How Government Regulations Affect The Competitive Environment And Impact Individual Business

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Government regulations affect the competitive environment and impact individual business. There are also laws set forth by the government to regulate businesses. The four major pieces of legislation are collectively known as the Antitrust laws.
1. Sherman Act 1890 o Illegal to restrain trade between states on foreign nations. As well as persons who monopolized, attempt to monopolized, conspire, or combine in order to monopolize any type of commerce or trade with states or foreign nations. Originally was a misdemeanor but then amended to a felony charge.
2. Clayton Act of 1914 o Outlaws price discrimination, tying contacts that require purchasing of another product to obtain the desired product, acquiring stocks of the competition when the outcome would result in less competition, and interlocking directorates in which director from one company is sitting on the board of a competitor causing a reduction in competition.
3. Federal Trade Commission Act 1914 o Created the Federal Trade Commission that has five members that works with the U.S. Justice Department to enforce the antitrust laws. The FTC can investigate upon request of firms or on its own. The Wheeler-Lea Act of 1938 amended the Federal Trade Commission Act so that the responsibility of protecting the public against false and misleading advertising of products and misrepresentation of said products as well.
4. Celler-Kefauver Act 1950 o Amended the Clayton act of 1914 in which that companies found a loop hole that they could obtain physical assets of another firm to reduce competition instead of acquiring their stocks. The Celler-Kefauver Act made it so that the loop hole was closed by prohibiting the physical assets being obtained by completive firms.

The purpose of industrial regulation is to protect society from firm from price and output control buy individual or small groups of businesses called Oligopolies and Monopolies. Oligopoly is a market dominated by a few large produces of similar or complementary products. Since there are a few in numbers they ca control prices but react to each other’s pricing, products, and advertisements. With regulation the government can regulate the pricing of the companies. The benefit of having a Oligopoly already is that they are competitive in pricing by nature. An example of an Oligopoly is gasoline companies. They already try to have the lowest price so that consumers will buy their gas, but being regulated they can’t hike up the prices. Monopoly is when there is only one firm in a market place and is the only producer of a product where there are no similar or substitution to the product. The monopoly can control the pricing and production very tightly to either drive prices or demand and scarcity of the product. Normal or unregulated monopolies can charge higher prices since there is no competition and have complete control of the market. But with regulations the government can manage pricing but the firm still get a reasonable profit. Monopolies can achieve a higher output at a lower cost that can benefit society more so than a larger number of companies producing smaller amount of a product.
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