Are there regulations against monopolies?

By Jean Folger AAA
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.

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