Monopoly

Quick Definition

A monopoly is a market structure in which one company is the sole provider of a product or service, giving it the power to set prices, control supply, and block competitors from entering the market. When one firm controls the entire market, consumers pay more, get less, and have fewer choices. That is why the federal government actively prosecutes monopolies through antitrust law.

What It Means

Competition is the engine that keeps prices fair, quality high, and innovation moving. When companies compete, they must lower prices, improve products, and serve customers better to win business. A monopoly eliminates that pressure. The single seller can raise prices above competitive levels, reduce output to create artificial scarcity, and let product quality stagnate because customers have nowhere else to go.

Monopolies form through several mechanisms. A company might acquire all its competitors, creating dominance through consolidation. It might control a critical resource that no one else can access. It might benefit from government licenses or patents that legally prevent competition. Or it might build such strong network effects that no competitor can attract enough users to challenge it.

The economic harm of monopolies is measurable. When a monopoly restricts output to raise prices, it creates what economists call deadweight loss: transactions that would have benefited both buyer and seller never happen because the price is too high. Society loses the value of those unrealized transactions. The monopoly profits, but the economy as a whole is smaller than it would be under competition.

The United States has enforced antitrust law against monopolies since the Sherman Antitrust Act of 1890. The Department of Justice (DOJ) and the Federal Trade Commission (FTC) share enforcement authority. In 2026, antitrust enforcement has intensified significantly. The DOJ has revived criminal antimonopoly prosecution, and both agencies are scrutinizing acquisitions of nascent competitors and bearing down on Big Tech.

The most significant monopoly case of 2026 was the Live Nation and Ticketmaster verdict. On April 15, 2026, a New York jury found that Ticketmaster and its parent company Live Nation illegally monopolized U.S. live event markets. The jury agreed with the DOJ and several state attorneys general that Live Nation used its dominance in concert promotion and venue management to force venues into using Ticketmaster for ticketing, punishing venues that considered alternative ticketing platforms. The court has not yet determined penalties, but states are expected to seek a forced sale of Ticketmaster and damages. The verdict was a public rebuke of the biggest U.S. concert ticket seller, which had been criticized by fans and artists for years.

How It Works

How Monopolies Form

How Monopolies Maintain Power

Once a monopoly is established, it uses several strategies to prevent competitors from entering:

Exclusive contracts. The monopoly requires suppliers, distributors, or customers to deal only with it, cutting off competitors' access to distribution channels. The FTC's case against Surescripts, documented in a February 2026 FTC publication, illustrates how loyalty discounts and exclusive contracts in two-sided markets with network effects can deny rivals the scale needed to compete. When a platform connects two groups (like prescribers and pharmacies), exclusive contracts on one side prevent new platforms from achieving critical mass on either side.

Predatory pricing. The monopoly temporarily prices below cost to drive entrants out of business, then raises prices once the threat is gone. This is difficult to prove legally because low prices can also reflect legitimate competition.

Tying and bundling. The monopoly forces customers who want its monopoly product to also buy a second product, leveraging monopoly power in one market to gain advantage in another. Microsoft's bundling of Internet Explorer with Windows in the 1990s is the classic example.

Regulatory capture. The monopoly influences regulators to create rules that burden competitors more than itself, raising barriers to entry under the guise of consumer protection.

How Antitrust Law Responds

The Sherman Act Section 2 prohibits monopolization, which requires two elements: (1) possession of monopoly power in a relevant market, and (2) the willful acquisition or maintenance of that power through exclusionary conduct. Having a monopoly is not itself illegal. The illegal act is using exclusionary tactics to acquire or maintain it.

The FTC and DOJ use several remedies:

In 2026, the FTC signaled a potential shift toward accepting behavioral remedies in settlements, despite a longstanding preference for structural remedies. In May 2026, the FTC settled its investigation of 365 Retail Markets' acquisition of Cantaloupe with a behavioral remedy, requiring Cantaloupe to divest certain assets while imposing conduct restrictions. This marked a departure from the previous stance that behavioral remedies are difficult to enforce and lock the agency into monitoring individual firms.

