The simulation game taught me that monopolistic models are detrimental to both market actors and consumers. The dominance of monopoly in the marketplace produces two types of inefficiency, namely consumer exploitation and allocative inefficiency. When only one entity rules the entire market, consumers cannot purchase better or cheaper substitutes and analogs for goods and services. It eventually leads to monopolists setting high prices by directly influencing the price of its output (Monopoly versus competition, 2021). Allocative inefficiency refers to a situation when the dominant actor distributes its products in a way that does not fit consumer needs and preferences.
Market Inefficiencies Caused by Monopolistic Competition
Price Discrimination showed me that the very market setting of monopolistic competition is also harmful to both producers and consumers. Consumer exploitation and high prices for products and services lead to the consumer surplus beginning to decline. When all products are at their highest price, consumers become less generous to sellers (Profit maximization, 2021). Low consumer surplus leads to members of a monopolistic competition starting to sell less of their goods and services. The combination of these inefficiencies results in a deadweight loss.
Monopolies and Monopolistic Competitive Firms Profitability
The market setting of monopolistic competition is beneficial only to monopoly and monopolistic competitive firms. Since this market model is inherently inefficient, there is only one tactic by which monopolists can maximize their profits. Experts note that a monopoly maximizes profit by choosing the quantity at which marginal revenue equals marginal cost (Profit maximization, 2021, para. 1). The next step includes the monopolist using the demand curve to find the price that will induce consumers (Profit maximization, 2021, para. 1). It is this model that generates the inefficiencies described above.
It has been acknowledged that competition is the primary instrument and ground of progress. Monopolies, in their turn, are regarded as the entities that prevent any growth due to their negative effects on competition in certain areas of the economy. Governmental monopolies are often allowed in many countries, but these are usually a limited number of industries and segments of the economy (Room and Cisneros Örnberg 224).
Monopolies are seen as publicly permissible when it comes to infrastructure, commodities, or some products that can be hazardous (such as alcohol, cannabis, and others). In the rest of the spheres of the economy, monopolies are regarded as destroyers of the free market, but making monopolies illegal can hardly make markets more effective due to several reasons (Armentano 5). Instead of merely banning monopolies, it is important to ensure the use of effective antitrust law that would facilitate competition and growth.
Why Is Monopoly Ban Ineffective?
In order to understand whether monopolies should be made illegal, it is necessary to identify what this phenomenon is. A monopoly can be referred to as a company that is a single provider of some products or services in certain markets (Daniels 84). Monopolies are usually huge companies that tend to dictate pricing, distribution, and other aspects related to product sales. However, by banning such companies, such technologically advanced countries as the USA risk losing entrepreneurial zeal in the sphere of technology.
Many digital companies have become monopolies because they remain the only providers of highly technological and unique products and services (Stucke and Ezrachi). Facebook or Google became monopolies because no companies can offer competitive products so far. Hence, by abolishing the very existence of monopolies, the American government can drive many entrepreneurs from the USA that can lose its economic competitiveness in the global market.
Moreover, businesses can try to develop strategies and models that would hide their monopolistic position. The division of branches, making them seem independent business entities, can be one of the approaches that have been utilized in other countries (Daniels 85). At the same time, these companies can continue their malpractice that would deteriorate competition and lead to complete monopolization of the sector. In that case, the quality of products would decline, and prices would rise. Therefore, the prohibition of monopolies is an ineffective strategy that can hardly prevent the monopolization of different segments of the market.
Anti-Monopoly Legislation: The Dawn
As far back as the late nineteenth century, Americans made a wise choice and did not ban monopolies. At that, the situation was almost uncontrollable in some of the most sensitive industries as monopolies tried to influence the operations of smaller companies in the industry, companies in related industries, and even governmental bodies (Stucke and Ezrachi). Instead, the US government developed a number of anti-trust policies that imposed quite strict regulations leading to the normalization of the economic situation. In simple terms, the government did not ban monopolies, so companies could grow and turn into multinationals. However, various policies imposed restrictions on activities that could lead to the monopolization of a sector of the economy and limit competition.
This approach has experienced some fluctuations in terms of the degree of restrictions and the overall public attitude towards the matter. For instance, these regulations were not as strict during the period of the Great Depression or other considerable economic issues as large companies and entrepreneurial zeal were rightfully seen as drivers of the economy (Stucke and Ezrachi). The golden age of antitrust laws lasted till the 1970s, and it may account for the stability in the U. S. economy.
However, since the 1970s, anti-monopoly laws have been applied rarely, which led to the rise of some multinationals and companies that tried to monopolize the market to a different extent. The rise of monopolies in modern times is an illustration of the ineffectiveness of this approach (Stucke and Ezrachi). It is critical to ensure the implementation of regulations and proper supervision of companies activities if they threaten competition and the development of marketing.
What Exactly Should Be Done?
Centuries of observations of monopolies and their activities suggest that three major approaches exist. These three models include the unrestricted operations of monopolies, robust anti-trust legislation, and the inappropriate use of anti-monopoly legislation. As mentioned above, only one of them was associated with economic growth and stability. The emergence of monopolies is often a natural cause of the development of markets at different stages of their development. Nevertheless, these companies activities and operations have to be regulated when they limit or can potentially restrict competition.
In order to illustrate the possible ways to address the issue, it is necessary to consider the latest examples of monopolies. These companies are the representatives of the digital industry, such as Facebook and Google. The companies emerged as natural monopolists as their products and services were unique for a long period of time (Smith). However, these multinationals are now accused of monopolistic practices aimed at diminishing competition in the market. These companies implement acquisitions and make agreements with other leading digital leaders, which deprives smaller businesses of competitive advantages forcing them out of or blocking their entrance into the market (Smith). The two companies try to prove in court that they do business fairly and do not try to reduce competition in the industry.
The current cases show a certain vulnerability of the existing anti-trust legislation, especially when it comes to industries where businesses can affect or even form, to a considerable extent, public opinion. Nevertheless, the legal decisions made in the golden age of anti-trust legislation can provide numerous valuable lessons to ensure the use of proper policies and the development of new ones. Transparency and clarity, as well as publicity, are three pillars for the future of anti-monopoly laws. Legislators should develop clear regulations that would ensure the facilitation of competition. New startups and entrants should receive support from the government. It is also critical to provide detailed information regarding monopolistic activities of companies to inform people who can make decisions regarding products and services to consume.
Conclusion
To sum up, it is necessary to stress that the mere ban of monopolies per se is counterproductive as it can, ironically, reduce competition and discourage companies from growing or remaining transparent and responsible. In some industries, especially during some stages of their development, monopolies are inevitable due to the uniqueness of some products and services. Therefore, instead of trying to prevent the emergence of monopolies, it is more effective to regulate their activities and prevent their attempts to diminish competitiveness in the associated markets. The U. S. economy displayed high results when such regulations existed and were implemented properly, so the return to this approach will be beneficial for the countrys further sustainable growth.
Works Cited
Armentano, Dominick T. Barriers to Entry. Abolition of Antitrust, edited by Gary Hull, Routledge, 2017, pp. 3-16.
Daniels, Eric. Reversing Course: American Attitudes About Monopolies, 1607-1890. Abolition of Antitrust, edited by Gary Hull, Routledge, 2017, pp. 63-94.
Room, Robin, and Jenny Cisneros Örnberg. Government Monopoly as an Instrument for Public Health and Welfare: Lessons for Cannabis from Experience with Alcohol Monopolies. . International Journal of Drug Policy, vol. 74, 2019, pp. 223-228.
