Saturday, May 17, 2014

Case against Monopolies-1630 (Queen’s grant of Playing Card Importation Monopoly) case brief

Case against Monopolies-1630 (Queen’s grant of Playing Card Importation Monopoly)
  • Merchantile economy controlled by the King. Predominant form of market structure. Parliament enacted a prohibition against the importation of gaming cards. Queen granted to Darcy the exclusive right to import playing cards. Allen argued that this grant was unlawful because it conflicted with Parliament. 
  • Court struck down the grant claiming that it was contrary to Parliament. More importantly they also found that the grant of the exclusive right to import these cards was contrary to the common law because (it was a monopoly):
    • Because it led to higher prices (modern economic theory affirms this)
    • Goods would be of inferior quality
    • It would lead to unemployment
    • Parliament act was to protect jobs from foreign competition. 
  • Arguments against Parliament and court’s point of view-
o       One argument is that if you forbid foreign companies to sell their goods in our country, then they won’t let us sell our goods in their countries.
o       Adam Smith “comparative advantage”, If each nation is allowed to freely trade without antitrust regulation, then each nation would specialize in its advantages. I.e. these may result from barriers to entry for automobiles, geography, etc.

1 comment:

  1. Case of Monopolies
    (England 1630)—“naked restraint of trade”

    Facts: Battle between Queen and Parliament. Parliament enacted law proscribing importation of playing cards. Queen gives exclusive rights to trade in playing cards to Darcy—essentially conferred patent right upon Darcy.

    Issue: Was the patent granted by the Queen legal?

    Holding: No. Court declared that the patent was invalid. Court declared that a monopoly was against the common law and pernicious to public policy: (1) prices were likely to increase, (2) product produced likely would not be of superior quality, and (3) monopoly would lead to unemployment.

    Rule of Law: Monopoly is an evil to be avoided.

    Existence of substitutes deters a firm within a competitive market from issuing supracompetitive prices. However, in a monopolized market there are no substitutes—monopolies thus serve to eliminate free choice.

    According to Minda, the act of Parliament created a barrier to entry to the English playing cards market, hence resulting in economic protectionism (high barriers to entry often exist to protect monopoly power).


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