Abuse of Dominant Position

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Abuse of dominant position

Second part

Demonization of dominant position, an exaggeration ?

Using the word of ''demonization'' may seem irrelevant, but makes sense from that moment on we consider everything that has been said before, how the United States as well as the European Union are condemning it, also the important amount of lawsuits concerning this subject. There is indeed nowadays a kind of a propaganda against too important companies, propaganda that comes straight from the States themselves. Nonetheless, if we take a look at the not so distant history of those States, we can easily notice that this demonization hasn't always existed. For instance, the British East India Company was given by the British Empire itself, through a Royal Charter, a monopoly upon the trade between the British Empire and it's colony, India. This company has largely contributed to extend the British Empire power. An interesting example is also the famous company, Standard Oil, founded by Rockefeller, which was till 1911 dominating the oil industry in the United States. Although it has been dismantled through the federal antitrust law, one can't deny that this company contributed to lower the prices of oil together with a modernization of the oil industry.

Satirical cartoon, 1904 - Standard Oil as an octopus, showing the importance of this “demonization”, also strongly evocative of Cold War propaganda.

Though, this diabolization is a fact. Google, Microsoft, Apple, are usually presented as huge companies aiming to earn more and more money thanks to defenceless consumers, whom choices are nullified by those leading companies. Is nonetheless the existence of leaders in dominant position on the market such a bad situation ? I will try to show you that this can be positive, or at least not so negative, and debatable.

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Schumpeter

First of all, as a theoretical introduction, I will mention the theories of Schumpeter. Defending the existence of dominant position on the market is quite a tough position, and only a very few people do or did. Amongst them is the most famous economist, one of the most influential of the 20th century, Joseph Schumpeter and his Growth Theory. According to him, the dynamics of Capitalism are lead by innovation, by the capacity for companies to get into a position of monopoly as a reward of their efforts both in the economic and technical perspectives. Schumpeter puts the entrepreneurs in the very centre of his theory, thanks to the ''Unternehmergeist'', which corresponds to the spirit of entrepreneurs, insides the companies. Those economical agents drive innovation (thus the capitalist system) through companies who are powerful enough to invest, to research and develop themselves. Therefore, holders of monopolies will exploit and create innovative activities in order to continue their position. Those monopolies are, according to him, necessary to develop new products and in a larger way, to develop the economy. This is what we call the Schumpeterian assumption.

Thus, the State (as well as the European Union …), shall not struggle against monopolistic and dominant position : The existence of dominant position is a just reward to companies and firms labour in undertaking. Moreover, according to him, the main innovations always came not from companies subjected to vehement competition, but from companies that were in a dominant position. This he explained by the fact that only dominant companies can afford to fund research activities, hoping to maintain their technological power, thus their dominant position. He even goes further in his theory, telling not only that the State shall not fight dominant positions, but per contra support them. This support can be held in legal way, granting patents to innovative companies in order to protect their innovations and their monopolies. Schumpeter describes for instance Henry Ford as the model of entrepreneur, especially...
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