What Can Be Done By Government To Prevent Monopoly?

Government intervention in the economy can help to prevent the formation of monopolies.

This is necessary because the creation of a monopoly in any market can have a damaging effect on business, the economy and the consumer.

Legislation can be passed to help prevent the monopolisation of a certain area of the market, or the courts can be used to help scrutinise the practices of business.

How does government prevent monopolies?

• Regulatory legislation: Legislation can be passed in order to make the playing field slightly more level. This is beneficial for smaller business because it helps to prevent domination by larger corporations. Regulatory legislation can also be beneficial for the consumer: The more competition there is, the lower prices should be.

• Judicial review: The government can issue a judicial review, which means that courts can scrutinise (and if necessary prevent) any move by a large business to establish a monopoly. A court review will be completely independent of any political or business interests, and therefore could be more effective than a governmental decision, (which could be influenced by politics, the media or economic factors).

• Government actions: The government may look to prevent the monopolisation of a market in order to reduce prices and increase confidence. Lower prices mean that the public will have more money to spend on other commodities - which is beneficial for the economy as a whole. Government can do this without needing to pass a bill, as pressure can be applied on business in other ways.