Antitrust policies are a threat to companies welfare; most of these laws are detrimental to monopolistic firms. This is due to the extensive market power that they dominate over a given sector in the economy. Most companies have suffered antitrust penalties due to their dominance in the market. This causes a negative effect to the statement of financial position of such firms. Microsoft is one of the best examples of companies that were subjected to antitrust laws. Microsoft is a monopolistic firm in the computer software sector. It deals with manufacturing and selling of computer chips to all the computer owners on the globe (Carstensen, 2012). The firm can regulate the prices of these computer chips to the best of their interest.
Reason why the firm was investigated
Microsoft Corporation was examined due to its continued market dominance. This was subject to its extended market power at a global perspective. The firm phased out all the new market entrants and ensured the market dominance was at its peak. New entrants into the market encountered aversive marginal cost that was associated with the deep investment. This cuts down the market players of the new entrants and retains the monopolistic firm to enjoy the market freedom. Microsoft was investigated due to this inefficiency that it caused the new entrants. The management was concerned with extending the business potential and ensuring that the firm achieved heavy influx of profits.
Microsoft was subjected to some pecuniary costs. In relation to the Sherman law; any firm that prevents another company from enjoying the business freedom needs to be fined heavily. The firm was fined due to this unscrupulous behavior. This reduced its significance in the business. New entrants like; Ubuntu, Linux mint among others had the opportunity of gaining new access into the market (Sadjowska et al, 2013). Due to the dominance of Microsoft, price was at its helm. The presence of the new entrants ensured that prices of these computer software’s had to be fixed to accommodate all the market players. Price fixing did reduce the completion significantly and moved from imperfect competition to perfect competition.
Impact of monopolies on the society
Monopolistic firms are too detrimental to the welfare of the society. They exhibit major market dominance and this cause decreasing returns to the consumer’s consumption circles. Monopolies set out their own prices without paying attention to the level of income of the consumers, for instance; the poor, middle income and the rich. This affects the poor in case the price is set at a higher level. This occurs especially when consumers are classified as one, without necessarily paying attention to their different classes and roles in the society. Therefore, monopolistic firms should always pay attention to the welfare of the consumers to ensure that efficiency is at its peak.
Example of a monopoly that benefits the society
All postal services in every economy across the globe play a significant role in its monopolistic roles. They ensure efficiency in service delivery compared a case where this sector was oligopolistic in nature. Postal corporations set out a price that is efficient to all the consumers irrespective of the class that they own in the society.
Antitrust laws need to be effected in a case where s firm behaves contrary to the welfare of the consumers. Efficiency should also be ensured when these laws are applied.
Carstensen, P. C. (2012). Introduction. Antitrust Bulletin, 57(4), 655-665.
Sadjowska, M., & Willems, B. (2013). Power Markets Shaped By Antitrust. European Competition Journal, 9(1), 131-173.