumer demand. This action illustrates cornering the market on a commodity, allowing price manipulation.

• Suppose a technology conglomerate acquires all the patents and manufacturing facilities for a highly specialized microchip that is critical for the next generation of electric vehicles. By controlling virtually the entire production and intellectual property related to this essential component, they can dictate its price to all automotive manufacturers, who have no alternative suppliers for this unique chip. This demonstrates how a company can corner the market on a crucial industrial component.