Monopolies

A MONOPOLY in general is the exclusive right belonging to one or to a certain number to sell some commodity. A legal monopoly has its origin in the law, which sometimes reserves to the Government the right to sell some commodity or service, or grants the exclusive privilege of doing so to someone or to a certain number. Thus, in some countries the Government has a monopoly of salt or tobacco, as it has in England of the postal telegraph service. Copyright and patent right are private monopolies granted by law to an author or to the inventor of a patent. A natural monopoly arises from one or a few who band together and who are the owners of the sole source of supply of some commodity. When one or more capitalists obtain joint control over the sale of some commodity we have a capitalistic monopoly. The moral principles which govern the exclusive right to sell are applicable also to the exclusive right to buy, and we shall apply them to both in this chapter.

A legal monopoly is lawful provided that it does not militate against the common good. In England the Tudor sovereigns abused their privilege of granting monopolies, and the Parliament under James I made such grants illegal and void. Copyright, however, patent right, and certain other privileges of a monopolistic character, are’ recognized and protected by English law.

A natural monopoly, too, is of course lawful, but if the commodity or service which is thus monopolized is necessary or very useful for the common good, natural equity prescribes that the price demanded should be fair and reasonable, even if it be not regulated by positive law. If the subject-matter of the monopoly belongs to the class of non-necessaries and luxuries, as, for example, a mine of diamonds or rubies of special quality, it cannot be said that the price is fixed and determined by natural conditions, and the owner will be justified in taking any price that he can get without fraud or misrepresentation.

Even capitalistic monopolies of commodities or services which are necessary or very useful to the community are not morally wrong if the prices charged are fair and reasonable, and if there is nothing reprehensible in the method of conducting business. The public may derive considerable advantages from these monopolies. They are capable: of effecting great savings in the costs of production, advertising, distribution, and general management, and they may secure a large return on their capital and at the same time sell cheaply to consumers. They obviate, too, the wastes and the recurring depressions in trade which follow from unlimited competition.

Monopolies, however, are morally wrong when the prices demanded for necessary or useful articles of consumption are excessive, or when the methods of business are unjust, uncharitable, or generally unlawful. The prices will be excessive when much more than a fair return for the capital employed is obtained, after all the costs of production and distribution have been defrayed, and when as a natural consequence they are higher than would rule if there were no monopoly. When means are used to crush rivals in order to secure a monopoly, when bribery of public officials is practised to obtain from Government specially favourable laws or treatment, when discriminating rates are obtained from railways and other companies, when workmen are tyrannically and unjustly treated, when prices of raw material are unduly depressed and producers are robbed of a fair compensation for their toil and trouble, and in general, when fraud or force is used to accomplish the end in view, the methods of business are immoral, and monopolies which employ such methods are to be condemned.

If prices demanded by a monopoly are, in the estimation of prudent men, higher than are fair and reasonable, injustice is committed, and there is consequently an obligation to make restitution to the buyers who have been robbed. If the prices charged are not altogether unfair and unreasonable, but high, and above what in the circumstances would be considered moderate, there will be a sin committed against charity, in that private advantage has been unduly pursued to the detriment of the people, who have been compelled to pay higher prices for the enrichment of the monopolists.

From what has been said, it is clear that what are called “rings ” and “ corners” in wheat, cotton, and other such commodities, are morally wrong, in that they cause the financial ruin of many people, and produce wide distress and instability of trade. Trusts, too, and combinations in trade are full of danger for the community. They wield immense power, and the temptations to abuse it, especially as a company has no conscience, as the saying is, are too great for the common run of business men. It is well that the Government should have the right of examining and inspecting the affairs of such bodies, and of applying the necessary remedies in case of abuse.

IV. Monopoly. 1. Notion. Monopoly is called the power of selling or determining the price acquired exclusively by one alone or by only a few.

2. Division. Monopoly is distinguished into public or legal and private. Public monopoly is that which the government reserves to itself, or grants to one or a few. Private monopoly is that which is acquired by the industry of private persons, for example by buying up all goods of some kind; by preventing goods of the same kind from being brought in by foreigners. Private monopoly is especially introduced by companies which either buy up certain goods in a very great quantity, or determine the regions where individual companies are to trade, and quasi-divide them among themselves. According to their diverse constitution they are called: trust, cartel or syndicates, pool, ring, corner.

There is also monopoly improperly so called, which is had when several persons conspire not to sell goods except at such and such a price.

3. Morality. 1. A monopoly which the government reserves to itself is licit, provided there is a proportionate cause, for example that the State may enjoy necessary revenues; that public order may be provided for, as in the monopoly of the postal office.

2. A monopoly which the government grants to another is likewise licit if a proportionate cause is present, for example that art, or industry generally, may be promoted.

3. One who, after buying up all the goods of some kind, sells them at the highest price which would be current if the monopoly were excluded, that seller, I say, sins neither against justice nor against charity. He does not sin against justice, "because everyone has a right to sell his own thing at the strict price" (St. Alphonsus, III, 816); he does not sin against charity, because no one is bound to neglect his own advantage in order to provide advantage for another (St. Alphonsus, loc. cit.). Nevertheless he is bound to abstain from a way of acting of this kind if competent authority, insofar as that is required by the common good and can practically be done, restricts the rights of private persons.

