The federal government has enacted legislation in order to regulate corporate activity and effectively protect the consumer. There are four pieces of legislation which are collectively referred to as the Antitrust Laws: the Sherman Act, the Federal Trade Commission Act, the Clayton Act, and the Robinson–Patman Act (“Anti-Trust Laws”, n.d., n.p.). The Sherman Act regulates interstate transactions, and makes it illegal to for companies to create monopolies within a market, or otherwise monopolize a given business sector (“Anti-Trust Laws”, n.d., n.p.). The Clayton Act also works to prevent monopolies by regulating mergers and acquisitions so that the end result of the transaction does not create a monopoly, or otherwise adversely affect the a company’s ability to fairly compete within the market (“Anti-Trust Laws”, n.d., n.p.). The Robinson–Patman Act regulates prices and ensures a fair market by prohibiting companies from engaging in price fixing and other unfair practices (“Anti-Trust Laws”, n.d., n.p.). When taken together, this legislation prevents monopolies, and restricts certain types of mergers and acquisitions, in order to preserve competition.
An oligopoly is a market structure where a particular market segment is largely controlled by a select few vendors, allowing those businesses to effectively control prices and manage competition within the market (“Oligopoly”, n.d., n.p.). While these companies effectively exercise control over market, their position within it is not at all exclusive. A monopoly is similar to an oligopoly, however, only one vendor exclusively controls the entire market (“Monopoly, n.d., n.p.). This position affords the company the ability, if left unregulated, to reduce supply and raise prices, at will. (“Monopoly, n.d., n.p.). The intended purpose of economic regulation is to prevent unfair competition and unfair pricing (“Anti-Trust Laws”, n.d., n.p.). These regulations work to prohibit unfair business practices, such as price fixing, and serve to guarantee a fair market for consumers.
The three primary federal and state regulatory commissions that govern industrial regulation are tasked with the job of protecting consumers, preserving the market, and maintaining the integrity of the economy by ensuring fair competition and open access for everyone. Through Antitrust Laws and other legislation and activity, the regulatory commissions work to prevent businesses from forming monopolies and/or oligopolies. They also serve to eliminate activity such as price fixing and other discriminatory practices (“Anti-Trust Laws”, n.d., n.p.). In providing these functions, the commissions effectively regulate industry and help conserve a free economy.
The intended purpose of social regulation is to protect the consumer and the general public through industry oversight of business in particular, non-economic areas of industry. These regulations generally apply to operations such as health and fairness in order to correct what economists refer to as “market failures” (Litan, n.d., n.p.). Regulations in this market sector address such issues as “truth in lending” to ensure that customers are able to make informed choices within a fair environment.
The primary function of the five primary federal regulatory commissions is to maintain an efficient market. These agencies are tasked with preventing or correcting “market failures” (Litan, n.d., n.p.). In order to do so, they must engage in certain activities, such as monitoring individual business activities to ensure environmental protocol is followed and their activities do not result in harm to others (Litan, n.d., n.p.). These regulatory commissions are also responsible for ensuring that businesses make all necessary disclosures to customers, whether they be financial institutions or pharmaceutical companies (Litan, n.d., n.p.). They are also tasked with maintaining a level of professionalism within industry through the licensing and regulation of certain professions, such those working in the legal and medical fields (Litan, n.d., n.p.). Lastly, the regulatory commissions are responsible to ensuring overall safety, whether it be for consumers using products, employees in the course and scope of their employment, or the citizenry in existing within the environment (Litan, n.d., n.p.). While economic regulation is certainly important, social regulation is equally invaluable to the economy.
The Antitrust Laws. (n.d.). Federal Trade Commission. Retrieved from http://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws
Monopoly. (n.d.). Merriam-Webster. Retrieved from http://www.merriam-webster.com/dictionary/monopoly
Oligopoly. (n.d.). Merriam-Webster. Retrieved from http://www.merriam-webster.com/dictionary/oligopoly
Price Fixing. (n.d.). Federal Trade Commission. Retrieved from http://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/dealings-competitors/price-fixing
Litan, R. (n.d.). Regulation. The Concise Encyclopedia of Economics. Retrieved March 13, 2014, from http://www.econlib.org/library/Enc/Regulation.html