About Monopoly Industries. How monopolies are protected from competition, technological advantages, and certain configurations of demand and supply


Academic Paper, 2017
5 Pages, Grade: 1

Excerpt

A monopoly (composition of ancient Greek μόνος monos "alone" and πωλεῖν pōlein "sell") is in economics a market situation referred to, in which only one provider is available for an economic good. Equally meaningful is the pure monopoly of distinguishing between market forms in which, for example, monopoly structures predominate only in a smaller subarea. Sometimes, contrary to the etymological meaning (pōlein "sell") and the definition used in this article, a market situation is called a monopoly in which only one buyer occurs. This form is a monopoly of demand as opposed to the supply monopoly outlined above. The term monopoly is sometimes used socially and politically apart from economy, for example for the monopoly of power of the state or the information monopoly.

The emergence of a monopoly, strictly speaking, begins where the competitive idea springs for the first time. One wants to be better than the other, so the motto. Consequently, an attempt is made to improve one's own position by setting differentiated parameters (price, quantity, advertising) in order to realize a decisive competitive advantage right up to the ideal of market power. For this purpose, various theoretical approaches can be set up to answer the key question of where exactly monopolies arise. A first guess can be found in the late Middle Ages (12th to 15th centuries), where goods were traded on the market and tried to sell the products (fish, fruits, vegetables) faster than the competition. However, it could also be the Baroque period through the first manufactories that were created towards the end of the 17th century. Or is it rather due to industrialization, in which the idea of ​​efficiency, prosperity and productivity progress has played a crucial role?

Another possible approach is described by Pierenkemper. He describes the economic history and begins in modern times (since 1500). Due to the ever-advancing industrialization in the 19th century, marked by Schumpeter and his creative process of destruction, he deals with the emergence of the industrialization process and its growth. He distinguishes between five stages of development. In the 4th phase of the development stages, the maturity phase, it is possible to use the latest technology and thus to optimally use the resources. Entirely new professions are emerging and companies are joining forces for MONOPOLEN, trusts and cartels for the first time. This monopoly or monopoly position can minimize costs, displace other competitors from the market or make it difficult for one to establish himself in the dominant market.

In the United States the Department of Justice is in charge of regulations and enforcement against the establishment of monopolies. Many consumers have never heard of antitrust laws, but enforcement of these laws saves consumers millions and even billions of dollars a year. The Federal Government enforces three major Federal antitrust laws, and most states also have their own. Essentially, these laws prohibit business practices that unreasonably deprive consumers of the benefits of competition, resulting in higher prices for products and services.

There is the so called “Shermann Anti-Trust Law”, the “Clayton Act” as well as the “Federal Trade Comission Act”. To begin with the “Shermann Anti-Trust Law” “outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids, and allocate customers, which are punishable as criminal felonies. The Sherman Act also makes it a crime to monopolize any part of interstate commerce. An unlawful monopoly exists when one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with anticompetitive conduct. The Act, however, is not violated simply when one firm's vigorous competition and lower prices take sales from its less efficient competitors; in that case, competition is working properly” (Department of Justice, 2017). The “Clayton Act”, “is a civil statute (carrying no criminal penalties) that prohibits mergers or acquisitions that are likely to lessen competition. Under this Act, the Government challenges those mergers that are likely to increase prices to consumers. All persons considering a merger or acquisition above a certain size must notify both the Antitrust Division and the Federal Trade Commission. The Act also prohibits other business practices that may harm competition under certain circumstances.” (Deparment of Justice, 2017). Lastly the “Federal Trade Comission Act”, has the purpose to prohibit unfair competition methods.

Finally, the Department of Justice States that, “Monopoly power entails both greater and more durable power over price than mere market power and serves as an important screen for section 2 cases. As a practical matter, a market share of greater than fifty percent has been necessary for courts to find the existence of monopoly power. If a firm has maintained a market share in excess of two-thirds for a significant period and the firm's market share is unlikely to be eroded in the near future, the Department believes that such facts ordinarily should establish a rebuttable presumption that the firm possesses monopoly power. The Department is not likely to forgo defining the relevant market or calculating market shares in section 2 monopolization and attempt cases, but will use direct evidence of anticompetitive effects when warranted and will not rely exclusively on market shares in concluding that a firm possesses monopoly power” (Department of Justice, 2008).

One concrete example of a company that had a legal process with the Department of Justice would be Microsoft. As the firm will use its “prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft's core products” (Department of Justice, 1999). “Furthermore, the ultimate result is that some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft's self-interest” (Department of Justice, 1999).

Another more recent example of how the Department of Justice proceeds against monopolies can be seen in the case against United Airlines in 2015 and 2016. The company wanted to buy 24 landing and takeoff slots from Delta Airlines at Newark Liberty Airport. “On Nov. 10, 2015, the department filed suit to block the proposed acquisition, alleging that it would violate Sections 1 and 2 of the Sherman Act by increasing from 73 percent to 75 percent United’s already dominant share of slots at Newark, one of the nation’s most important airports. The complaint alleged that the enhancement of United’s dominant position would subject air-travel passengers at Newark – who already pay some of the highest fares in the nation – to higher fares and fewer choices” (Departement of Justice, 2016).

References

“Kumagai, Y. (2012). Breaking Into the Monopoly : Provincial Merchants and Manufacturers' Campaigns for Access to the Asian Market, 1790-1833. Leiden: Brill NV.”

“BLUMM, M. C., & MOSES, A. P. (2017). THE PUBLIC TRUST AS AN ANTIMONOPOLY DOCTRINE. Boston College Environmental Affairs Law Review, 44(1), 1.”

“Davis, C., & Hashimoto, K. (2016). Economic Integration, Monopoly Power and Productivity Growth without Scale Effects. Review Of Development Economics, 20(1), 152-163. doi:10.1111/rode.12200”

Monopolies. (2016). Salem Press Encyclopedia,

“Deparment of Justice (2017 )” https://www.justice.gov/atr/competition-and-monopoly-single-firm-conduct-under-section-2-sherman-act-chapter-2”

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Details

Title
About Monopoly Industries. How monopolies are protected from competition, technological advantages, and certain configurations of demand and supply
College
Post University
Grade
1
Author
Year
2017
Pages
5
Catalog Number
V385840
ISBN (eBook)
9783668606944
File size
431 KB
Language
English
Tags
about, monopoly, industries
Quote paper
Peter Rössel (Author), 2017, About Monopoly Industries. How monopolies are protected from competition, technological advantages, and certain configurations of demand and supply, Munich, GRIN Verlag, https://www.grin.com/document/385840

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