In o ne of the earliest monopolization cases to search the Supreme Court, the government alleged and the Supreme Court accepted that standard oil had employed the following techniques on its way to achieving this market position:

1. Local price wars to drive rivals out of business or to reduce the price paid by standard oil for a merger agreement.
2. Purchase of rivals for the purpose of dismantling their refineries and taking them out of production.
3. Negotiation of preferential rebates, not available to competitors, from rail road companies.
4. Control of pipelines needed to ship oil from oilfields to refineries.
5. Operation of bogus independent companies, actually controlled by standard oil, to maintain an appearance of competition.

Courts were bound by the language of section 2, which as we have seen condemns

Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several states, or with foreign nations . . .

This does not condemn monopoly. Our study of strategies that create dominance shows that monopoly, within the meaning of the antitrust laws, can arise as the result of the normal process of competitive rivalry. A firm way achieves a dominant position by developing a low – cost method of production. Alternatively, it may become dominant by developing a new product, which drives rivals from the market because it better satisfies consumer needs the government might even grant the firm a legal monopoly on the new product in the firm of a patent. It would make a no sense to condemn monopoly, under laws designed to promote competition, if monopoly can sometimes result from competition. What section II prohibits is monopolization, the act of acquiring a monopoly. We now trace the cases in which courts made the distinction between legal and illegal acquisition of monopoly.

Peter Rossi works in his family’s fast food shop during and after his school years and is acquainted with the personal involvement and many tasks. Elinda Rossi has retail experience the children, ages 13 and 15, can assist with the business when not in school. Casual assistance will be needed during peak hours and for occasional work relief.

The business purchase price of $95,000 includes sale of the equipment which is two years old, the goodwill and the location lease which is registered. It is proposed that the Rossi’s savings of $25,000 be combined with the $30,000 given to them by parents and a bank loan of $40,000 over 5 year to buy the business. Rossi’s have a further $10,000 which will be used for operating funds during startup as some additional equipment is needed.

The forecast revenue and costs indicate that the bank loan can be re-paid on a $1,000 per month basis leaving sufficient income for the family and wages for casual labor. The goal of the venture is to build the business over a 5 year period and sell it with increased goodwill before the present 10 year lease is too close to re-negotiation; 8 years remain on the lease at present. It is estimated that the value for re-sale in 5 years will be substantially in excess of the $95,000 purchase price, the bank loan will be paid off and a modest income will have been obtained by the family during the period. At this point, a new enterprise will be considered possibly a local restaurant or retail venture.

Savings accumulated by the Janes permit investing $20,000 in the business as Director Loans and to provide some operating funds. As presently employed the combined incomes of the Janes is in excess of $55,000 per annum. Net income has been directed towards saving for a business opportunity and removing their home mortgage. Reduced salaries will be taken from the new enterprise, $25,000 and $15,000 respectively while anticipating paying the single staff employee a salary of $18,000 and allowing $2000 for direct employee overhead costs.

Operational figures reveal that the venture will not become profitable until the second year and external financing will be required. Anticipating capital value accumulating in the business and payback of Director’s Loans in a reasonable operating period, the venture is considered viable. An overdraft facility of a maximum of $15,000 will be requested from the bank using the personal home property as security.

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