Legal Definitions - monopoly power

Monopoly power refers to a company's significant ability to dictate prices for its goods or services, or to prevent other businesses from effectively competing in a particular market. A key factor in determining if a company possesses monopoly power is its substantial share of that market.

Here are some examples illustrating monopoly power:

• Imagine a company that develops a proprietary software platform essential for a niche industry, such as specialized medical imaging analysis. This company holds all the patents and intellectual property for its software, which has become the undisputed industry standard. Because no other company has been able to develop a comparable or compatible system, this company can set high licensing fees for its software without fear of customers switching to a competitor. This scenario demonstrates monopoly power because the company can control prices due to the absence of viable alternatives and the difficulty for new competitors to enter the market.

• Consider a single corporation that owns and operates all the high-speed fiber optic cables connecting a remote island nation to the global internet. There are no alternative cable providers, and building new infrastructure would be prohibitively expensive and time-consuming. This corporation could charge significantly higher rates for internet access to businesses and consumers on the island, or impose unfavorable terms on smaller internet service providers who need to use their cables. This exemplifies monopoly power through both its ability to control pricing for an essential service and its capacity to exclude potential competitors from offering internet services on the island.

• Think of a company that manufactures a unique, patented microchip that is absolutely critical for the performance of all high-end electric vehicles. No other company can produce this specific chip, and vehicle manufacturers cannot easily substitute it with another component without significantly compromising their product's performance or safety. This company could dictate the price of these chips to electric vehicle makers, knowing they have no other viable option. This illustrates monopoly power because the company has significant control over the pricing of an essential component and effectively prevents other chip manufacturers from competing in this specific high-performance segment.