The most important condition for the development of the economy is the presence of high-quality and healthy competition. Situations when some organizations strive to monopolize their activities are unacceptable. In every developed country, an antitrust policy should be pursued - the work of state authorities to prevent the concentration of individual possessions and powers in someone else's hands.
Monopoly concept
The antitrust policy of the state is aimed at preventing and preventing the emergence of monopoly enterprises. Monopoly is a large organization that controls the entire production and sale of certain products. Due to the monopoly enterprise in the relevant market area there is completely no competition.
Monopolies in world history were considered the norm. The fact is that in most countries, production was controlled by the state. Often, either the power itself or some of its close associates formed large organizations that occupied the entire market. As a result, economic development proceeded slowly, there was no competition, and the state retained the planned form of the economy.
The first notable opponent of the monopolies was the English economist Adam Smith. He declared the inadmissibility of seizing any sphere of influence, since any such action can be regarded as a factor threatening the economic development of the state. Only the support of healthy competition and competent planning of antitrust policy will effectively solve the problem of stagnation.
This opinion is shared today by most experts. Next, we consider the forms of restriction of competition and the ways to conduct antitrust policy.
History of Antitrust Regulation
What is characteristic for the development of competition in the economic sphere of Russia? Attempts to create antitrust policies and antitrust laws were made as early as 1908. Then a law was introduced in the Empire, very similar to the Sherman’s American position. As one would expect, most Russian entrepreneurs reacted negatively to the law and did not accept it.
In the USSR, laws on antitrust policy and competition support were not adopted in principle. A planned economy dominated the country, and therefore there was no question of any type of entrepreneurship. The state independently ensured a reduction in resource costs and production costs to an extremely low bar. The consequence of this policy was the deepest stagnation in the national market of the USSR.
A high level of monopolization remained after the collapse of the USSR. State monopolies through accelerated privatization turned into joint stock companies. However, all the shares were bought not by groups of people, but by specific people. As a result, enterprises were concentrated in the hands of single owners.
In 1991, the Law on Competition and the Goals of Antitrust Policy was adopted. It consolidated the foundations of public policy aimed at combating competition restrictions. The principles and methods of such a struggle will be described below.
Monopoly Suppression Policy: General Description
The state is obliged to protect a competitive market. Perhaps this is only possible through a high-quality antitrust policy. Individual authorities should apply a number of economic, social, legal, tax and financial measures. Only acting in different fields will the state be capable of the high-quality implementation of procedures for the prevention and suppression of competition restrictions.
The problem of monopolization has a certain duality. In conditions of increased concentration of production, they tend to decrease, which leads to higher prices and a crisis. At the same time, concentration leads to mass production, and as a result, to lower production costs and save basic types of resources.
The state, the purpose of which is the conduct and development of antitrust policy, must take into account all the features and forms of influence of monopolies on the national market. For example, caution should be taken when limiting natural monopolies.
The fight against monopolies contributes to economic, technical and social progress. Here you can draw a simple parallel: the elimination of monopolies leads to increased market competition, which leads to an increase in supply and demand. Prices are going down, the social standard of living is rising.
Monopolization Factors
Despite the prohibitions established by law, the market naturally tends to monopolize. Many factors and objective reasons contribute to this.
The first reason is the desire of organizations to acquire superprofits, which is possible if there is no competition. This is the most complex and common factor. It is due to the very nature of man - namely, the desire to enrich and receive a large amount of material wealth.
The second condition for striving for monopolization is connected with the establishment by the government of barriers and borders for the entry of individual organizations into a specific industry. These are procedures such as certification or licensing. It would seem that in what way legal procedures for registering enterprises can interfere with the implementation of the state antitrust policy? Experts argue that the presence of barriers leads to the emergence of more monopolies. Not all enterprises gain legal force, which is why the existing minimum strengthens its position. The problem can be solved by weakening the registration procedure.
The next condition for the increase in the processes of monopolization is the foreign economic policy of a protectionist nature, aimed at protecting domestic producers from foreign competition. Thus, foreign goods may be subject to large duties or their import into the country is limited.
Increasing trends towards the merger of organizations or the takeover of one enterprise by another constitute another factor of monopolization. Such actions have their names - for example, a syndicate, a cartel, etc. The forms of monopolies will be discussed a little later.
Thus, legislators who determine the state antitrust policy should take into account all of the above factors. Only awareness of what exactly needs to be fought will help to form a high-quality economic course.
Types of Monopolies
For a better understanding of how exactly the state antitrust policy should be implemented, a general description of the main types of monopolies should be given.
The first classification divides large enterprises that restrict competition into artificial and natural. Everything is simple here: if a monopoly was formed on its own, without the intervention of representatives of the organization, then we are talking about the natural nature of its composition. Artificial formation implies the presence of a human factor. In this case, a particular person initially had illegal plans to limit competition.
There are much more artificially created monopolies than natural ones. This is facilitated by a number of factors, which have already been described above.
There are other classifications according to which the following types of monopolies exist:
- State or legal. They are, as a rule, legal, since the state can concentrate individual spheres of production in their hands. In Russia, this is the defense industry.
- Pure monopolies. Occur when the manufacturer in the market alone.
- Temporary monopolies. May be associated, for example, with scientific and technological progress.
- Absolute monopolies. They are determined by the absolute control of one company over the sale of products and production.