I said: "at the highest price which would be current if the monopoly were excluded"; for he would sin against justice if he increased the price above the highest at which the goods would be sold if the monopoly did not exist, or if the goods were available among several sellers (St. Alphonsus, loc. cit.). The reason is that the just price of a thing is that which is assessed by common estimation, with attention paid to the quantity of goods commonly known, whether they are or are not among several sellers - for the price does not increase precisely from fewness of sellers, but from the rarity itself of the goods; whence if there were few sellers but abundant goods, they would not on that account be estimated more highly. But the quantity of goods is the same in one seller as if it existed divided among several.

4. Those who conspire about not selling goods except at the highest price do not sin against justice; since they neither deprive buyers of a good to which they have a right - for no one has a right to buy at a lesser price - nor by an unjust means do they impede them from obtaining a good, that is, from buying at a lesser price. But it is more commonly taught that they sin against charity. "The reason is that although charity does not oblige you to sell below the highest price, it nevertheless seems to oblige you not to dissuade others from selling at a milder price; just as, although charity does not oblige you to give alms, it nevertheless seems to oblige you not to dissuade others who wish to give it" (St. Alphonsus, III, 817).

Corollary I. The things said about the conspiracy of sellers must also be applied to the conspiracy of buyers not buying except at such a price.

Corollary II. Those who sell goods at the lowest price with this event, that after others' shops have been overthrown they may demand a greater price, do not sin against justice, as is clear; nor against charity, because no one is bound to neglect his own advantage on account of another's damage, which will follow occasionally. And this has even more force if, with you abstaining, another perhaps less liberal person would do the same thing.

Corollary III. They act unjustly who compel their workers to buy goods in their own shops or in other determinate shops, and to receive goods less good or of greater price; which way of acting, moreover, is commonly also prohibited by civil laws.

Finally note that the contract of exchange is ruled by the same principles by which buying and selling is ruled.

Whether merchants sin against justice, or against charity, who, at the time of harvest or vintage, buy all the wheat or wine of a region at a very low price, so that afterward they may sell it more dearly? It is certain that this is licit if the goods bought are not necessary for the sustenance of life, or for the common condition of the commonwealth, such as precious gems, noble horses, women's adornments, and the like. L. 816. But if the discussion concerns things necessary for the sustenance of life, the negative answer is more probable, as it seems, with respect to justice, provided they do not sell above the highest price which would prevail apart from monopoly. The reason is that they violate no one's right. The negative answer is also more probable with respect to charity, provided they do not induce others to sell more dearly, nor themselves sell above the highest price which would have place apart from monopoly; because they use their own right. For no one is bound to neglect his own advantage in order to avoid another's damage which he is not bound to avert. - L. 816, 833; Lugo 176; Less. 150-152; Molina d. 345, n. 7. - 19.

Whether merchants sin against justice and against charity who conspire not to sell their goods except at the highest, although just, price?

As regards justice, there is no sin, since the highest price is still a just price. The highest price, namely, which would exist apart from monopoly. For a price cannot be judged just which arises from this conspiracy. The justice of a price cannot depend on the mere judgment of the seller and buyer. Thus likewise workers sin who agree among themselves not to hire out their work except at a price exceeding the highest; the highest, that is, with this agreement excluded. But as regards charity, the answer is affirmative, because although charity does not oblige one to sell below the highest price, nevertheless it seems to oblige one not to dissuade others from selling at a lower price. This would certainly be grave where the matter concerns things useful and necessary for life, and grave for the poor; indeed also for those who are not poor. Thus, although charity does not oblige you to give alms, nevertheless it obliges you not to dissuade others who are willing to give alms. But it would be against charity and against justice if other merchants were prevented by fraud and force from selling goods at a cheaper price. An injury would be done to them and to the buyers. Lugo 173, 175; L. 817.

Whether, once a monopoly has been made by merchants concerning an unjust price, it is licit for others to sell goods at the same price? The first opinion affirms, because the just price is that which commonly runs, from whatever source this comes. The second opinion, which seems better to St. Alphonsus, 817, denies. "The reason is that a price increased through injustice is always and of itself unjust, and must be brought back to justice."

What is sale through brokers, commonly sensali? - Sale through brokers is that which is made not immediately by him to whom the things belong, but through others by commission; and these are called brokers. Brokers can be either merely friends, or hired for this by a special wage, or hired for various works at an annual price.

912. • Monopoly is the power of selling existing in the hands of one or of a few only; or it is a manner of acting by which one or several bring it about that they alone sell or buy something. One kind is legal, which is granted by public authority from a reasonable cause; another private, which is exercised by the work of one or of several merchants.

I say I. A legal monopoly is lawful, provided it is made with a just price. The reason is that, on account of a just cause of the public good, the Prince can grant it as a privilege, or for exacting tribute from merchants.

I say II. A private monopoly is illicit in the following cases: 1. if a merchant impedes by fraud or a lie that other goods be brought in, so that he himself may sell his goods more dearly with common detriment; 2. if one or a few buy all the goods, so that afterwards they may sell them more dearly; 3. if workmen or craftsmen agree that they will not teach their art except for an unjust price, or that no one will complete a work begun by others. - St. Lig. n. 815.

913. Questions. - Q. 1. Whether merchants sin against justice and charity who conspire not to sell their goods except at the highest, although just, price?

Resp. 1. As to justice, there is a twofold probable opinion.

I. OPINION affirms it, because merchants of this kind by an unjust means compel others to buy at the highest price. - Laymann, etc.

