Coercive Monopoly - Anti-trust

Anti-trust

There are examples in history where a firm that is not a government-granted monopoly is claimed to have a coercive monopoly, and anti-trust action has been initiated to resolve the perceived problem. For example, in United States v. Microsoft The Plaintiff's Finding of Fact alleged that Microsoft "coerced" Apple Computer to enter into contracts resulting in the prohibition of competition. Eric Raymond, an author and one of the founders of the Open Source Initiative, says "The thing a lot of people somehow missed is that the courts affirmed the findings of fact – that Microsoft is indeed a coercive monopoly." Although the court ruled against the company, many continue to argue that Microsoft was not a coercive monopoly. Another disputed example, is the case of U.S. v. Aluminum Co. of America (Alcoa) in 1945. The court concluded that Alcoa "excluded competitors." The ruling is heavily criticized for punishing efficiency and is quoted below.

It was not inevitable that it should always anticipate increases in the demand for ingot and be prepared to supply them. Nothing compelled it to keep doubling and redoubling its capacity before others entered the field. It insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connections and the elite of personnel.

Advocates of a laissez-faire economic policy are quick to assert (barring private criminal conduct) that a coercive monopoly can only come about through government intervention, and defend these situations as non-coercive monopolies in which government should not intervene. They argue that competition with these monopolies is open to any firm that can offer lower prices or better products —that competition is not excluded. They claim that these monopolies keep their prices low precisely because they are not exempt from competitive forces. In other words, the possibility of competition arising indeed affects their pricing and production decisions. A coercive monopoly would be able to price-gouge consumers secure with the knowledge that no competition will develop. Some see the fact that prices are low as lending evidence to the assertion that a monopoly is a non-coercive monopoly.