Smith, Kelly Anne. The Rise, Fall, and Rebirth of the U.S. Antitrust Movement. Forbes, 2021. Web.
Stucke, Maurice E., and Ariel Ezrachi. What You Need to Know About the Facebook Antitrust Lawsuit. Harvard Business Review. 2017. Web.
An era seeing vast social, political, and economic changes, the Progressive Era from 1890 to the 1920’s was a steppingstone in correcting democracy and eradicating widespread issues spawned by monopolistic industrial figures. A precursor in laying the framework for WWI and the Roaring Twenties, the Progressive movement saw a dramatic rise in industrialization as movement supporters were avid modernizers. Nonetheless, despite its prosperous economic growth, the rise of unionization and economic/ social public policy posed as a threat towards many industrial giants and the progressive modernization. Through analyzing economic and political setbacks and break throughs, the changes within the progressive period saw a rollercoaster of peaks and fallbacks from economic panics to and heavy federal political and social regulation of industrial monopolists; society emerging from an agrarian and calm lifestyle, to an industrial and crooked capitalist playground.
Progressive Economics saw an extensive amount of changes domestically, revitalizing the struggling conditions America was submerged in. During this era of innovation, industrialization and railroad expansion led the pack in bolstering a heavy effect on domestic economic prosperity. In Gary Walton and Hugh Rockoff’s ‘History of the American Economy’ they go on to note how during this period, the production of steel for railroads doubles, highlighting how a sudden halt on railroad development would simply have postponed growth for two years. However, despite fiscal success, the renaissance of economic growth stemmed from the Panic of 1893, taking a direct blow and monumental detriment to the Philadelphia Reading Railroad, the National Cordage Company, and following this, a lingering wave of bank failures across the South and West (Walton & Rockoff, 333). With America in economic turmoil, railroad’s and their monopolist leaders were sent into dismay, becoming financially strapped, however “when the long period of falling prices reversed itself in 1896, the ICC disallowed rate increases sufficient to match rises in the general price level. Railroads reacted by slowing their repair and replacement of capital stock and equipment” (Walton and Rockoff,276). Concluding the 19th century and entering a new decade, its evident to distinguish how the American economic landscape relied so heavily on an industrial society as opposed to an agrarian dominance. Railroads and their manufacturing companies amassed such power that they in an essence dictate the flow of fiscal success. Nonetheless, their superiority in the market created an intensive monopoly, and without government intervention, regulation of business practices continued to go unrecognized, creating a ruthless laissez faire economic system. However, despite having railroads under a private ownership, their contribution to other markets was beneficial. Looking at the agricultural sector, the railroad “had saved at most only about 1.4% of GNP in the transportation of agricultural products…an upper-bound estimate of the social savings came to about 7.3% of GNP in 1890” (Walton and Rockoff, 278). Unethically, railroads were placing a detriment on labor conditions with the exploitation of underpaid workers, yet the efficiency and exponential expansion of the railroad system assisted in a minor yet, reliable mode of boosting economic conditions.
While the railroads were an external measurement of how Progressive Economics shifted, internal measurements of currency had a dramatic impact on international relations. Beginning in the late 19th century, until 1920’s the U.S. came into its own as a dominating economic power, with a net balance of goods and services quoted at $7billion (Watson and Rockoff, 251). As to what the pandora’s box to economic growth laid low and behold in the implementing gold standard, a notable international currency. In previous efforts to successfully adherence to the gold during financial crises, it put a massive strain to supply additional money to financial markets. However, with a reversal in international capital flow, the Progressive economy and its fixed exchange rate of gold promoted “the free flow of goods and capital across international borders… Bonds sold in London there sent streams of capital into the less-developed parts of the world” (Watson and Rockoff, 329). As America had entered a heavily industrialized era, relations with foreign countries grew. Metaphorically it acted as the key holder into international markets. The iteration of the gold standard as a dominant currency allowed for a reduction in volatile inflation amongst input and output of goods yet stimulating the supply of goods for an ever-expanding population. As a growing manufacturing economy and with a vast and stable international market, the United States saw itself as a massive nonreproducible power, producing an extensive portion of petroleum, copper, coal, etc. (Watson and Rockoff, 350). Nonetheless with WWI begging in 1914, the gold was a viable source of paying off debt to America from Britain and France, allowing industrial businesses to soar. European surplus granted the feasibility for gold as acting as more than just a resource for payment, but as a staple in financing politics, changing the direction of international relations.
With the surge in economic fluctuation, the Progressive Era sought out to make sure that dominating industrial forces wouldn’t implement any unethical practices in order to satisfy capitalist greed. With prior tariffs established from the Civil War, tariffs were established in order to pay off any war debts. With the early implementation of the Interstate Commerce Commission in 1887, it began the period in which domestic policies, primarily economic ones, became more utilized (Watson and Rockoff, 275). With congress attempting to pass a form of tax legislation in 1894, it was found unconstitutional in 1895 (Watson and Rockoff, 354). However, while this initiative to introduce an income tax initially failed, it laid the framework in establishing acts including the Elkins Act of 1903, Hepburn Act of 1906, and the ratification of the 16th amendment in 1913. In examining the effects of these Poli-Economic policies, entering the Progressive Era saw a motive in protecting the wellbeing of the laborer, and maintaining the economic regulation amongst manufacturers and capitalists. As a Progressive government took form, the ratification of amendments and tax reforms, nonetheless, shifted the paradigm of tax income, realizing that the worker was being heavily taxed despite low income. Mean to mention the high industrial prices exuded a strenuous force on low and low middle-class Americans. Hence the transformation had adopted a more regulated system for democrats and republicans and workers and capitalists .
Within every century, the United States economy is seemingly booming and subtilling deflating all the time. Shifting into the 20th century, its evident how economics and politics crafted a landscape for industrialists. Walton and Rockoff note how “the beginning of the twenty-first century looks very much like the beginning of the twentieth century”. Looking at the framework of industrialists and laborers, the degree to which this statement is valid is high. In the Progressive and Roaring Twenties era, the emergence of industrial monopolists dominating the private sector found itself intertwined in a hotpot of labor rights and unionization. Yet in 21st century, despite more federally regulated labor laws, there are excessive loopholes in which the rich evade taxes, nonetheless, outsourcing international labor as mode of profiting off cheap labor, second favoring the domestic labor market. Moreover, preserving the cycle of monopolistic greed and labor exploitation.
A monopoly is an exclusive possession of the supply of or trade in a commodity or service. After being offered the position of Junior Executive and thinking about the pros and cons of each side, I have concluded to accept the role of Junior Executive at Mega Avocado Corporation. Three main points that support my claim are the data from our 2008 and 2009 production, our general knowledge about what a monopoly is and how it works, and the power of the patent.
My strongest point about why joining a monopoly is the best decision is the data and research from our production in 2008 and 2009. In 2008 our data reflected our place in a competitive market, while our 2009 data depicts our place in a monopolistic market. Our costs per avocado were lower in 2009, making our sales increase. The 2009 data makes my point valid because it is ethical for our producers and our consumers. Most people think that a monopoly causes prices to be higher for consumers; however, our data shows explicitly that we did not price gauge and that our prices were fair. According to this data, our profits were higher, being a monopoly versus being in a competitive market. Therefore, joining MAC as a Junior Executive is ethical and fair.