II. OPINION, the more probable, denies it, because if others are compelled to buy at the highest price, they are not compelled by the sellers, but by their own necessity, which cannot be called true coercion on the part of the sellers. - St. Lig. n. 817. - Lugo, etc. ¹.

¹ Cardinal De Lugo nevertheless notes two things (Disp. 26, nn. 172 and 173). The first is that these things hold unless, however, someone of those merchants is impeded by others through force, deceit, or fear from selling the goods at a cheaper price. For injury is done to buyers when other sellers are unjustly impeded from selling at a cheaper price.

The other regards rightly finding this just measure of the highest price. For, to use the words of De Lugo, concerning this there seems to be a difficulty: how that highest just price must be understood, in which merchants conspire without injustice; namely, whether it is the same highest just price which would exist if the monopoly were not made, or rather that which, with that difficulty and conspiracy of sellers supposed, would be estimated as just. For it seems that that conspiracy cannot be made without the just price by that very fact being varied, since the justice of the price is taken from the facility and abundance, or difficulty and rarity, of sellers. Nevertheless, the answer is that, without doubt, it is understood in the first sense, concerning the highest just price at which, with that monopoly set aside, those goods would be sold, and thus the aforesaid Doctors suppose, namely those who stand for this negative opinion; for the just price ought not to be taken from the state introduced by the monopoly itself, but from the state which, with it set aside, the goods would have; the reason for which we will give immediately.

Resp. 2. As to charity, affirmatively, because although you are not obliged by charity to sell below the highest price, nevertheless you seem to be obliged not to dissuade others from selling at a lower price. Thus, although you are not bound by charity to give alms to such a poor man, nevertheless you are prohibited from dissuading others, if there are any who wish to give it: therefore by parity... - St. Lig. ibid.

914. • Q. 2. Whether merchants sin against justice or against charity who, at the time of harvest or vintage, buy all the wheat or wine of the region at the cheap price then current, so that afterwards they may sell more dearly?

Resp. 1. Negatively, more probably, as it seems, as to justice, provided they do not sell above the highest price which would be current with the monopoly set aside. The reason is that they violate the right of no one. - Thus Lugo. - St. Lig. n. 817.

Resp. 2. Negatively also, probably, as to charity, provided they do not induce others to sell more dearly, nor themselves sell above the highest price which, with the monopoly cut away, would have place, because they use their own right; for no one is bound to neglect his own advantage in order to avoid another's damage, when he is not obliged to avert it. - Lugo. - Lessius, etc., against others.

Q. 3. Whether, once a monopoly has been made with an unjust price by some merchants, it is lawful for others to sell goods at the same price?

Resp. Negatively, because a price increased by injustice always remains unjust, and should not be called common estimation, but fraud and deception. - Thus commonly with St. Lig. n. 817. - See Cases, n. 958 and following.

(3) A monopoly (from the Greek μονοπωλία, single or sole selling), is the exclusive right or power secured to one or more persons, to sell some commodity or to carry on some branch of trade or manufacture. A monopoly is permissible if it is granted by law for the common good. Thus in some countries the government controls the sale of salt or tobacco. This is called a legal monopoly (monopolium legale seu legitimum). A legal monopoly may be private, namely, if it is granted by law to private persons, such as inventors or authors (monopolium privatum). This, too, is licit, provided it does not result in an undue raise of prices or in what has become known since the World War as “profiteering,” namely, buying up the necessaries of life with a view to reselling them at enormous profits.

“A natural monopoly arises from one or a few who band together and who are the owners of the sole source of supply of some commodity. . . . A natural monopoly . . . is . . . lawful, but if the commodity or service which is thus monopolized is necessary or very useful for the common good, natural equity prescribes that the price demanded should be fair and reasonable, even if it be not regulated by positive law. If the subject-matter of the monopoly belongs to the class of nonnecessaries and luxuries, as for example, a mine of diamonds or rubies, of special quality, it cannot be said that the price is fixed and determined by natural conditions, and the owner will be justified in taking any price that he can get without fraud or misrepresentation. Even capitalistic monopolies of commodities or services which are necessary or very useful to the community are not morally wrong if the prices charged are fair and reasonable, and if there is nothing reprehensible in the method of conducting business. The public may derive considerable advantages from these monopolies. They are capable of effecting great savings in the costs of production, advertising, distribution, and general management, and they may secure a large return on their capital and at the same time sell cheaply to consumers. They obviate, too, the wastes and the recurring depressions in trade which follow from unlimited competition. Monopolies, however, are morally wrong when the prices demanded for necessary or useful articles of consumption are excessive, or when the methods of business are unjust, uncharitable, or generally unlawful. The prices will be excessive when much more than a fair return for the capital employed is obtained, after all the costs of production and distribution have been defrayed, and when as a natural consequence they are higher than would rule if there were no monopoly. When means are used to crush rivals in order to secure a monopoly, when bribery of public officials is practiced to obtain from government specially favorable laws or treatment, when discriminating rates are obtained from railways and other companies, when workmen are tyrannically and unjustly treated, when prices of raw material are unduly depressed and producers are robbed of a fair compensation for their toil and trouble, and in general when fraud or force is used to accomplish the end in view [viz., excessive profits] the methods of business are immoral and monopolies which employ such methods are to be condemned. If prices demanded by a monopoly are in the estimation of prudent men higher than are fair and reasonable, injustice is committed, and there is consequently an obligation to make restitution to the buyers who have been robbed [or to the community]. If the prices charged are not altogether unfair and unreasonable, but high, and above what in the circumstances would be considered moderate, there will be a sin committed against charity, in that private advantage has been unduly pursued to the detriment of the people, who have been compelled to pay higher prices for the enrichment of the monopolists. “From what has been said it is clear that what are called ‘rings’ and ‘corners’ in wheat, cotton, and other such commodities are morally wrong, in that they cause the financial ruin of many people, and produce wide distress and instability of trade. Trusts, too, and combinations in trade are full of danger for the community. They wield immense power, and the temptations to abuse it, especially as a company has no conscience, as the saying is, are too great for the common run of business men. It is well that the government should have the right of examining and inspecting the affairs of such bodies and of applying the necessary remedies in case of abuse.”³⁰