Real-World Examples

Live Nation and Ticketmaster (2026)

The Live Nation verdict is the most consequential antitrust ruling of 2026. Live Nation is the largest concert promoter in the United States and owns Ticketmaster, the dominant ticketing platform. The DOJ and state plaintiffs argued that Live Nation used its promotion and venue management power to coerce venues into using Ticketmaster. Venues that wanted Live Nation to bring concerts to their city had to use Ticketmaster for ticketing. Venues that considered switching to a competing ticketing platform risked losing Live Nation tours.

The jury agreed, finding that this bundling of promotion and ticketing constituted illegal monopolization. The result was that fans paid higher ticket prices and fees, competing ticketing platforms could not gain market share, and artists had fewer options for touring and ticketing. States are now expected to seek a forced sale of Ticketmaster, which would break up the vertically integrated monopoly.

U.S. Anesthesia Partners (2026)

In April 2026, the FTC reached a settlement with U.S. Anesthesia Partners (USAP) to resolve a 2023 complaint alleging that USAP engaged in a decade-long scheme to consolidate anesthesia services in Texas. The FTC alleged that USAP systematically bought up nearly every large anesthesia practice in Texas in a roll-up strategy, creating a single dominant provider with the power to demand higher prices. The complaint estimated that USAP's dominance cost Texans tens of millions of dollars more each year for anesthesia services than before USAP was created.

The settlement requires USAP to restore a competitive market structure, undoing the roll-up that created the monopoly. This case illustrates how private equity roll-up strategies can create regional monopolies that harm consumers through higher prices, even without a single large merger that would trigger traditional antitrust review.

Natural Monopolies

Not all monopolies are illegal. Some markets are natural monopolies where a single provider is more efficient than multiple competitors. Utilities are the classic example: running two sets of water pipes or electric wires to every house is wasteful. In these cases, the government grants a legal monopoly but regulates prices to prevent the monopoly from exploiting consumers.

Public utilities, railroad tracks, and local telecom infrastructure often operate as regulated natural monopolies. The trade-off is that consumers get service from a single provider, but the regulator ensures prices remain reasonable and service quality meets standards.

Key Points to Remember

• A monopoly exists when one company controls the entire market for a product or service
• Monopolies harm consumers through higher prices, lower quality, and reduced innovation
• The Sherman Antitrust Act of 1890 prohibits the willful acquisition or maintenance of monopoly power through exclusionary conduct
• Having a monopoly is not illegal. Using exclusionary tactics to create or maintain one is
• The Live Nation and Ticketmaster verdict in April 2026 was the most significant antitrust ruling of the year, finding illegal monopolization of U.S. live event markets
• The FTC and DOJ share enforcement authority and have intensified antitrust prosecution in 2026
• Natural monopolies like utilities are legal but regulated to prevent price exploitation

Common Mistakes to Avoid

• Confusing market dominance with monopoly. A company can have a large market share without being a monopoly. Google dominates search with roughly 90% market share, but it faces competition from Bing, DuckDuckGo, and others. A true monopoly has no meaningful competitors. Market dominance alone is not illegal. The illegal act is using that dominance to exclude competitors through anticompetitive practices.
• Assuming all monopolies are illegal. Natural monopolies in utilities, railroads, and infrastructure are legal and often regulated. Patent monopolies on pharmaceuticals are legal and time-limited (20 years). Government-granted franchises for public services are legal. The illegality depends on how the monopoly was acquired and maintained, not on its mere existence.
• Ignoring network effects in digital markets. Two-sided platforms like payment networks, ride-sharing apps, and ticketing systems can tip to monopoly through network effects. The FTC's Surescripts case in 2026 showed how exclusive contracts in two-sided markets prevent competitors from achieving critical mass. When analyzing digital monopolies, always consider whether network effects create winner-take-all dynamics.
• Underestimating the role of private equity roll-ups. The USAP case showed that private equity firms can create regional monopolies by buying up dozens of small practices in a sector (anesthesia, veterinary services, dental) without triggering traditional merger review. These roll-ups can raise prices for consumers just as effectively as a single large merger. Regulators are increasingly focused on this strategy.
• Assuming antitrust enforcement is purely partisan. Antitrust enforcement has increased under both Democratic and Republican administrations. The Trump FTC in 2026 has continued cases initiated under the Biden administration, including the Live Nation prosecution. The bipartisan concern about market concentration transcends party lines, even when specific approaches differ.

