Question

Suppose in country A, company B is a giant firm in the domestic smart- phone business with more than 70% market shares. Customers in country A found that company B already pre-installed lots of unwanted apps that are impossible to be removed. Lots of consumers complain about this bundled purchase. (a). Based on the information given in the paragraph, what might be an important reason for the bundled purchase? (b). Suppose some consumers decide to sue company B for its practicing of bundled sale as a monopoly. Abuse of monopoly power (by a monopoly) is illegal in country A, and by law, "a company is considered a monopoly if it is the only seller of a product without close substitute". If company B is indeed considered a monopoly, it might be forced to break up into a few smaller firms. Suppose you are a lawyer working for the consumers, use your imagination, what kind of documents/data might be helpful as evidence in support of the sue. (c). Suppose instead, you are a lawyer working for company B, what type of documents/data might be helpful for help the company winning the case.

Answer 1

Answer and Explanation:

a) The reason Company B installed unwanted apps could be because they have a contract with third party app development companies in which the third party firm pays them for installing their apps on their mobile phone. Also, since they have 70% of the market share, the third party companies know the dominant firm's mobile phones are bought by majority of the people Country A.

b) Possible reason could be that the company wants the consumers to have important apps pre-installed in their mobile phones so that they would not have to face the hassle of downloading the apps on their own. Basically for their convenience.

Monopoly is a market structure where one firm has absolute market power subject to government regulation. It includes unique product or no close substitution, market entry and exit is quite hard, non price competition is non existent. Therefore, as a lawyer representing the consumer, I would look into the above conditions that influence monopoly. Such as if the market entry of new entrants is hard or not. Also, since the firm holds 70% of the market share, it is quite evident that the firm is the single dominating company within the industry. This could be one of the major thing that could identify that this is a monopoly market structure.

c) In the case of being a lawyer and representing the firm, the best data I could gather is that mobile phone is not a unique product and the 30% of the market share is still catering to the demand of the people within Country A. Therefore, there is potential for other firms to launch a mobile phone which has no pre-installed apps and customers could buy their product.