Quiz 31: Promoting Competition in a Global Context
Monopoly When a single corporation has control on a single market, then it is called monopoly. A firm is called monopolist when one or a few corporations has control over the market. A firm that has monopoly can do the following: 1. Can control the market price. 2. Can restrict output. Market Power The capability of a firm to control the price and restrict production and distribution of the product geographically is called the market power of the firm. A firm if has monopoly can increase the price bit and firms have no fear of losing the buyers. Neither of the firm exists or if exists does not have the flair to attract the customers. A firm may have monopoly in one geographic area but may not have monopoly in other area. Relation The more the market power of a firm, the more is the firm's monopoly. The monopoly of the firm can be measured /observed only when the firm is in the position to control the price. Sometimes there is a need to outperform some company then there is a need to sell the product below the price so that other could not survive. If buyers have the option of switching to other products then this market power will not be demonstrated. So the firm has the capability of proving that consumers uses.
There are times when the firm increases the market power, but in real it does not restrain trade, then in this situation rule of reason applies. This rule allows the court to check the agreement that violates the anticompetitive agreement. The anticompetitive agreement violates Section 1 of the Sherman Act. Court tries to find whether the firm is putting reasonable restrain on trade. Court also analyses the following: 1. What is the need or purpose of the agreement? 2. Do firms have power to achieve that noble purpose? 3. How will be the market competition after signing the agreement? 4. Parties could have relied on less restrictive means to achieve their purpose.
Yes , Company I actions can be judged under the section 1 of Sherman Act. As per the Section 1, when two or more persons sign a contract to conspire a business in such a way that they can put restrain on trade, so that their market position is consolidated. Company I is governed by various directors which belong to various groups and has commercial interest. The Company I is non-profit making but the directors has its own commercial interest and Company I is able to do because they are registry controller. According to Company V, Company I is putting various restrictions on Company V. A few are that 1. Company I is not allowing to use New Services to Company V 2. Company I is restricting the use of various old and New services to Company V 3. Company I is setting the prices So, it's evident now that company I is restraining Company V from trade. So, Company I actions can be judged under the section 1 of Sherman Act It's a vertical restraint of trade. Company I has appointed Company V to provide registry services of ".com" TLD in accordance with Company I specifications. Company I can appoint some other companies for registry services for other TLD's. Company I and Company V will not be competing with each other. Yes, it matters that Company I directors are from other groups and has commercial interest in Internet. However, Company I director's may wish to fulfil commercial objectives which they have. This can motivate them to take decisions, which are not fair enough for Company I, or its associate but good for their own companies. Company I can argue that Company V has brought the case in violation of Section 1 of Sherman Act, but has not given any proof of breach of antitrust. The formation of Company I is different. The board of directors of the company are from those companies, which are already in Internet business, and they have their own interest. A few companies may be the competitor of Company V and they may be funding company I. So the decision making in company I is different from other companies as they try to satisfy the requirements of all the directors. This was a know fact to company V at the time of signing the agreement. Company I controls a few TLD's rest are by other registrants. Company V can join hands with others for rest TLDs. Company V has not given any documentary proof that their agreement is restraining the trade. Company I has not given the name of the competitors, restricted services and the losses due these restriction. Also there is no discussion weather company V has filed any complaints with Company or they have put this matter among the board of members on company I. Probably they might have solve the issue. A very important fact is Company I does not compete in market as it is a non profit organisation.