Although this data from 2008 and 2009 highly supports monopolistic markets, the common thread with monopolies is that prices increase for consumers due to price-fixing and price gauging as the profit increases as well. “Monopolies face inelastic demand and so can increase prices-giving consumers no alternative” (economicshelp.org). Many believe this action to be unethical because it creates an unfair market place with no competition, so consumers must pay high prices. However, in our MAC monopoly, our prices are fair and even below the competitive market prices the year before.
“Monopolies are firms that dominate the market” (economicshelp.org). Many people, without clarification, automatically assume that monopolies are bad because they hurt consumers. However, they can lower average costs, which, in theory, help the consumers. Think about natural monopolies. The long-term investment can gain lower long-run average costs. Having one primary firm produce the good or service limits the amount of infrastructure and investment. This process makes it more efficient for a monopoly to exist. The Sherman Anti-Trust Acts make monopolies legal and able to run their firms without using their power to gain advantages. As long as companies follow these laws, then there is no reason for a company not to be allowed to gain control and have a competitive advantage.
There are a few disadvantages of a monopoly that come into play. In some instances, it creates a decline in consumer surplus because fewer consumers can purchase the goods at the inflated prices. All of these advantages and disadvantages depend on the market type. For instance, if factors such as a contestable market, ownership, and government regulation take hold, it depends on the structure and type.
My final point that brings my statement the most strength is the power of the patent. “A patent is a government authority or license conferring a right or a title, for a set period, especially the sole right to exclude others from making, using, or selling an invention”. The patent in a monopoly provides incentives for firms to become innovative. The development of new technology and knowledge betters our society. This innovation causes high profits allowing companies to invest and fund further projects and funnel some of the profits back into the community.
While some see monopolies as a positive use for innovation, others see it as a lack of innovation. People believe that there is a lack of motivation to create new products because there is no competition to beat out. Since many are not able to compete with a monopoly, the motive for innovation is business and market demands, not ingenuity.
In modern American societies, monopolies are generally considered to be harmful because they cause markets to fall. The main concern is that monopolistic firms can charge any price they want for a good or service because they know that people need their items. However, there are situations in which the positive advantages outweigh the negative disadvantage. This Junior Executive position at Mega Avocado Corporation is one of them. This monopoly helps the consumer and the producer. The prices are low, and the profits are up. What more could be wanted? I can prove that my role as a Junior Executive is ethical and fair through production data in 2008 and 2009, the basic understanding of the pros and cons of a monopoly, and finally, the power of the patent and innovation.
I had taken two introductory economics courses prior taking the ECON 310 course this semester, and I had learned a lot about the different markets including monopoly, oligopoly and monopolistic competitive markets. However, I always had trouble understanding the difference between them and it has always been very confusing to me until I got the opportunity to further learn them in this course. So, I decided to explore it in more details in this essay. In a monopolistic competitive market, there is no perfect information as in a perfectly competitive market. In this business environment, consumers can be deceived by perceiving that the products are different when in fact they can be interchangeable with their counterparts. Like oligopolies, they also depend heavily on marketing strategies to achieve product differentiation but differ by having unlimited competition that is not favored by entry barriers, as in the perfectly competitive market. Monopolistic competitive features, therefore, generally include differentiated products, large numbers of vendors and no entry restrictions.
In this environment, there is a great variability of the product, which justifies the millions of shampoo bottles in a hallway. Stunned by the number of bottles, the question comes to one’s mind is that weather there can be only one predetermined shampoo. Well, thanks to the monopolistic competitive companies like Aveeno, Garnier, Neutrogena, Pantene and the all too many to list, for trying to convince the consumers like us that their shampoo provides ‘silkier’ hair. Whether it is true or not, it does not necessarily matter as long as the consumer believes that it is true. Take conventional toothbrushes that like shampoo, they all have the same purpose. However, if a supplier of a ‘one-of-a-kind’ toothbrush with a softer handle believes that the feature is worth more and the consumer agrees, then the toothbrush will be sold at a higher price. A softer handle will not provide whiter or cleaner teeth, but it will help the variability of the product that gives the consumer a wide variety of options.
Unlike oligopoly, monopolistic competitive companies must worry about competing with unlimited competition. Competition can be so extensive that it can be across the road or even neighbors. So why can companies decide to compete so closely when operating in less competitive places? The answer lies in the economist concept of spatial interpretation, that is, the company competes with consumers in the form of convenience by attracting more consumers by establishing more physical stores. If there is a total number of potential consumers within a certain range, companies will compete in an accessible environment. This explains the establishment of a gas station on the way to San Francisco. The gas station wants to compete for space and customers within the same exit because it does not want to create any distance from the convenience of competitors. If Chevron is to be pumped at a convenient exit, drivers trying to reach San Francisco will not want to drive more than a mile away to pump Arco gasoline.
Usually, there are a large number of independent companies competing in the market. The most common examples of monopolistic competition are fast-food burger companies such as McDonald’s and Burger King. Both companies are selling similar products, but it depends on their favorite consumers. They sell burgers or any kind of food, such as fried chicken, french fries and soda. There are similarities, but no consistency. Another characteristic that distinguishes a monopolistic competitive market is that, unlike a perfectly competitive market, there is no barrier to entry for monopolistic competition. There can be ten food trucks on a street, and no one limits entering another one into the market. As long as revenue can be recognized, profits can be shared. The same cannot be said for pure monopolists and oligarchs, who lobby and indirectly prevent competitors from entering.
Monopolistic competition has a large number of sellers, but each seller acts independently and has no influence on others. Just like sellers, there are a large number of product buyers in the market, and each buyer acts independently. Monopoly competitors try to differentiate their products so that consumers cannot make alternative efforts. In this model, each company will have a product similar to its competitors, but it is not a perfect substitute. Only small differences between them allow competition. A monopolistic competitive market is essentially a mashup between an oligopoly and a perfectly competitive market.
References
Monopolistic Competition. (2016, Oct 13). Retrieved from https://studymoose.com/monopolistic-competition-essay
An era seeing vast social, political, and economic changes, the Progressive Era from 1890 to the 1920’s was a steppingstone in correcting democracy and eradicating widespread issues spawned by monopolistic industrial figures. A precursor in laying the framework for WWI and the Roaring Twenties, the Progressive movement saw a dramatic rise in industrialization as movement supporters were avid modernizers. Nonetheless, despite its prosperous economic growth, the rise of unionization and economic/ social public policy posed as a threat towards many industrial giants and the progressive modernization. Through analyzing economic and political setbacks and break throughs, the changes within the progressive period saw a rollercoaster of peaks and fallbacks from economic panics to and heavy federal political and social regulation of industrial monopolists; society emerging from an agrarian and calm lifestyle, to an industrial and crooked capitalist playground.
