A monopoly is when a company has exclusive control over a good or service in a particular market. Not all monopolies are illegal; for example, businesses that produce a superior product or are well managed may disadvantage their competitors while not violating antitrust law.
Monopolies are illegal if they are established or maintained through improper conduct, such as exclusionary or predatory acts. This is known as anticompetitive monopolization.
How Illegal Monopolies Are Formed
Here are some examples of how illegal monopolies are formed:
- Price Fixing: competitors agree to buy or sell products or services at a fixed price or rate
- Price Discrimination: selling similar goods to buyers at different prices
- Exclusive Dealings: requiring a buyer or seller to do buy or sell all or most of a certain product from a single supplier
- Group Boycotts: competitors agree to boycott a certain entity
- Tying Contract: selling a product or service on the condition that the buyer agrees to also buy a different product or service
Law Prohibiting Illegal Monopolies
Under federal and some state laws, private parties (businesses or consumers) who were harmed by anticompetitive conduct can bring antitrust lawsuits seeking damages (in some instance treble damages) and injunctive relief.