The following are the important measures to curb the growth and practice of monopoly.
1. Anti-Monopoly Laws :
As a reaction against trusts, mergers and combinations which were taking place in the U.S. in the nineteenth century, many Acts were passed to, curb them, The Sherman Anti-Trust Act of 1889, the Clayton Act and the Federal Trade Commission Act of 1914, the Robinson Patman Act of 1936, the Anti-Merger Act of 1950, all were meant to prevent monopolies and bring about fair competition.
In Canada the Combines Investigation Act has been, amended from time to time to deal with monopolies. lit the U.K. Monopolies and Restrictive Practices Act of 1948 and 1953 also aimed at regulating the monopolistic tendencies. Similar anti-monopoly laws have been passed in West Germany, Sweden etc. as well. In India the MRTP Act was passed in 1970, to control monopoly and restrictive trade practices.
Anti-monopoly laws broadly had the following objectives :
1. To prevent monopoly firms coming into existence.
2. To prevent unfair and restrictive practices.
3. To split monopoly combinations into independent firms.
Thus, as E.A G. Robinson holds anti-monopoly legislation may try-to prevent the creation of monopoly “by rendering illegal the devices which may be employed to drive competition out of the market”.
2. Price Control :
A charge against monopoly is that the monopoly price is higher than competitive price and monopoly output is lower than competitive output. So the government may fix competitive price to be followed by a monopolist. Thereby the monopolist may be compelled to raise his output so as to maximize profit. Efforts may also be made to compel monopoly concerns to produce larger output. Such measures intended to raise monopoly output, however, are not always successful.
3. Maintenance of Fair Competition :
Monopolistic tendencies emerge on account of either the absence or weakness of competing firms. The monopolist always tries to eliminate any real or potential competition., even by four and immoral means. So the government may pass legislation to maintain fair competition. Economists like Henry C. Simons think that the conditions making for restrictions on competition should be removed and competition should be established at any cost, Mr. L.K. Jha, Chairman, Economic Administrative Reforms Commission (EARC) emphasized the importance of creating a general environment of competitiveness, with a view to curbing monopolistic trends in India. Instead of a sellers market, we should develop a buyers’ market.
The government may try to support competitive enterprise through a discriminating tax system. To promote competition, the government may give certain special facilities to the small and cottage sector. For instances the government may decide to purchase all their requirements of stationery from the small scale sector. Small producers can effectively challenge the authority of the monopoly producers.
In spite of such measures, monopolies have succeeded in the past to undersell the products of their rivals and consolidate their position,
4. State Regulation of Patents :
In a capitalist country, patent laws often give rise to monopolistic, tendencies by limiting productive capacity, dividing the market and stifling new enterprise. So patent laws should be properly regulated by the state. Halm therefore comments “an important part of the government anti-monopolistic policy is, therefore, patent law which achieves its ends with a minimum of danger that the, patent may become can initiative to predatory litigation.
5. Purchasers Association :
The monopolist exercises his monopoly power because he operates in a sellers’ market. He hardly faces any competition. The bargaining strength of the monopolist is too high. The relative strength of the buyers, therefore, has to be increased, to match that of the monopolist. This is possible only when the purchasers would be organized and form their association to bargain from a position of equal strength. In many countries, therefore, the governments give special consideration for the promotion of consumers’ co-operation.
6. Imports :
In the developing countries, very often demand rose at a faster pace and new capacity came into being at a lower pace. So a buyers market develops. Existing sellers exercise monopolistic power and exploit the consumers. So imports could be liberally allowed, subject to, of course, foreign exchange position. The volume of imports should be such so that there would be no extra ordinary profits.
7. Nationalization or Government ownership of Monopolies :
Various measures suggested above may not be fully effective in curbing monopoly. Hence some suggest that the government should acquire the ownership of monopolistic industries. In fact, in case of public utility services, such as the railways, electricity, telephones etc. public ownership and management has become quite common, irrespective of the nature of the economic system. In the developing countries, the policy of nationalization plays a significant role. But nationalization implies substitution of private monopoly by public monopoly or state monopoly.
This does not amount to any real solution to the problem. There is no guarantee that public monopolies will be more efficient and superior to the private monopolies. ‘Concentration of economic power in the hands of the government may ultimately lead to the arosion of people’s freedom. In many western countries like Canada, France, Federal Republic of Germany, etc., public sector bodies also come under the purview of restrictive trade practices.
8. Well-behaved Big Business :
Some economists believe that as big firms become older their bahaviour will become more oriented towards public interest. They will be better behaved and eschew the excesses of their youth, J.M. Keynes has argued in favour of this view, ‘One of the most interesting and unnoticed developments of recent decades has been the tendency of big enterprise to socialize itself.
A point arrives in the growth of a big, institution at which the owners of the capital, the shareholders, are almost dissociated from the management with the result that the direct personal interest of the latter in the making of great profit becomes secondary.” The more conspicuous a certain concern is in public eye and the more vulnerable it is to public attack, the greater will be its chances of getting tamed and subdued. Such voluntary, self-imposed control, however, is very rare.
9. Publicity :
Prof. A.C. Pigou has suggested publicity as a means of controlling monopolies. “If all the facts regarding monopolistic agreements, or regarding rates of profit being made, are published for all to know and the monopoly is confronted with the need to justify its actions before the court of public opinion, inexcusable use of monopoly powers will often be curtailed.”
When monopoly is based in part or in whole on the goodwill of the customers, publication of its corruption, malpractices, offering of donations to political parties, price and output agreements, cut-throat competition, etc., is likely to ,have a sobering impact on the monopolist. He is likely to be more reasonable being apprehensive of public wrath. Moreover, by making known excessive margins of profit, potential competitors may be stimulated. So from time to time the state should publish statistics of various aspects of monopoly.