Progressive Economics saw an extensive amount of changes domestically, revitalizing the struggling conditions America was submerged in. During this era of innovation, industrialization and railroad expansion led the pack in bolstering a heavy effect on domestic economic prosperity. In Gary Walton and Hugh Rockoff’s ‘History of the American Economy’ they go on to note how during this period, the production of steel for railroads doubles, highlighting how a sudden halt on railroad development would simply have postponed growth for two years. However, despite fiscal success, the renaissance of economic growth stemmed from the Panic of 1893, taking a direct blow and monumental detriment to the Philadelphia Reading Railroad, the National Cordage Company, and following this, a lingering wave of bank failures across the South and West (Walton & Rockoff, 333). With America in economic turmoil, railroad’s and their monopolist leaders were sent into dismay, becoming financially strapped, however “when the long period of falling prices reversed itself in 1896, the ICC disallowed rate increases sufficient to match rises in the general price level. Railroads reacted by slowing their repair and replacement of capital stock and equipment” (Walton and Rockoff,276). Concluding the 19th century and entering a new decade, its evident to distinguish how the American economic landscape relied so heavily on an industrial society as opposed to an agrarian dominance. Railroads and their manufacturing companies amassed such power that they in an essence dictate the flow of fiscal success. Nonetheless, their superiority in the market created an intensive monopoly, and without government intervention, regulation of business practices continued to go unrecognized, creating a ruthless laissez faire economic system. However, despite having railroads under a private ownership, their contribution to other markets was beneficial. Looking at the agricultural sector, the railroad “had saved at most only about 1.4% of GNP in the transportation of agricultural products…an upper-bound estimate of the social savings came to about 7.3% of GNP in 1890” (Walton and Rockoff, 278). Unethically, railroads were placing a detriment on labor conditions with the exploitation of underpaid workers, yet the efficiency and exponential expansion of the railroad system assisted in a minor yet, reliable mode of boosting economic conditions.
While the railroads were an external measurement of how Progressive Economics shifted, internal measurements of currency had a dramatic impact on international relations. Beginning in the late 19th century, until 1920’s the U.S. came into its own as a dominating economic power, with a net balance of goods and services quoted at $7billion (Watson and Rockoff, 251). As to what the pandora’s box to economic growth laid low and behold in the implementing gold standard, a notable international currency. In previous efforts to successfully adherence to the gold during financial crises, it put a massive strain to supply additional money to financial markets. However, with a reversal in international capital flow, the Progressive economy and its fixed exchange rate of gold promoted “the free flow of goods and capital across international borders… Bonds sold in London there sent streams of capital into the less-developed parts of the world” (Watson and Rockoff, 329). As America had entered a heavily industrialized era, relations with foreign countries grew. Metaphorically it acted as the key holder into international markets. The iteration of the gold standard as a dominant currency allowed for a reduction in volatile inflation amongst input and output of goods yet stimulating the supply of goods for an ever-expanding population. As a growing manufacturing economy and with a vast and stable international market, the United States saw itself as a massive nonreproducible power, producing an extensive portion of petroleum, copper, coal, etc. (Watson and Rockoff, 350). Nonetheless with WWI begging in 1914, the gold was a viable source of paying off debt to America from Britain and France, allowing industrial businesses to soar. European surplus granted the feasibility for gold as acting as more than just a resource for payment, but as a staple in financing politics, changing the direction of international relations.
With the surge in economic fluctuation, the Progressive Era sought out to make sure that dominating industrial forces wouldn’t implement any unethical practices in order to satisfy capitalist greed. With prior tariffs established from the Civil War, tariffs were established in order to pay off any war debts. With the early implementation of the Interstate Commerce Commission in 1887, it began the period in which domestic policies, primarily economic ones, became more utilized (Watson and Rockoff, 275). With congress attempting to pass a form of tax legislation in 1894, it was found unconstitutional in 1895 (Watson and Rockoff, 354). However, while this initiative to introduce an income tax initially failed, it laid the framework in establishing acts including the Elkins Act of 1903, Hepburn Act of 1906, and the ratification of the 16th amendment in 1913. In examining the effects of these Poli-Economic policies, entering the Progressive Era saw a motive in protecting the wellbeing of the laborer, and maintaining the economic regulation amongst manufacturers and capitalists. As a Progressive government took form, the ratification of amendments and tax reforms, nonetheless, shifted the paradigm of tax income, realizing that the worker was being heavily taxed despite low income. Mean to mention the high industrial prices exuded a strenuous force on low and low middle-class Americans. Hence the transformation had adopted a more regulated system for democrats and republicans and workers and capitalists .
Within every century, the United States economy is seemingly booming and subtilling deflating all the time. Shifting into the 20th century, its evident how economics and politics crafted a landscape for industrialists. Walton and Rockoff note how “the beginning of the twenty-first century looks very much like the beginning of the twentieth century”. Looking at the framework of industrialists and laborers, the degree to which this statement is valid is high. In the Progressive and Roaring Twenties era, the emergence of industrial monopolists dominating the private sector found itself intertwined in a hotpot of labor rights and unionization. Yet in 21st century, despite more federally regulated labor laws, there are excessive loopholes in which the rich evade taxes, nonetheless, outsourcing international labor as mode of profiting off cheap labor, second favoring the domestic labor market. Moreover, preserving the cycle of monopolistic greed and labor exploitation.
A monopoly is an exclusive possession of the supply of or trade in a commodity or service. After being offered the position of Junior Executive and thinking about the pros and cons of each side, I have concluded to accept the role of Junior Executive at Mega Avocado Corporation. Three main points that support my claim are the data from our 2008 and 2009 production, our general knowledge about what a monopoly is and how it works, and the power of the patent.
My strongest point about why joining a monopoly is the best decision is the data and research from our production in 2008 and 2009. In 2008 our data reflected our place in a competitive market, while our 2009 data depicts our place in a monopolistic market. Our costs per avocado were lower in 2009, making our sales increase. The 2009 data makes my point valid because it is ethical for our producers and our consumers. Most people think that a monopoly causes prices to be higher for consumers; however, our data shows explicitly that we did not price gauge and that our prices were fair. According to this data, our profits were higher, being a monopoly versus being in a competitive market. Therefore, joining MAC as a Junior Executive is ethical and fair.
Although this data from 2008 and 2009 highly supports monopolistic markets, the common thread with monopolies is that prices increase for consumers due to price-fixing and price gauging as the profit increases as well. “Monopolies face inelastic demand and so can increase prices-giving consumers no alternative” (economicshelp.org). Many believe this action to be unethical because it creates an unfair market place with no competition, so consumers must pay high prices. However, in our MAC monopoly, our prices are fair and even below the competitive market prices the year before.
“Monopolies are firms that dominate the market” (economicshelp.org). Many people, without clarification, automatically assume that monopolies are bad because they hurt consumers. However, they can lower average costs, which, in theory, help the consumers. Think about natural monopolies. The long-term investment can gain lower long-run average costs. Having one primary firm produce the good or service limits the amount of infrastructure and investment. This process makes it more efficient for a monopoly to exist. The Sherman Anti-Trust Acts make monopolies legal and able to run their firms without using their power to gain advantages. As long as companies follow these laws, then there is no reason for a company not to be allowed to gain control and have a competitive advantage.
There are a few disadvantages of a monopoly that come into play. In some instances, it creates a decline in consumer surplus because fewer consumers can purchase the goods at the inflated prices. All of these advantages and disadvantages depend on the market type. For instance, if factors such as a contestable market, ownership, and government regulation take hold, it depends on the structure and type.
My final point that brings my statement the most strength is the power of the patent. “A patent is a government authority or license conferring a right or a title, for a set period, especially the sole right to exclude others from making, using, or selling an invention”. The patent in a monopoly provides incentives for firms to become innovative. The development of new technology and knowledge betters our society. This innovation causes high profits allowing companies to invest and fund further projects and funnel some of the profits back into the community.
While some see monopolies as a positive use for innovation, others see it as a lack of innovation. People believe that there is a lack of motivation to create new products because there is no competition to beat out. Since many are not able to compete with a monopoly, the motive for innovation is business and market demands, not ingenuity.
