Definition of Legal Monopolies in Economics

A legal monopoly exists when a single enterprise or company has absolute control over a particular good or service in the market. Although there are legal monopolies in almost all countries, their number is decreasing. For several decades, the political climate has opposed legal monopolies, as they are perceived as a combination of the worst characteristics of corporations and governments. The first sign of this trend was the dissolution of Ma Bell in the 1980s, and many broadcasting monopolies such as the British BBC were reduced in stature to mere corporations. Now that we know what a legal monopoly is, let`s look at some examples to explain this concept. As mentioned earlier, the U.S. Postal Service is a legal monopoly. Although other companies offer parcel delivery, Swiss Post offers both parcel delivery and postal delivery. They are still the dominant delivery system when it comes to postal delivery. In the 21st century, monopolies do not operate by controlling an entire global market, but simply hold monopolies (usually in banking, transportation, and energy) in a particular region or country.

Most of the monopolies that exist today do not necessarily dominate an entire global industry. Instead, they control significant assets in a country or region. Due to the decline in demand for letters, many postal companies have diversified into other business areas such as banking. In America, the United States Postal Service (USPS) has a legal monopoly that makes it difficult to compete with reduced costs and superior quality. In the UK, the postal system, once under the control of the Royal Mail Group, went private in 2015. Other European countries have also privatized postal systems. Like post offices in many countries, the U.S. Postal Service has a legal monopoly on the delivery of letters without an overnight stay. [Citation needed] A legal monopoly is able to remedy some of the disadvantages described above. Legal monopolies arise when a government believes that it would be in the interest of citizens to allow a single company to be the sole provider of services (or products).

AT&T Corp. is a classic example of a legal monopoly that operated as such until 1982. For a monopoly to be legal, the government must be involved. This is often done in the form of price regulation. Assessing the conduct of an alleged monopolist requires a thorough analysis of the market and the means used to obtain or maintain the monopoly. Obtaining a monopoly through high-quality products, innovation or business acumen is legal; However, the same result achieved by exclusion or displacement actions may raise concerns about antitrust. Right now, you may be wondering what exactly a legal monopoly is. Well, first of all, it is important to explain the general term monopoly.

A monopoly is an enterprise that offers a good or service that has no narrow replacement. It exists when there is only one supplier and there is a barrier that prevents new companies from entering the market and offering competition. In other countries, sports societies enjoy the same de facto protection, especially if they are considered international. The Fédération Internationale de Football Association (FIFA) and the Olympic Games are examples of international sports monopolies. One of the critical problems with legal monopolies is that once a company receives a mandate or license to operate in a particular market or industry, it excludes consumer choices and alternatives. At the same time, it can reduce the aspiration of companies with legal monopolies to innovate and offer consumers better products and services. In addition, it can also exacerbate gender inequalities. Now let`s review an example to help us better understand legal monopolies. Suppose Joe owns and runs a company that makes wind turbines in a very remote area.

Currently, it is necessary to find a company in this area that can provide the electricity that the surrounding homes and businesses need so much. Joe`s Company is the only company that offers this type of service. There is no competition that offers a replacement for electricity. A legal monopoly is a mandate given by the government to an individual company to operate in a particular sector or industry with absolute power to manufacture and supply goods and services, as well as the certainty that no other company than them will participate in the business. In addition, it helps the government regulate prices in this sector. Explains, therefore, how government measures to create legal monopolies create a price equilibrium and control the forces of supply and demand. The regulation of gambling in many places implies a legal monopoly when it comes to national or state lotteries. While private operations with companies such as racetracks, off-piste betting sites and casinos are allowed, the authorities are only allowed to license one operator. A legal monopoly is initially ordered because it is considered the best option for a government and its citizens. For example, AT&T operated as a legal monopoly in the United States until 1982, as it was considered important to have a cheap and reliable service that was easily accessible to all. Railways and airlines have also been operated as legal monopolies, through various periods of history. It has been found that Microsoft has a monopoly on operating system software for IBM-compatible PCs.

Microsoft was able to use its dominant position in the operating system market to exclude other software developers and prevent computer manufacturers from installing non-Microsoft browser software that could work with Microsoft`s operating system software. Specifically, Microsoft illegally maintained its monopoly of the operating system by including Internet Explorer, Microsoft`s Internet browser, in every copy of its Windows operating system software sold to computer manufacturers, making it technically difficult not to use its browser or to use a non-Microsoft browser. Microsoft also granted free licenses or discounts for the use of its software, which discouraged other software developers from promoting a non-Microsoft browser or developing other software based on that browser. These actions have hampered computer manufacturers` efforts to use or promote competing browsers and have discouraged the development of add-on software compatible with non-Microsoft browsers. The court found that, although Microsoft did not link all types of competition, its actions prevented competitors from using the most profitable means to take market share from Microsoft. To settle the case, Microsoft agreed to put an end to certain conduct that prevented the development of competing browser software. As technology improves, new products may emerge. These new products can therefore create a substitute for the goods produced by the monopolies.

This can jeopardize a monopoly. Some examples of this can be found in the parcel delivery industry. The postal service was once the main route through which parcels were delivered. However, when other carriers such as UPS and FedEx emerged, the postal service monopoly was weakened. There are illegal monopolies created and existing by predatory or exclusionary actions that are considered as such. Illegal monopolies exploit their market share through price discrimination, tied selling agreements and exclusive transactions. In many cities, bus transportation has a legal monopoly, but some municipal governments have legalized bus competition due to pressure from consumers who want lower prices and entrepreneurs who want it. A legal monopoly is ordered when it is beneficial to both citizens and the government. For example, in the United States, AT&T operated as a legal monopoly until 1982 because it was very cheap and had a reliable service that was easily accessible to everyone. Real routes and airlines have also functioned as legal monopolies at different times in history. The idea behind the introduction of legal monopolies is that if too many competitors invested in their own supply infrastructure, prices would reach a very high level in all areas. As technologies advance and economies evolve, the rules of the game balance themselves.