No, simply being a monopoly is not inherently a crime. However, the act of monopolizing—that is, engaging in specific predatory or anticompetitive conduct to gain or maintain monopoly power—is illegal under antitrust laws in many jurisdictions, including the United States.
Understanding Monopoly and the Law
A company might achieve a dominant market position through superior products, innovation, or efficient business practices. This is often seen as a result of healthy competition and is not unlawful. The problem arises when a company uses its significant market power not just to compete, but to unlawfully stifle competition, exclude rivals, or harm consumers.
The distinction lies between a company that has a monopoly (perhaps naturally or through legitimate means) and one that achieves or maintains a monopoly through unlawful actions.
The Sherman Act and Monopolization
In the United States, the primary federal law addressing monopolization is the Sherman Act, enacted in 1890. Specifically:
Section 2 of the Sherman Act
This crucial section makes it illegal for any person to monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of trade or commerce among the various states or with foreign nations. This means that engaging in certain conduct to create or sustain a monopoly is prohibited.
| Aspect | Legal Monopoly | Illegal Monopolization |
|---|---|---|
| Market Position | Achieved through legitimate means (e.g., superior product, efficiency). | Achieved or maintained through predatory or exclusionary conduct. |
| Conduct | Fair competition, innovation, consumer benefit. | Anticompetitive actions, intent to harm competition, consumer detriment. |
| Legality | Permitted; often a result of market success. | Unlawful; subject to criminal and civil penalties. |
| Examples | Developing a groundbreaking technology; superior business model. | Predatory pricing; exclusive dealing arrangements to shut out competitors. |
What Constitutes Illegal Monopolization?
To prove illegal monopolization, authorities typically must demonstrate two things:
- Possession of monopoly power in the relevant market.
- Willful acquisition or maintenance of that power through anticompetitive conduct, as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.
Examples of conduct that could be considered illegal monopolization include:
- Predatory Pricing: Selling products or services at extremely low prices, below cost, with the intent to drive competitors out of the market, then raising prices once competition is eliminated.
- Exclusive Dealing Arrangements: Forcing customers or distributors to deal exclusively with the monopolist, preventing them from doing business with competitors.
- Tying Arrangements: Requiring a customer to purchase a less desirable product or service from the monopolist as a condition of buying a more desirable product or service.
- Refusal to Deal: A monopolist refusing to provide essential inputs or access to essential facilities to competitors without legitimate business justification.
- Abuse of Intellectual Property: Using patents or copyrights not to protect innovation but to unlawfully stifle competition.
Penalties for Illegal Monopolization
Violations of the Sherman Act can carry severe penalties, including:
- Criminal Charges: Individuals can face substantial fines and imprisonment. Corporations can face multi-million dollar fines.
- Civil Enforcement Actions: The government can seek injunctions to stop anticompetitive conduct, or force structural remedies like divestiture of assets.
- Private Lawsuits: Competitors or consumers harmed by illegal monopolization can file private lawsuits for treble damages (three times the actual damages incurred) and legal fees.
Key Takeaways
The key is distinguishing between a monopoly that results from fair competition and one that is established or maintained through illegal, anticompetitive actions. While having a monopoly isn't a crime, the conduct of monopolizing can be, leading to significant legal consequences.
