It must be emphasized that natural (i. e., de facto) monopolies, which are relatively rare in well-developed free markets, differ fundamentally in kind from the legal monopolies just discussed. Unlike legal monopolies, natural monopolies are constantly subject to potential competition; consequently, they must maintain the best possible product at the lowest possible price or else surrender market share to new competitors. Of course, in a truly free market, unlike our present system, the flow of capital from industry to industry is not hampered by regulation, so that competition can arise rapidly wherever the opportunity arises.

Furthermore, the requirements of information flow (for reasons that will be explored further in Section 5) impose a natural brake on corporate size in a free market, making it exceedingly difficult for large companies to remain efficient enough for economic viability, at least in well-developed markets. The powerful monopolies and cartels that arose in Western countries in the late nineteenth and early twentieth centuries, for instance, were clearly products of growing statism and protectionist interventionism, and not of advancing free-market capitalism. This view is supported by knowledgeable historians of radically different political persuasions. As F. A. Hayek pointed out (), such monopolies and cartels cannot reasonably be attributed to advanced capitalism, industrialization, or technology, since they appeared first not in the most advanced industrial country—i. e., Britain—but in Germany, where capitalism remained in its early stages and where socialist and statist ideas and policies predominated. Marxist historian Gabriel Kolko, analyzing the American political economy of the same period, arrived at virtually the same conclusion ().