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 natural monopoly can also occur in smaller local markets for products that are difficult to transport. For example, cement production has economies of scale, and the amount of cement demanded in a local area may not be much larger than what a single plant can produce. In addition, the cost of transporting cement on land is high, so a cement plant in an area without access to water transport can be a natural monopoly. Like the popular board game of the same name, a monopoly is a market environment where a business unit owns everything. Monopolies are bad for consumers in all areas, with legal monopolies theoretically being the exception. The following examples of monopolies offer different types of monopolistic enterprises. The examples are both theoretical and practical. Some companies are monopolistic in the field in which they operate. Since there are many examples of monopoly, not all variations and types are explained here, but the contours of all types remain the same, that is, the company or a company is the sole seller of a product without competitors or substitutes. Products considered utilities depend in part on the technology available.
Fifty years ago, local and telephone service was provided by cable. It didn`t make much sense to have multiple companies building multiple wiring systems in cities and across the country. AT&T lost its monopoly on long-distance transportation when the technology for providing telephone services shifted from wires to microwave and satellite transmission, allowing multiple companies to use the same transmission mechanism. The same has happened with local service, especially in recent years, with the growth of mobile phone systems. What legal mechanisms protect intellectual property? 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. The National Recovery Act to promote and enforce producer cartels was defeated in Schechter Poultry Corp. v. United States. 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. Luxottica – A company that owns all the major brands of sunglasses. The company bought almost all the major eyewear brands. However, they are always named differently. This creates an illusion in the customer`s mind that they have a variety of sunglasses to choose from, even though they are all made by a single company. Luxottica produces more than 80% of the world`s eyewear. The aviation industry is a good example of a natural monopoly, or at least an industry with monopolistic characteristics. A legal monopoly is a situation in which the government grants a company to be the exclusive supplier of a good and/or service in exchange for the right to be monitored and regulated. Professional sports organizations such as Major League Baseball are not legally protected from independent league baseball games, but are sometimes called legal monopolies because they are exempt from U.S. antitrust law. Brand monopolies occur when a company`s products have reached such a high status that the company can charge them a premium based on the name alone. This may be the case even if the product itself is no better than the products of the competition.
It can be even worse. In other words, a brand monopoly usually exists without a monopoly on assets. Think of a white t-shirt from a famous designer that sells for $50. It may be no different from a white t-shirt that you can get in a department store for $5, but due to the strength of the brand, the manufacturer may dictate the higher price. It is a monopoly power. A legal monopoly refers to a company that operates as a monopoly under a government mandate. A legal monopoly offers a particular product or service at a regulated price. It can be managed independently and regulated by the state, or both state-run and state-regulated.