Related Concepts

Monopoly is part of a spectrum of market structures. An oligopoly is a related structure where a few firms (rather than one) dominate the market, producing similar but less extreme effects on competition. Antitrust law is the legal framework that prohibits monopolies and anticompetitive behavior. Economic moats are the competitive advantages that can lead to monopoly-like power, including network effects, switching costs, and cost advantages. Competitive advantage is the broader concept of factors that allow a company to outperform rivals. Pricing power is the ability to raise prices without losing customers, which monopolies possess in extreme form. Network effects are a mechanism through which digital monopolies form, as each additional user makes the platform more valuable. Economies of scale can create natural monopolies when unit costs decline so much that one large producer undercuts all competitors. The FTC publishes enforcement updates and competition analysis at FTC.gov, and the DOJ Antitrust Division provides case information at justice.gov/atr.

Frequently Asked Questions

Q: What is the difference between a monopoly and an oligopoly? A: A monopoly has one seller controlling the entire market. An oligopoly has a small number of sellers (typically two to seven) who collectively dominate the market. In a monopoly, the single firm has complete pricing power. In an oligopoly, firms must consider competitors' reactions when setting prices, which can lead to either price competition or tacit collusion. Both market structures reduce consumer welfare compared to competitive markets, but monopolies are generally more harmful.

Q: Is having a monopoly illegal in the United States? A: No. Having monopoly power is not itself illegal under U.S. antitrust law. The Sherman Act Section 2 prohibits the willful acquisition or maintenance of monopoly power through exclusionary conduct. A company that gains a monopoly through superior products, business acumen, or historical accident has not violated the law. The violation occurs when the company uses its monopoly power to exclude competitors through tactics like exclusive contracts, predatory pricing, or tying arrangements.

Q: What happened in the Live Nation and Ticketmaster case? A: In April 2026, a federal jury in New York found that Live Nation and Ticketmaster illegally monopolized U.S. live event markets. The DOJ and state plaintiffs proved that Live Nation used its dominance in concert promotion and venue management to coerce venues into using Ticketmaster, punishing venues that considered alternative ticketing platforms. The court has not yet determined penalties, but states are expected to seek a forced sale of Ticketmaster and damages. The verdict could result in the breakup of the largest concert ticketing company in the United States.

Q: How do network effects create monopolies? A: Network effects occur when a product or service becomes more valuable as more people use it. A social network with 2 billion users is more valuable to each user than one with 2 million users. This creates a positive feedback loop: more users attract more users, tipping the market toward a single dominant platform. Once a platform achieves critical mass, competitors cannot attract enough users to challenge it, even with a superior product. The FTC's Surescripts case in 2026 addressed how exclusive contracts in two-sided network markets prevent competitors from achieving that critical mass.

Q: Can monopolies ever benefit consumers? A: In limited cases, yes. Natural monopolies in utilities and infrastructure can be more efficient than multiple competing providers running duplicate infrastructure. Patent monopolies incentivize pharmaceutical innovation by giving companies a temporary exclusive right to profit from their research investment. In these cases, the monopoly is either regulated (utilities) or time-limited (patents). Unregulated monopolies in competitive markets, however, almost always harm consumers through higher prices and reduced innovation.