Duhaime's Law Dictionary


Monopoly Definition:

A commercial advantage enjoyed by only one or a select few companies in which only those companies can trade in a certain area.

Related Terms: Cartel, Oligopoly, Anti-trust, Monopsony

In Liggett Group v Brown Wiloamson Tobacco, Justice Niemeyer of the United States Court of Appeals wrote, at Footnote #2:

"[M]onopoly is the control of a market by one seller...."

In Carpet Group, Justice Greenaway of the United States District Court (New Jersey) defined monopoly as follows:

"[A] monopoly exists when one firm controls all or the bulk of a product's output, and no other firm can enter the market or expand output at comparable costs."

In Canada v Superior Propane, these words were adopted by a Canadian administrative tribunal, the Competition Tribunal:

"[M]onopoly refers to a firm that sells free of any competitive discipline a product with no substitutes. A monopoly so-defined is fictional. Every product has some alternatives, if only because a consumer can keep the cash to purchase other commodities and services. Market power is a matter of degree, so a monopoly is not categorically defined."

Some monolopoies are legal, such as those temporarily created by patents.

Others are secretly built by conspiracy between two or more companies and are prohibited by law.

For example, the relevant antitrust law in the United States is the Sherman Act for which the following is a frequent refrain found in the law books:

"The offense of monopoly under § 2 of the Sherman Act has two elements: (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident."1

Nor is it uncommon to find that courts avoid a detailed criteria of exclusivity within a given market to determine where a monoply exists preferring instead to look at the fact of control(s). For example, consider these words of Justice Gibson of the United States Court of Appeals in Hiland Diary:

"We need not decide in this case what percentage less than 50% alone might produce a monopoly under certain circumstances peculiar to the market concerned, but we do think a 20% market share under the circumstances of this case is competitively inadequate to sustain a monopoly and thus permit price dictation and the ability to exclude competition....

"[T]he hallmark of monopoly is that power exists to raise prices or to exclude competition when it is desired to do so."

REFERENCES:

  • Canada (Commissioner of Competition) v. Superior Propane Inc., 18 C.P.R. (4th) 417 (2000)
  • Carpet Group Intern. v. Oriental Rug Import Association, 256 F. Supp. 2d 249 (2003)
  • Hiland Dairy, Inc. v. Kroger Company, 402 F. 2d 968 (1968)
  • Liggett Group v. Brown & Williamson Tobacco, 964 F. 2d 335 (1992)
  • United States v. Grinnell Corporation, 384 US 563 (1966; Note 1)

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