Firm’s Competitive Environment
Author
Institution
Introduction
A comprehensive understanding of the government regulations and the dynamics pertaining to the competitive environment of businesses comes is imperative not only for businesses but also for potential employees. Needless to say, the markets are made up of different structures, each of which is affected in a different way by the varied regulations. On the same note, a number of bodies and commissions are established in an effort to regulate the markets and ensure fairness not only among the business entities but also with regard to the customers.
Antitrust laws
Also called competition laws, antitrust laws underline statutes aimed at protecting consumers from predatory or unfair business practices through safeguarding the existence of fair competition in open-market economy. The United States has four fundamental antitrust laws including the following.
Sherman Act – enacted in 1890, the Sherman Act prohibits any conspiracy, contract or combination between two or more business entities that imposes unreasonable restrictions on commerce and trade (Vogel, 1998). It prohibits monopolies, conspiracy or agreements that monopolize the market of a particular service or product.
Clayton Act- this Act, passed in 1914, aimed at addressing specific practices whose effect is the creation of a monopoly or substantially lessen competition. It covers mergers and acquisition, exclusive dealing agreements, tying arrangements, as well as interrelated boards of directors.
Robinson-Patman Act – coming into force in 1936, the Act addressed discrimination in prices that are charged to competing purchasers for goods that have similar quality and grade (Vogel, 1998). It aimed at protecting small businesses through restricting the capacity of larger companies to dictate discriminatory discounts via their purchasing power.
Federal trade Commission Act – the Act gave the Federal Trade Commission the authority to enforce the three other antitrust laws. It prohibited deceptive practices and unfair competition methods (Balleisen, 2011). It was designed to nip anticompetitive practices in the bud.
Intended Purpose of economic regulation in monopolies and oligopolies
Oligopolies
These refer to market structures that are characterized by few firms dominating the market, selling differentiated or identical products with considerable barriers to entry in the industry. Economic regulations in this industry are aimed at ensuring economic efficiency. Oligopolies may try to fix prices, leading to high prices and reduced production unlike the case of perfect competition. In addition, economic regulations of oligopolies are aimed at enhancing the growth of the industry, especially considering that oligopolies can apply unethical practices so as to limit entry into the industry.
Monopolies
Economic regulation of monopolies aims at preventing excess price. Deficiency of government regulation may cause monopolies to put the prices up, resulting in allocative inefficiency and a reduction in consumer welfare. In addition, economic regulations safeguard the quality of services in monopolies (Baldwin et al, 2010). Monopolies often have no incentive to provide quality services as there is no competition. Economic regulations ensure that monopolies meet specific standards of service. Moreover, economic regulations promote competition and limit monopsony power (Baldwin et al, 2010). Firms that have monopolistic powers may choose to exploit monopsonic buying power.
Key functions of federal commissions governing economic regulations
Federal Energy Regulatory Commission (FERC)
FERC controls oil pipeline rates, hydroelectric licensing, wholesale electric rates, natural gas pricing and interstate electricity sales.
Securities and Exchange Commission – SEC’
SEC was created with the aim of controlling securities markets, as well as protecting investors. It has statutes that encourage full public disclosure and protect investors from manipulative and fraudulent practices in security markets (Balleisen, 2011).
Federal Communications Commission
The FCC aims at making available worldwide, nationwide and radio communication services with sufficient facilities at reasonable cost to all United States people without discrimination (Balleisen, 2011). It also aims are promoting safety of property and life via radio and wire communications.
Intended purpose of social regulation in all market structures.Social regulation underlines a wide range of rules that govern the manner in which individuals or businesses undertake their activities with the aim of correcting varied market failures (Baldwin et al, 2010). It aims at serving two purposes. First, it prohibits business entities from producing goods with certain characteristics of in ways that would harm public interests like environment, health and safety (Baldwin et al, 2010).
Secondly, it aims are ensuring that business entities produce goods with certain characteristics and in ways that would benefit public interests.
Key functions of the five primary federal regulatory commissions that govern social regulation.
Environmental Protection Agency (EPA)
EPA was established with the sole aim of protecting the environment and human health through the creation and enforcement of laws made by Congress. It is responsible for the maintenance and enforcement of national standards under varied environmental laws in consultation with local and state governments (Baldwin et al, 2010).
Food and Drug Administration
FDA promotes and protects public health via supervision and regulation of dietary supplements, tobacco products, food safety, prescription, vaccines, blood transfusions, veterinary products, pharmaceutical drugs, biopharmaceuticals and ERED (Balleisen, 2011).
U.S. Consumer Product Safety Commission
CPSC controls the manufacture and sale of varied consumer products through banning dangerous consumer products, researching on their potential hazards, and issuing recalls if such products are already in the market (Balleisen, 2011).
Occupational Safety and Health Administration
OSHA has the mission of safeguarding healthful and safe working conditions for workers through establishing and enforcing standards, as well as offering assistance, education, outreach and training (Baldwin et al, 2010).
National Highway Traffic Safety Administration
The NHTSA aims at saving lives, preventing injuries, as well as lowering vehicle-related crashes through the development of anthropomorphic dummies that are used in safety testing and the test protocols themselves (Balleisen, 2011).
References
Baldwin, R., Cave, M., & Lodge, M. (2010). The Oxford handbook of regulation. Oxford: Oxford University Press.
Vogel, S. K. (1998). Freer markets, more rules: Regulatory reform in advanced industrial countries. Ithaca, NY [u.a.: Cornell Univ. Press.
Balleisen, E. J. (2011). Government and markets: Toward a new theory of regulation. Cambridge: Cambridge University Press.
