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Legal Dictionary

monopoly

Legal Definition of monopoly

Noun

  1. commercial advantage enjoyed by only one or a select few companies in which only those companies can trade in a certain area. Some monopolies are legal, such as those temporarily created by patents. Others are secretly built by conspiracy between two or more companies and are prohibited by law.

Definition of monopoly

Etymology

    From Latin monopōlium, from Ancient Greek μονοπώλιον (monopōlion, “a right of exclusive sale”), from μόνος (monos, “sole”) + πωλέω (pōleō, “I barter, sell”).

Pronunciation

  1. (RP) enPR: mənŏ'pəl"", IPA: /məˈn'pəˌli/, SAMPA: /m@"nQp@%li/
  2. (US) enPR: mənä'pəl"", IPA: /məˈnɑpəˌli/, SAMPA: /m@"nAp@%li/
  3. Audio (US) [?]

Noun

monopoly (plural monopolies)

  1. A situation, by legal privilege or other agreement, in which solely one party (company, cartel etc.) exclusively provides a particular product or service, dominating that market and generally exerting powerful control over it.
  2. An exclusive control over the trade or production of a commodity or service through exclusive possession.

    A land monopoly renders its holder(s) nearly almighty in an agricultural society

  3. The privilege granting the exclusive right to exert such control

    Granting monopolies in concession constitutes a market-conform alternative to taxation for the state, while the crown sometimes bestowed a monopoly as an outrageous gift

  4. (metonymy) The market thus controlled
  5. (metonymy) The holder (person, company or other) of such market domination in one of the the above manners.

Further reading

A monopoly (from Greek monos / μονος (alone or single) + polein / πωλειν (to sell)) exists when a specific person or enterprise is the only supplier of a particular commodity. (This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry). Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods. The verb "monopolise" refers to the process by which a company gains much greater market share than what is expected with perfect competition.

A monopoly is distinguished from a monopsony, in which there is only one buyer of a product or service ; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations such that one or a few of the entities have market power and therefore interact with their customers (monopoly), suppliers (monopsony) and the other companies (oligopoly) in a game theoretic manner - meaning that expectations about their behavior affects other players' choice of strategy and vice versa. This is to be contrasted with the model of perfect competition in which companies are "price takers" and do not have market power.

When not coerced legally to do otherwise, monopolies typically maximize their profit by producing fewer goods and selling them at higher prices than would be the case for perfect competition. Sometimes governments decide legally that a given company is a monopoly that doesn't serve the best interests of the market and/or consumers. Governments may force such companies to divide into smaller independent corporations as was the case of United States v. AT&T, or alter its behavior as was the case of United States v. Microsoft, to protect consumers.

Monopolies can be established by a government, form naturally, or form by mergers. A monopoly is said to be coercive when the monopoly actively prohibits competitors by using practices (such as underselling) which derive from its market or political influence. There is often debate of whether market restrictions are in the best long-term interest of present and future consumers.

In many jurisdictions, competition laws restrict monopolies. Holding a dominant position or a monopoly of a market is not illegal in itself, however certain categories of behavior can, when a business is dominant, be considered abusive and therefore incur legal sanctions. A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic interest group. Patents, copyright, and trademarks are all examples of government granted and enforced monopolies. The government may also reserve the venture for itself, thus forming a government monopoly.

References:

  1. Wiktionary. Published under the Creative Commons Attribution/Share-Alike License.

Translation of monopoly in Malay

Monopoli

Noun

  1. Monopoli



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