Home Monopolization What You Must Know About Monopolization

What You Must Know About Monopolization


Monopoly is a market structure where a single entity has control over the entire market of a product or service. While having a dominant market share is not inherently illegal, monopolization occurs when a company uses its market power to maintain that control and exclude competition. In this article, we will discuss what you must know about the concept of monopolization.

Background on Monopoly and Monopolization

Monopoly is a market phenomenon in which the control over the production, distribution, or pricing of goods or services are held by a single firm or entity. Competing businesses are either excluded from the market or relegated to a marginal status. Monopolization, on the other hand, denotes the process of creating or securing a dominant position in a market.

The Antitrust Regulation

The antitrust regulation, such as the Sherman Act of 1890 and the Clayton Act of 1914, has been designed to prevent monopolies and monopolization. These laws make monopolizing behavior illegal and empower regulatory agencies to monitor businesses that may be indulging in such acts.

Elements of Monopolization

Monopolization can manifest itself in ways that may not be immediately obvious. To establish monopolization, various factors need to be present. First, the entity in question must have a significant market share. Second, the entity must possess significant barriers to entry that make it difficult for competitors to enter the market. Lastly, the entity must engage in behaviors that seek to maintain or increase its market share at the expense of existing or potential competitors.

Examples of Monopolization

One notable example of monopolization is the case of the AT&T. By 1913, AT&T held a virtual monopoly over the telephone industry in the United States, including the control of patents related to telephony, such as the Alexander Graham Bell patent. As a result, AT&T faced anti-trust lawsuits over its telecommunications monopoly in the early 20th century.

Another example is that of Microsoft in the tech industry. Through its control over personal computer operating systems and software applications, Microsoft made it difficult for alternative browsers such as Netscape to compete in the market. Ultimately, Microsoft was found to have engaged in monopolization and was subject to significant regulatory scrutiny and penalties.


Monopolies and monopolization significantly restrict market democracy as well as penalize sectors of the economy, including consumers and competitors. Understanding the elements of monopolization and its regulatory framework is essential in maintaining market integrity, protecting consumers’ rights, and ensuring a fair competitive environment. Companies that engage in monopolistic behaviors should be aware of their legal obligations and the risks they face of regulatory scrutiny and legal consequences.

Contained within the Sherman Antitrust Act are two sections. The first section addresses company behavior through negations and deals, and the second deals with the ability of an individual to monopolize a market. In each section there are different items of focus. In the first section the focus is on companies, while in the second it is on individuals.

In economics a monopoly occurs when within a given sector of the economy there is a one and only one provider of the good or service. A monopoly is also marked by a lack of competition. Indeed, within economics the true definition states that in a monopolistic market there is zero competition. The Sherman Antitrust Act’s main focus is to limit the occurrence of monopolies within the market and to ensure a free market within interstate commerce.

The study of economics defines a free market system and a monopoly very differently. In a free market system price is set by supply and demand, with supply and demand meeting at a point of equilibrium considered the best place for the market to operate. In a monopoly the idea of price with relation to supply and demand is eliminated. Instead a monopolistic company can define the price for which they sell their good or service.

Monopolization within a free market system can occur and can present serious dangers for the free market system as a whole. The process of monopolization rarely happens by chance. Instead an individual seeks out to monopolize the market with the end goal of being able to set a price of a good or service for the whole sector. This can either happen internally for a company acquiring all the necessary levels in the manufacturing process or through the use of contracts. In either instance it becomes a restraint on interstate commerce, and therefore, illegal under the Sherman Act.

In economics it is very important to understand that general size of a company does not necessarily confer it a title of monopoly. While in traditional economics a monopoly is defined as the sole provider, in reality this is usually not the case. A company can be considered a monopoly if the company’s size to market share is large enough to directly affect price and output.

While not all monopolies are bad, some are even government-regulated, there are some that can be detrimental to competition, and therefore, future market innovation. This is why the Sherman Act focuses on individuals in the second section and their explicit intent to monopolize a sector of the economy, and then to use that monopolistic power that comes with being a price setter.

Intent within the second part of the Sherman Act is very important because it puts a high value on personal responsibility. There have been many business owners within the United States that have come to have monopolistic control, but the dissolution of their company is based on their original intent.

If an owner seeks only to produce a superior product, therefore monopolizing the market, the only item he can be found guilty of is creating a superior product, not a legal crime. However, if the intent is to monopolize, then it is criminal in nature and is a violation of the Sherman Antitrust Act.