Legal monopoly
Encyclopedia
A legal monopoly, statutory monopoly, or de jure monopoly is a monopoly
that is protected by law from competition. A statutory monopoly may take the form of a government monopoly
where the state owns the particular means of production or government-granted monopoly
where a private interest is protected from competition such as being granted exclusive rights to offer a particular service in a specific region (e.g. patented inventions) while agreeing to have their policies and prices regulated. This type of monopoly is usually contrasted with de facto monopoly
which is a broad category for monopolies that are not created by government.
. The Statute of Monopolies of 1623 was an early step in an English movement to convert letters patent
from a method of rewarding royal favourites at other than royal expense, to a method of encouraging inventors.
The Dutch East India Company
, British East India Company
and similar national trading companies were granted exclusive trade rights by their respective national governments. Private interlopers were subject to criminal penalties, and the companies fought wars in the 17th century to delineate and defend their monopoly territories.
Legal monopolies on alcohol
remain commonplace, both as a source of public revenue and as a means of control, and the monopolies on opium
and cocaine
, formerly important for revenue, were converted or reinstituted during the twentieth century to curb the abuse of controlled substances. For example, Mallinckrodt Incorporated is the only legal supplier of cocaine in the United States
.
The regulation of gambling
in many places includes an official monopoly national lottery
or state lottery. Where private operation is allowed, for example in horse racing
, off-track betting
and casino
s, the authorities may license only one operator.
The early 19th century Gibbons v. Ogden
case weakened the steamboat monopoly that New York had granted, producing an exception for interstate commerce. However the later Slaughter-House Cases established that a local law creating a legal monopoly did not violate the rights of other merchants in the United States.
In the middle twentieth century many countries established a monopoly broadcasting
agency, such as BBC
, Radiodiffusion-Télévision Française
, or RAI
. Most large countries relaxed their law or privatized their state broadcaster late in the century.
In parts of the United States
, AT&T
had a legal monopoly on the provision of local telephone service
and in long distance until 1984 when local service was vertically divested
. The divested local companies
continued to be protected in lesser degree from competition in the local exchange market as a public utility
.
National Postal, telegraph and telephone service monopolies were enforced in many countries until the late 20th century. Telstra
, for example, had a legal monopoly on telecommunications in Australia.
As do the Post Office departments in many countries, the United States Postal Service
has a legal monopoly on delivery of non-overnight letters.
In many cities bus service enjoys a legal monopoly, however some city governments have legalized bus competition due to pressure from consumers who desire lower prices and entrepreneurs that would like to provide them.
Professional sports organizations such as Major League Baseball
are not legally protected from new market entrants, but nonetheless are sometimes called legal monopolies on grounds that they are exempted from US antitrust law.
Professional licensure
as of Professional Engineer
s in the United States or Chartered Accountant
s in the United Kingdom, does not limit the number of practitioners to one, but detractors sometimes call the system a legal monopoly anyway.
The creation of Sirius XM Radio by merger left the United States with only one licensed satellite radio broadcasting company. However, the United States Department of Justice
decided that this was not harmful to competition, due to the presence of terrestrial broadcasters.
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
that is protected by law from competition. A statutory monopoly may take the form of a government monopoly
Government monopoly
In economics, a government monopoly is a form of coercive monopoly in which a government agency or government corporation is the sole provider of a particular good or service and competition is prohibited by law...
where the state owns the particular means of production or government-granted monopoly
Government-granted monopoly
In economics, a government-granted monopoly is a form of coercive monopoly by which a government grants exclusive privilege to a private individual or firm to be the sole provider of a good or service; potential competitors are excluded from the market by law, regulation, or other mechanisms of...
where a private interest is protected from competition such as being granted exclusive rights to offer a particular service in a specific region (e.g. patented inventions) while agreeing to have their policies and prices regulated. This type of monopoly is usually contrasted with de facto monopoly
De facto monopoly
A de facto monopoly is a monopoly that was not created by government. It is most often used in contrast to de jure monopoly, which is one that is protected from competition by government action....
which is a broad category for monopolies that are not created by government.
