What is the meaning of a Monopoly under competition law?
Monopoly refers to a market structure or market situation where a single seller dominates the sales of a unique product or commodity in the market.
In a monopoly market, because the seller is the sole dominant of the goods of which there are no close substitutes to such product, the seller faces no competition.
The single producer of the goods may either be an individual owner, a single partnership or a joint-stock company.
Because the monopolist has full control over the supply of a commodity being the sole seller of it, he possesses the power to set the price and becomes the market controller.
What are Pure Monopolies?
A pure monopoly is said to exist when there is only one producer of a good/product and there are no other competitors to it.
A company is said to have a pure monopoly in the market when such a company is the sole seller in the market of a product with no other close substitute.
What are Natural Monopolies and the power of Patent?
When a company becomes a monopoly due to high fixed or start-up costs in an industry, is said to develop a natural monopoly.
Natural monopolies also develop when an industry is a specialised industry where only one company can meet the needs of the demand or industries that require some unique raw materials or technologies.
When companies manage to acquire patents on their products, such products become patented products that prevent competitors from developing the same product in a specific field, there can have a natural monopoly.
After patenting a product, the patent enables the company to earn profits of the product for several years without the fear of any competition to such a product.
For example:- pharmaceutical companies are often allowed patents and develop natural monopoly to promote research and innovation.