Monopolies, Pools, and Trusts

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Monopolies,Pools, and Trusts
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A Monopoly What Is It?

• A single seller of a product (good or service).
• Monos single, alone
• Polo to sell
• Lack of Competition means
• Higher Prices
• Inferior Goods and Services
• Less Innovation
• Competition is the rivalry of two or more parties
  over something.

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Competition

• Do you try harder when youve got competition?
  So do businesses!
• Think of two runners in a race

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Monopolies and Competition
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170
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200
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Monopolies and Competition
200
150
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Monopolies Real Life Examples

• De Beers
• A family of diamond companies.
• Microsoft
• United States v. Microsoft
• Local Water Company
• The only provider for that service in your area.

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Pools

• A voluntary agreement among companies that
• sets production quotas
• fixes prices
• allocates sales and market territories
• Monopolistic
• Emerged before trusts
• After pools were struck down in courts, trusts
  emerged

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Trusts

• Emerged in late 19th century
• Intended to monopolize business
• Standard Oil Trust first well-known trust
• Before we delve into industrial trusts, lets
  take a look at what a legal trust is!

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A Trust Fund

• A trust is like a holding pen for your money or
  assets.
• A trust has 4 components
• The grantor
• The beneficiary
• The assets
• The trustee

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Trusts (Monopolies)

• Stockholders turn over stock to board of
  trustees.
• Many smaller, competing firms merge into one big
  company.
• The trust can manage the companies without owning
  them!

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Trusts (Monopolies)

• Trust Tactics
• Buy outs
• Price undercuts
• Long-term customer contracts
• Forced customer purchases
• Intimidation and violence
• Famous Trusts
• Standard Oil, US Steel, American Tobacco Company

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Trusts (Monopolies)

• In this kind of trust, what are the assets and
  who is the grantor, beneficiary, and trustee?

Stock
Stock
Stockholders
Trust
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Breaking Trusts

• 1890 Sherman Antitrust Act
• 1914 Clayton Antitrust Act
• 1914 FTC Act
• 1911 Standard Oil Trust busted by government
  action

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Are Monopolies Always Illegal?

• Not always! Only if they violate antitrust laws.
• Think about the Local Water Company