Examples
Jurisdictions have at various times imposed legal monopolies on various commodities, including salt, iron and tobaccoTobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...
. The Statute of Monopolies of 1623 was an early step in an English movement to convert letters patent
Letters patent
Letters patent are a type of legal instrument in the form of a published written order issued by a monarch or president, generally granting an office, right, monopoly, title, or status to a person or corporation...
from a method of rewarding royal favourites at other than royal expense, to a method of encouraging inventors.
The Dutch East India Company
Dutch East India Company
The Dutch East India Company was a chartered company established in 1602, when the States-General of the Netherlands granted it a 21-year monopoly to carry out colonial activities in Asia...
, British East India Company
British East India Company
The East India Company was an early English joint-stock company that was formed initially for pursuing trade with the East Indies, but that ended up trading mainly with the Indian subcontinent and China...
and similar national trading companies were granted exclusive trade rights by their respective national governments. Private interlopers were subject to criminal penalties, and the companies fought wars in the 17th century to delineate and defend their monopoly territories.
Legal monopolies on alcohol
Alcohol monopoly
An alcohol monopoly is a government monopoly on manufacturing and/or retailing of some or all alcoholic beverages, such as beer, wine and spirits. It can be used as an alternative for total prohibition...
remain commonplace, both as a source of public revenue and as a means of control, and the monopolies on opium
Opium
Opium is the dried latex obtained from the opium poppy . Opium contains up to 12% morphine, an alkaloid, which is frequently processed chemically to produce heroin for the illegal drug trade. The latex also includes codeine and non-narcotic alkaloids such as papaverine, thebaine and noscapine...
and cocaine
Cocaine
Cocaine is a crystalline tropane alkaloid that is obtained from the leaves of the coca plant. The name comes from "coca" in addition to the alkaloid suffix -ine, forming cocaine. It is a stimulant of the central nervous system, an appetite suppressant, and a topical anesthetic...
, formerly important for revenue, were converted or reinstituted during the twentieth century to curb the abuse of controlled substances. For example, Mallinckrodt Incorporated is the only legal supplier of cocaine in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
.
The regulation of gambling
Gambling
Gambling is the wagering of money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods...
in many places includes an official monopoly national lottery
National lottery
National Lottery may refer to:*National Lottery , the state lottery of Ireland*National Lottery , the state franchised in the United Kingdom...
or state lottery. Where private operation is allowed, for example in horse racing
Horse racing
Horse racing is an equestrian sport that has a long history. Archaeological records indicate that horse racing occurred in ancient Babylon, Syria, and Egypt. Both chariot and mounted horse racing were events in the ancient Greek Olympics by 648 BC...
, off-track betting
Off-track betting
Off-track betting refers to sanctioned gambling on horse racing outside a race track.-US history:...
and casino
Casino
In modern English, a casino is a facility which houses and accommodates certain types of gambling activities. Casinos are most commonly built near or combined with hotels, restaurants, retail shopping, cruise ships or other tourist attractions...
s, the authorities may license only one operator.
The early 19th century Gibbons v. Ogden
Gibbons v. Ogden
Gibbons v. Ogden, 22 U.S. 1 , was a landmark decision in which the Supreme Court of the United States held that the power to regulate interstate commerce was granted to Congress by the Commerce Clause of the United States Constitution. The case was argued by some of America's most admired and...
case weakened the steamboat monopoly that New York had granted, producing an exception for interstate commerce. However the later Slaughter-House Cases established that a local law creating a legal monopoly did not violate the rights of other merchants in the United States.
In the middle twentieth century many countries established a monopoly broadcasting
Broadcasting
Broadcasting is the distribution of audio and video content to a dispersed audience via any audio visual medium. Receiving parties may include the general public or a relatively large subset of thereof...
agency, such as BBC
BBC
The British Broadcasting Corporation is a British public service broadcaster. Its headquarters is at Broadcasting House in the City of Westminster, London. It is the largest broadcaster in the world, with about 23,000 staff...
