What is a monopoly? The Oxford dictionary definition is “the exclusive possession or control of the supply of or trade in a commodity or service.” The United States, like a majority of the world, is a free-market economy which allows the ability for competitive prices which works off a voluntary exchange of a note for goods and services through supply and demand. Monopolies do have benefits that would allow individual companies to grow such as vertical integration and horizontal integration. For example, Deseret Cattle and Citrus is a fully vertically integrated company that gets the supplementation of horizontal integration with in the agricultural industry. The Company doesn’t out source any cattle to their company and is fully documented from birth to the moment it is on your plate. The company uses horizontal integration as a supplementary factor by purchasing land and businesses that allow the vertical integration to grow. Another example of this is when they purchased a 50,000 head feedlot from a company called hitching post in Southwest Kansas. With this information imagine if they were the only company in the United States that held all the power to dictated how much beef cost. Other than them being a company with strong religious ties what if they had no moral compass and just up charged the prices of beef that only allowed certain demographic of people access.
Monopolies like everything has its advantages and disadvantages. I can think of a large list for both advantages and disadvantages that would impact today’s economy. Some disadvantages such as high consumer prices, which even in today’s market effects people’s way of living, doesn’t give companies less incentive to cut costs, be innovative, or invest, would allow companies to much political power in order to maintain interests, and provides limited choices for consumers. The advantages allow companies to have higher profit with research and development, ultimately lowers average cost from an increasing scale, governments are able to regulate the economy of scale and provide fair prices. There are 4 types of monopolies which include Pure Monopoly, Monopolistic Competition, Natural Monopoly, Public Monopoly. Pure monopoly is the stereotypical monopoly everyone thinks about when discussing the topic, it refers to a single entity controlling the entirety of a supply of goods and or service. Monopolistic competition is a section of monopolizing where the market has a surplus of companies that produce similar but different products such as restaurants or clothing and apparel. Natural monopolies essentially have higher fixed cost structure, limited or no competition due to the high start up cost, has the ability to provide the product or service and meet the demand of an industry, and also has a high minimum efficient scale which means growing companies lack the ability to control the larger companies and increases the costs of operating. Public monopoly are typically tax supported and heavily controlled by the government because they are usually government entities such as the local post office and city construction that maintain the roads and highways that run throughout the state.
The way the Government protects consumers from monopolies is through antitrust laws which prevent the ability for mergers and acquisitions to not influence the market or allow the formation of monopolies. The top 3 antitrust laws that come to mind when talking about monopolies The Sherman Act (1890), the Federal Trade Commission Act (1914), and the Clayton Act (1914). The Sherman Act prohibits the merging or formation of “cartels”, any kind of agreement to lock prices within markets, limit an industry’s ability to create a product for capital gain, or prevent new competition with in an industry to discourage a flux in prices. The Federal Trade Commission primarily provides the protection of consumers from deceptive practices otherwise known as a scam which can present themselves in plenty of forms such as false advertisements, the theft of one’s identity, and any sort of frauds. Lastly, the Clayton Act which prevents unethical practices including the fixing of prices and a monopoly, as well as supporting the rights of laborers.
In conclusion, monopolies have some advantages that could be very beneficial to the free-market such as vertical and horizontal integration which could allow the growth of companies within an industry and allow companies to produce surplus which would in turn lower costs for both companies and consumers. Monopolies can become out of control relatively quick but with antitrust laws regulating the economy it allows for the efficient growth and development with in an industry to provide the consumers with competitive prices and meet the demand of the consumers.