Antitrust Practices and Market Power - Essay Example

Standard oil firm counts among one of the firms that was investigated on the antitrust act. The firm has an oligopoly structure dominated by small number of sellers. The main reason that seeked to investigate the firm was to establish whether it posed a barrier for other companies’ entry into the market. With the expansion of oil across the globe, the oil factories were involved in poor disposal of waste products into the water system and adoption of poor methods of oil distribution. For instance, it was observed that oil could be passed through leaked pipes which posed a great danger to the society.

The establishment of the oil company firm was to see an improvement in the field of oil and refinery. As a natural monopoly company, it developed proper infrastructure within the American region which could see proper distribution and proper disposal of oil without causing any damage to the environment. This saw it rise above other companies in a quest to benefit the economy (Utton, 2003). In the case of the oil company, the court adopted Sherman Antitrust act so as to regulate the monopoly. This act was coined by John Sherman viewed to be an appropriate for prevention of abusive monopolies from exploiting the consumers.

The standard oil firm was estimated to be in control of about 90 percent of oil facilities in America. The oil firm faces imperfect competition as a result of existence in low number of people as prospective sellers. Through government monopoly, power was vested in the American Congress to regulate the economy through tax collection. The main provision of this act was that any person responsible for monopolizing will be held guilty and so be subjected to punishment. The year 1911, the Supreme Court in America established that standard oil company was structural monopoly that was responsible for taking part in unfair practices in the field of business (Utton, 2003).

Monopolies are believed to have originated during the colonial period of administration. This case saw huge companies and firms in the United States endowed with the responsibility of receiving huge contracts deals. Monopolies can be seen in form of capitalism characterized by lack of competition; this eventually leads to high fluctuation of products prices and poor quality products. For instance, monopoly is known to supply at a very low output and charging higher prices for its products which may eventually lead to a dead weight loss in the society.

In this regard, it will seek to maximize its economic profits and take control of the market demand curve. Monopolies are also at a very better place of enjoying the economies of scale which comes as a result of production of goods in large quantities. In this essence, there are tendencies to be a decline in cost of production resulting to increase in monopolies profits. It has been cited that the loss in economic welfare that arises from exploitation of monopoly power has made the government to take upon some measures in order to regulate some monopolies (Wall et al 1988).

In other cases some firms that practiced monopoly were able to rise to power since they had positive effect on the economy of the American government. It was estimated that some of the profits gained through monopolists were used to conduct a research viewed to be beneficial to the society. Through research, consumers were able to learn more about the products that were being sold in the monopoly market and the benefits