In modern American societies, monopolies are generally considered to be harmful because they cause markets to fall. The main concern is that monopolistic firms can charge any price they want for a good or service because they know that people need their items. However, there are situations in which the positive advantages outweigh the negative disadvantage. This Junior Executive position at Mega Avocado Corporation is one of them. This monopoly helps the consumer and the producer. The prices are low, and the profits are up. What more could be wanted? I can prove that my role as a Junior Executive is ethical and fair through production data in 2008 and 2009, the basic understanding of the pros and cons of a monopoly, and finally, the power of the patent and innovation.
I had taken two introductory economics courses prior taking the ECON 310 course this semester, and I had learned a lot about the different markets including monopoly, oligopoly and monopolistic competitive markets. However, I always had trouble understanding the difference between them and it has always been very confusing to me until I got the opportunity to further learn them in this course. So, I decided to explore it in more details in this essay. In a monopolistic competitive market, there is no perfect information as in a perfectly competitive market. In this business environment, consumers can be deceived by perceiving that the products are different when in fact they can be interchangeable with their counterparts. Like oligopolies, they also depend heavily on marketing strategies to achieve product differentiation but differ by having unlimited competition that is not favored by entry barriers, as in the perfectly competitive market. Monopolistic competitive features, therefore, generally include differentiated products, large numbers of vendors and no entry restrictions.
In this environment, there is a great variability of the product, which justifies the millions of shampoo bottles in a hallway. Stunned by the number of bottles, the question comes to one’s mind is that weather there can be only one predetermined shampoo. Well, thanks to the monopolistic competitive companies like Aveeno, Garnier, Neutrogena, Pantene and the all too many to list, for trying to convince the consumers like us that their shampoo provides ‘silkier’ hair. Whether it is true or not, it does not necessarily matter as long as the consumer believes that it is true. Take conventional toothbrushes that like shampoo, they all have the same purpose. However, if a supplier of a ‘one-of-a-kind’ toothbrush with a softer handle believes that the feature is worth more and the consumer agrees, then the toothbrush will be sold at a higher price. A softer handle will not provide whiter or cleaner teeth, but it will help the variability of the product that gives the consumer a wide variety of options.
Unlike oligopoly, monopolistic competitive companies must worry about competing with unlimited competition. Competition can be so extensive that it can be across the road or even neighbors. So why can companies decide to compete so closely when operating in less competitive places? The answer lies in the economist concept of spatial interpretation, that is, the company competes with consumers in the form of convenience by attracting more consumers by establishing more physical stores. If there is a total number of potential consumers within a certain range, companies will compete in an accessible environment. This explains the establishment of a gas station on the way to San Francisco. The gas station wants to compete for space and customers within the same exit because it does not want to create any distance from the convenience of competitors. If Chevron is to be pumped at a convenient exit, drivers trying to reach San Francisco will not want to drive more than a mile away to pump Arco gasoline.
Usually, there are a large number of independent companies competing in the market. The most common examples of monopolistic competition are fast-food burger companies such as McDonald’s and Burger King. Both companies are selling similar products, but it depends on their favorite consumers. They sell burgers or any kind of food, such as fried chicken, french fries and soda. There are similarities, but no consistency. Another characteristic that distinguishes a monopolistic competitive market is that, unlike a perfectly competitive market, there is no barrier to entry for monopolistic competition. There can be ten food trucks on a street, and no one limits entering another one into the market. As long as revenue can be recognized, profits can be shared. The same cannot be said for pure monopolists and oligarchs, who lobby and indirectly prevent competitors from entering.
Monopolistic competition has a large number of sellers, but each seller acts independently and has no influence on others. Just like sellers, there are a large number of product buyers in the market, and each buyer acts independently. Monopoly competitors try to differentiate their products so that consumers cannot make alternative efforts. In this model, each company will have a product similar to its competitors, but it is not a perfect substitute. Only small differences between them allow competition. A monopolistic competitive market is essentially a mashup between an oligopoly and a perfectly competitive market.
References
Monopolistic Competition. (2016, Oct 13). Retrieved from https://studymoose.com/monopolistic-competition-essay
The problem of systematic oppression and marginalization of members of the LGBT community has been in existence in the United States for a significant amount of time, making its way into a range of domains, the military is one of the key areas. Therefore, by lifting the ban on homosexual people being in the military, Barak Obama made a massive breakthrough in the relationships between gay and straight people in American society. When considering the forces behind the change, one must mention the propensity in the society toward building diversity-oriented social justice. The influence of political changes, particularly, the reinforcement of the Liberal Party’s principles, can be considered as the driving force behind the alterations that the U.S. society underwent at the time.
Social Values and the Implementation of Policy Changes
The observed phenomenon owes its existence to the notion defined by Parry (2012) as the “tribal psychology of politics.” Particularly, the propensity among the members of a particular society to follow the principles of justice set and supported by the majority provide the foundation for a massive change in people’s perception of homosexuality, societal taboos, morality, and the role of complying with moral standards.
Additional Examples of Social Values
As the results of a quiz offered by the Moral Foundation (2018) show, most Conservative respondents indicated that they valued morality and compliance with societal standards as high as justice, prevention of harm to others, fairness, and other essential notions that allow providing people with their irrefutable rights (Parry, 2012). Therefore, it can be assumed that the changes in the political landscape of the state served as the basis for enhancing the principles of acceptance within the state (Moral Foundation, 2018). It could be argued that the specified changes were reciprocal and that the results of the elections that allowed Liberals to become the majority were the effect of a shift in social values. Nevertheless, the specified case is a prime example of political factors defining the development of societal relationships.
Monopoly and Government Interventions
When considering the effects of monopoly on the present-day market environment, one must admit that the specified force cannot be described as strictly negative or positive. Instead, it provides a mixed effect that can be used for different purposes, including the encouragement of economic growth.
In addition, one must keep in mind that the modern global market does not contain the specimens of what can be termed as a pure monopoly. The absence thereof can be explained by the rise in product diversity and the increase in opportunities that companies can pursue in the global economy. The resulting emergence of numerous organizations operating in the same niche as corporate giants creates little to no room for absolute monopoly.
However, monopolies also set high-quality standards for the products and services that they deliver. Therefore, opportunities for improving the state economy and promoting active development can be built. The emphasis on the R&D processes and waste management will encourage new entrants in the global market to explore their potential and locate innovative decisions that will make them stay afloat even in the realm of increasingly high competition.
Therefore, introducing tools for governmental regulation of the global market does not seem a sensible idea. Because of the inability to embrace the nuances that guide decision-making processes in the specified environment, governments will fail to create the setting in which organizations will be able to function. Although basic supervision is crucial to ensure the legitimacy of market transactions, rigid control should not be introduced since it will hamper economic growth.
References
Moral Foundation. (2018). Moral foundations questionnaire. Web.
Parry, M. (2012). Jonathan Haidt decodes the tribal psychology of politics. Chronicle of Higher Education, 58(22), B6.
This is a civil action brought by the government pursuant to Section 4 of the Sherman Act. The contention of the government in this case was grounded on the reasoning that the appellee had used unlawful means to monopolize interstate commerce. The argument of the government in the case was that the monopoly by Cellophane was further in contravention of Section 2 of the Sherman Act.
The trial court in the case held that the market to be observed in the determination of the flexibility of packaging materials had to be observed in regard to the competition dynamics. The market, therefore, played a role in preventing the appellee in the possession of monopoly of the market. The trial court dismissed the appeal accordingly.