³⁰ Slater, A Manual of Moral Theol., Vol. I, pp. 535 sqq.—In the United States the only monopolies that the laws look on with favor consist of the post office, which is a government monopoly, and the rights granted to individuals under the patent and copyright laws. Monopolies commonly known as trusts are regarded as odious, and various States and the Federal Congress have enacted laws making them illegal. (Cfr. Cyclopedia Americana, Vol. X, s. v. “Monopoly,” and Vol. XV, s. v. “Trusts”).—Cfr. J. A. Ryan, “The Moral Aspect of Monopoly,” in the Irish Theological Quarterly, Vol. III (1908), No. 11.—St. Alphonsus, Theol. Mor., l. III, nn. 815–817.—J. P. Gury, Comp. Theol. Mor., I, nn. 855–857.—M. Cronin, The Science of Ethics, Vol. II, pp. 325 sqq.

1136. NOTION. Monopoly, or sale by one, can be defined: the exclusive power of selling, existing in the possession of one or of a few only.⁰⁴

DIVISION. This power can be of right or of fact; whence a twofold monopoly is given: monopoly of right, if this power is sanctioned by public authority; and monopoly of fact, if it is exercised apart from or against right. Besides, monopoly of fact and of right is either public or private, according as it is exercised by the Government or by private persons.

Private monopoly of fact is either strictly so called, or monopoly of merchandise, which can be had in a double way: a) if someone impedes the importation of other wares, so that he alone may sell his own; but today, on account of innumerable railways, this impediment will rarely be possible. b) If at an opportune time, for example harvest, one or a few buy all, or almost all, wares, so that then they may sell again at a great price; - or it is broadly so called, or monopoly of price, and exists when sellers conspire among themselves not to sell or not to buy except at a certain price.

1137. PRINCIPLES. I. Private monopoly of right is licit. For the Government can, on account of a just cause of the public good, concede such a privilege to merchants.

Thus, in some regions, the privilege of selling tobacco or salt is conceded to a few, so that the tax necessary to the republic may thence be increased. But lest civil society be burdened by monopolies of this kind, it belongs to the prince or magistrate to tax fittingly the price of the things to be sold (III, 814). - With respect to typographers, or authors, recall the things said n. 856.

Note. A fortiori, a public monopoly is licit, provided it does not extend to almost all businesses (cf. Vermeersch, o. c., n. 183, 2, b).

1138. • II. Private monopoly of fact is sometimes unjust, sometimes illicit, and sometimes just and licit.

1. It is unjust: a) If a merchant impedes by fraud or lie that other wares be brought in, so that he may sell his own wares more dearly with damage to citizens. b) If merchants conspire among themselves so that they may sell above the highest price, or buy below the lowest; for it does not belong to private persons to change the common and legitimate taxation of price. c) If one or a few buy all or almost all things necessary for support, so that they may sell them for more than they would be sold in the market, monopoly being removed.

We said necessary things; for it would not be unjust if wares not necessary for the support of life or for the common state of the republic were bought, such as precious gems, noble horses, ornaments of women, and similar things.

2. It is illicit, but not unjust, if merchants, without force and lie, so agree about the price of wares that, with the just price preserved, they neither sell for less nor buy for more than what was agreed among them.

These indeed sin against charity, although it is not always mortal; for charity, although it does not oblige one to sell below the highest price, nevertheless seems to oblige one not to dissuade others from selling for a lesser price. - But they do not sin against justice, because the highest price is still just.

3. It is licit and just if one or several buy wares so that they may sell them again with moderate gain.

Indeed, although they were to sell again at the highest price, they would not sin against justice, because anyone has a right to sell his own thing at the rigorous price; nor against charity, because no one is held to neglect his own benefit so that he may avoid another's damage, which he is not held to avert (III, 816, 838).

IT IS ASKED. Whether, after a monopoly has been made by merchants concerning a price beyond the highest, it is licit for OTHER merchants to sell at the same price?

Resp. St. Alphonsus denies it with the truer opinion; because that estimation, as arising from injustice, cannot be just, nor can it be called common estimation, but deception and fraud (III, 817; H. Ap., X, 184; l. El. qq. ref., n. 34).

1139. Note. The things which we have said about a conspiracy of sellers also have force for masters who hire craftsmen to work at a lesser price from mutual machination; as for craftsmen who, as in today's time is accustomed to be done, especially by members of the worst association, commonly called internationale, by mutual agreement promise themselves that they will not do or not perfect such work unless they receive such a price. But what is to be said concerning mutual agreement to cease from one's work, see below n. 1154.

