Question

1. If a large firm is found to possess monopoly power, what else is needed to find the firm guilty of monopolization? How does this change if the firm is part of the New Economy? Why is possessing monopoly power insufficient for illegality?
2. Which of the three market definitions considered by Judge Hand in the Alcoa case do you think is the most defensible?
3. In 2015 the biotech entrepreneur Martin Shkreli bought the marketing rights to Daraprim, which is a drug that treats a parasitic infection. He then raised the price from $13.50 to $750 per pill.
   1. Is his conduct in violation of U.S. antitrust laws?
   2. In a country that prohibits “Excessive pricing,” would this price hike be illegal?
   3. Should the government intervene and pass legislation to put a price cap on the drug? What are the benefits and costs of such a policy?

Answer 1

The firm must have dominant position in the market and is able to create entry barriers for other firms to avoid competition. There must be abusive use of dominant position by the monopolist. A dominant firm must act to harm the competitive process as opposed to competitors. When the anticompetitive efforts of the monopolist outweigh the procompetitive efforts, the firm is liable for prosecution under Sherman Act.

Microsoft was found to have used contracts that severely disadvantaged the competing browsers. Original Equipment Manufacturers were prohibited from altering windows desktop and initial boot sequence. It was decided and concluded that such activity rather than improving the position of the Microsoft browser, led to its fall. Microsoft was declared monopoly but judge held that the share was quite large and stable and it is protected by a high entry barrier. One reason was that Microsoft lacked a commercially viable alternative to Windows.