Monopoly with Competition

Can a company be monopolistic even though it does not exclude competition? Last week the U.S. Supreme Court said yes. In a unanimous decision which greatly broadened the definition of monopoly, the Court upheld the conviction of the Big Three cigaret companies (American, Reynolds, Liggett & Myers) and 13 top executives on antitrust charges.

The Big Three had contended that no monopoly existed. Reason: during the period covered by the indictment, competitors had increased their share of the cigaret market. But the court ruled that the mere presence of competition did not mean that there was no monopoly, as long as the defendants had conspired to get or keep the power to exclude competition and intended to use that power.

There was no direct documentary evidence to prove the existence of a conspiracy. But there was circumstantial evidence. Examples: the companies raised their prices simultaneously; their tobacco buyers did not bid against each other.

Now the Big Three and the individual defendants will have to pay fines of $15,000 each. But no one was naive enough to believe that this would loosen the hold of the Big Three on the cigaret industry.

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