The issue before the appellate court was to determine whether alleged monopolist tendencies of the company violated Section 2 of the Sherman Act.
The issue was closely coupled with a determination of whether the company enjoyed a monopoly in competition and the assigning of given prices. The determination of the court was to be based on the reasoning that the commodities that are sold must be of a different character (Cefrey 64).
The case was originally instituted in the District Court of the United States in the District of Columbia. The case was further transferred to the District of Delaware. The defendant, E.I. DuPont, was a corporation with its operations in Delaware. Its successor was E.I. DuPont Cellophane Company. The company had all along concentrated on the sale of cellulose in the form of films and in the form of bands.
The company entered into the business of manufacturing cellulose in 1923. Its collaboration with the La Cellophane Company, which was based in France, was a new twist in its operations. The company was re-incorporated to include the subsidiary company in 1929. DuPoint subsequently took over the operations of the company from 1936 onwards.
The plaintiff in this case expounded the meaning of economic and legal concepts put forward in the case. There are several theories put across by the plaintiff, although the final determination of the case has been left in the hands of the plaintiff. The legal and economic theories of monopoly were strictly put across in the sense that a line was to be drawn between the two.
It was the plaintiff’s case that the defendant engaged in acts that were prohibited under the Sherman Act. The plaintiff further argued that the monopoly had legal and economic repercussions. Several philosophies to affirm the argument made by the plaintiff were considered. The disagreement in the economic and legal concepts involved in this case was presented for consideration.
The consideration had provoked various disagreements in the United States today. The economic discussion follows a need to breach the gap between the legal and economic theories of monopoly. The discussion in the case was later supported by the agreement in the economist’s world that both types of monopoly are restricted to competition and in a free market; it is easier to determine the operation of one type.
The plaintiff in this case endeavored to distinguish the two concepts. The contrast between the legal and economic concepts of competition and monopoly has a broad effect in the markets where there are substitute products. The discussion was solely based on the coalescence between the old concepts of economy and the new ones.
It was the plaintiff’s case that the recent economic advancements have presented situations that require strong regulatory mechanisms to avoid harsh monopoly in the markets. Though the differences between the reasoning of the courts and the economists were evident, the issue of monopoly was cutting across. The economists had a term to define the monopoly, while the courts termed the monopoly as a major violation of the Sherman Act.
The plaintiff stated that the varying differences between the definitions of the defendant’s acts were to be construed in the favor of the plaintiff (Letwin 22). The plaintiff engaged in a lengthy discussion designed to prove the case against the defendant.
The issue of perfect competition as opposed to pure monopoly also emerged in this case. The terms are to be used in their actual meaning without interchanging them to introduce semantic interpretation. The two extremes between perfect competition and pure monopoly should be understood in a wider definition (Cefrey 33).
The plaintiff in this case sought the understanding of the legal and economic concepts to aid the court in arriving at both an economically sound decision, as well as a decision that could be a solid precedent.
The influence of the defendant’s goods in the market alleged to have been monopolized was brought to the attention of the court. In the wake of technological considerations, the issue of monopoly could be seen from a different perspective. Pure competition and monopoly have gained a new meaning in a situation whereby the market is not physical in nature.
In the sense of markets that entail imperfect competition, the interest of the consumers is ignored while the big companies enjoy a sizeable deal of the profits. All market situations can fall short of pure competition and find themselves in the whims of monopolistic competition.
The monopolistic trends in this case were promoted by the defendant who engaged in a situation whereby many sellers trade in products in different categories, but their monopoly is highly pronounced. The plaintiff asserted that the oligopolistic behavior of the producers was a perfect controvert to the desired intention of the antitrust laws.
The defendants were of the view that there are multiple benefits attributed to the use of oligolistic competition. Though there were proposals by the defendant that the concept of workable competition could be used, it is still clear that such agreements were not in line with the Sherman Act (Colino 14).
Monopoly in the sphere of competition was put to test in this case whereby the court was forced to consider some of the major theories in an attempt to arrive at a fair decision. The plaintiff defined some of the major terms in respect to pure monopoly. It was the submission of the plaintiff that pure monopoly could occur in cases where the buyer is not in a position to consider the substitute products.
The test of a marketing concept that benefits the society is the theoretical perspective that economists put into consideration. The defendant failed to regulate the flow of products in the market, thus it was evident that the company enjoyed a monopoly. The new products in the markets could not get a chance because the defendant employed monopolistic means to ensure that the market remained solely its monopoly.
The fact that an old company had a wider sense of influence is the position that the new entries in the market find themselves in. According to the plaintiff’s arguments, the products were supplied without substitutes and the consumers were adversely affected by the unhealthy monopoly and competition.
The plaintiff in this case clearly observed that the Sherman Act does not define the scope of competition. The purpose of the passing of the Sherman Act by the United States Congress was to preserve the freedom of buying and selling goods. In addition, the Act was to protect the innocent sellers from any form of restraints and monopolies (Letwin 41).
The intention of the Congress as put forward by the plaintiff was to make sure that secure competition is promoted without any form of monopolies. The freedom of trade was in the light of the developments designed to secure the markets whereby the trade should take place. The plaintiff in this case further asserted that Cellophane offered products that were substantially tangible for sale to the public.
The market for other products was in this sense adversely influenced, thus portraying the products of the defendants as the best products in this case. The monopoly powers were critical in the market delimitation. The question of whether the defendant controlled the market and prices was necessary to analyze the trends of the product distribution in the market.
The plaintiff requested the court to determine whether there was any form of control by the defendant’s company on the nature of products in the market and the different ways of determining the price of each of the products.
The burden of proof in this case was on the government since it was alleged that the defendant was using the monopoly to influence the markets and prices. It was important to ascertain whether there was a point of economics concepts applying in the record given by the defendant and the plaintiff in court (Cefrey 92).
Identify which antitrust law(s) were violated in this case
The facts given in the case provided many instances whereby the Sherman Act was violated. The court applied a broad sense of the Sherman Act. Section 2 of the Sherman Act provides that in an event that a person takes part in any form of monopoly, that person will be deemed guilty under the Sherman’s Act.
The act of monopoly in the case above was based on the understanding that the defendant engaged in acts that led to the diminishing of healthy competition, thereby leading to a situation where others are hindered from taking lawful trade. The most common element in these cases is that the other producers of the similar products in the market are hindered from accessing the customers from the same vantage point.
Any act that imposes the issue of unhealthy competition in the markets is undesirable and Section 2 of the Sherman Act makes it unlawful. The acts are, therefore, unlawful in the strict sense of Section 2. Although the Act does not offer an elaborate definition of monopoly, it is clear that this entails something that is in the judgment of the consumers more than extraordinarily successful.
This may be summed up to mean that similar acts are designed to make it impossible for other parties to get access to the market. The test to determine whether Cellophane engaged in the unlawful monopoly was based on the control and the dominance of the market. It is unlikely to talk about monopoly without the essential element of control or dominance.
The guilty party must exhibit a level of control over the market. The power of monopoly is diverse and includes situations whereby the guilty party is able to influence the prices and limit any form of competition. The Sherman Act makes sure that any form of undue control on both the market and the prices is dealt with.
The Act was enacted to enhance a level playing ground for both new and old companies in the markets. Any move by a company to unfairly regulate or dominate to eliminate competition is undesirable and courts of law have made it clear that they do not intend to entertain the acts of such companies (Cefrey 73).
