The result is that a potential competitor now has an incentive to enter the market with a plant employing full economies of scale that would produce greater quantities at lower prices. The first company, however, could now complain to a regulatory agency that the interloper is using predatory pricing to drive him out of business so that it can then charge a monopoly price. There is no disputing that economies of scale do lead to a better utilisation of resources, higher output, lower costs and prices. But this is where schizophrenia takes hold. The economies of scale company can then be accused of using greater output and lower prices to keep out competition.
Lower prices are predatory while 'excess' capacity is monopolistic.
Defenders of monopoly 'theory' raise the possibility of a firm with economies of scale producing at a price high enough to generate economic profits yet low enough to keep out potential competitors because of the cost of capital. Now this is really sloppy thinking. But if the fear of competition forces a company to lower its prices it obviously cannot be in a monopoly position, even though it is a sole producer. If our imaginary firm is making economic profits then there must be a maladjustment between supply and demand. These profits will induce others to enter the market and compete away the profits by expanding output.