monopoly

In economics, the domination of a market for a particular product or service by a single company, which can therefore restrict competition and keep prices high. In practice, a company can be said to have a monopoly when it controls a significant proportion of the market (technically an oligopoly). In a communist country the state itself has the overall monopoly; in capitalist countries some services, such as transport or electricity supply, may be state monopolies.

In the UK, monopoly was originally a royal grant of the sole right to manufacture or sell a certain article. In the Middle Ages, the crown granted trading or manufacturing privileges to specific companies or individuals in order to raise revenue or allow new industries to grow, such as the grant of privileges to develop new techniques in glass‐making. By the 16th century, the system was open to widespread abuse and was being used as a form of patronage to favour individuals who used the monopoly solely for financial gain, as when playing cards became the subject of a monopoly. Elizabeth I was forced to annul many of her grants after campaigns in Parliament in 1597, 1598, and 1601 but monopolies were revived under James I and Charles I. The system was extended to include the administrative powers of the crown, such as licensing alehouses. Monopolies were restricted to fostering economic innovation in 1624 and the Long Parliament abolished industrial monopolies, although they continued in the commercial field until after the Glorious Revolution of 1688.

The Monopolies Commission, now the Monopolies and Mergers Commission, was established in 1948 to regulate monopolies and investigate whether they operate against the public interest. The Fair Trading Act 1973 defines a monopoly supplier as one having ‘a quarter of the market’, and the Monopolies and Mergers Commission controls any attempt to reach this position (in the USA ‘antitrust laws’ are similarly used). The Competition Act 1980 covers both private monopolies and possible abuses in the public sector. A monopsony is a situation in which there is only one buyer; for example, most governments are the only legal purchasers of military equipment inside their countries.