Monopoly is Not Just a Game: Governments Take Serious Action with Antitrust Legislation

Everyone envies the player who buys both Boardwalk and Park Place, owns every railroad company, and purchases hoards of obnoxious plastic houses because, inevitably, all will land on that double-hotel property and pay a pretty penny to a very smug, unremorseful owner. Clearly, Monopoly is a cutthroat game and it only yields one winner—it is definitely no "candyland". In fact, the board game, an American favorite, provides an accurate reflection of the kind of business monopolies that ruin competitive markets. Luckily, in real life such unfair actions don’t go unnoticed and governments interfere with money-hungry corporations in order to protect the economy. Dating back to the dissolution of the Standard Oil Company trust in the early 1900’s in the United States, antitrust laws such as the Sherman Act of 1890 have helped eliminate the threat of cartels and monopolies worldwide and are still used today.

In the past week international organizations made two influential antitrust decisions that will have major implications for the global economy. The first is the completion of the final draft of antitrust law in China and the latter is the European Union court’s ruling against the software corporation Microsoft. In the advent of these events I decided to explore the blogoshpere to discover what other scholars and professionals have to say about the matter. The first blog I found, Center for International Finance and Development, is the University of Iowa’s College of Law blog that covers current events in global finance. The post I analyzed, “China Passes Anti-Monopoly Law”, comments on the new Chinese laws and speculates about their future impact on international business and investment. The other blog I discovered, The Crucible and Column, focuses on modern industrialism issues. In the article “EU to Microsoft: You’re Too Good”, author and market manager Kendall Justiniano criticizes the EU’s recent legal decision. After reading these articles I commented on each, offering my own analysis of the situation and posing scholarly questions. Below this introduction, my comments and the links to these blogs can be found.

Comment:

While I commend China for taking action against monopolies and supporting a competitive market, your article encouraged me to also explore the negative impact that China’s new antitrust laws will have on international trade and investing. You stated that “some foreign investors worry the government may use the new law as a basis for protectionism,” and I find myself fearing this same result. China’s history of isolationism does not help to abate these fears either—their disregard for foreign interaction started with the closure of its borders in the 1500s under the Qing Dynasty and continued into the 20th century during Mao Zedong’s communist regime. Perhaps the examples of isolationism I just described are not exactly protectionist policies, but their underlying premise is the same: China does not seem to favor or welcome foreign involvement. Furthermore, these new antitrust laws which are comprised of “vague” legislation may allow the Chinese government to arbitrarily prohibit “unpopular foreign investment” and this could be detrimental to many international businesses. On a different note, you also report that the new policies “will eventually do away with government monopolies”. However in Article 7, the law provides that certain state-owned industries will be “protected by the state”. If this law stands, how do you foresee the abolishment of these government monopolies and what timeline do you predict for this event?

Comment:

After reading your article and researching antitrust laws over the past week, I too have concluded that the allegations and final ruling against Microsoft are unreasonable and have major implications for the business world. Although I fully support antitrust legislation when it effectively curbs monopolies, I see it as an impediment to market growth when it is excessively applied. If Microsoft was successfully sued for providing (or “bundling” in the words of the opponents) their customers with a media player option in their operating system, then corporations worldwide need to take note. Apparently the promotion of one’s product over that of the competition’s is now grounds for suing. Apple iTunes will have to be compatible with all MP3 players, Gillette razors will have to hold every brand of blades, and the list goes on. Instead of promoting fair market conditions, these kinds of rulings will only prohibit capitalism. In your article you suggest that the only solution to this problem is “laissez faire” economics because “monopolies which hurt the consumer cannot exist for long in a free economy where proper rights are enforced.” Although I agree that laissez faire is a logical answer, I’m curious how you propose countries to successfully enforce these “proper rights” in the absence of anti-trust legislation. Is there a more effective solution on the horizon?

Out of the Darkness, into the Light: Africa's Quest for Illumination and Progress

Viewed from space, the image of the earth illuminated at night is truly astounding. Twinkling lights scattered across the globe cluster in brilliant patches in the Americas, Europe and Asia while the remainder of the unlit lands shirk in the shadows. It is a striking contrast that, at first glance, may be attributed to population variations throughout the earth—the densely populated areas appear to produce tremendous amounts of light while the uninhabited regions remain dim and starkly bare. While this theory can generally be considered true, one blatant exception remains.