An interesting subspecies of monopoly is monopsony. This is a kind of restriction of individuals in purchasing power - in other words, the buyer’s monopoly. An obvious example of monopsony is the purchase of military equipment by the state.
There are three main forms of monopolies:
- Trust is an association of enterprises deprived of independence. The trust presupposes the dominance of a large enterprise over its constituent entities.
- Syndicate - an association of enterprises that maintain independence. It is associated with the purchase of products and their subsequent marketing.
- A cartel is the same syndicate, but associated with hiring labor and marketing products.
Despite the similarity of all the indicated forms, each type of monopoly has characteristic features and features. When regulating antitrust policy, this should be taken into account.
Antitrust Regulation
So, how is antitrust policy implemented? The state structure has a whole plan for conducting activities aimed at developing healthy competition and suppressing monopolistic trends.
The first step in regulation is to determine the type of monopoly. The special authority must determine the shape of the illegal facility and its features. If we are talking about the merger of enterprises, the state uses the method of artificial separation. So, some cartel will receive a subpoena, where it will already deal with the payment of fines, self-liquidation or reorganization, the search for the perpetrators, etc.
There is no Ministry of Antimonopoly Policy in Russia. Instead, the FAS - the Federal Antimonopoly Service - operates. It is on this body that most of the powers are assigned to eliminate and prevent processes aimed at restricting competition.
Antitrust Models
The fight against artificial restriction of competition can take place in two forms: American and European. The first type of struggle is much tougher and more stringent. The fact is that in the framework of the American model, monopoly is prohibited in principle. Not even a single occurrence of restriction of competition is allowed. In other words, the market has complete freedom. Everything is slightly different with the European model. Single monopolies are allowed here, but they are strictly monitored.
America has the famous antitrust law. It is based on the provisions of the laws of Clayton and Sherman. These acts completely prohibit the incorporation of enterprises into a trust; accordingly, any secret agreements or actions restricting competition in production are not allowed.
In most European countries, monopolies are fought by applying the provisions of the 1957 Rome Treaty. Monitoring of compliance with the law is carried out by the European Commission, which issues permits for the creation of temporary monopolies in individual industries. The Treaty of Rome applies to the countries of the European Union, as well as to South Africa, Australia and New Zealand. Russia did not ratify the document, but established very similar rules in the economic sphere.
Price regulation
An important role in the conduct of antitrust policy in Russia is played by the price regulation procedure. It is understood as the formation and change by the state of prices for products manufactured by the enterprise. Price regulation aims to combat the monopolistically high cost of goods.
The entire process under consideration is based on two important principles:
- breakeven;
- increase in production efficiency.
The first principle is implemented by setting prices at the level of average costs. As a result, a monopoly brings neither profit nor loss.
The principle of production efficiency involves setting the price of goods at the level of marginal cost of the monopolist. This will ensure maximum production.
The state regulates pricing. Thus, the creation of monopoly prices — excessively high or excessively low — is not allowed. High prices are set for extra profit. Excessively low prices limit access to the industry of competing enterprises. There is also the concept of monopsonic price. This is the establishment of the dominant market consumer enterprise of the value that reduces the level of costs due to suppliers.
Pricing in itself does not indicate an organization’s desire to limit competition. However, it is the pricing procedure that is the most important area of antitrust policy.
Competition support
Competition is the main enemy of monopolists. Restriction of healthy market competition is the main goal of organizations that want to establish only their possessions in a particular area. The state must maintain competition. In antitrust policy, this is a priority area that determines the development of industrial capacities, the production of goods, pricing, etc.
State support for competition should be implemented in the following areas:
- creating and maintaining favorable conditions for the emergence and development of successful competition in the market;
- supporting competition through the formation of new laws;
- increasing the pace of scientific and technological progress, that is, reducing the time for developing and disseminating the latest technologies in production.
The last point is especially important. It is scientific progress that allows us to organize effective competition. Antitrust policy in the Russian Federation, according to many experts, is implemented rather poorly. State power often does not pay any attention to large monopolists, and sometimes even supports them. That is why all hope remains on technological and scientific progress. Thanks to these phenomena, competition will receive its natural development.
Taxation
The last way to combat competition is taxation policies. It is also regulated by the authorities, namely state tax inspectorates. In order to reduce profits earned by dominant enterprises, the state sets a number of additional taxes. By the nature of the collection, they can be divided into two main forms:
- Lump-sum tax. It does not depend on the volume of production and is only part of the constant monopoly costs. We are talking, for example, about the price of a license for the exclusive right to engage in one or another activity.
- Food tax. It is charged for each unit of production and is part of variable monopoly costs.
Both types of tax reduce profits from production volumes. At the same time, they increase the amount of finance received in the state budget. All this has a socially useful orientation.
Economists argue that lump-sum tax is more efficient and more beneficial. The fact is that the commodity type of taxation changes the optimal prices and the volume of output. As a result, the company reduces the amount of manufactured goods, and the price rises at this time. This phenomenon significantly exacerbates the economic damage to consumers.
A lump-sum tax increases the level of average and fixed costs of monopolists. The value of marginal costs does not change, and therefore the company is kept from changing prices to the volume of production. The state, unfortunately, does not take consumer interests into account when imposing additional taxes on monopolies. This problem also needs to be addressed.