The defendant in this case used all the necessary powers to ensure that the prices in the market were motivated by the influencing nature of their products. The packaging of the products was based on different companies, but the monopoly was evident at all times. The employment of other companies to complete the packaging was a limiting factor as far as competition was concerned (Jacobson and American Bar Association79).
It was clear that no one in the market would make Cellophane without the full access of the defendant’s techniques. This meant that the monopoly continued since the company could not offer their technique of manufacturing to other parties, apart from the ones they had license to use the patent rights of the company.
The defendant argued that it was incorrect for the plaintiff to assert that the defendant was guilty of monopoly because the wrapping materials were provided by another company. The defendant requested the court to treat the monopoly and price control as intertwined. It was essential to consider the issue of price control, competition, and monopoly in one breath in order to establish a violation under Section 2 of the Sherman Act.
The question of limiting competition is inconceivable without the control of prices. Dealing with other products that are not the subject of the license in the assignment presents an intricate question on the nature of competition and how prices in that case may be interfered with. It is possible to have a classic monopoly in patents and the licensing.
This can be easily built from the agreement that the patent holder and the licensed party enter into. On the other hand, the violation of the Sherman Act must put into consideration the place where the act took place. A retailer may be considered guilty of monopoly, while the monopoly is not a making of the retailer but it is due to the location of the retailer’s business (Cefrey 34).
The plaintiff in this case was to establish that there was a strict control of the prices of the Cellophane products. Failure to raise such a possibility means that the defendant was not guilty. A question of fact was raised requiring the plaintiff to adduce evidence showing that there was a violation of the Sherman Act through the defendant’s acts.
Although the products of the company have been priced higher, more concrete evidence was required. The question of whether there was the creation of competition or destruction of competition was addressed with key emphasis placed on the role of the defendant in the entire proceedings to prove the guilt of the accused (Colino 61).
The proof of guilty under the Sherman Act is a matter of evidence and the government in this case was put at task to show how the accused had monopolized the operations. It is worth noting that the Sherman Act was enacted to protect the well-being of the consumers, as well as making sure that the producers are not slapped with suits that are very frivolous.
The dynamic of the markets in the day-to-day setting should be understood. The control of the market may be hard to prove bearing in mind that the markets are changing. With the diverse modes of creating a market, the consumer could be in control of the market in many instances.
The characteristics of the markets at the time of the framing of the Act have changed. It is, therefore, unlikely to expect the Sherman Act to capture the markets created by technological advancement (Cefrey 46).
Product market
Product market in this case makes reference to the specific goods that the defendant company was dealing with during the time of the alleged commission of the Sherman offense.
The market was diverse in the sense that some of the subsidiary companies were offered an opportunity to sell the Cellophane products in other parts of the world. The product market was, therefore, not dominated by DuPont since a lot of the packaging was left in the hands of the foreign companies. It means that many of the products were sold in a wide market, although the most affected people were the United States citizens.
The product market was not limited to the United States because other countries were highly interested in the consumption of the goods. In this sense, the goods were bought by both the retailer and business people across the world. The establishment of the final consumers of the products that were produced by DuPont was not an identifiable since the product market was diverse.
The product market is based on the existence of the market at a given point in time; it is possible to have a lot of product markets in many places. The demand and supply aspects of a product may call for more markets being established to deal with the same nature of the products (Colino 98).
Geographical market
The geographical market is the frame of the location. The scope of the operation of a certain entity in a given region is defined by the geographical marks. The geographical mark is where the business entity is located and the place of operation. In the current case, the place of operation was across the world, but the place of operation was in the United States.
The company’s main operations were in the United States whereby it was incorporated. The subsidiaries that were licensed by the defendant were in other countries. Therefore, it is clear that the company had its operations in the United States, but the geographical market was not easily determined since its products were sold all over the world.
At one time, the operations of the company were joined with those of a French company. The geographical market in the United States was the biggest in size. It is not easy to get a clear definition of the operations of the company in a company where the products are recognized across nations. The only geographical location that one can identify is the one that indicates the incorporation or area of operation of the company (Colino 98).
Actual and potential sellers
In a product market, the sellers are classified into two classes. They could be real in the sense that they are selling the products or they have sold them before. Actual sellers exist in the product market and they are engaged in making sure that the buyers are handled.
Actual sellers are very important since they orient the potential sellers. On the other hand, potential sellers are those that have not taken part in active selling, but they are aiming at joining other sellers. They could be in wholesale or in small scale. The time of sale is the crucial part used in identifying actual and potential sellers. A potential seller has the determination of taking part in the selling, but the seller is yet to start selling.
The essence of a well regulated market entails both the potential and actual sellers. For purposes of succession, a potential seller takes the place of the actual seller.
Having both actual and potential sellers builds healthy competition in the market, which benefits the buyers and other stakeholders. The continuity of the market is promoted and the buyers do not have to worry about the forces that may affect the market in the future days (Cefrey 45).
Actual and potential buyers
The buyers in a product market are in the form of the potential and actual buyers. Actual buyers have already established a relationship with the sellers in the market. They are known in the market and the sellers are aware of the distinct tastes and preferences. The established relationship is based on the consistency of a given seller in appearing to a given buyer with the same product.
The actual buyers are identified with certain products. Potential buyers are not known to the actual sellers. Their determination and existence in the market is to spot the products that are suitable and those that they can buy in the future. They are not buyers since they have the expression of willingness, but they have not yet engaged in a constructive mode of buying.
The potential factors in each case are different, but the mode of transactions is the same. In the present case, DuPont had a lot of actual buyers, but it was having some as potential buyers. The progress of the company in the United States of America and other parts of the world clearly indicates that the company enjoys a wide range of potential buyers (Colino 74).
Spot market
A spot market means any market that has not been identified for purposes of selling and buying. A spot market is mainly available for the consideration of the seller. In many cases, the seller identifies the market and makes the effort of ascertaining the capacity that it can hold at a given time.
Many companies invest in research whereby they identify the diversity of a given market in the sense of the strengths and the weaknesses that they might encounter. With such an analysis, new products are created geared towards establishing the potential and actual sellers in a given place.
A spot market is developed depending on the reaction of the buyers in the first stages of the market research. A spot market compared to an actual market exists only when there are chances of other parties developing interests, thus taking part in the search for the market. In a nutshell, a spot market exists in theory and it is different from the product market (Cefrey 76).
Summary of the judgment
In the judgment, the court sought to establish whether DuPont had violated any antitrust law. Specific reference was made to Section 2 of the Sherman Act. The court was of the view that the wording of Section 2 of the Sherman Act required strict proof and could not be understood by making general phrases.
It was the plaintiff’s duty to adduce evidence to show that the defendant engaged in a conduct that was in promotion of monopolization. The court observed that without the said evidence, the case was to be dismissed without consideration of the consequences to the plaintiff and the individuals aggrieved.
The section of the law must be coupled with the essential facts analogous to those that Sherman Act would apply (Bergh and Camesasca 68).
The facts were to be read in the light of Section 2 of the Sherman Act. The essential facts that show that the defendant was in control of the market dynamics were considered in the issues before determination. In the court, there was an admission by the witness brought by the plaintiff that the defendant was a transparent company that dealt in selling packaging materials.
The court took the time to analyze a table that was provided demonstrating the quality of the products made by DuPont. It was evident that the quality of the products that were made by the defendant placed it in a better position compared to other companies dealing with the same type of products.