1008. • Monopoly, according to the force of the name itself, derived from the Greek monos, alone, and poleo, I sell, signifies the sale of one, or made by one sole seller; and therefore it is conveniently accepted for: the exclusive power of selling, existing in the possession of one, or of only a few.

Monopoly they generally distinguish into public and private. A public monopoly is one if it is constituted by public authority, which indeed is wont to happen in two ways, namely: a) when the public authority or Government reserves to itself, as such, the sale of some merchandise, and by this reason imposes on the community as it were an indirect tax; b) when public authority grants to one or only a few citizens the privilege of selling certain merchandise, with the exclusion of others. - A private monopoly is one if one, or several by the mode of one, by their own private authority, machination, and industry bring it about that either they alone sell certain merchandise, or that they do not sell their merchandise except at such a price.

1009. • Query. Whether monopoly is licit?

Resp. 1° Public monopoly by the confession of all is licit; provided it rests on just causes, and moreover care is taken that the privileged monopolists do not increase the price of the merchandise beyond the terms of the just.

Resp. 2° As to private monopoly, first of all a threefold mode must be distinguished by which it can be had, namely: a) by impeding, lest foreign merchants import merchandise of the same kind; or b) by buying all the merchandise of the same kind; or c) by conspiring with others, so that no one sell merchandise for less. But with this distinction attended to, it seems it must be established thus.

1010. First Rule. - When one or several impede merchandise from being imported from elsewhere, it must be investigated by what means they do this. If for this they use force or fraud or other unjust means, they certainly sin against justice and are held to restitution both toward foreign merchants, and toward fellow citizens who suffer damage through the unjustly impeded importation of merchandise. But if they apply no unjust means, they do not seem able to be condemned of sin, at least of injustice.

I say: at least of injustice; for those impeding the importation of merchandise, even without injustice, would then certainly sin against charity toward neighbor if they act thus without a right cause, for example: without the cause of obtaining honest profit, or of guarding beforehand lest they themselves and fellow citizens be compelled to sell their merchandise at a cheaper price. For charity forbids that without a right cause we furnish to our neighbor even only an occasion of damage.

1011. Second Rule. - If one or a few buy all, or almost all, merchandise of some kind which is necessary for the sustenance of life and common society, for example grain, oil, salt, etc., so that afterwards they may sell it above the highest price which, the monopoly excluded, would run, from the opinion which St. Alphonsus¹ calls common and true, they sin against justice; because in this hypothesis they are the true cause why the price is unjustly increased.

But we said: 1° if all or almost all merchandise of some kind, etc.; for it seems to pertain to the common industry of merchants, certainly licit, that they buy at the price now running merchandise of this kind remaining after citizens have sufficiently procured it for themselves, so that afterwards they may sell it with some moderate profit.²

We said: 2° merchandise which is necessary for the sustenance of life and common society; for if it is a question of things in no way necessary, but only of things pertaining to pleasure, for example precious gems, etc., the proposed rule is not applicable, as you will easily understand from the things noted above concerning the price of such things, n. 965.

We said: 3° so that afterwards they may sell it above the highest price which, the monopoly excluded, would run; for if afterwards in selling they do not exceed the highest price which would run even with the monopoly excluded, they do not seem to sin against justice; because they are not the cause why the price is increased unjustly; indeed, according to many, neither do they sin against charity, since charity does not oblige one to neglect his own advantage to prevent the inconvenience of a neighbor. Yet it seems opposed to the due order of charity that one seller of this kind also induce others to sell similarly, and thus, without a right cause, close off to citizens the way of buying merchandise at a lesser price.

1012. Third Rule. - When several conspire so that they sell only at such a price, again a distinction is needed. If they conspire thus to a price above the highest, they sin against justice and are held to restitution; but if they conspire thus to the highest price only, they do not indeed sin against justice; but, from the common doctrine, against charity; because charity, although it does not oblige you to sell below the highest price, nevertheless seems to oblige you not to dissuade others from selling at a lesser price; just as, granted that charity does not oblige you to give alms, nevertheless it seems to oblige you not to dissuade others who wish to bestow it.¹

Moreover, those things which in this third rule are established concerning sellers conspiring must also, as Carriere rightly warns, be applied to buyers conspiring to a price below the lowest (which is against justice), or to the lowest price only (which is against charity). And the same things they commonly apply to craftsmen who, (as nowadays is practiced rather frequently, especially by members of the pernicious society commonly called the International) by mutual agreement promise among themselves that they will not do or perfect such a work unless they receive such a price; and, vice versa, also to masters who by mutual machination hire craftsmen to work at a lesser price. For although all these things are not monopolies strictly so called, nevertheless concerning these one must judge from the same principles.

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."

I. A monopoly is a convention or conspiracy by which many deliberate concerning such a ware not to be sold, save at this or that price designated by themselves. There are four (others reckon twelve) chief kinds of monopoly. First, when one or many seek out and buy up wares, that, scarcity being brought in, the rest may be compelled to buy from them at a dearer price. Second, when one obtains a privilege from a prince, by force of which he alone, the rest being excluded, can sell such wares. Third, when many hinder foreign wares from being brought into a city, that they themselves may be able to sell at a dear price their own, perceived from their own estates or sought out elsewhere, to the detriment of the common good. Fourth, when merchants conspire together and determine that wares are to be sold at so much and not less; or on the contrary, when buyers conspire together and determine that so much and not more is to be paid for wares.

