Legal Definition of Monopoly

70. See, for example, Broadcom Corp. v. Qualcomm Inc., 501 et seq..3d 297, 307 (3d Cir. 2007) («The existence of monopoly power can be established by direct evidence of non-competitive prices and production restrictions»); PepsiCo, Inc. v. Coca-Cola Co., 315 F.3d 101, 107 (2d Cir. 2002) (per curiam) (stating that «there is authority to support [the thesis] that a relevant market definition is not a necessary element of a monopoly claim»); Conwood, 290 F.3d at 783 n.2 (stating that monopoly power «may be directly demonstrated by evidence of price control or exclusion of competition» (cited Tops Mkts., Inc. v. Quality Mkts., Inc., 142 F.3d 90, 9798 (2d Cir. 1998))).

Gambling regulation in many places implies a legal monopoly over national or state lotteries. While private operations with companies such as racetracks, off-track betting sites and casinos are allowed, authorities are only allowed to allow one operator. As noted above, courts generally decide whether a company has monopoly power by first identifying the relevant market and then looking at market shares, entry conditions and other factors related to that market. An important question is whether claimants should instead be allowed to prove their monopoly power only by direct evidence, such as evidence of high profits (70), which makes a market definition superfluous. While no court relied solely on direct evidence to establish monopoly power, one court found that direct evidence was sufficient to survive summary judgment, even if the plaintiff had not «precisely defined the relevant market.» (71) US law generally considers monopolies to be harmful because they impede the channels of free competition which determine the price and quality of products and services offered to the public. As a group, monopoly holders have the power to set prices, foreclose competitors and control the market in the geographical area concerned. U.S. antitrust laws prohibit monopolies and other practices that unduly restrict competitive trade. These laws are based on the belief that equality of opportunity in the market and the free interaction of competitive forces lead to the best allocation of the nation`s economic resources. Moreover, competition is supposed to promote material progress in production and technology while preserving democratic, political and social institutions.

However, short-term price-cost margins are not of much use in determining whether a firm has a monopoly position. Monopoly power requires that the company be able to charge prices high enough to generate an above-average return on investment. It is not clear how many prices must exceed the short-run marginal cost before there is monopoly power. (79) Depending on the size of the firm`s fixed costs, even a significant difference between price and short-term marginal costs may not be sufficient to achieve even a normal rate of return. Indeed, a firm should not be presumed to have monopoly power simply because it has prices above short-term marginal costs and therefore has a high price-cost margin. (80) 40. See generally 1 Section of Antitrust Law, Am. Bar Ass`n, Antitrust Law Developments 231 (6th ed.

2007) («A market share of more than 70% generally represents the beginning of monopoly power, at least with evidence of significant barriers to entry and evidence that existing competitors have not been able to increase production.» (footnotes omitted)); Areeda & Hovenkamp, op. cit. cit., note 11, ¶ 801a, p. 319 («While one cannot be too categorical, we consider it reasonable to assume the existence of significant market power of a single undertaking if it is demonstrated that the defendant`s market share in a well-defined market, protected by sufficient barriers to entry, exceeded 70 or 75 % in the five years preceding the complaint.»); See footnote 2025 and accompanying text. The Federal Trade Commission Act of 1914 (15 U.S.C.A. §§ 41 et seq.) created the Federal Trade Commission, the regulatory agency that promotes free and fair competition in interstate commerce by prohibiting price-fixing, false advertising, boycotts, illegal combinations of competitors, and other methods of unfair competition. The Department believes that a safe haven for monopoly market share – as opposed to market power – merits serious examination by the courts. In the many decades of application of Article 2, we know of no court that has found monopoly power when the defendant`s share was less than fifty per cent, suggesting that cases of monopoly power below such a share, although theoretically possible, are extremely rare in practice. It is therefore plausible that the cost of researching such cases outweighs the benefits.

With the invention of the telephone in 1876 by Alexander Graham Bell, the company founded by the inventor (now AT&T) was able to establish itself as a monopoly until 1907. Since the company`s service was used by all citizens in the United States, many believed that the government would step in and take control of AT&T to prevent the company from gaining too much power. The second circuit defined monopoly power as «the ability (1) to achieve prices well above competitive levels and (2) to do so for a substantial period of time without erosion due to new entry or expansion.» (46) Similarly, other district courts have held that undertakings with dominant market shares do not have a monopoly position if their market power is not sufficiently sustainable. (47) In 1913, the Department of Justice reached a settlement with AT&T, and the company was allowed to exercise a monopoly for the next seven decades. The reasoning was that the government believed it was important to have reliable telephone services available nationally. One speaker suggested applying the hypothetical and monopolistic paradigm in certain cases of monopoly acquisition, defining the relevant market at a time prior to the commencement of the impugned conduct, and maintaining the resulting market definition to the present day in order to assess whether the enterprise had monopoly power. (64) This proposal is theoretically valid. Unfortunately, significant practical issues can make it difficult to identify consumer preferences and other relevant factors at an earlier stage, hindering the ability to perform a specific «but for» procedure. (65) Furthermore, market definition may no longer be relevant at the time prior to implementation due to the introduction of new products or other significant changes in the market. «A company can only have monopoly power in a market if that market is also protected by significant barriers to entry.» (50) In particular, a high market share does not provide a reliable indication of competitors` potential to meet market demand.

Even if there is no current competitor, the attempt to raise the price above the competitive level may result in a sufficient influx of competitors to make this price increase unprofitable. (51) In the present case, the company does not have a monopolistic position, although it may currently have a dominant market share. (52) Let us examine some examples of legal monopolies: 52. See, for example, United States v. Waste Mgmt., Inc., 743 F.2d 976, 98384 (2d Cir. 1984) (noting that in a market where entry is easy, a firm that raises the price «would then be faced with lower prices demanded by all existing competitors and the entry of new competitors, a situation fatal to its economic prospects, if it is not fixed»). See generally Franklin M. Fisher, Diagnosing Monopoly, Q. Rev. Econ.

& Bus., Summer 1979, pp. 7, 23 (with the note that «consideration of the role of entry plays an important role in any assessment of monopoly power»). The legal definition presents it as a market system that contains only one seller dealing with a particular good or service. As the sole seller of goods or services without viable alternatives, the seller has no competitors in a monopoly market. Now let`s look at what a legal monopoly is. Similar to a general monopoly, there is only one supplier of a good or service. However, a legal monopoly receives government support and rights, either nationally or in a specific region. In exchange for government support and rights, the government then has the right to supervise and regulate all activities, tariffs, and policies. The Dutch East India Company, the British East India Company and similar national trading companies have been granted exclusive trading rights by their respective national governments. Private independent traders operating outside the jurisdiction of these two companies were prosecuted. Therefore, these companies fought wars in the 17th century to define and defend their monopoly territories. According to Alcoa and American Tobacco, courts generally required dominant market share before finding monopoly power.

The Fifth Judicial District noted that «monopolization is rarely established when the defendant`s share of the relevant market is less than 70%.» (22) Similarly, the Tenth Judicial District found that lower courts generally require a minimum market share of between 70 % and 80 % in order to establish monopoly power. (23) Similarly, the Third Judicial District found that «a share well above 55 % was required to demonstrate prima facie market power»(24) and considered that a market share of between seventy-five and eighty % of turnover «is more than sufficient to demonstrate a presumption of power». (25) In a monopoly, one or more persons or undertakings completely dominate an economic market.