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Industrial regulation is government imposed regulation of an entire industry in order to monitor prices and products provided to the public. Industrial regulation exists to avoid overpricing, lack of competition and the overall taking advantage of consumers. The intended impact on the markets is to promote competition and economic efficiency. Industrial regulation also intends that monopolies and oligopolies do not control the entire market, charging high prices and providing fewer and inferior products, which in turn “harms consumers and society” (McConnell, Brue, Flynn & et al, 2011, pg. 382). These regulations reduce the market power of monopolies, therefore allowing entry into the market by the competition which then allows for substitute products and price competition. It also reduces the power of oligopolies and increases market competition and prevents collusion. The antitrust laws also help anti competition and price fixing by not allowing monopolies to develop.
Social Regulation is government imposed restrictions on corporate behavior to avoid unwanted behavior such as pollution or dangerous work situations. Social regulation exists to protect society by maintaining safer products, lessening pollution, improving work conditions and creating greater equality of economic opportunity, otherwise considered to improve our way of life. A vast majority of employers and also employees are affected by social regulation. Employers are required not to discriminate in hiring practices, allowing more opportunities to various groups of people including people with disabilities. Also, employers must provide safe working conditions as stating in OSHA (The Occupational Regulation 3 Safety and Health Administration).
This is maintained by requiring employees to watch safety videos and practice safety procedures. To be compliant, employers are required to spend money on training materials, time and manpower enforcing anti-discrimination and safety protocols. Natural monopolies are entities that exist due to being more cost efficient and providing lower cost services or goods to consumers because of economies of scale. Due to the size of the entity, fixed costs spread over more units of output, leading to lower variable costs. One example would be our local utilities, where the single firm can provide the entire market supply of electricity therefore “competition is uneconomical” (McConnell, Brue, Flynn & et al, 201, pg. 382.)
Natural monopolies are formed by the government, naturally or by acquisitions. Natural monopolies should exist in some locales and industries because it would be cost efficient for the consumer. It was would not be efficient for a new electric company to come and spend a lot of capitol, creating new power lines, buildings, etc. and then charge higher costs to consumers to cover the initial cost. According to economic theory natural monopoly is optimal regulation, that is, how a firm regulates to produce and price optimally for consumers. D. Four major pieces of Antitrust Laws are:
1. The Sherman Act of 1890 which lays out two ideas. First, any trust, conspiracy, or restraint in trade or commerce is declared illegal. Second, anyone found guilty of monopolizing shall be found guilty of a felony. This act is designed to curb monopolization and anti-competition.
Regulation 4 2. The Clayton Act of 1914: Price discrimination is deemed illegal when it reduces competition and is based on costs differences. It also prohibits tying contracts, acquisition of stocks from competing corporations and directors of one corporation cannot be board member of a competing firm. 3. The Federal Trade Commission (FTC) Act of 1914: Has responsibility to enforce antitrust laws by investigating unfair competitive practices. The FTC can issue cease-and-desist orders when unfair methods of competition are found. 4. The Wheeler-Lea Act of 1938: Gives the FTC additional reasonability’s to protect the public from false advertising, established the FTC as an independent agency and made unfair and deceptive sales practices illegal. 5. Celler-Kefauver Act: Amended the Clayton Act by prohibiting anti-competitive mergers by acquiring the competitions stock. Previously purchasing a firm’s physical assets was a way to acquire a competitive firm. E. Three Industrial Regulatory Commissions are:
1. The Federal Energy Regulatory Commission which regulates the transmission of natural gas, oil and electricity, including the wholesale sale of electricity and gas. The FERC reviews mergers and acquisitions by electric companies, regulates the sale of wholesale electricity and gas, regulates the transportation of oil by pipeline, approves applications for interstate natural gas pipeline and storage facilities. The FERC also licenses and inspects hydroelectric projects. 2. The Federal Communications Commission regulates interstates and international communications by radio, television, wire, satellite and cable.
The FCC processes Regulation 5 applications for licensing and filings, analyzes complaints and conducts investigations against the Communications Act of 1934. It also develops and implements regulatory programs and educates and informs consumers about telecommunication goods and services. 3. State Public Utility Commission which regulates the public utilities by state ensures fair, just and reasonable rates. The CPUC develops and implements policies to promote competition in communications division, represents the commission before the United State Congress and federal agencies. It also provides information and assistance to the general public. One division oversees the safety of electric and communication facilities. F. Five main federal regulatory commissions are:
1. The Food and Drug Administration which protects public health by assuring safety of drugs, vaccines, medical devices, cosmetics and food. They intend to lessen the risk of unsafe products for everyone. 2. The Equal Opportunity Commission enforces laws making it illegal to discriminate and applies to all hiring, firing, promotions, harassment, training, wages and benefits. This allows everyone a fair chance at employment. 3. The Occupational Safety and Health Administration assure safe and healthy working conditions for all men and women and were created to improve working conditions. 4. The Environmental Protection Agency protects the air, water and noise pollution and was created to protect the environment and therefore human health. 5. The Consumer Products Safety Commission ensures the safety of consumer products by helping protect consumers from the risks of product incidents.
Regulation 6 REFERENCES
McConnell, C., Brue, S., Flynn, S., & et al, S. (2011).Economics. (19e ed.).
New York: McGraw-Hill%2FIrwin.