COMPETITION

1
COMPETITION REGULATORY AGENCIES

• Types of Competition
• Mergers
• Government Regulation
• Anti-Trust Legislation
• Federal Regulatory Agencies

2
TYPES OF COMPETITION

• Perfect Competition a large number of companies
  all producing essentially the same product. No
  company has any control over price.
• Imperfect Competition a situation in which a
  company has enough control over the market to
  influence price.
• Types of Imperfect Competition
• Monopoly a market in which a single seller
  dominates the market.
• Monopolistic Competition many companies compete
  in an open market to sell products that are
  similar, but not identical. (restaurants/clothing)
  
• Oligopoly a market dominated by a few large,
  profitable firms. (70-80 of the output)
  (airlines/automobiles)

3
Mergers

• Merger when two businesses come together to
  form one business.
• Types of Mergers
• Horizontal Merger when two businesses who are
  competing come together.
• Vertical Merger - when two businesses that are in
  different steps of an operation come together.
• Conglomerate Merger when two businesses that
  are in unrelated markets come together.
• Takeover when one business buys more than ½ the
  stock of another business on the open market.
• What is the correlation between mergers and
  competition?

4
GOVERNMENT REGULATION

• Regulation
• Process by which the government passes laws, and
  the executive branch enforces policies designed
  to oversee business activity.
• Regulation became prevalent during the industrial
  revolution. Regulation includes making the
  workplace safer, keeping the marketplace
  competitive, overseeing the stock market, and
  protecting the environment.
• Deregulation
• Process by which the government becomes less
  involved in controlling business activity. Some
  politicians feel that regulation tends to hinder
  economic growth.

5
Anti-Trust Legislation

• Definition - Anti-trust legislation is
  legislation designed to break up existing
  monopolies and prevent the formation of new
  monopolies to increase competition in the
  marketplace.
• Examples
• Sherman Antitrust Act (1890) - legislation
  outlawed agreements and conspiracies that
  restrain interstate or foreign trade.
• Federal Trade Commission Act (1914) created the
  Federal Trade Commission (FTC) gave power to
  bring cases against private businesses engaged in
  unfair trade practices.
• Clayton Act (1914) restricted the practice of
  selling goods to different buyers at different
  prices.
• Hart-Scott-Rodino Anti-Trust Improvement Act
  (1976) - outlawed mergers which substantially
  lessen competition.

6
FEDERAL REGULATORY AGENCIES

• Environmental Protection Agency (EPA) Agency
  was created to reduce pollution, and enforce
  federal environmental laws and policies.
• Federal Communications Commission (FCC) Agency
  regulates radio, television, phone, telegraph,
  and satellite industries.
• Food Drug Administration (FDA) Agency was
  created to monitor the safety and health of all
  foods and drugs.
• Federal Trade Commission (FTC) Agency was
  created to monitor business practices. FTC is in
  charge of stopping monopolies from forming, and
  maintaining a competitive marketplace.
• Interstate Commerce Commission (ICC) Agency was
  created to monitor all surface transportation
  (ground).
• Nuclear Regulatory Commission (NRC) Licenses
  and regulates civilian uses of nuclear energy in
  order to protect public health and safety, as
  well as the environment.
• Occupational Safety Health Administration
  (OSHA) This agency was created to oversee
  workplace safety. The agency does periodic
  checks of businesses to ensure the safety of
  workers.
• Securities Exchange Commission (SEC) This
  agency monitors the stock market. The agency
  enforces policies to provide fair trade practices
  in the various stock exchanges.