A legal monopoly is a mandate given by the government to a sole proprietorship to operate in a particular sector or industry with absolute power to produce and supply goods and services, as well as the assurance that no other enterprise than them will participate in the enterprise. It also assists the government in regulating prices in this sector. Explains how government measures to create legal monopolies create a balance between prices and control supply and demand. The aviation industry is a good example of a natural monopoly, or at least an industry with monopolistic characteristics. Although this law is still in place today, it has not stopped a handful of very powerful companies from gaining a large market share in their industries. Below, we take a closer look at seven companies that could easily be considered quasi-monopolies today. The government uses warrants to allow an organization to enter and operate in a particular industry on its own and to prohibit others from entering the industry. It can help companies generate more sales, reach a wide range of consumers and enjoy a sense of market leadership, but have followed and adhered to government regulations and guidelines, so that in some respects a partial sense of decision-making is lost. On the positive side (for consumers), it was not easy to get this agreement through the regulators. Both companies were forced to sell some brands to ease competition concerns. AB InBev is also prohibited from using its power to restrict the distribution of beer from competitors. But even with these concessions, the company still holds a dominant market share in the U.S.
of about 45%. In a legal monopoly, the government is able to regulate prices and provide generally accessible services/goods to the population, supervise the operation of businesses, and ideally move the monopoly so that it acts in the best interest of consumers. Monopolies are illegal in the United States, but there are circumstances in which a natural monopoly can occur. In these circumstances, a market or market sector has such prohibitive barriers to entry that only one or a few firms (called oligopolies) are present. The Royal Mail Group is an example of a legal monopoly in Europe, and the Fédération Internationale de Football Association (FIFA) is another. A legal monopoly occurs when a single firm or corporation has absolute control over a particular good or service in the market. Although there are legal monopolies in almost all countries, their number is decreasing. State antitrust laws such as California`s Cartwright Act and federal antitrust law, particularly the Sherman Antitrust Act, prohibit anticompetitive monopolization.
Private parties (businesses or consumers) affected by anticompetitive behavior can file antitrust suits under federal and state laws and seek damages and injunctive relief. Throughout U.S. history, some transportation companies have been declared legal monopolies in order to keep prices low for consumers. The same applies to energy suppliers at regional level. And until 1982, in the United States, the telephone service provider AT&T was called a legal monopoly. It was found that AT&T, as an individual supplier, would benefit from the economies of scale to offer consumers lower rates than in a competitive market. It is also known as a legal monopoly or de jure monopoly. It may be independent or managed by the State, or partially dependent on the Government; In both cases, however, government regulation is inevitable. The opposite concept is the de facto or natural monopoly that the government does not create. Natural monopolies face more obstacles than statutory monopolies or de jure monopolies. Let`s look at the factors that influence a legal monopoly.
In a monopoly, there can be no narrow substitute for a good or service. The bottom line is that a tight replacement equals the competition. Competition cannot exist in a monopoly. How dominant is Google? According to Net Market Share, Google`s search engine holds a global market share of 79% as of June 2017. In contrast, Google`s three closest competitors — Bing, Baidu, and Yahoo — currently have a global market share of just 7.3 percent, 7 percent, and 4.9 percent, respectively. Given that Google`s market share is more than four times that of its three closest competitors combined, I think it could easily be considered a quasi-monopoly. It doesn`t take long for the government to recognize the need for Joe`s service and provide support. In turn, Joe`s business is regulated by the government, especially in terms of price. In other words, Joe must follow the government`s guidelines regarding the prices it charges for the electricity produced by its turbines.
Joe`s business became a legal monopoly. Let`s look at some of the examples of legal monopolies: Throughout history, various governments have imposed legal monopolies on a variety of products, including salt, iron, and tobacco. The first iteration of a statutory monopoly is the Statute of Monopolies of 1623, an Act of the English Parliament. Under this Act, patents evolved from letters patent, which are written orders from a monarch that confer title on an individual or company. Microsoft was found to have a monopoly on operating system software for IBM-compatible PCs. Microsoft was able to use its dominant position in the operating systems market to exclude other software developers and prevent computer manufacturers from installing browser software competing with Microsoft to run on Microsoft`s operating system software. In particular, Microsoft unlawfully maintained the monopoly of its operating system by including Internet Explorer, Microsoft`s internet browser, with each copy of its Windows operating system software sold to computer manufacturers and by making it technically difficult not to use its browser or to use a browser not originating from Microsoft. Microsoft has also provided free licenses or discounts for the use of its software, which has discouraged other software developers from promoting a non-Microsoft browser or developing other software based on that browser. These measures have hampered computer manufacturers` efforts to use or promote competing browsers and have discouraged the development of add-on software compatible with non-Microsoft browsers.
The General Court found that, although Microsoft had not guaranteed all the opportunities for competition, its measures had prevented competitors from using the least expensive means to take away market share. To settle the matter, Microsoft agreed to stop certain conduct that prevented the development of competing browser software. Looking ahead, AB InBev`s growth plans include expanding its presence in international markets and realizing the synergies of its massive acquisition. With so many best-selling brands under its wing, AB InBev seems well positioned to maintain its near-monopoly status. A legal monopoly, also known as a legal monopoly, is a business protected by law against competitors. In other words, a legal monopoly is an enterprise that has been mandated by the government to act as a monopoly. In many rural areas, there may be only one telephone company. These companies then become the only company to offer the service with little or no competition. As with telephone service, in many rural areas there may be only one company or utility offering water.
So there is no competition. The courts do not require a literal monopoly before applying the rules governing the conduct of individual corporations; This term is used as an abbreviation to designate a firm with significant and lasting market power, i.e. the long-term ability to raise prices or crowd out competitors. This is how this term is used here: a “monopolist” is an enterprise with significant and permanent market power. Courts look at the company`s market share, but generally do not find monopoly power if the company (or a group of companies acting together) generates less than 50% of the turnover of a particular product or service in a given geographical area. Some courts have required much higher percentages. Moreover, this leading position must be sustainable over time: if competitive forces or the entry of new firms may discipline the behaviour of the leading firm, courts are unlikely to conclude that the firm has sustainable market power. There are illegal monopolies created and existing by predatory or exclusionary acts that are considered as such. Illegal monopolies exploit their market share through price discrimination, tying and exclusive transactions. A legal monopoly is a commercial entity that acts as a monopoly with a government mandate.
U.S. antitrust law prohibits monopolistic market behavior; However, the nature of some markets has resulted in unique agreements between market participants and the federal government.