Antitrust practices and market power - Essay Example

Antitrust practices and market power Grade (13th, Nov. Antitrust practices and market power Google, the world’s largest search engine is an organization which has raised concern for antitrust violations, prompting the US Senate Antitrust Subcommittee to start an investigation over the possibilities of such violations (Newman, 2011). The main reason for the increased concern is the fact that Google has been acquiring almost every other website in countless lines of business. Additionally, the website businesses competing with Google have raised concern over their unfair treatment in search rankings.

More to this, is the fact that the impact of such limitless business acquisitions by Google needs to be analyzed (Newman, 2011). While the pecuniary costs associated with this Google antitrust behavior is price fixation and control for the search engine and website business prices, the non-pecuniary costs associated with the behavior include throwing other website companies out of business, or making them incur losses, which will in turn slow down the economic growth. Monopoly structure entails the operation of a single seller in the market, while the oligopoly structure involves the presence of only few sellers in the market, which work in collusion for their economic benefit (Tucker, 2010).

Both monopoly and oligopoly are achieved through effecting entry barriers for other business into the same market. The barriers can be natural barriers, such as high capitalization, infrastructure or specific resource requirement for entry to the market, which is only available to one or a few firms. Barriers can also be government barriers, where the government institutes some restrictions in form of legislation to prevent other businesses venturing into a certain industry, which is only designated for a particular operator (Tucker, 2010).

Oligopolies and monopolies are not always bad for the society. Even though oligopolies and monopolies allows just few firms to determine the quantities of products they avail to the market or fix prices they charge for such products, there are situations under which monopoly and oligopoly are beneficial to the society. Monopolies can allow a firm to take advantage of economies of scale by producing more commodities that lower the long run average costs, making it possible for the firm to offer low prices for its products (Tucker, 2010).

The same case applies to firms operating under oligopoly, where it is only a few of them which are producing for the large market needs of the customers. This allows such firms to enjoy economies of scale, through producing in higher quantities, thus spreading their fixed costs over a large number of outputs. A good example of a situation where monopoly or oligopoly can benefit the society is the case of Amazon.com, when it was operating as a monopoly in the 1990s and when operating as an oligopoly after other online retailers ventured into retailing books.

Having been the only online retailer specializing in books, Amazon.com was able to provide its products at a cheaper price, thus benefiting the society (Tucker, 2010). The same case happens to present day, since there are only few online retailers dealing with books. This enables the few retailers to offer their products to the customers at a relatively lower price. Therefore, notwithstanding the fact that competition in the market is good for healthy market operations, lack of such competition can also benefit the society.

ReferencesNewman, N. (2011, March 14).The Case for Antitrust Action against Google. The Blog.Tucker, I. B. (2010). Microeconomics for today. Mason, OH: South-Western Cengage Learning.