A legal monopoly is when an individual company or corporation has absolute control over a specific good or service in the marketplace. While there are legal monopolies in almost every country, their numbers are declining.
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 specific region or country. Most monopolies that exist today do not necessarily dominate an entire global industry. Instead, they control significant assets in one country or region.
Key Takeaways
- Legal monopolies do exist, but they are in decline.
- Energy companies still hold monopolies in America and Europe.
- The USPS is a form of a legal monopoly in America.
- The 1890 Sherman Antitrust Act was created to break up unfair monopolies in the United States.
- Before antitrust laws, many companies acted as monopolies without consequence.
Understanding Legal Monopolies
For several decades the political climate has run against legal monopolies, as they were perceived as being a combination of the worst traits of corporations and governments. The first sign of this trend was the breakup of Ma Bell in the 1980s, and many broadcasting monopolies such as England’s BBC have been reduced in stature to simple corporations.
The 1890 Sherman Antitrust Act broke up monopolies in the U.S., including the undoing of John D. Rockefeller’s Standard Oil and the American Tobacco company by 1911. Another example occurred, the government broke up the steel industry when it was run by Andrew Carnegie.
There are illegal monopolies, which are created and exist by utilizing predatory or exclusionary actions, are considered such. Illegal monopolies leverage their market share by price discrimination, tying contracts, and exclusive dealings.
Anything to do with guns is also sharply restricted to just a few entities in most countries as well.
Types of Legal Monopolies
One of the few legal monopolies in many countries is mail carriers. Mail corporations tend to be organized as semi-independent of the government and are expected to be self-sufficient. Competition is sharply limited or nonexistent for parcel and letter services.
Because of the declining need for letters, many mail corporations have branched into other business lines, such as bank services. In America, the United States Postal Service (USPS) holds a legal monopoly making it challenging to compete with reduced costs and higher quality. In the United Kingdom, the mail system, once under the Royal Mail Group, became private in 2015. Other countries in Europe also have privatized mail systems.
Making and selling alcohol is also a common legal monopoly, as one must possess a government license to do either. Likewise, despite the prohibition of dangerous drugs such as heroin, there are legal monopolies that control producing and distributing them for legitimate scientific purposes; legalized marijuana in the United States currently falls somewhere in between those two.
Grocery and Retail
The sprawl of Walmart across America is considered by some to be a monopoly. According to research from the Institute of Local Self-Reliance, Walmart controls 50% or more of grocery sales, This includes 43 US metropolitan areas and 160 smaller American markets. In 38 areas, Walmart’s share of the grocery market is 70% or higher, which could be considered a monopoly because it dominates a specific region and market segment, according to the nonprofit.
Sports
A strange outlier in the U.S. is the legal monopoly that sports corporations such as the National Football League and Major League Baseball enjoy. They are legally protected from antitrust lawsuits and have enjoyed such protection since the 1920s.
In other countries, sports corporations have the same de facto protection, particularly if they are regarded as international. The Fédération Internationale de Football Association (FIFA) and the Olympics are examples of international sports monopolies.
What Is the Legal Definition of Monopoly?
The U.S. Supreme Court defines monopoly power as “the power to control prices or exclude competition.”
Which Monopolies Are Legal in the United States?
Some examples of legal monopolies in the U.S. are the USPS, which holds a legal monopoly on mail carrying, the National Football League, and Major League Baseball are legal monopolies.
When Did Monopolies Become Illegal in the U.S.?
Not all monopolies are illegal, but the 1890 Sherman Antitrust Act broke up many monopolies in the United States like the American Tobacco Company and Standard Oil.
Which Monopolies are Legal in Europe?
The Royal Mail Group is an example of a legal monopoly in Europe, and the Fédération Internationale de Football Association (FIFA) is another.