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Problems with Industrial Regulation
Regulated firms have no incentive to cut costs because they will not increase profit by doing so. Instead, they will just pass these costs onto the consumer and will make it more expensive, actually being counteractive on the point of regulating business. -
Example of Criticisms of Social Regulation
One example of criticisms of social regulation are the belief that governments are regulating things that they do not need to regulate, such as pollution standards, because there is not enough scientific backing to the reasons why they are regulating it. They fear that the government is overregulating in a way to set prices to where they want them to be. -
Sherman Act
This act outlawed restraint of trade as well as monopolization. It also made Collusive price-fixing and other anti-competitive actions illegal. -
Example of Social Regulation
Food and Drug Administration -
Monopoly Behavior vs Monopoly Structure
The Standard Oil Case questioned whether Standard Oil was a monopoly. Since they had anti-competitive actions, they were determined a monopoly, but this verdict made people question whether monopolies could get away with being a monopoly if they did not have anti-competitive actions. -
Clayton Act
Legally defined unethical business practices like price fixing and monopolies and also established labor rights.
This act protected workers and smaller companies from unethical purchasing. It also placed more restrictive qualities on forming a monopoly where as the Sherman Act was aimed at breaking up current monopolies. -
Federal trade Commission Act
This act outlawed the unfair competitive tactics that companies used to gain the system by getting monetary compensation for conduct that is harmful to consumers. -
Monopoly Behavior vs Monopoly Structure
The US Steel Case proved that the size of the firm wasn't the issue on whether or not a company was a monopoly, but it was whether or not the company had performed illegal acts against other competitors in a way to gain economic power. -
Regulation on Natural Monopolies
This attempts to set natural monopolies at a place where they make an accounting profit but are at the cheapest point for the consumer. -
Wheeler-Lea Act
This act made the FTC responsible for stopping false advertising and the misrepresentation of products, eventually making false/deceptive sales practices illegal. -
Issues of Enforcement
The issue is the question of whether antitrust policies are enforced well enough, which has two sides; It's been like this forever why change it vs the world is innovating, and this enforcement is out of date. -
Example of Relevant Market Interpretation
In the Alcoa Case, the government decided that Alcoa was a monopoly because it controlled 90% of the aluminum ingot market, but later they ruled that DuPoint Cellophane did not have a monopoly even though they held 100% of the cellophane market because they did not have a monopoly over the relevant market of flexible packing materials. -
Celler-Kefauver Act
An anti-merger act that was passed by congress to prevent mergers and acquisitions that would reduce competition
This was enacted to stop monopolies from forming, as bigger companies could just buy the smaller companies’ producers and thus run them out of business, creating a monopoly where one company controls all parts of production and has an insane barrier to entry. -
Deregulation
Deregulation is the removal of government policies, especially ones that regulate economic policies.
Deregulation was pushed for in the 1970s by politicians in the philosophy that less government regulations would promote more economic competition thus increasing productivity and effectiveness in companies and would lower prices. -
Effectiveness of Antitrust Laws on Monopolies
The antitrust laws on monopolies have been fairly effective, as they have successfully found companies that are monopolies in their field and have made them split apart or create some form of punishment that removes their status of monopoly. -
Effectiveness of Antitrust Laws on Price Fixing
This has been effective because the government has been able to find companies that are conspiring with each other and set prices higher than they should be in price-fixing and has dealt with these in the courts, fining them. -
Effectiveness of Antitrust Laws on Merger Guidelines
The government passed merger guidelines based loosely on the herfindahl index.
They used this in a way that says that two companies are only allowed to have a horizontal merger if the merger significantly adds to their herfindahl index score then the government would intervene and would say that the companies are not allowed to merge -
Effectiveness of Antitrust Laws on Mergers
Based off of the merger guidelines, the government will see if they will let the companies merge.
This is effective in stopping companies from buying out the competition, as the government can have direct intervention on whether or not they should be allowed to become a monopoly, and the only reason that they would allow it is if the other company is already suffering from significant economic losses. -
Legal Cartel Theory
The theory that politicians will regulate local, regional, and national firms who fear the impacts of competition on their survival, but this will create a legal monopoly that guarantees a profit, much like a cartel. -
Example of Social Regulation
Americans Disabilities Act
