[Am-info] Monopolies can be legal

[Eric M. Bennett]

John Poltorak wrote:

>Give me an example of a legal monopoly.

HP was sued a few years ago for antitrust violations.  The market was 
"replacement parts for HP printers".  The court found that HP had a 
monopoly on this market, but that they had not abused it.  There are 
lots of little monopolies.  In a small town out in the middle of 
nowhere, there may be only one gas station or one grocery or drug 
store, which in that geographical market may legally qualify as a 
monopoly.

Another case of a legal monopoly could be in a market where there are 
two large players and one of them does something disastrous like 
Enron and goes belly up, leaving the market to be served only by one 
company.  Suppose Coca-Cola went out of business tomorrow because of 
some horrendous financial scandal.  Pepsi would probably have 
sufficient market share to be judged a monopoly, if "soft drinks" 
were a separate market from beverages in general.  Legally, the 
remaining company is said to have had monopoly "thrust upon it", and 
there is no violation, unless the company then takes advantage of its 
market power to restrain new competition in that market, or to 
restrain competition in other markets (such as by tying).  I don't 
have a specific real-world example of a case where a court found that 
this had happened, but the Supreme Court has addressed this 
theoretical possibility of "historical accident".  Certainly some 
people have argued that Microsoft is such an example because of IBM's 
mistake of not buying DOS from Microsoft outright.


-- 
Eric Bennett / ericb@pobox.com / emb22@cornell.edu
Cornell University, Chemistry & Chemical Biology

They that can give up essential liberty to obtain a little temporary
safety deserve neither liberty nor safety. -Ben Franklin