Monopoly power

A pure monopoly is defined as a single supplier. While there only a few cases of pure monopoly, monopoly ‘power’ is much more widespread, and can exist even when there is more than one supplier – such in markets with only two firms, called a duopoly, and a few firms, an oligopoly.

According to the 1998 Competition Actabuse of dominant power means that a firm can ‘behave independently of competitive pressures’.  See Competition Act.

For the purpose of controlling mergers, the UK regulators consider that if two firms combine to create a market share of 25% or more of a specific market, the merger may be ‘referred’ to the Competition Commission, and may be prohibited.

Formation of monopolies

Monopolies are formed under certain conditions, including:

  1. When a firm has exclusive ownership or use of a scarce resource, such as British Telecom who owns the telephone cabling running into the majority of UK homes and busine