II. A monopoly of the first kind all disapprove. The second they approve, when the privilege obtained from the prince is a just one and consonant with the public good. For if the privilege were obtained from the prince by crafty art and fraud, and turned to the prejudice of subjects, then it would be unjust, and the use of it unlawful. The third kind of monopoly all condemn as unjust, and teach that the monopolists are subject to restitution. The fourth is similarly unjust, as will presently be plain.

III. QUESTION I. Is it lawful for sellers to enter upon an agreement of not selling wares save at the highest price? ANSWER. The Salmanticenses affirm it, who cite Lessius, de Lugo, Tapia, Navarrus, and others: because merchants have a right of selling at the highest price, which is otherwise just. The contrary opinion is to me the more probable. For although the highest price be within the confines of the just price, nevertheless a conspiracy of not selling save at the highest price, and of not buying save at the lowest, is unjust and detrimental to the commonwealth. For this perverse convention being excluded, many merchants would buy and sell now at a middle, now at the lowest, now at the highest price, which would turn to the great advantage of the commonwealth. The end of merchandise is the public good. Therefore trade becomes vicious as often as it is opposed to this end.

IV. QUESTION II. A monopoly being once constituted by merchants of selling wares at an unjust price by excess, do other merchants, not partakers of that monopoly, sin against justice if they sell their wares at this unjust price? ANSWER. The Salmanticenses with Diana, Bonacina, and Reginald deny it, because, they say, that the price is unjust is by accident to them, from the injustice of others. Is not this an excellent reason? Is it by accident to you that the price is unjust? It is by accident that the monopolists fixed the price; but the price is unjust per se. Do not the monopolists sin in exacting this unjust price? You say yes. Why? Because the price is unjust. Therefore you also will sin by accepting an unjust price. Distinguish the sin which the monopolists committed by increasing the price from the injustice of the price constituted. The former is by accident to you. But the exaction of an unjust price is of itself a sin to you. The said opinion therefore is to me false. Read what Cicero writes, Book III of the Offices, chapter 12.

V. QUESTION III. What is to be said of an agreement of reselling and of rebuying? ANSWER. This agreement can be added either in favour of the seller, or in favour of the buyer, or in favour of both together. It is made in favour of the buyer if you say: I buy from you this book on this agreement, that at a time appointed by me you buy it back from me. It is made in favour of the seller if you say: I sell you this book on this agreement, that at an appointed time you sell the same back to me. It is made in favour of both when to each is left the faculty of withdrawing from the contract.

VI. An agreement of this kind is lawful when it is made in favour of the seller alone, if the following conditions be observed. First, that contracts of this kind be celebrated in good faith and with a sincere mind of selling and buying, all palliated usury being excluded. Second, that the quantity of the price be tempered according to the added condition of the burden. Third, the condition is that the thing be sold at the price current at the time of the resale. Fourth, that the danger or advantage of the thing sold be thrown back upon the seller, and that the identity of the thing sold be preserved: as if a vineyard be sold with its fruits, it ought likewise to be resold with the fruits.

VII. QUESTION IV. Is the contract of kinship lawful? ANSWER. In Italian that contract is called the jus di ricupera, or the right of redeeming a thing sold. This right is granted to the blood-relations of the seller of recovering within a prescribed time an estate sold. For movables, however precious, can in no way be redeemed. The right of drawing back estates sold is confirmed by the laws of all nations and princes. And this order is observed in such a contract. The price at which the estate was bought ought to be paid to the buyer. This right is granted to the nearer blood-relation, and by degrees to the rest. If the nearer yield this right, the next of kin succeeds. He who by guiles and frauds hinders this right sins against justice. Blood-relations also sin when they recover estates sold in favour of friends, from whom they receive money with which they redeem the estate. Likewise when they recover in order to sell at a greater price. At the least they work against the end and spirit of the law, which regards the preservation of families, and by no means affords a handle for thrusting out lawful possessors and disturbing the public peace.

VIII. QUESTION V. Is the Mohatra contract lawful? ANSWER. The Mohatra contract is entered upon when a man in need of ready money buys from a merchant wares of which he has no need, at the highest price — say, 56 — with an agreement added by the merchant that they be resold to him by the buyer at the lowest price — say, 50. The agreement can be added either expressly or tacitly. The contract can also be celebrated without any agreement, whether tacit or express, either with a different or with the same merchant. In the first way it is a usurious contract, condemned by Innocent XI in this thesis: The Mohatra contract is lawful even in respect of the same person, and with a contract of resale entered upon beforehand with the intention of gain. Under the cloak of a contract of selling and buying usury is hidden, as is plain to all. For the feigned seller gives 50 on loan, that he may receive 56. Now all disapprove this contract, once defended by some. Cardinal de Lugo, Vol. II, disputation 26, section 1, no. 208, although he adheres to the common opinion, nevertheless widens the buckles. Read Vol. VII, Book 3, chapter 5, no. 9.

IX. Theologians dispute whether, every agreement both tacit and express being excluded, and scandal and the danger of infamy being excluded, the aforesaid contract be lawful. The common opinion of the younger authors affirms it. But in practice it scarcely happens that the prescribed conditions are observed. Wherefore the contract of sale is to be separated in mind and in fact from the contract of loan, the masks being stripped off.

