ABSTRACT
Antitrust law's essential premise is that markets uncorrupted by restrictions on competition tend toward efficiency. In industries bearing natural monopoly characteristics, competition may be antithetical to efficiency. The natural monopoly problem lends itself to one of three solutions. First, the government could grant a single company a lawful monopoly, limit entry and exit into and out of the market, and regulate the firm's pricing. Second, the state could nationalise the industry, building the grid with public funds and pricing optimally. Finally, the government could impose an interconnection duty on a monopolist, requiring it to grant its competitors access to the network at a reasonable price. This chapter focuses on the first solution, which has long been the principal United States approach to problems of natural monopoly and has been applied in the United Kingdom following the privatisation of state-run enterprises in the 1980s. The chapter concludes with a brief word on the banking industry.
