Regulating the Market
Stephanie Cruz
Western Governors University

Regulating the Market When it comes to the business world, there are two types of regulations that must be taken into account and understood. The first is industrial regulations and the second it social regulations. The part they play for businesses has the ability to affect the market in what can be deemed both beneficial and harmful ways. Industrial regulations by definition, is the governments old-fashioned way of regulated prices as well as the products provided to consumers in certain industries (Author, 2011, pg. __) Once industrial regulation is understood, the question of why it exists comes into play. Based on the theory mentioned in our textbook called “public interest theory of regulation,” we see that industrial regulation is important because it allows the government to keep natural monopolies from charging prices that would only be needed if there were several companies all producing the same products and competing with one another (2012, pg. __). The main reason for these industrial regulations: to keep these natural monopolies from harming both their consumers as well as society. For example, electricity, gas, and cable television are some of the entities that are affected by these regulations in regards to market structure. (Need to do part 3 and 3a. of section A) Turning to another type of regulation found in the business world, we find social regulations is defined as the governments interest in what condition products and services that businesses produce will be in and how those conditions will affect both consumer and society. Generally speaking, social regulations apply to all industries. These regulations are concerned with protecting as well as providing growth for society. For example, social regulations set rules for food, individuals in the workforce, health and safety, and water safety. Because of these regulations, companies have to follow specific guidelines even if it will cost them more money to ensure the products they are selling are safe to use. (Need to finish part 2 and 2a in section B) Being that these regulations are put in place to keep natural monopolies in line, I’ll discuss what these kinds of monopolies are for a better understanding. By definition, natural monopolies are industries which have a consumer base that is large enough for them to be able to offer products at a much lower price than an industry that has several companies all producing the same product. The rationalization behind the need for these natural monopolies is to ensure local companies such as an electric company can offer their services to their customers and not have to compete with larger, worldwide companies. In theory, natural monopolies keep the economy balanced. To ensure these natural monopolies remain as such, the government created the Antitrust Laws which keeps companies who do not need to compete for business from participating in those types of competitive activities such as price-fixing and monopolizing. There are currently four of this Antitrust Laws. The first is the Sherman Act of 1890 which makes it illegal for companies to act as monopolies or refuse to trade or sell their product. The Clayton Act of 1914 makes certain practices that companies might engage in, illegal such as price-fixing. The third act created was the Federal Trade Commission Act of 1914 which established a group of people to investigate complaints against businesses, have hearings, an issue “cease and desist orders” (year, pg. __). The final antitrust law is known as the Celler-Kefauver Act of 1950 which prohibits a company from acquiring the assets of another company if it will diminish the competition in the industry. By establishing these laws, the government was able to create a sort of control on the industries in an effort to protect the economy and the public. Diving further into the industrial regulations, one can see that there are three major regulatory commissions which watch over the industrial regulation. The Federal Energy Regulatory Commission (1906) is responsible for industries involved in producing energy such as electric companies and gas companies. Another commission is the Federal Communications Commission (1934) which regulates industries such as telephone companies and television. The third commission is the State Public Utility commissions which govern electric companies and telephone companies. The difference between the first and third commissions is the fact that one watches the country and the other watches an individual state. So how do these commissions work? Take for example Augusta, Ga. There are two main electric companies in the area. Their domain is split by a main road. Everything on one side of the road belongs to one company and everything on the other side of the road belongs to the other company. This gives both companies equal business and neither can compete with the other because they are confined to their own areas.
Just as there are federal regulatory commissions for industries, there are also federal regulatory commissions for social regulation. These commissions govern companies who produce products and services that protect the public from harm. There are five major regulatory commissions. The first is the Food and Drug Administration (1906) which as it suggests is concerned solely with how safe and how well items dealing with food, drugs, and cosmetics are produced. The Equal Employment Opportunity Commission (1964) is responsible for ensuring businesses are complying with the regulations of hiring and terminating their workers. Likewise, the Occupational Safety and Health Administration (1971) ensure industrial jobs remained safe for workers. The fourth commission is the Environmental Protection Agency (1972) keeps a watchful eye on the companies who deal with products such as water and air. This brings us to the fifth and final regulatory commission which oversees the Consumer Product Safety Commission (1972) which ensures any product produced by a company is safe for the consumers in which it was intended. Need a conclusion paragraph.

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