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 characterised 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.
United States of America v. Microsoft Corporation, 253 F.3d 34, was a landmark American antitrust law case at the United States Court of Appeals for the District of Columbia Circuit. The U.S. government accused Microsoft of illegally maintaining its monopoly position in the personal computer (PC) market, primarily through the legal and technical restrictions it put on the abilities of PC manufacturers (OEMs) and users to uninstall Internet Explorer and use other programs such as Netscape and Java.
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.
Anti-competitive practices are business or government practices that prevent or reduce competition in a market. Antitrust laws ensure businesses do not engage in competitive practices that harm other, usually smaller, businesses or consumers. These laws are formed to promote healthy competition within a free market by limiting the abuse of monopoly power. Competition allows companies to compete in order for products and services to improve; promote innovation; and provide more choices for consumers. In order to obtain greater profits, some large enterprises take advantage of market power to hinder survival of new entrants. Anti-competitive behavior can undermine the efficiency and fairness of the market, leaving consumers with little choice to obtain a reasonable quality of service.
In economics and business ethics, a coercive monopoly is a firm that is able to raise prices and make production decisions without the risk that competition will arise to draw away their customers. A coercive monopoly is not merely a sole supplier of a particular kind of good or service, but it is a monopoly where there is no opportunity to compete with it through means such as price competition, technological or product innovation, or marketing; entry into the field is closed. As a coercive monopoly is securely shielded from the possibility of competition, it is able to make pricing and production decisions with the assurance that no competition will arise. It is a case of a non-contestable market. A coercive monopoly has very few incentives to keep prices low and may deliberately price gouge consumers by curtailing production.
Monopoly profit is an inflated level of profit due to the monopolistic practices of an enterprise.
Predatory pricing is a commercial pricing strategy which involves the use of large scale undercutting to eliminate competition. This is where an industry dominant firm with sizable market power will deliberately reduce the prices of a product or service to loss-making levels to attract all consumers and create a monopoly. For a period of time, the prices are set unrealistically low to ensure competitors are unable to effectively compete with the dominant firm without making substantial loss. The aim is to force existing or potential competitors within the industry to abandon the market so that the dominant firm may establish a stronger market position and create further barriers to entry. Once competition has been driven from the market, consumers are forced into a monopolistic market where the dominant firm can safely increase prices to recoup its losses.
Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust law, anti-monopoly law, and trade practices law; the act of pushing for antitrust measures or attacking monopolistic companies is commonly known as trust busting.
In economics, market power refers to the ability of a firm to influence the price at which it sells a product or service by manipulating either the supply or demand of the product or service to increase economic profit. In other words, market power occurs if a firm does not face a perfectly elastic demand curve and can set its price (P) above marginal cost (MC) without losing revenue. This indicates that the magnitude of market power is associated with the gap between P and MC at a firm's profit maximising level of output. The size of the gap, which encapsulates the firm's level of market dominance, is determined by the residual demand curve's form. A steeper reverse demand indicates higher earnings and more dominance in the market. Such propensities contradict perfectly competitive markets, where market participants have no market power, P = MC and firms earn zero economic profit. Market participants in perfectly competitive markets are consequently referred to as 'price takers', whereas market participants that exhibit market power are referred to as 'price makers' or 'price setters'.
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.
The Cellophane paradox describes a type of incorrect reasoning used in market regulation methods.
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.
Donald Frank Turner was an American antitrust attorney, economist, legal scholar and educator who spent most of his career teaching at Harvard Law School. He was also Assistant Attorney General in charge of the Antitrust Division from 1965 to 1968.
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.
The history of United States antitrust law is generally taken to begin with the Sherman Antitrust Act 1890, although some form of policy to regulate competition in the market economy has existed throughout the common law's history. Although "trust" had a technical legal meaning, the word was commonly used to denote big business, especially a large, growing manufacturing conglomerate of the sort that suddenly emerged in great numbers in the 1880s and 1890s. The Interstate Commerce Act of 1887 began a shift towards federal rather than state regulation of big business. It was followed by the Sherman Antitrust Act of 1890, the Clayton Antitrust Act and the Federal Trade Commission Act of 1914, the Robinson-Patman Act of 1936, and the Celler-Kefauver Act of 1950.
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 was carrying out the restrictive practice, rather than a single firm, which 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. Even so, the case was brought under both sections.
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.
