A monopoly, as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a specific person or enterprise is the only supplier of a particular thing. This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly and duopoly which consists of a few sellers dominating a market. Monopolies are thus characterized by a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price well above the seller's marginal cost that leads to a high monopoly profit. The verb monopolise or monopolize refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge overly high prices, which is associated with a decrease in social surplus. Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry.
The Sherman Antitrust Act of 1890 is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce. It was passed by Congress and is named for Senator John Sherman, its principal author.
In the United States, antitrust law is a collection of mostly federal laws that regulate the conduct and organization of businesses to promote competition and prevent unjustified monopolies. The three main U.S. antitrust statutes are the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. These acts serve three major functions. First, Section 1 of the Sherman Act prohibits price fixing and the operation of cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that may substantially lessen competition or tend to create a monopoly. Third, Section 2 of the Sherman Act prohibits monopolization.
In United States antitrust law, monopolization is illegal monopoly behavior. The main categories of prohibited behavior include exclusive dealing, price discrimination, refusing to supply an essential facility, product tying and predatory pricing. Monopolization is a federal crime under Section 2 of the Sherman Antitrust Act of 1890. It has a specific legal meaning, which is parallel to the "abuse" of a dominant position in EU competition law, under TFEU article 102. Section 2 of the Sherman Act states that any person "who shall monopolize. .. any part of the trade or commerce among the several states, or with foreign nations shall be deemed guilty of a felony." Section 2 also forbids "attempts to monopolize" and "conspiracies to monopolize". Generally this means that corporations may not act in ways that have been identified as contrary to precedent cases.
The essential facilities doctrine is a legal doctrine which describes a particular type of claim of monopolization made under competition laws. In general, it refers to a type of anti-competitive behavior in which a firm with market power uses a "bottleneck" in a market to deny competitors entry into the market. It is closely related to a claim for refusal to deal.
Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993), was a case in which the Supreme Court of the United States rejected the assertion that attempted monopolization may be proven merely by demonstration of unfair or predatory conduct. Instead, conduct of a single firm could be held to be unlawful attempted monopolization only when it actually monopolized or dangerously threatened to do so. Thus, the Court rejected the conclusion that injury to competition could be presumed to follow from certain conduct. The causal link must be demonstrated.
A.D. Bedell Wholesale Co., Inc. v. Philip Morris Inc., 263 F.3d 239, was an early appellate case testing the legality of the Tobacco Master Settlement Agreement (MSA), in this instance whether it could properly be alleged to violate the Sherman Antitrust Act.
Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), was a United States Supreme Court case that decided whether a dominant firm's unilateral refusal to deal with a competitor could establish a monopolization claim under Section 2 of the Sherman Act. The unanimous Supreme Court agreed with the 10th Circuit that terminating a pro-consumer joint venture without a legitimate business justification could constitute illegal monopolization. However, its decision created an exception to the general rule that firms can decide with whom to do business absent collusion, sparking significant controversy about the appropriate scope of this exception. In a subsequent case, Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, Justice Scalia, writing for the majority, stated that Aspen Skiing is "at or near the outer boundary of § 2 liability." Although its holding has been narrowed, this case's relevance remains contested, especially in the context of refusals to license intellectual property.
Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992), is a 1992 Supreme Court decision in which the Court held that even though an equipment manufacturer lacked significant market power in the primary market for its equipment—copier-duplicators and other imaging equipment—nonetheless, it could have sufficient market power in the secondary aftermarket for repair parts to be liable under the antitrust laws for its exclusionary conduct in the aftermarket. The reason was that it was possible that, once customers were committed to the particular brand by having purchased a unit, they were "locked in" and no longer had any realistic alternative to turn to for repair parts.
Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488 (1942), is a patent misuse decision of the United States Supreme Court. It was the first case in which the Court expressly labeled as "misuse" the Motion Picture Patent/Carbice tie-in defense to a charge of patent infringement and created the present blanket remedy in infringement cases of unenforceability of the misused patent. The decision re-emphasized that misuse can be found without finding an antitrust violation.
Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965), was a 1965 decision of the United States Supreme Court that held, for the first time, that enforcement of a fraudulently procured patent violated the antitrust laws and provided a basis for a claim of treble damages if it caused a substantial anticompetitive effect.
