What makes an illegal monopoly?
An unlawful monopoly exists when one firm has market power for a product or service, and it has obtained or maintained that market power not through competition on the merits, but because the firm has suppressed competition by engaging in anticompetitive conduct. This occurs when a company uses exclusionary or predatory acts to establish or maintain its dominant position in the market, rather than relying on superior products, innovation, or business acumen.
Understanding Monopolies and Antitrust Laws
To better understand what makes an illegal monopoly, it’s essential to explore the concept of monopolies and the laws that regulate them. The Sherman Act is a federal law that prohibits monopolies and trusts, and it’s enforced by the Federal Trade Commission (FTC).
Frequently Asked Questions
What laws make monopolies illegal?
The Sherman Act makes it unlawful for any person to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations“.
What is illegal vs legal monopolies?
Competitors may be at a legitimate disadvantage if their product or service is inferior to the monopolist’s, but monopolies are illegal if they are established or maintained through improper conduct, such as exclusionary or predatory acts.
What acts made monopolies illegal?
The Sherman Anti-Trust Act of 1890 was the first federal act that outlawed monopolistic business practices.
What is an example of a legal monopoly?
Some examples of legal monopolies in the U.S. are the USPS, which holds a legal monopoly on mail carrying, the National Football League, and Major League Baseball.
Are monopolies bad for the economy?
Monopolies can be bad for the economy if they use their market power to stifle competition and innovation.
Are monopolies good for the economy?
On the other hand, monopolies can be good for the economy if they use their market power to innovate and improve efficiency.
Why is USPS a legal monopoly?
The USPS has a legal monopoly on mail carrying because Congress gave the Post Office Department a monopoly over the carriage of letter-mail by a group of federal laws known as the Private Express Statutes.
Is the NFL a legal monopoly?
The NFL is a legal monopoly because it’s exempt from antitrust laws, but it doesn’t have economic monopoly power because it can’t increase profits by reducing the quantity of its product.
Does the NFL have a monopoly?
Yes, the NFL has a monopoly, but it’s a legal one.
Are all monopolies illegal?
Obtaining a monopoly by superior products, innovation, or business acumen is legal, but the same result achieved by exclusionary or predatory acts may raise antitrust concerns.
Is Apple a monopoly?
A judge ruled that Apple doesn’t have monopoly power because customers can choose Android phones instead.
Is Amazon a monopoly?
Amazon is considered a monopolist that uses its power to hike prices on American shoppers and charge sky-high fees on hundreds of thousands of online sellers.
Is Walmart a monopoly?
Walmart can be compared to a modern-day monopoly due to its dominating cost leadership tactics and competitive advantage.
Is Disney a monopoly?
Disney isn’t considered a monopoly because it doesn’t have the exclusive possession or control of production or distribution in any of the businesses it engages in.
Which market structure is usually illegal?
In many cases, monopolies are illegal because they can allow a company to take advantage of customers by charging more as the only product provider.
Is Google a monopoly?
Google controls around 90% of the U.S. search engine market, which raises concerns about its monopoly power.
Is Netflix a monopoly?
Netflix cannot be considered a monopoly structure because it’s not the only choice for consumers, with alternatives like HBO, Amazon, Disney, and Hulu.
Is Microsoft a monopoly?
Microsoft is able to exercise its monopoly power over OEMs and PC consumers in a variety of ways, which raises antitrust concerns.