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What is a Monopoly?

Monopoly and Unfair Business Competition – Indonesian Law

What is monopoly? Monopoly is the condition of market when there is only one provider of a particular service or product. The condition is very beneficial for the service providers because they have the freedom of lack market competitors. On the other hand, the customers did not have any variety for the available service or product and has to buy the service or product at the given facilities and cost. Similarly, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods.

Generally monopoly is viewed as person getting hold of market by implementing unfair means such as providing the service at much low cost than other service providers and causing the competitor to put up with heavy financial loss. This result in removing enemy’s subsistence from market and the monopolist again raises his service price to recover the losses. This was what Microsoft did and cases filed against its chairman.

What are the reasons monopoly occur? There are many reasons why monopoly occur, such as when a businessman get hold of resources for a product which other people cannot get, when people gets high skills that many people cannot have their kind or level of skill for that product or service, when the product gives excellent utilities and be the most user friendly product, when the product or service is newly invented and there are no technology available yet for that product or service except from that supplier, and et cetera.
There are two types of monopoly, the first one is legal monopoly and illegal monopoly.

The Legal Monopoly

Legal monopoly is also called as government-grated monopoly. It prohibits the production of particular service by citizens of its country. It does this by imposing fine and registering the case to be against law. The government preserves the venture for itself, consequently forming the government monopoly. Generally the Government does this in cases where the availability of that service may cause severe national and international threat such as arms and ammunition, currency, nuclear weapons etc. Such market policy is often called state monopoly. The example of government monopoly in Indonesia is done by BULOG, which prohibits other people to import hulled rice (beras).

Illegal Monopoly. Illegal monopoly is a situation where people (not the government) have the total control over a product or service. As a result, there are no other varieties or alternatives for people or the consumer to the monopolized product, which formed a price maker. This is could occur when a single firm be in charge of the total supply in a pure monopoly, it is able to apply a significant amount of control over the price by changing the quantity supplied.

The Example of a Monopoly Case

The former telecommunications provider in Malaysia, Telekom Malaysia Bhd (TM), viewed in doing monopoly given that the privatization rest Malaysia’s top telecom group and a fast-growing international player in the Asian region. The company persists to hold the de facto monopoly on the country’s fixed-line telecom market, with more than 4.6 million access lines. Adding up to its fixed line business, TM is also one of Malaysia’s leading mobile phones providers, a position hardened subsequently the company’s 2003 acquisition of Technology Resources Industry (TRI) and its Celcom mobile telephone unit. Celcom is a long-time leader in the Malaysian cellular market, with a market share approaching 30 percent. Besides that, TM also functions the country’s leading Internet provider.

Describing Fair Business Competition?

We can easily found competition in this world, for example, while animals fighting for their food. In relationship between the human beings, competition existed in many aspect of life. Business is one of the aspects. In business, it is really important to understand how the law of competition works.

Competition in Business means selling or providing similar products or services to the consumers among two or more business subject. Business competition is divided into two types, which are fair and unfair business competition.

In business, it is essential to do the competition open and healthy. Open and healthy competition is beneficial both for the consumers and for businesses. The basis for competition in business is if businesses compete in a transparent field, the businesses will grow and become more profitable. On the other hand, the consumers will more likely to pay lower price, better quality, and wider variant of products.

Unfair Business Competition

Is the competition between business subjects in production product or service, which is done dishonestly, impose disadvantage for customers and other parties, and also against policies. There are seven types of unfair business competition, which are fixed pricing, tied selling, abuse of dominant position, Resale Price Maintenance (RPM), Bid-rigging, misinterpretation in advertising, and Double Ticketing.

Commandment for Avoiding Unfair Business Competition. There are four prohibited activities for business subject (individual or business entity) to do based on Law no. 5 of 1999. The activities are monopoly (article17), monopsony (article 18), market authority (article 19,21), and conspiracy (article 22, 23, 24).