A:

A monopoly occurs when a single company or group owns all or nearly all of the market for a particular type of product or service. A monopoly is characterized by the absence of competition, which can lead to high prices and inferior products and services. Governments attempt to prevent monopolies through the use of antitrust laws. In the United States, antitrust laws include the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914. Today, these Acts are enforced by the Federal Trade Commission (FTC) and the Antitrust Division of the United States Department of Justice (USDOJ).

Antitrust laws prohibit practices that restrain trade, and apply to all industries and the various levels of business, including manufacturing, transportation, distribution and marketing. The antitrust acts address such topics as price discrimination, price fixing and other unfair business practices. The laws are intended to preserve competition and allow smaller companies to enter a market, and not to simply suppress strong companies.

In 1994, the U.S. government accused Microsoft of using its significant market share in the PC operating systems market to prevent competition and maintain its monopoly. The complaint, filed on July 15, 1994, stated that "The United States of America, acting under the direction of the Attorney General of the United States, brings this civil action to prevent and restrain the defendant Microsoft Corporation from using exclusionary and anticompetitive contracts to market its personal computer operating system software. By these contracts, Microsoft has unlawfully maintained its monopoly of personal computer operating systems and has unreasonably restrained trade." A federal district judge ruled that Microsoft was to be broken into several technology companies, but the decision was later reversed by a higher court. The eventual, and controversial, outcome of United States v. Microsoft was that Microsoft had not dominated the market through unfair practices, but through innovation, successful marketing and desirable products. Microsoft was ordered to make some changes but was otherwise free to maintain its operating system, application development and marketing methods.

RELATED FAQS
  1. How do I find a good personal bankruptcy lawyer?

    While it is not necessary to hire an attorney to file bankruptcy, the rules that govern bankruptcy can be extremely complex, ... Read Full Answer >>
  2. What are unregistered securities or stocks?

    Before securities, like stocks, bonds and notes, can be offered for sale to the public, they first must be registered with ... Read Full Answer >>
  3. How does FINRA differ from the SEC?

    With all the financial organizations out there, knowing what they all do can be as complicated as knowing where to invest. ... Read Full Answer >>
  4. What is the Dodd-Frank Act? How does it affect me?

    The Dodd-Frank Wall Street Reform and Consumer Protection Act is a massive piece of financial reform legislation passed by ... Read Full Answer >>
  5. Can a company be state-run and publicly traded at the same time?

    A state-run company or enterprise cannot be publicly traded in the U.S. However, it is possible to purchase shares of state-run ... Read Full Answer >>
  6. Under the “Brochure” rule of the Investment Advisers Act of 1940, which of these ...

    Under the "Brochure" rule of the Investment Advisers Act of 1940, which of these statements is true? a. The ADV Part II ... Read Full Answer >>
Related Articles
  1. Investing News

    Mexican Energy, Telecom Reforms Please Foreign Investors

    Two years into his first term, Mexican President Enrique Peña Nieto is following through on radical campaign promises he made to Mexican citizens for sweeping multi-industry reform.
  2. Investing

    Top Cities Where Airbnb Is Legal Or Illegal

    Thinking of subletting your apartment on Airbnb? Make sure that you meet your city's regulations first.
  3. Term

    Understanding the Maintenance Margin

    A maintenance margin is the minimum amount of equity that must be kept in a margin account.
  4. Credit & Loans

    Co-signing a Loan? Make Sure You Know The Risks

    Contractually, co-signers are just as responsible for the loan as the person actually borrowing the money. Be careful not to put yourself at risk.
  5. Investing

    Trends In Copyright Litigation

    The Internet has resulted in an explosion in content. An increasing number of copyright trolls are monetizing such content through litigious practices.
  6. Taxes

    What's IRS Form 2848 Used For?

    It's a power of attorney tax form and here's what it can, and cannot, do.
  7. Investing

    Is Airbnb Safe? What You Need To Know

    Thinking of booking a room or listing your home on Airbnb? Get up to speed on safety features for both guests and hosts.
  8. Personal Finance

    Top 5 Ways to Retain Your Best Employees

    You need to think beyond salary to make the most talented people want to stay on for the long term.
  9. Taxes

    Gay Couples: Here Are Your New Rights

    The expansion of same-sex marriage means gay and lesbian partners can now enjoy basic spousal rights, regardless of where they live.
  10. Taxes

    Gay Marriage and Taxes: Everything You Should Know

    Same-sex couples now have a variety of tax strategies to consider.
RELATED TERMS
  1. Emergency Banking Act Of 1933

    A bill passed during the administration of former U.S. President ...
  2. Slander

    Slander is the act of harming one person’s reputation by telling ...
  3. Libel

    Libel is publishing a statement about someone in written form ...
  4. Defamation

    Defamation is any statement (written or spoken) that damages ...
  5. Fair Housing Act

    This law (Title VIII of the Civil Rights Act of 1968) forbids ...
  6. PCI Compliance

    Technical and operational standards that businesses are required ...

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!