1 / 19

American Monopolies

American Monopolies. Economic Definition. Sole supplier of a product w/no substitutes Only Nike shoes, McDonalds food, Saddlebred clothes, Dell computers, Arrowhead bottled water, etc. Company has more market power than anyone else Can raise prices w/o losing $$$ to rivals

amelia
Télécharger la présentation

American Monopolies

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. American Monopolies

  2. Economic Definition • Sole supplier of a product w/no substitutes • Only Nike shoes, McDonalds food, Saddlebred clothes, Dell computers, Arrowhead bottled water, etc. • Company has more market power than anyone else • Can raise prices w/o losing $$$ to rivals • Arrowhead is the only supplier of bottled water  they can charge higher prices

  3. Barriers to Entry (BTE) • BTE – restrictions of entry by new firms into an market/industry (1) Legal restrictions • Making entry illegal via patents • 1 supplier of hot dogs in a stadium • 1 company picking up garbage • U.S. Postal Service

  4. Barriers to Entry (BTE) (2) Economies of scale – business expands, i.e. makes more $$$, as costs go down • 1 firm supplies market @ a lower avg. cost than 2+ firms (natural monopoly) • Electrical companies (HSV Utilities) • Cable companies (Comcast) • Rural areas • 1 grocery store • 1 theater • 1 restaurant

  5. Barriers to Entry (BTE) (3) Control of essential resources • Alcoa was only supplier of bauxite • Important raw material for aluminum • China is world’s only producer of pandas • De Beers family has dominated the diamond trade since 1930s

  6. Collusion • Agreement b/w 2+ people/companies to limit market competition by deceiving others • An attempt to gain unfair advantage • Divide the market • Set artificial prices • Limit production

  7. Microsoft (MS)

  8. Basics • 1975 – Founded by Bill Gates & Paul Allen • 1980 – Co. introduces its first OS, Xenix • 1990 – FTC begins decade-long fight w/MS over collusion

  9. Microsoft Business Practices • 1988-1994 – MS received royalties from computer companies selling computers w/microprocessors • Due to a per processing license, it received $$$ regardless if computer had MS software or not • 1995 – Windows 95 released • Included Internet Explorer (IE) web browsing & MS Office

  10. United States v. Microsoft (2000) • U.S. Dept. of Justice & 20 states filed civil actions against MS for violating the Sherman Act • MS alleged crimes: • Abused monopoly power on Intel-based computer systems in its sales • Bundled IE w/its Windows operating system

  11. United States v. Microsoft (2000) • Original ruling • MS violated Sections 1 & 2 of Sherman Act • MS is to be divided into 2 companies • 1 to produce operating systems • 1 to produce software components • MS appealed the ruling • Settlement (2001) • MS shares software w/3rd-party companies • MS still allowed to bundle IE w/Windows

  12. U.S. Standard Oil

  13. Basics • 1870 – Est. as a corporation in Cleveland, OH • Led by John D. Rockefeller • Eliminated most competition in Cleveland w/i first 2 months of existence

  14. Standard Oil Business Practices • 1882 – Combined diff. companies spread across diff. states under 9 individual trustees; formed a trust • 1890 – Sherman Act passed by Congress • Forbade any contract, scheme, deal, or conspiracy that restricted trade • OH AG files lawsuit against Standard Oil • 1897 – Rockefeller retires, remains major stockholder in Standard Oil

  15. Standard Oil Business Practices • 1911 – US DOJ sued Standard Oil, ordered group to break up into 34 companies • Jersey Standard  Exxon • Standard Oil Company of New York  Mobil • Standard Oil of Ohio  Amoco • Standard Oil of California  Chevron • Exxon & Mobil later merged to form ExxonMobil

  16. Standard Oil Business Practices Other Trusts… Standard Oil Trust… Fueled its machines Used waste to produce items like Vaseline • Dumped gasoline into rivers • Piled mountains of heavy waste

  17. Standard Oil of New Jersey v. United States (1911) • Standard Oil undercut a lot of other businesses; later bought them out, particularly gas/service stations • Significantly underpriced same items as competitors • Made threats to suppliers & distributors of competitors • US-SC needed to determine if a company buying out others to rid of competition is legal

  18. Standard Oil of New Jersey v. United States (1911) • Original ruling • Standard Oil’s business practices led to a monopoly, thus restricting trade/competition for other businesses • Congress had power through its Commerce Clause to regulate monopolies, and enforce the Sherman Act

More Related