Antitrust regulation of monopolies 

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Antitrust regulation of monopolies

The high efficiency of natural monopolies makes their crushing absolutely unacceptable. This does not mean that the government may refrain from regulation of natural monopolies, because their uncontrolled activity may harm the economy. These structures are trying to solve their problems by raising tariffs and prices. The implications for the country's economy are the most destructive. Production costs in other areas increases, defaults grow, interregional connections ties are paralyzed. The natural character of a monopoly position creates an opportunity for effective work, but does not guarantee that these opportunities will be realized in practice. Basic way to tackle the negative aspects of natural monopolies is the state control after pricing in natural monopoly and after the volume of the production. Price regulation of natural monopolies requires mandatory binding maximum value prices for the products of a monopolist. In this case the consequences of this regulatory action are directly dependent on the particular level at which prices are fixed. Another difficult problem related to natural monopoly refers to their status: whether or not these companies should be public or private? The origins of this problem are connected with the fact that natural monopolies are very specific subject of the economy, which has never operated on a purely market principles. If the natural monopoly excludes competition, if the consumer is absolutely devoid of choice, though many other mechanisms of functioning of the market are broken, is not it better to manage the natural monopolies, not as private but as state-owned enterprises? Traditional arguments in favor of nationalization are connected with the fact that for the state enterprise it is easier to carry out government policies on prices, tariffs, production volumes. Public ownership eliminates monopolistic abuse in order to enrich the owners. Arguments against nationalization fears are associated with lowering the efficiency of natural monopoly. With no need to focus on commercial success, the director of the firm becomes a public official. He is willing to carry out any instructions just to satisfy the wishes of his superiors. The risk of corruption increases. There are strong arguments on both sides. Countries with a statist mentality prefer nationalization of natural monopolies. Countries with a strong individualistic tradition vice versa are leaning toward private property.

Unlike natural monopolies, artificial monopoly is formed in those industries where a single producer does not have high efficiency compared to several competing firms. The establishment of monopoly type market is not inevitable for this industry, although in practice it may occur if the monopolist can eliminate future competitors. The main goal of antitrust policy is to prevent monopolistic abuses. Considering natural monopolies these goals are achieved through direct government intervention in the activities, in particular, forced by setting prices. In the case of artificial monopoly regulation is the main focus of opposition to the formation of monopolies, and sometimes the destruction of those already formed. To do this, the state uses a wide range of sanctions: preventive measures, fines for improper behavior on the market, the direct de-monopolization. The basis for the activation of antitrust policy is the existence of any of the two main signs of monopolization of the market: the concentration of a very large market shares in the hands of one company, or interweaving of a leading company with its competitors. Determination of the degree of concentration in the industry is focused on the 3 factors' rate of major companies: the size of turnover, number of employees and amount of capital. Share of the company turnover shows what part of the total goods supply the firm concentrates.

The implementation of antitrust action by the state in the tactical plan is possible in two ways. First, the anti-monopoly measures should be preceded by a significant part of the transition to market relations. You must first create a system of measures to counter monopolies (the creation of antitrust laws, the dismantling of major groups, primary de-monopolization). Antitrust policy is modifying over time. At a certain stage of development some areas of antitrust policy takes priority, but with the change of the situation the emphasis also changes. We can say that antitrust policy and antitrust law are not intended to prohibit or eliminate monopolistic entities. The society had the understanding that the monopoly profits as a growth factor cannot be destroyed. So the real task of antitrust policy is to put up the monopoly of state control, to exclude the possibility of monopoly power abuse. Karl Marx in the middle of the last century came to the conclusion that the emergence of monopolies requires government intervention. The main objective of this intervention is to protect and preserve free competition, which threatens the monopolistic tendencies. Specifically, we can formulate such goals: limiting monopolies support and promote small business, consumer protection. There are two main forms of struggle against monopolies:

-Preventing the creation of monopolies;

-The restriction of the monopoly power.

Demonopolization is carried out by market liberalization. This is achieved by flexible maneuvering customs treatment (reduction of customs duties, the abolition of quotas, and the elimination of other barriers for foreign products entry to the domestic market), improving the investment climate for foreign investors, supporting small businesses. The state control is important in the process of concentration of capital, financial penalties for violations of antitrust laws.


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