This led to the court holding that the prominence of the defendant in the market was not based on unfair competition, but on the fact that the quality of products was outstanding. The prices of Cellophane were slightly lower than those of the competitors. It is common knowledge that the actual buyers would prefer cheaper quality products in the market where the high products that are cheaper are placed.
The court emphasized the point that Sherman Act was not applicable in a situation whereby the defendant was not engaging in unfair practices to defeat the interests of the emerging competitors. The Cellophane products did not bear any form of resemblance to the products paraded by other sellers.
It was established that the buyers would not find Cellophane products unique in comparison with other products of the same nature in the market, but they preferred the products all the same. The physical properties were not the same, but the products were designed to serve the same purpose.
The inference by the buyers of DuPont products indicated that it was the reputation of the company that made it easy to market its products in all markets. Producers used to vary the prices of their products with time. The court opined that the defendant could not be held liable for unfair competition, while there was evidence indicating that the company was not engaged in competition for the packaging materials.
Notwithstanding the foregoing discussion, the court was of the opinion that the merging of DuPont with the French company was desired to maintain dominance over the sale of Cellophane. The merging saw a new twist whereby the products of the company were manufactured with new skill and technique. The nature of information in the process of manufacturing was treated with a lot of secrecy and confidentiality.
Its contracts with the foreign companies were made in a way that they maintained their continental market. It was the opinion of the court that DuPont had no authority to set the prices arbitrarily.
The court was keen to point out that there was a great misconception of antitrust laws. A monopolistic sense of minimizing profits was not equivalent to price rises. The court decided that the lowering of profits was not a violation of any antitrust laws (Bergh and Camesasca 87).
The court was of the opinion that the misconception of the antitrust laws was very predominant, but the alleging parties did not endeavor to adduce evidence showing the violation of the stated laws. In the court’s opinion, there was adversity for the control of the Cellophane market. DuPont had the biggest share in the market, but this did not mean that it had violated any antitrust law.
The holding of a bigger portion was interpreted by the court to mean that the defendant was guilty of monopolization. The court clearly stated that it was not a conclusive defense because the defendant had licensed the patent rights to other companies.
The court observed that DuPont was placed in a position whereby it had powers to withdraw the licenses if it had evidence that the subsidiary companies were using them in contravention of the antitrust laws (Bergh and Camesasca 28).
The competition that the Sherman Act sought to regulate was core and Cellophane having more sellers in the market was a fundamental breach of the Sherman Act. The monopoly could not be allowed to prevail since the unprotected public was likely to suffer a great damage. The issue of profit making was geared towards benefiting the company at the expense of the public.
To safeguard the interests of the unsuspecting public, the court found that the act of having many sellers in the market could amount to an unfair competition. Charging a lesser amount of money on products that were of high quality was a move geared towards maintaining monopoly (Bergh and Camesasca 16).
Rebuttal to the judgment
The holding in this case was against the defendant. The application of the antitrust laws in the day-to-day guarding of violations should be applied with due caution. Court decisions ought to foster an economic sense to promote free trade, instead of issuing judgments that gag the free market. This should be done by ensuring that all parties in the market compete on the same level (Jacobson and American Bar Association 87).
Courts should not place any parties at a disadvantage, while letting others enjoy the monopoly of their products. In the case above, the court ought to have engaged in pre-litigation negotiations to give the defendant an opportunity to explain the reasons for lowering the prices. The court case should have been the last resort in the given instance bearing in mind that some harsh decisions may adversely affect a given seller.
There is widespread expenditure in the cases that governments are instituting against different entities as a move to protect the interests of citizens. Some of the decisions have proved to be a waste of resources and the tax payers’ money. In the consideration of the decisions reached before by the courts of law, it is clear that there is a complete disregard for the several dynamics of the market forces.
There are several dangers posed to the existing market going by the court’s decision reached in the above case. The effects range from having unfair regulation of the already established business entities to complete removal of a business from operating given the harsh penalties meted on the business.
It is clear that Sherman Act was crafted with the desire to regulate businesses against any forms of monopoly, which is undesirable in ensuring that new entities in a market are in the same footing with the older entities. It is a key Act if the sections of the law are to be applied with the minimum implications. In many situations, it is important to note that the markets are supposed to enjoy minimum regulations.
In other words, markets should be left to regulate themselves, and outside regulation by the courts or any other body should be a matter of the last resort. It means that the intents of the market should be put into consideration when coming up with any decision (Jacobson and American Bar Association 77).
Any form of restraint could have far reaching effects on the well-being of the markets in the sense that it may unnecessarily restrain the strong entities. The law should not be seen to impose an unnecessary form of restraints on the already existing entities. Instead, there should be incentives to promote the existing businesses. There has been a wide scope of the protection, which is not applicable in the new markets.
The markets should be allowed to regulate themselves. This can be reached by making sure that the monopoly state is determined after application of many tests. It has been established that the competitiveness of a market plays a key role in determining the prices of commodities in the markets. It is through competition that many of the entities in the market find their way in a market.
The courts of law have a role to play in making sure that the applicability of the law is not acting as a hindrance to the flow of goods and services in the market. The liberalization of the market is the most essential feature in a market because it ensures that freedom of willing seller, willing buyer is promoted.
Unless the courts of law interpret the law to promote free markets, there will be an imposition of undesired constraints and both buyers and sellers will avoid markets (Jacobson and American Bar Association 89).
The judgment ought to have studied the dynamics of the market before holding against the defendant. There was a substantial failure on the part of the court in reaching its decision. It is always essential for the court to ensure that there is a balance between the prayers of the plaintiff and doing what is economically sound.
Several safeguards should be imposed in cases whereby the interests of the plaintiff are adverse to the economic needs of a given market. This means that in the present event, the court should have introduced a condition to settle the situation. In some cases, it is important to allow the parties to settle their matters without the court having to determine the matter.
In so doing, the court makes sure that the parties make determinations regarding their rights without letting the court determine the outright winner and loser. This is essential since it determines the rights of different parties, while putting the prevailing circumstances into consideration. The inherent consequences of the said decision are that it affected the proper functioning of the market.
Laws that have a direct impact on the economic setting should be interpreted with a lot of care to ensure that there is coexistence among various players in the market. There should be coexistence between the rights of the consumers in the markets and the interests of other business entities in the market. The court in this case was supposed to ensure that the remedies under the Sherman Act were interpreted to favor all the parties involved.
The appellant in this case proved its case within the standards that were provided for under the Sherman Act. This case demonstrates a scenario whereby some of the decisions before courts do not make economic sense. Such decisions should not be entertained since they pose economic challenges whenever they are allowed to take effect (Jacobson and American Bar Association 80).
For instance, such judicial decisions act as deterrents to any business entity that wishes to join the market, as well as hindering the existing firms from growing expanding and forming mergers in the fear that they will be said to be monopolistic.
Works Cited
Bergh, Roger van den, and Peter D. Camesasca. European Competition Law and Economics: A Comparative Perspective, Antwerpen: Intersentia, 2001. Print.
Cefrey, Holly. The Sherman Antitrust Act: Getting Big Business under Control, New York, NY: Rosen Publishers Group, 2004. Print
Colino, Sandra Marco. Competition law of the EU and UK, Oxford: Oxford University Press, 2011. Print.
Jacobson, Jonathan M., and American Bar Association. Antitrust law Developments. 6th edn. Chicago, IL: Section of Antitrust Law, ABA, 2007. Print.
Letwin, William. Law And Economic Policy in America: The Evolution of the Sherman Antitrust Act, Chicago, IL: The University of Chicago Press, 1981.Print