Dominant firms and the monopoly problem: Conclusion

Although expanding section 2 enforcement to include dominance ac- quired by discontinued acumen, chance event, and default failure poses numerous difficulties,48 the approach proposed has the advantage over existing policy of addressing the issue of single-firm dominance in a direct and candid manner. Assigning residual responsibility to the government to intervene in a dominant firm industry that has reached an advanced stage of development (within which self-correcting market processes operate only slowly) relieves the need to rely on claims that anticompetitive conduct is the culprit. It thereby allows enforcement to proceed in a more assertive, less contrived way.49 Dominant firm industries in which a conduct offense was tenuously associated with dominance could be attacked expressly in terms of structural monopoly (or mixed structural-conduct monopoly). Equally important, the reach of antitrust enforcement could be extended to include industries in which dominance cannot be attributed even remotely to predatory or exclusionary business tactics. Industries in which dominance has manifestly resulted from chance event or default failures, and which now enjoy apparent insularity, would thus come within the ambit of section 2 enforcement without strain.

That notions of stochastic and default failures serve to relieve the strain under which conventional analysis labors in treating the dominant firm condition is hopefully evident. That the proposed enforcement policy follows directly, however, might be disputed. Thus, others might be prepared to accept the argument that dominant firm outcomes are commonly explained by chance event and default failures, but then conclude that such dominance is sufficiently rare that it be tolerated as one of the costs that is associated with what, ordinarily, is a well-working, self-policing enterprise system.

Indeed, for those industries in which the degree of dominance falls below the suggested threshold level, toleration is what is proposed here. But rather than accept all monopolistic outcomes, however egregious, with the same degree of equanimity, the more severe cases are put through a dissolution proceeding. Mainly this is because (1) unassisted market processes are least likely to upset the dominance condition in these industries in any short’period of time, (2) uncontested dominance runs contrary to prevailing social norms and undermines confidence in an enterprise system, and (3) the side effects of a delimited policy are not judged to be sufficiently serious to offset the prospective economic and social gains.

Source: Williamson Oliver E. (1975), Markets and hierarchies: Analysis and antitrust implications, A Study in the Economics of Internal Organization, The Free Press.

Leave a Reply

Your email address will not be published. Required fields are marked *