X. QUESTION VI. Can those who undertake wares to be sold from a lord retain anything for themselves, if they sell the same for more than was prescribed by the lord? ANSWER. If these, whom St. Antoninus calls Riratticri, exceed the limits of the just price in the sale, they are bound to restore the excess to the buyer. If they recall the wares to a better state by their own industry, they can retain for themselves the increase of price which corresponds to their industry. Similarly, when the lord consents that they retain for themselves what they receive beyond the price which is prescribed — provided nevertheless that the limits of the just price be not overleapt — they in no way sin. This agreement and peculiar industry being removed, brokers are bound to render the whole price to the lord. Since by no title can they retain anything for themselves. Not by reason of the ware, because it is the lord's; not by force of the common industry employed in the sale, because they let out this industry to the lord at an agreed price. Nor is it to the purpose that you object that the lord designated the price: since he designated that the ware was to be sold at so much and not at a cheaper price; but for the rest his intention was not, nor can it by right be presumed, that it should not be sold for more, the occasion being given, unless, as I have said, they expressly declare it. In good faith therefore ought intermediaries of this kind to conduct the lord's business, since they cannot enrich themselves with another's wares. What has been said of selling is to be said also of buying. Wherefore tailors are thieves when, buying cloths for the making of garments by the lord's commission, they retain something for themselves, under pretext of having bought more cheaply.

Monopoly, as Molina says, disput. 345, is called as it were one selling. Now a Monopoly arises when one, or a few, bring it about that they alone sell some kind of merchandise at whatever price has pleased them.

Moreover a Monopoly is defined: It is a convention, machination, and industry of certain merchants, by which they bring it about that they alone either sell some kind of goods, or sell at a certain price.

Now this can be done in four ways: either conspiring among themselves about the price, so that no one sell cheaper. Or bringing it about that they alone sell certain goods, or buying up all the goods of a certain kind, and suppressing them, until the price of them has risen very much. Or impeding that they be carried off elsewhere by others. I shall discuss all these.

I suppose, moreover, with D. Bonavent. in speculo animae, cap. 2. at the end, that the gathering is unjust when someone gathers even his own goods, say the fruits of the earth, from the mere ardor of growing rich, or that scarcity be procured, and the goods stored be afterwards sold more dearly, and again the price be restored.

Therefore as to the first case: if the merchants do not sell beyond the limits of the just price, nor is it ordered to the bringing in of scarcity, I say it is not iniquitous against justice. So Less. lib. 2. cap. 21. dub. 20. num. 145. Molina t. 2. disp. 345. Navar. in sum. Lat. cap. 23. num. 42. Maior in 4. dist. 15. quaest. 4. Sylvester v. emptio, quaest. 18. Fagundez l. 5. cap. 35. Bass. num. 24. nevertheless say that such men sin against charity. Nauarrus indeed speaks in general. And the holy Doctor indicates this same thing, while he says that those making monopolies from the mere ardor of having, sin. Some, however, among those cited by Fagundez say they sin against justice, whom they certainly violate, exceeding the just price.

As to the second case: it is certain that the Prince can grant, as some say, the faculty (in Italian Appalto), and the merchants can accept it, provided it not be to the public loss. So Molina t. 2. disp. 345. Fagundez l. 5. cap. 35. and others. But let the just price be observed, says Bassaeus num. 25.

As to the third way, when many together buy goods, that they may afterwards sell at a dearer time at their pleasure. I say with D. Bonav. that they sin against justice, and are held to restitution. So also Gabr. 4. dist. 15. quaest. 10. art. 3. Medin. de restit. quaest. 36. Sylvest. v. emptio, quaest. 10. Angelus v. negotiatio, Sums l. 6. de iust. quaest. 2. art. 2. Maior in 4. dist. 15. quaest. 4. alioqui 41. Fagund. l. 5. cap. 35. Azor. 3 p. l. 8. cap. 28. Regin. l. 25. num. 327. Sylvest. quaest. 77. art. 1. quaest. 2. Conrad. de contr. quaest. 51 Rebell. 2. p. de oblig. iust. l. 9. quaest. 5. Bassaeus num. 27. where, with Fill. tract. 35. num. 214. Less. l. 2. dub. 21. num. 153. Molin. disp. 345. adds that it is not done against commutative justice, but Legal, and therefore they are not held to restore. But they are deceived: for by the law of nations buying ought to be free to individuals in the whole breadth of the just price, and accordingly an injury is done to the buyers by that whole agreed increase of the price.

But to buy up all the goods, or so great a supply, that scarcity is brought in, or the liberty of buying at the just current price in due time is taken from individuals; is an injustice compelling to restitution. See Medin. de restit. quaest. 36. §. penult. Sylvest. v. emptio, quaest. 10. Ang. v. Negotiatio, Sot. l. 6. de Iust. quaest. 2. and the others cited above.

Wherefore in vain does Fagund. num. 7. say it is licit; if liberty and abundance remain.

The fourth mode of monopoly is unjust by the consent of all, as Fagund. num. 9. says. In vain indeed does Bassaeus num. 27. add, that this is true if the merchants are diverted by force, or fraud; not, if by prayers, or persuasions. Certainly they still inflict injustice on the citizens against the law of nations; even if not on the arriving merchants, who nevertheless, for the most part, suffer some loss.