FTC v. Motion Picture Advertising Service Co., 344 U.S. 392 (1953), was a 1953 decision of the United States Supreme Court in which the Court held that, where exclusive output contracts used by one company "and the three other major companies have foreclosed to competitors 75 percent of all available outlets for this business throughout the United States" the practice is "a device which has sewed up a market so tightly for the benefit of a few [that it] falls within the prohibitions of the Sherman Act, and is therefore an 'unfair method of competition' " under § 5 of the FTC Act. In so ruling, the Court extended the analysis under § 3 of the Clayton Act of requirements contracts that it made in the Standard Stations case to output contracts brought under the Sherman or FTC Acts.
Otter Tail Power Co. v. United States, 410 U.S. 366 (1973), is a United States Supreme Court decision often cited as the first case in which the Court held violative of the antitrust laws a single firm's refusal to deal with other firms that denied them access to a facility essential to engaging in business.
United States v. Terminal Railroad Association, 224 U.S. 383 (1912), is the first case in which the United States Supreme Court held it a violation of the antitrust laws to refuse to a competitor access to a facility necessary for entering or remaining in the market. In this case a combination of firms carried out the restrictive practice, rather than a single firm. That made the conduct susceptible to challenge under section 1 of the Sherman Act rather than under the heightened standard of section 2 of that act, but the case was brought under both sections.
Lorain Journal Co. v. United States, 342 U.S. 143 (1951), is a decision of the United States Supreme Court often cited as an example of a monopolization violation being based on unilateral denial of access to an essential facility, although it in fact involved concerted action. When the Lorain Journal's monopoly over advertising in the Lorain, Ohio area was threatened by the establishment of a competing radio station, the Journal's publisher refused to accept advertising from those who advertised over the radio station and required them to advertise only in the Journal. The purpose of the publisher was to eliminate the competition of the radio station. The Supreme Court held that the publisher had attempted to monopolize trade and commerce, in violation of § 2 of the Sherman Antitrust Act, and was properly enjoined from continuing the conduct.
A hub-and-spoke conspiracy is a legal construct or doctrine of United States antitrust and criminal law. In such a conspiracy, several parties ("spokes") enter into an unlawful agreement with a leading party ("hub"). The United States Court of Appeals for the First Circuit explained the concept in these terms:
In a "hub-and-spoke conspiracy," a central mastermind, or "hub," controls numerous "spokes," or secondary co-conspirators. These co-conspirators participate in independent transactions with the individual or group of individuals at the "hub" that collectively further a single, illegal enterprise.
LePage's Inc. v. 3M, 324 F.3d 141, is a 2003 en banc decision of the United States Court of Appeals for the Third Circuit upholding a jury verdict against bundling. Bundling is the setting of the total price of a purchase of several products or services over a period from one seller at a lower level than the sum of the prices of the products or services purchased separately from several sellers over the period. Typically, one of the bundled items is available only from the seller engaging in the bundling, while the other item or items can be obtained from several sellers. The effect of the bundling is to divert purchasers who need the primary product to the bundling seller and away from other sellers of only the secondary product. For that reason, the practice may be held an antitrust violation as it was in the LePage's case, in which the Third Circuit held that 3M engaged in monopolization in violation of Sherman Act § 2 by (1) offering rebates to customers conditioned on purchases spanning six of 3M's different product lines, and (2) entering into contracts that expressly or effectively required dealing exclusively with 3M.
United States v. Dentsply Int'l, Inc., was a 2005 Third Circuit antitrust decision in the United States finding that Dentsply, a monopolist manufacturer-supplier of dental supplies, used its exclusive dealing policy to keep rival firms' sales "below the critical level necessary for any rival to pose a real threat to Dentsply's market share,".
Raising rivals' costs is a concept or theory in United States antitrust law describing a tactic or device to gain market share or exclude competitors. The origin of the concept has been attributed to Professors Aaron Director and Edward H. Levi of the University of Chicago Law School, who wrote briefly in 1956 that a firm with monopoly power can decide to impose additional costs on others in an industry for exclusionary purposes. They stated that such a tactic "might be valuable if the effect of it would be to impose greater costs on possible competitors."
Hartford-Empire Co. v. United States, 323 U.S. 386 (1945), was a patent-antitrust case that the Government brought against a cartel in the glass container industry. The cartel, among other things, divided the fields of manufacture of glass containers, first, into blown glass and pressed glass, which was subdivided into: products made under the suction process, milk bottles, and fruit jars. The trial court found the cartel violative of the antitrust laws and the Supreme Court agreed that the market division and related conduct were illegal. The trial court required royalty-free licensing of present patents and reasonable royalty licensing of future patents. A divided Supreme Court reversed the requirement for royalty-free licensing as "confiscatory," but sustained the requirement for reasonable royalty licensing of the patents.