, Radiodiffusion-Télévision Française
Radiodiffusion-Télévision Française
Radiodiffusion-Télévision Française was the French national public broadcasting organization established on 9 February 1949 to replace the post-war "Radiodiffusion Française" , which had been founded in 1945...
, or RAI
RAI
RAI — Radiotelevisione italiana S.p.A. known until 1954 as Radio Audizioni Italiane, is the Italian state owned public service broadcaster controlled by the Ministry of Economic Development. Rai is the biggest television company in Italy...
. Most large countries relaxed their law or privatized their state broadcaster late in the century.
In parts of the United States
Communications in the United States
The primary regulator of communications in the United States is the Federal Communications Commission. It closely regulates all of the industries mentioned below with the exception of newspapers and the Internet service provider industry.- Press :...
, AT&T
AT&T
AT&T Inc. is an American multinational telecommunications corporation headquartered in Whitacre Tower, Dallas, Texas, United States. It is the largest provider of mobile telephony and fixed telephony in the United States, and is also a provider of broadband and subscription television services...
had a legal monopoly on the provision of local telephone service
Local telephone service
Local telephone service is the provision of telecommunications networks and services within a limited geographic region.Traditionally, local telephone service was provided by small companies based in given cities and towns as opposed to larger, national or international companies...
and in long distance until 1984 when local service was vertically divested
Bell System divestiture
The Bell System divestiture, or the breakup of AT&T, was initiated by the filing in 1974 by the U.S. Department of Justice of an antitrust lawsuit against AT&T. The case, United States v...
. The divested local companies
Incumbent local exchange carrier
An ILEC, short for incumbent local exchange carrier, is a local telephone company in the United States that was in existence at the time of the breakup of AT&T into the Regional Bell Operating Companies , also known as the "Baby Bells." The ILEC is the former Bell System or Independent Telephone...
continued to be protected in lesser degree from competition in the local exchange market as a public utility
Public utility
A public utility is an organization that maintains the infrastructure for a public service . Public utilities are subject to forms of public control and regulation ranging from local community-based groups to state-wide government monopolies...
.
National Postal, telegraph and telephone service monopolies were enforced in many countries until the late 20th century. Telstra
Telstra
Telstra Corporation Limited is an Australian telecommunications and media company, building and operating telecommunications networks and marketing voice, mobile, internet access and pay television products and services....
, for example, had a legal monopoly on telecommunications in Australia.
As do the Post Office departments in many countries, the United States Postal Service
United States Postal Service
The United States Postal Service is an independent agency of the United States government responsible for providing postal service in the United States...
has a legal monopoly on delivery of non-overnight letters.
In many cities bus service enjoys a legal monopoly, however some city governments have legalized bus competition due to pressure from consumers who desire lower prices and entrepreneurs that would like to provide them.
Professional sports organizations such as Major League Baseball
Major League Baseball
Major League Baseball is the highest level of professional baseball in the United States and Canada, consisting of teams that play in the National League and the American League...
are not legally protected from new market entrants, but nonetheless are sometimes called legal monopolies on grounds that they are exempted from US antitrust law.
Professional licensure
Licensure
Licensure refers to the granting of a license, which gives a "permission to practice." Such licenses are usually issued in order to regulate some activity that is deemed to be dangerous or a threat to the person or the public or which involves a high level of specialized skill...
as of Professional Engineer
Professional Engineer
Regulation of the engineering profession is established by various jurisdictions of the world to protect the safety, well-being and other interests of the general public, and to define the licensure process through which an engineer becomes authorized to provide professional services to the...
s in the United States or Chartered Accountant
Chartered Accountant
Chartered Accountants were the first accountants to form a professional body, initially established in Britain in 1854. The Edinburgh Society of Accountants , the Glasgow Institute of Accountants and Actuaries and the Aberdeen Society of Accountants were each granted a royal charter almost from...
s in the United Kingdom, does not limit the number of practitioners to one, but detractors sometimes call the system a legal monopoly anyway.
The creation of Sirius XM Radio by merger left the United States with only one licensed satellite radio broadcasting company. However, the United States Department of Justice
United States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
decided that this was not harmful to competition, due to the presence of terrestrial broadcasters.