Question

Provide a long explanation. Ecomomic monopolies can been seem as undesirable. Courts define it as a power that is used to contol prices and not include competition. Referring it as "restraining trade" or "unfair anti competitive behavior". Do you think monopolistic practices should be codemed or outlawed.

Answer 1

Monopolistic practices if pursued on the basis of restraining trade and or anti-competitive practices, should be condemned and outlawed, because it violates the principle of free and fair competition in the market. Such type of monopolistic practices go for the price manipulation so that type charge less in the short run to eliminate competitors and then they put higher price in the long run to exploit the consumers. These monopolies also promote the behavior of economic rent and corruption to intentionally put competitors out of the market.

But, there should not be a law of umbrella cover nature to prevent all the monopolies even if few of them were good. For example, a company investing huge capital in infrastructure development and nobody unable to meet that capital investment, will automatically create natural monopoly without making any wrong practices by the company making investments. In this scenario, regulation of the natural monopoly, must ensure that monopoly gets normal profit and operate in the long run. Not doing so, will be discouraging to the firms who want to do investments and build private property rights.

In this regard, there are already two laws, named as Sherman Act and Clayton act to protect the free and fair market based competition and prevent anti-trust or anti-competitive practices. So, there should not be negative bias in general in law making authorities also, towards monopolies unless they review each case on an objective basis.