Article V: On Monopoly

534. Monopoly of sale, as it were a singular trading or the sale of one alone (alleenhandel), generally is the power of selling certain wares exclusively, existing in the possession of one or a few. A private monopoly, or monopoly of fact, and a public and legal monopoly, or monopoly of right, are distinguished, according as it arises from the act of private persons or is claimed by public authority.

1. A legal monopoly is the exclusive power of selling certain wares, made by public authority, either to the treasury itself, which reserves to itself the manufacture and sale of some wares and thus imposes an indirect tax upon the community, or to one or a few private persons, to whom is given the privilege of selling certain wares to the exclusion of others (for example, to pharmacists), whether by selling that privilege or by granting it gratis.

2. A private monopoly exists when a few men a) by various means buy almost all the wares, and thus bring it about that they alone sell a certain kind of wares more dearly, at a price pleasing to themselves: a monopoly of direct engrossing; or b) make an agreement with other sellers not to sell a certain ware below a determined price: a conventional monopoly, or monopoly of price; or c) prevent other wares from being brought in, so that they may sell their own at a greater price: a monopoly of indirect engrossing. Therefore it is constituted in a threefold way.

Sometimes monopolies tend only to this, that the excess of competition be corrected; sometimes especially that a price greater than just be imposed upon buyers. They are instituted in various ways: sometimes sellers, or associations of sellers, entrust the whole administration of the matter to a few who arrange all things pertaining to the production and sale of the matter, in which case the institution is usually called a trust or syndikat, which has a wide diffusion in Great Britain and especially in the federated States of America; or, for this end, they create a certain governing company, which possesses a greater number of the shares of the individual associated companies, which is called a holding; or they only agree concerning limiting the production or sale of some ware, liberty being left in other matters, and this is usually called a Kartell, which especially comes into use in Germany or also in France; and if it is done merely occasionally and for a time, it is called a pool; finally, sometimes by common counsel they buy the greatest quantities of a determined ware, so that they may be able to preserve or increase the price and thus receive a great gain, which among various peoples comes under the names corner or ring.¹

¹ Tanquerey, Th. M., De Virt. Iustitiae, n. 775 and following, where many useful things concerning monopolies are noted.

Nevertheless the sense of these names is not always so perfectly distinct.

535. Principles to be attended to in monopolies. I. Monopolies, even private ones, which are instituted for this end, that they may provide a remedy against the excesses of unbridled competition, and pursue that end by legitimate means and do not exceed the just price, are not of themselves illicit or unjust. For neither the end nor the means contain anything illicit.

II. On the contrary, those private monopolies are unjust which are instituted so that, competition being utterly destroyed, prices may be imposed upon buyers at the whim of sellers, or which use unjust means for overcoming other sellers. In the first case damage is unjustly inflicted upon buyers, in the other upon the other sellers.

III. A legal monopoly of the State or of the treasury, for a proportionate cause, within certain limits is legitimate, even if the legal price established is greater than the common one. For it is one of the means by which the State obtains for itself the money necessary for conducting public affairs; therefore, provided that the money is applied to the common good, and the taxation does not exceed just limits, the excess in price is nothing but an indirect tax.

More determinately:

A. In a private monopoly:

1. When it is made in the first way indicated above (n. 534), they sin against justice if they sell beyond the highest price which would have existed if they had not made the monopoly, attention being paid to the quantity of wares and the greater or lesser frequency of buyers; for the abundance of wares is as great as if the monopoly had not preceded, and likewise the necessity of buying. And also other merchants cannot without injustice sell wares at the unjust price which has been introduced by monopoly, because it is unjust for all, unless perhaps they themselves were forced to undergo an excessive price in acquiring them;

2. When it is made in the second way, they sin against justice if the price should be beyond the highest. But by demanding the highest price, they can sin gravely against charity if it concerns things which are not matters of pleasure or useful to few, but things which many need; for charity, although it does not oblige one to sell below the highest price, nevertheless obliges one not to impede others from selling at a lower price; just as also, when it does not command almsgiving, it forbids that others be impeded from giving it. Indeed they sin against justice if by unjust means they impede other merchants from selling for less;

3. When it is made in the third way, they commit injustice both against fellow citizens and against foreign merchants, if they impede importation by unjust means (for example, frauds, deceit, etc.), because each one has a strict right not to be impeded by unjust means from attaining an advantage; but if they impede by just means, it can be licit, provided the price is not above the highest.

