In 1994, the U.S. government accused Microsoft of using its significant market share in the PC operating systems sector to prevent competition and maintain a monopoly. The action, filed on July 15, 1994, states: «The United States of America, acting under the direction of the Attorney General of the United States, is bringing this civil action to prevent and prevent the defendant Microsoft Corporation from using exclusionary and anti-competitive agreements to market its PC operating system software. Through these contracts, Microsoft illegally maintained its monopoly on PC operating systems and unreasonably restricted trade. Natural or state-authorized monopolies thrive in the utility industry. Typically, there is only one large (private) company in an area or municipality that provides energy or water. Monopoly is allowed because these suppliers incur high costs for the production of electricity or water and the supply of these essential goods to each local household and business, and it is considered more efficient if there is only one supplier of these services. A monopoly refers to the moment when a company and its product offerings dominate a sector or industry. Monopolies can be seen as an extreme result of free-market capitalism, as a single enterprise or group becomes large enough without restrictions or restrictions to own all or substantially all of the market (goods, supplies, raw materials, infrastructure, and assets) for a particular type of product or service. The term monopoly is often used to describe a company that has complete or almost complete control over a market. A company with a pure monopoly means that a company is the only seller in a market without other narrow substitutes. For many years, Microsoft Corporation had a monopoly on the software and operating systems used in computers.
Even with pure monopolies, there are high barriers to entry, such as considerable start-up costs, that prevent competitors from entering the market. (What is the difference between a monopoly and an oligopoly? Learn more.) A natural monopoly can occur when a company becomes a monopoly in an industry due to high fixed or start-up costs. Natural monopolies can also occur in industries that require unique raw materials and technologies, or it can be a specialized industry where only one company can meet the requirements. A monopoly is characterized by lack of competition, which can lead to high costs for consumers, inferior products and services, and corrupt behavior. A company that dominates an industry or industry can use that dominance to its advantage and at the expense of others. It can create artificial scarcity, set prices, and circumvent the natural laws of supply and demand. It can hinder new entrants in this field, discriminate and hinder experimentation or the development of new products, while the public – deprived of recourse to the use of a competitor – is at its mercy. A monopolized market often becomes an unfair, unequal and inefficient market. There are also public monopolies established by governments to provide essential services and goods, such as the United States. Postal Service (although, of course, since the advent of private carriers like United Parcel Service and FedEx, the USPS has less of a monopoly on mail delivery). The largest monopoly breakup in U.S. history was that of AT&T.
After decades of allowing the giant telecommunications company to control the country`s phone service as a state-backed monopoly, the giant telecommunications company found itself challenged under antitrust law. In 1982, after an eight-year court battle, AT&T had to divest itself of 22 local foreign exchange services companies and has since been forced to sell assets or split units. Mergers and acquisitions between companies of the same company are therefore highly regulated and studied. Companies are typically forced to divest assets if federal authorities believe a proposed merger or acquisition violates antimonopoly laws. By selling assets, it allows competitors to enter the market through those assets, which can include factories and equipment and customers. Companies that have patents on their products, which prevents competition from developing the same product in a particular field, may have a natural monopoly. Patents allow the company to make a profit for several years without fear of competition to cover the high start-up and research and development (R&D) costs incurred by the company. Pharmaceutical or pharmaceutical companies often receive patents and a natural monopoly to promote innovation and research.
U.S. Department of Justice. «At&T Divestment: Was It Necessary? Was it a success? Accessed August 8, 2020. Antitrust laws and regulations are introduced to prevent monopolistic operations – to protect consumers, prohibit practices that restrict trade, and ensure that a market remains open and competitive. U.S. Department of Justice. «UNITED STATES OF AMERICA, Plaintiff, v. MICROSOFT CORPORATIOn, Respondent.» Accessed August 8, 2020. Federal Trade Commission. «Antitrust laws.» Retrieved 8 August 2020. To see how well you know the information, try the quiz or test activity.
In a monopolistic competitive industry, barriers to entry and exit are generally low, and companies try to differentiate themselves through price reductions and marketing efforts. However, since the products offered are so similar between different competitors, it is difficult for consumers to say which product is the best. Some examples of monopolistic competition include retail stores, restaurants, and hair salons. If you accidentally placed the card in the wrong field, simply click on the card to remove it from the box. If you need a break, try one of the other activities listed under the flashcards, such as Matching, Snowman, or Hungry Bug. Although you feel like you`re playing a game, your brain is always making more connections with information to help you. Use these flashcards to memorize information. Look at the big map and try to remember what`s on the other side. Then click on the card to return it. If you know the answer, click the green Knowledge box.
Otherwise, click the red Don`t know box. In 1890, the Sherman Antitrust Act became the first law passed by the U.S. Congress to limit monopolies. The Sherman Antitrust Act was strongly supported by Congress and passed by the Senate by a vote of 51 to 1 and the House of Representatives unanimously by 242 to 0. A federal district judge ruled in 1998 that Microsoft should be split into two tech companies, but the decision was later overturned on appeal by a superior court. The controversial result was that, despite some changes, Microsoft was free to maintain its operating system, application development, and marketing methods. Imagine what a neighborhood would look like if there were more than one electricity company serving an area. The streets would be invaded by electric poles and electric wires as different companies compete to attract customers and connect their power lines to homes. Although natural monopolies are allowed in the utility industry, the downside is that the government heavily regulates and supervises these companies. Regulation can control the rates that utilities charge their customers and when rate increases.
(For more information, see «What are the characteristics of a monopoly market?») The Sherman Antitrust Act has been used over the years to crush large corporations, including the Standard Oil Company and the American Tobacco Company. In 1914, two more antitrust laws were passed to protect consumers and prevent monopolies. The Clayton Antitrust Act created new rules for mergers and corporate directors, and also listed specific examples of practices that would violate the Sherman Act. The Federal Trade Commission Act created the Federal Trade Commission (FTC), which sets standards for business practices and enforces both antitrust laws, as well as the antitrust division of the U.S. Department of Justice. Our documents. «Sherman Anti-Trust Act (1890).» Retrieved 8 August 2020. If there are multiple sellers in an industry with many similar substitutes for the goods produced, and the companies retain some power in the market, this is called monopolistic competition.