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Estimating Monopoly Power With Economic Profits, Michael A. Williams, Kevin Kreitzman, Melanie S. Williams, William M. Havens

Melanie S. Williams

Monopolization and attempted monopolization are prohibited by section 2 of the Sherman Act. Proving the existence of monopoly power, however, is problematic. While direct evidence is sometimes available, more often courts rely on indirect—and sometimes highly disputed—evidence that firms have obtained or attempted to obtain monopoly power. Courts have been reluctant to rely on direct evidence of supra-normal profits as proof of monopoly power because (1) accounting profits as recorded in firms’ financial statements differ from economic profits, which fundamentally determine whether a firm as monopoly power, and (2) short-term, supra-normal profits are not, by themselves, evidence that a firm …