Monopoly is a beast that rules by abusing fair trade, June 23, 2008

COMPETITIVENESS is the adrenaline of all economies, says Pradeep S Mehta

Many businesses, however, either collude through cartels or plainly abuse their dominance through monopolistic and exclusionary behavior. Every other day, cartels are being hauled up by fair-competition agencies around the world. But a more difficult fight is against dominant players abusing their preeminence through monopolistic practices. For example, the fight of the European Commission with Microsoft Corp over alleged abusive behavior.

In its first-ever and biggest fine on a single company, the commission recently levied a fine of US$1.4 billion against Microsoft for noncompliance with its order.This is a typical case of an intellectual property rights holder that misuses its position by ensuring that consumers have little choice, and are thus pushed into buying their products. In India, Monsanto is facing a competition action (involving the Competition Act) on grounds that it charges excessively for its patented Bt cotton seeds.The case has not been resolved finally, but shows how intellectual property rights holders abuse their monopolistic status.

Abusive behavior can also be seen in many other cases, where there are natural monopolies, such as airports, energy and utility companies. Energy companies around the world create onerous conditions for their consumers, most of whom do not have a choice at all. Another type of abusive behavior has been observed in segments like microprocessors.In Europe, and in parts of Asia, monopoly power is still seen as problematic and worth serious competition action.

In North America, monopoly power has been relegated largely to a regulatory also-ran as agencies focus on cartels and merger reviews.

The key questions for all those interested in fair competition policy are first, does the divergence have any practical impact on consumers and economies? Second, does it matter if agencies differ on abusive monopoly power.

So how are we facing a situation in which the European Commission is seen to be blazing a trail against abuse of monopoly power while the US Department of Justice treats monopoly power as seriously as rowdiness at a game?

The answers lie in more than one place. One answer could be that the US and the EU simply enforce their competition rules differently.

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