The African continent, home to nearly one billion people, shows almost no electric activity when compared to other similarly inhabited areas. As one of the most populated regions in the world, Africa should be a beacon of light, yet is as dark as the all-but empty Siberia and Antarctica. The visible lack of electricity gives testament to Africa’s severe poverty and technological deficiencies; currently, only the wealthy areas of South Africa, Egypt and Morocco show any sign of civilization. However, this grim situation has recently caught the attention of the international community and Sub-Saharan Africa is on the brink of a major and deeply needed change.

The World Bank, a global organization that provides financial and technical assistance to developing countries, has partnered with the International Finance Corporation (IFC) to launch a revolutionary program that will provide modern lighting to 250 million people in Sub-Saharan Africa. The initiative, aptly titled Lighting Africa, will enlist the help of businesses, universities, governments and organizations worldwide to develop market conditions for the “supply and distribution of new, non-fossil fuel lighting products” throughout rural and urban Africa. Although the project seems very ambitious, it is definitely manageable. Enabled with a well-organized, realistic and collaborative plan the international community will effectively guide Africa not only out of darkness, but poverty as well.

The cooperative nature of the Lighting Africa initiative will be a major contributor to its success. Partnership amongst various African governments, global businesses, and Non-Government Organizations (NGOs) will ensure that both innovation and regulation are given equal attention. The entire project is based on a competition that will award grants to organizations that submit the best proposals for the design and delivery of the low cost, environmentally-friendly lighting. Since the contest’s commencement on September 4, 2007, more than 350 companies, from African-based small businesses to multinationals such as Philips, have expressed interest in participating. The project’s success depends heavily on the intellectual contributions from these private sector participants. Furthermore, the competition encourages efficiency and cost effectiveness, two characteristics that bureaucratic organizations and slow-responsive governments often lack when addressing problems. Nevertheless, government and NGO involvement will definitely play a vital role in this large-scale project. The Lighting Africa initiative will be a lengthy process with the final stages of completion set for 2030. Although this twenty-three year time frame is realistic, it is also daunting and will require firm leaders to enforce deadlines and maintain focus. This leadership role will be allocated to governments and organizations that will help regulate, assist and motivate the participants. These actions, coupled with those of the private sector, will help to ensure the completion and success of the initiative.

Perhaps the most important characteristic of the program, however, is the role of the free market in the process. Recent debate over the ineffectiveness of simple monetary aid provides insight on how the World Bank’s campaign may provide the best solution to eliminate poverty. In a book published in 2006 titled The White Man’s Burden, New York University economics professor William Easterly argues that development aid cannot work because it is unable to replicate the complex market mechanisms that make countries rich. Another supporter of this argument, Gurcharan Das, former head of the multinational sector of Proctor and Gamble, also claims that economic growth can only be achieved through the free market when competition and enterprise are allowed to flourish.

Of course there are opponents who argue that more aid, not less is actually needed. Jeffrey Sachs, an economist involved with the United Nation’s Millennium Goals argues in his book, The End of Poverty, that the amount of developmental aid that actually reaches the poor is too small to make a difference. The average per capita amount of aid given in 2002 was only $12—hardly enough to buy anything. While Sachs makes a valid point by suggesting that more charity be given to the poor, he avoids addressing the real issue: in order to escape perpetual poverty and reliance on others, African states will need to learn to support themselves.

So how can African nations get the training they need to become economically independent? The answer can be found in the Lighting Africa program that gives African governments and businesses the opportunity to experiment with the lighting market. Surprisingly, even the “energy poor in Africa” spend about $17 billion a year on expensive, inefficient lighting sources such as kerosene. For these consumers there is a need for more affordable and safe lighting materials, indicating the presence of a largely untapped market for modern lighting products.

In addition to simply servicing customers, the new market created through the Lighting Africa program will boost local commerce and investment, create jobs and improve the overall quality of life. Productivity levels will rise with the advent of longer workdays, health services will improve with better lighting, students will be able to study longer and safety and security will be enhanced. If the World Bank’s Lighting Africa initiative proceeds as planned—focused on bolstering the free market—Africa may soon be taking an independent step out of the darkness and into economic stability.