Julius, a Catholic priest, when he had bought shares in a certain company that manufactured soap for a large sum of money, received notice that on a certain day the shareholders would discuss whether the company should join itself to a new soap monopoly. Julius ordinarily takes no active part in the business of the company, but he would like to know whether he is bound to cast a vote against the proposal, inasmuch as many things are written in newspapers against the monopoly, but especially that it sells fifteen ounces of soap in place of sixteen, that several officers have already been dismissed as unnecessary, and that the more injurious suspicions are not without foundation in view of the things that we hear concerning monopolies in America. Hence it is asked:

1. Is it lawful for a cleric to trade?

2. What is a monopoly, and is it lawful?

3. Can anyone sin against justice by abstaining from action?

4. What is to be said of the case?

1. Is a cleric allowed to trade?

No; a cleric is forbidden by ecclesiastical law to trade in the strict sense; that is, to buy commodities with the intention of selling them unchanged for profit. It is probably not unlawful for clerics to have shares in industrial companies, provided that they do not take an active part in the business, e.g., as directors.¹

1 Manual of Moral Theology, vol. i, p. 616.

2. What is a monopoly, and is it allowed?

A monopoly is the exclusive right belonging to one or to a certain number to sell some commodity. A monopoly is not morally wrong, provided that there is nothing reprehensible in the method of conducting business and the prices are fair and reasonable.²

2 The same work, p. 535.

3. May a sin against justice be committed by simply abstaining from action?

Yes; such negative co-operation is a sin against justice whenever one’s office or duty require one to prevent an unjust action.

4. The case. Julius, a priest, bought shares in a soap company. One day he got notice of a meeting to be held by the shareholders to decide whether the company should join a new monopoly of soap-makers. Julius was not clear as to whether monopolies are wrong and whether he was not bound to vote against the proposal.

From what has been said it is clear that monopolies are not necessarily immoral if prices are fair and if there is nothing wrong in their business methods. Hence it is a question of fact in each case. The soap monopoly sold fifteen ounces of soap for sixteen. If this was publicly known and the price was reasonable, there was nothing immoral in this. Several officials had been dismissed as unnecessary. This, too, might have been perfectly lawful. Suspicions resting on what some monopolies and trusts are sometimes guilty of can not afford sufficient ground for condemning all monopolies. Julius should make inquiries about the directors of the monopoly and its methods of doing business, and if he finds nothing objectionable, he will not be bound to vote against the proposal. If he does find anything objectionable, he will be so bound, for the shareholders are responsible for the acts of the company which does business in their name and for their benefit. If the monopoly is formed, Julius should keep an eye on its business methods, and if he discovers anything unjust or uncharitable in them, he should endeavor to correct it, or withdraw from the company.

Titius, a very wealthy Catholic, wishes to know whether it is lawful to invest money in a very large company called a “Trust” or “Combine.” Such companies, however, are accustomed to proceed in this way: They reduce the expenses of management, inasmuch as one person is able to direct several centers of business; they also reduce the expenses of carriage, inasmuch as from several centers the nearest can always be selected; and, when expenses have been reduced by these and other means, they can sell at a lower price than others. Thus, within a fairly short time, they acquire the whole trade in some article in the place where they establish their headquarters, for competitors either cease to trade or associate themselves with the company, which, left alone, can itself fix the price at which things are sold. When they have obtained the trade of one city, they attack another by similar methods and quickly overcome all competitors. Hence it is asked:

1. What is a monopoly, and to what extent is it lawful or unlawful?

2. What is the just price of things, and how is it recognized?

3. What is to be said of the case?

1. This question is answered above, p. 315.

2. This question is answered on p. 304.

3. The case. Titius, a rich Catholic, wants to know if he may put his money into a trust or combine. The combines lessen working expenses and are thus able to sell cheaper to the public. There is no moral difficulty in the question so far. Even if by selling cheaper they may drive competitors out of the trade, still as the public good is to be preferred to that of individual tradesmen, there is no moral objection to their action. However, when a trust comes into a place and begins to undersell competitors with the intention of driving them out of the trade or of compelling them to join the trust, and when it has conquered all competitors, of raising prices to as high a figure as is safe, there is at least a sin against charity. For it is against charity to use the greater economic power of a combine to ruin or to coerce rivals. If the prices at which the combine sells after it has acquired a monopoly in a place are higher than would prevail if the combine had not driven competitors out of the field, its action is also against justice.

Caius, a very wealthy grain merchant, desires to become still wealthier. Hence he asks other rich men, after pooling their money, to buy all the grain that is in the market, if it can be done, in order that they may afterward sell it at a higher price and thereby gain an enormous sum. Julius, a Catholic, among others is asked to contribute money to the business, and indeed consents, but is soon to repent of it, for, whatever the conspirators do, the price of grain gradually falls and Julius loses the sum contributed. Afterward he comes to confession, and his confessor, doubtful concerning his obligations, asks:

1. What is a monopoly?

2. Is a monopoly unlawful, and why?

3. What is to be said of the case?

1. This question is answered above, p. 315.

2. This question is answered on p. 318.

3. The case. Caius, a rich merchant, wished to make a corner in wheat and asked some other rich men to join him. The intention was to buy up all the wheat available, and then sell it at a higher price. Such an intention is at least uncharitable, for if the attempt succeeds it produces widespread hardship and disaster. If the prices demanded by the monopoly are higher than are fair and reasonable and than what would rule if there were no monopoly, the monopoly is also against justice, and entails the obligation of making restitution to those whom it has injured.

Julius therefore committed sin by joining the would-be monopolists. However, as they did not succeed in their design it was only a sin of intention, and Julius may be absolved if he is sorry for what he has done and firmly resolves never to do the like again.