In the aftermath of the third and final presidential debate, it is worth reflecting on how the political and economic climates have changed over the course of the last century. While both Barack Obama and Mitt Romney discussed their individual thoughts on U.S. foreign policy and overseas conflicts, the viewers were reminded that their current circumstances are far different than they were in 1912.

Back then the defining issue was how to manage dominant industrial monopolies, with the incumbent and presidential challengers of the time proposing different courses of action. While President Howard Taft was determined to dissolve prevailing monopolies, challengers Woodrow Wilson and Teddy Roosevelt proposed alternate ways of regulating companies such as the American Tobacco Company and Standard Oil.

Antitrust Law and Monopolies
History tells us that Woodrow Wilson won the election and subsequently created two antitrust acts which were passed straight into legislation. In addition to the pre-existing Sherman Act, these three policies have underpinned antitrust law in the United States ever since, although they have been forced to evolve and adapt considerably as the nature of industry has changed over time. One thing that has not changed is the core purpose of antitrust law, which was established to protect the wider interests of consumers rather than independent business owners.

Another thing that has remained constant over the last century is the prevailing attitude of government officials and law groups, who generally maintain that monopolies or firms with monopoly power are extremely detrimental to the economy and consumer interests. This philosophy has seen a number of large corporations challenged as monopolies throughout history, with technological leaders such as Google, Intel and Microsoft among those that have been regularly targeted by antitrust enforcers.

Microsoft in particular, has faced an extremely difficult time since technological advancement began to gather momentum during the early 1990s. Not only was it continuing to innovate and striving to establish itself as a market leader, it was also facing considerable pressure from antitrust investigation units. More specifically, as the corporation strived to optimize its software and Windows operating system, it was accused of destroying web browser competition in the system market and creating significant barriers to entry for its competition.

Why Challenging Perceived Monopolies Could Be Detrimental for Consumers
Microsoft ultimately won a prolonged legal battle against President Clinton's Justice Department at the turn of the century, although it fared far worse when found guilty of contravening EC (European Commission) competition law in 2004. Despite these mixed fortunes, it is worth questioning whether antitrust enforcers are acting in the consumer's interests when they pursue large corporations such as Microsoft. In addition to this, there are serious concerns as to whether the existing laws can regulate the rapidly evolving and increasingly competitive technology markets today.

In terms of the former, it is worth bearing in mind that being a monopoly is not considered a criminal offense in the U.S. Similarly, consumers actively benefit when corporations offer lower price points and strive to innovate as a way of improving their products or service, with the increasingly competitive smartphone market providing a relevant case in point. Regardless of whether a single firm is dominant or has a disproportionate share of the market compared to its rivals, the only consideration that needs to be made is whether the monopoly in question is harming customers or actually benefiting them.

The Bottom Line
With this in mind, it is clear that monopolies can sometimes be positive for U.S. consumers, as long as they do not create a barrier to entry for rival firms and continue to protect the financial interests of their customers. It has also been argued that corporations with monopoly power create standardization within the market place, which encourages technological efficiency and also creates a far smoother consumer experience.

Related Articles
  1. Economics

    Understanding Organic Growth

    Organic growth is the increase in a company’s revenue and value due to internal operations.
  2. Economics

    Explaining Market Penetration

    Market penetration is the measure of how much a good or service is being used within a total potential market.
  3. Economics

    Calculating the Marginal Rate of Substitution

    The marginal rate of substitution determines how much of one good a consumer will give up to obtain extra units of another good.
  4. Economics

    Understanding Cost of Revenue

    The cost of revenue is the total costs a business incurs to manufacture and deliver a product or service.
  5. Economics

    What is a Code of Ethics?

    A code of ethics is a collection of principles and guidelines an organization expects its employees to follow.
  6. Stock Analysis

    5 Reasons Thoratec Corp. Keeps Impressing Investors

    Learn about Thoratec Corporation and its position in its industry. Understand five key factors why the company has impressed investors.
  7. Entrepreneurship

    Startup Analysis: How Much Is Palantir Worth?

    Learn about the private company Palantir, its valuation and how its valuation was derived. Understand how the company operates and if it deserves the valuation.
  8. Stock Analysis

    Jawbone: An IPO You Should Have on Your Radar

    Learn about the company Jawbone and how it has become successful with multiple product lines. Understand the benefits of investing in an IPO
  9. Economics

    What is a Free Rider Problem?

    In economics, the free rider problem refers to someone being able to get, for less or even for free, what others pay more for.
  10. Stock Analysis

    Startup Analysis: How Much Is Dropbox Worth?

    Learn about the private company Dropbox and how it operates. Understand the company's current valuation, how it was derived, and if it deserves it.
RELATED TERMS
  1. Sticky Wage Theory

    An economic hypothesis theorizing that pay of employees tends ...
  2. Normal Profit

    An economic condition occurring when the difference between a ...
  3. Supply

    A fundamental economic concept that describes the total amount ...
  4. Principal-Agent Problem

    The principal-agent problem develops when a principal creates ...
  5. Black Money

    Money earned through any illegal activity controlled by country ...
  6. Bidding Ring

    A group of individuals or businesses that conspire to affect ...
RELATED FAQS
  1. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  2. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  3. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  4. What are some examples of Apple and Google's best-selling product lines?

    There are many good examples of product lines in the technology sector from some of the largest companies in the world, such ... Read Full Answer >>
  5. What is a negative write-off?

    A negative write-off is a write-off conducted by a company or accountant after deciding not to pay back an individual or ... Read Full Answer >>
  6. How can tariffs cause inefficiencies in domestic industries?

    Any government regulation naturally creates inefficiencies in a pure supply and demand marketplace. When it comes to the ... Read Full Answer >>

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!