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. What is a monopoly?

    Monopoly is a fun family game, but in real life, a monopoly can be dangerous to a country's economy. A monopoly occurs when ... Read Answer >>
  2. Why was Microsoft subject to antitrust charges in 1998?

    On May 18, 1998, the Department of Justice filed antitrust charges against Microsoft (Nasdaq:MSFT ). The charges were brought ... Read Answer >>
  3. What companies have been targeted for anti-trust action in the 21st century?

    Several companies have been targeted for antitrust action in the past decade. These companies range from food service to ... Read Answer >>
  4. Are monopolies always bad?

    Learn why governments sanction some monopolies, such as monopolies over public utilities, and why these monopolies are good ... Read Answer >>
  5. What is an antitrust law?

    Antitrust laws - also referred to as "competition laws" - are statutes developed by the U.S. Government to protect consumers ... Read Answer >>
  6. Why are oligopolies legal while monopolies are not?

    Learn about oligopolies and monopolies. Explore situations where anti-competitive practices have led to intervention by the ... Read Answer >>
Related Articles
  1. Insights

    A History Of U.S. Monopolies

    These monoliths helped develop the economy and infrastructure at the expense of competition.
  2. Small Business

    Antitrust Defined

    Check out the history and reasons behind antitrust laws, as well as the arguments over them.
  3. Personal Finance

    Why We Need Antitrust Laws (MSFT, AAPL)

    A look at antitrust laws in the United States and the many anticompetitive practices they safeguard against.
  4. Insights

    A History Of U.S. Monopolies

    Here are a few of the most notorious monopolies in U.S. history.
  5. Small Business

    What are Antitrust Laws?

    Antitrust laws regulate competition between companies.
  6. Insights

    Wall Street History: The NYSE Is Born, Bubbles Form

    This week in financial history saw the birth of the NYSE an attempt to destroy Microsoft, and much more.
  7. Insights

    Microsoft: By The Numbers

    We take a look back at this company's past and present numbers to see what they can tell us about its future.
  8. Investing

    Microsoft's Cloud, LinkedIn Deal Dominate 2016

    Microsoft's growth in cloud services and its emergence into a threat to Amazon was one of 2016's biggest surprises
  9. Investing

    Microsoft Makes LinkedIn Concessions (MSFT, LNKD)

    European antitrust regulators are eyeing Microsoft's $26.2 billion purchase of LinkedIn. Here's what MSFT may have to do to get the deal approved.
  10. Insights

    Who is Driving Microsoft's Management Team

    Microsoft’s transition to the cloud infrastructure and services business has the company’s leadership in the forefront of the battle to protect online privacy.
RELATED TERMS
  1. Monopoly

    A situation in which a single company or group owns all or nearly ...
  2. Clayton Antitrust Act

    An amendment passed by the U.S. Congress in 1914 that provides ...
  3. Natural Monopoly

    A type of monopoly that exists as a result of the high fixed ...
  4. Legal Monopoly

    A company that is operating as a monopoly under a government ...
  5. Antitrust

    The antitrust laws apply to virtually all industries and to every ...
  6. Franchised Monopoly

    Monopoly status given by the government to a company. A franchised ...
Trading Center