One of the critical issues with legal monopolies is that once a company receives a mandate or license to operate in a particular market or industry, it eliminates consumer choice and alternatives. At the same time, it can reduce the willingness of companies with legal monopolies to innovate and offer better products and services to consumers. In addition, it can also exacerbate gender inequality. Due to the decline in demand for letters, many courier companies have diversified into other areas of activity such as banking. In America, the United States Postal Service (USPS) has a legal monopoly that makes it difficult to compete with reduced costs and higher quality. In the UK, the postal system that once belonged to the Royal Mail Group became private in 2015. Other European countries have also privatized their postal systems. A legal monopoly, a statutory monopoly or a de jure monopoly is a monopoly protected by competition law. A statutory monopoly may take the form of a State monopoly if the State owns the means of production in question, or a State-granted monopoly in which a private interest is protected from competition, such as the granting of exclusive rights to offer a particular service in a particular region (e.g. patented inventions) while agreeing to regulate its policies and prices.  This type of monopoly is generally compared to the de facto monopoly, which is a broad category for monopolies that are not created by the government. Now let`s review an example that helps us better understand legal monopolies. Let`s say Joe owns and operates a company that makes wind turbines in a very remote area.
Currently, we need to find a company in this area that can provide homes and surrounding businesses with much-needed electricity. Joe`s Company is the only company that offers this type of service. There is no competition that offers a replacement for electricity. Let`s look at some of the examples of a legal monopoly: Microsoft has a monopoly on operating system software for IBM-compatible PCs. Microsoft was able to use its dominant position in the operating system market to exclude other software developers and prevent computer manufacturers from installing non-Microsoft browser software to run on Microsoft`s operating system software. In particular, Microsoft unlawfully maintained the monopoly of its operating system by including Internet Explorer, Microsoft`s internet browser, with each copy of its Windows operating system software sold to computer manufacturers and by making it technically difficult not to use its browser or to use a browser not originating from Microsoft. Microsoft has also provided free licenses or discounts for the use of its software, which has discouraged other software developers from promoting a non-Microsoft browser or developing other software based on that browser. These measures have hampered computer manufacturers` efforts to use or promote competing browsers and have discouraged the development of add-on software compatible with non-Microsoft browsers. The General Court found that, although Microsoft had not guaranteed all the opportunities for competition, its measures had prevented competitors from using the least expensive means to take away market share.
To settle the matter, Microsoft agreed to stop certain conduct that prevented the development of competing browser software. For a monopoly to be legal, the government must be involved. This is often done in the form of price regulation. Now let`s look at what a legal monopoly is. Similar to a general monopoly, there is only one supplier of a good or service. However, a legal monopoly receives government support and rights, either nationally or in a specific region. In exchange for government support and rights, the government then has the right to supervise and regulate all activities, tariffs, and policies. Throughout history, successive governments have imposed legal monopolies on a variety of products, including salt, iron and tobacco. The first iteration of a statutory monopoly is the Statute of Monopolies of 1623, an Act of the English Parliament.
Under this Act, patents evolved from letters patent, which are written orders from a monarch that confer title on an individual or company. The prevailing idea behind the introduction of legal monopolies is that if too many competitors invest in their own supply infrastructure, prices in a particular industry would reach unreasonably high levels. Although this idea is justified, it does not last indefinitely, because in most cases capitalism ends up triumphing over legal monopolies. As technologies advance and economies evolve, the rules of the game tend to stabilize on their own. This reduces costs and reduces barriers to entry. In other words, competition ultimately benefits consumers, more than legal monopolies. The production and sale of alcohol is also a common legal monopoly, as you must have a government license to do both. Similarly, despite the prohibition of dangerous drugs such as heroin, there are legal monopolies that control their production and distribution for legitimate scientific purposes; The legalization of marijuana in the United States is currently somewhere in between.
Some examples of legal monopolies in the United States are the USPS, which holds a legal monopoly on mail transportation, the National Football League and Major League Baseball are legal monopolies. Gambling regulation in many places implies a legal monopoly over national or state lotteries. While private operations with companies such as racetracks, off-track betting sites and casinos are allowed, authorities are only allowed to allow one operator. Right now, you may be wondering what exactly a legal monopoly is. Well, it is first important to explain the general term monopoly. A monopoly is a company that offers a good or service that has no narrow substitute. It exists when there is only one supplier and there is a barrier that prevents new companies from entering the market and creating competition. A legal monopoly is a mandate given by the government to a sole proprietorship to operate in a particular sector or industry with absolute power to produce and supply goods and services, as well as the assurance that no other enterprise than them will participate in the enterprise. It also assists the government in regulating prices in this sector. Explains how government measures to create legal monopolies create a balance between prices and control supply and demand. As mentioned earlier, a legal monopoly eliminates a number of disadvantages of a monopoly.