Oligopoly Law and Legal Definition

An oligopoly exists when a few companies dominate an industry or market Prices are set by agreement among the manufacturers rather than by operation of supply and demand mechanism. Oligopoly often leads to collusion among manufacturers. Few companies need to control a significant share of total production or sales, for an oligopoly to exist. In an oligopoly there is likely to be significant barriers to entry to new competitors. Presence of few companies in an industry does not negate existence of competition. In such a market, competition often includes increased expenditure on marketing and advertising in order to win brand loyalty rather than reduction in prices or increase in quality of products.