In all the aforesaid monopolies, however, they can easily sin against legal justice and charity toward their own country or city.

B. A legal monopoly is licit, provided it is made with a just price and is conceded for a reasonable cause, for example:

1. Because there are certain wares for making which great expenses are required, which without such a privilege no one would easily undertake;

2. As remuneration to inventors or perfectors of some art: this of itself is just because it contributes to the common good, inasmuch as it gives an incentive to the industry of private persons; unless, however, the price is increased beyond every reasonable limit;

3. By way of tax, for obtaining the money which the government needs. This too is of itself just, as we have said; nevertheless by accident it can be opposed to commutative justice, if in it the conditions required for the justice of taxes were not observed, for example, if the price of those things which are necessary for sustenance were notably increased, or the burden were too unequal among subjects.

536. Observations. 1. Monopolies can have their utilities and advantages, both for lessening expenses in producing and distributing things, whether by the use of more perfect instruments or by a better division of labor; and also for restraining immoderate rivalry or an excessive abundance of things, and for checking the abuses arising therefrom and avoiding damages. Therefore there can be in them the character of a certain defense, by which the condition of masters and workers may be made more secure.

2. But there are also disadvantages of monopolies, as Vermeersch notes, Th. M. II, n. 467: if sellers demand a price without any proportion to labor and expenses, or increase it as much as they can, although they ought to have regard to that which they themselves paid; if they unduly depress the wages of workers or relatively diminish them, when prices are increased much more although no title of gain has accrued to the masters, for example, if wages are increased 5 percent while prices grow 10 percent; if by studied sales and purchases the common estimation in stock exchanges is vitiated, and it is obtained that the titles of companies are estimated above or below the value of the things.

3. Wherefore enormous gains are of themselves suspect of injustice; nevertheless sometimes they can be explained by a special reason, whether a) by sale in another region, where because of inequality of exchange or another cause wares are sold much more dearly; or b) by some invention by which someone is able to make things at a far lower price than they commonly are made; or c) by special skill and industry, by which, for example, because wares have been bought together in accumulation, many expenses are spared.

4. Hence, in order to protect the common good and defend other citizens, monopolies ought to be ruled by public power, namely, lest they pursue excessive gains, lest they increase the prices of things more than is fair with harm to proletarians and the poor, lest they extend their power too much and, to the detriment of social authority itself, obtain a certain economic potentate in the republic, so that officials and magistrates depend upon them, or laws profitable to their private good and harmful to the public good are enacted.

5. Looking upon these things, Pius XI, in the recent encyclical Quadragesimo anno, complains: "Some have so hardened themselves against the goads of conscience that they have come to this opinion, that it is licit for them both to increase their gains in any way whatever, and to protect, by right and by wrong, against sudden turns of fortune the riches gained by great effort and zeal. The easy profits which come to anyone in a market freed from every law draw very many to exchanging and selling wares, who, desiring this one thing, that with the least labor intervening they may obtain ready profits for themselves, by unbridled trading so frequently increase or diminish the prices of wares according to their will and greed that they overthrow the prudent forecasts of manufacturers. Those things which have been established by law for promoting associated business undertakings, while they divide and limit the danger of conducting affairs, have furnished an occasion for the most shameful license. For we see that minds are only slightly touched by this diminished obligation of rendering accounts; moreover, by hiding under the protection of a certain common name, the worst injuries and frauds are perpetrated; finally, the managers of economic associations, forgetful of their office, betray the rights of those whose profits they had undertaken to administer."