Types of Regulation

1
Types of Regulation

• Regulation of Production, Distributing, and
  Financing
• Regulation of Competition
• Regulation of Prices
• Prevention of Monopolies and Combinations

2
Regulation of Production, Distribution,
Financing

• The government may regulate activities involving
• Transportation
• FAA
• Production of goods
• Quality
• Financing
• Federal Reserve System
• FIRREA
• Communication
• Telecommunications Act of 1996
• Weights and Measurements
• Metric Conversion Act of 1975
• Health and Beauty Standards
• Cosmetics, Food, Drugs

3
Regulation of Competition

• Federal Trade Commission Act
• Created Federal Trade Commission
• Outlawed all unfair methods of competition,
  including
• Harassing tactics
• Coercing by refusing to sell
• Discriminating
• Industrial espionage
• False and deceptive advertising
• Disparaging competitors products
• Misleading labels
• Simulating the appearance of competitors goods
  and/or advertisements

4
Regulation of Prices

• Clayton Act of 1914
• Prohibits price discrimination in interstate or
  foreign commerce if the discrimination may
  substantially lessen competition or may create a
  monopoly.
• Cannot charge different customers different
  prices for the same goods
• Cannot disguise as advertising allowances or
  other valuable benefits that are given to some,
  but not all.
• Both giving and receiving any illegal price
  discrimination is a crime

5
Permitted Price Discrimination

• Difference in grade, quality, or quantity of
  goods sold
• Difference in the cost of goods
• Different transportation costs
• Closeout sale of goods
• Good faith attempt by a seller to meet the
  competition in a particular competitive market by
  lowering price charged in that market
• Deterioration of goods

6
Prevention of Monopolies Combinations

• The Federal Antitrust Act (Sherman Antitrust Act)
• The Clayton Act
• Takeover Laws

7
Sherman Antitrust Act

• Prohibited Conduct
• Section 1 forbids a conspiracy or agreement by
  two or more parties to unreasonably restrain
  trade
• Horizontal Price Fixing agreement between
  competitors
• Vertical Price Fixing agreement between
  manufacturer retailer
• Tying Arrangement refuses to sell one product
  unless buyer purchases another product
• Section 2 prohibits unlawful monopolization or
  attempt to monopolize an industry

8
Sherman Antitrust Act

• Scope of the Act
• Applies to
• Most persons engaging in interstate commerce
• Most activities, including manufacturing,
  production and selling
• Protects all persons, including consumers and
  competitors

9
Sherman Antitrust Act

• The act does not prohibit
• A city from imposing rent limits
• A manufacturers agreement to distribute goods
  through only one dealer
• Large businesses, simply because they are big
• Domination of a market by a company because of
  its superior product or business judgment
• Certain industries are exempt
• Marine insurance associations
• Farm cooperatives
• Labor Unions

10
Sherman Antitrust Act

• Penalties/Remedies
• Imprisonment for up to 3 years
• Fines of up to 10 million for companies and
  350,000 for individuals
• Civil suit by persons harmed for treble damages
• A state may file a class action suit on behalf of
  its citizens

11
Clayton Act

• Forbids a company from acquiring an interest in
  the assets ownership, or conduct of another firm
  if doing so will substantially lessen competition
  or create a monopoly
• Firms must give a premerger notification to the
  FTC before merging
• A court may enter a divestiture order that
  requires a party to give up a prohibited interest
  in another company or its assets.