The customers and businesses whom relied on these industries began to complain to the government. The government responded with the Sherman Act of 1890. Industrial regulations protect consumers by stopping companies and industries from creating a monopoly giving consumers no other source of goods that the company may offer. This would cause the prices to skyrocket. With industrial regulations, being a monopoly is against the law and monitored by the government.
A company is regulated making competition necessary which keeps prices to consumers more affordable. In addition, company suppliers are protected due to industrial regulations companies cannot mandated who their suppliers supply to or make deals outside of what is regulated. Oligopolies and monopolies are affected by industrial regulations. An example would be the US aluminum industry. “This industry has 3 huge firms that dominate the entire national market. ” (McConnell, Brue & Flynn, 2011, p. 23) Many utilities are monopolies by having the entire market share in certain areas. With deregulation of these utilities, the market becomes open and competition for market share begins. Social regulation is a set of departments created by the government to protect consumers and society from faulty goods and to protect their health and social day-to-day activities in from their homes to their workplace and giving everyone an equal opportunity to seek and enjoy employment.
Social regulations were created to protect society in regards to the products they buy making sure they are safe to use, eat and the air is healthy to breath, people are not discriminated against for any physical disability, their rate, their religious beliefs and that their workplace is a safe place to work. Social regulations affects all industries across the board. Some examples of the entities would be the Food and Drug Administration which has jurisdiction over all food, drugs and cosmetics. It protects consumers by making sure these industries’ products are safe for use and consumption.
Another example would be Occupational Safety and Health Administration. OSHA. OSHA makes sure all industries provide a safe working environment for its workers. Additional entities under social regulations are Equal Employment Opportunity Commission which has jurisdiction over hiring, promoting and discharging of workers; Environmental Protection Agency, which keeps watch over air, water and noise pollution; Consumer Protection and Safety Commission, which has jurisdiction over the safety of consumer products. McConnell, Brue & Flynn, 2011, p. 384). A natural monopoly is defined as a “single firm which can supply the entire market at a lower average total cost than could a number of competing firms. ” (McConnell, Brue & Flynn, 2011, p. 376). Natural monopolies get established when that industry is the only company that can produce the product they make. Examples would be utility companies. These companies have very large operations but they are able to product their product, in this case, electricity, at a relatively low cost to the end consumer. The economic objective of industrial regulation is embodied in the public interest theory of regulation. In that theory, industrial regulation is necessary to keep a natural monopoly from charging monopoly prices and thus harming consumers and society. The goal of such regulation is to garner for society at least part of the cost reductions associated with natural monopoly while avoiding the restrictions of output and high prices associated with unregulated monopoly. ” (McConnell, Brue & Flynn, 2011, p. 82). The Sherman Act of 1890 was the first legislation of the anti-trust laws. It outlawed restraints of track such as price fixing, dividing up markets and companies being a monopoly. The Clayton Act of 1914 was created to go into more detail and clarify what was allowed and not allowed under the Sherman Act. It outlaws price discrimination, tying contracts, acquisition of stocks of competing corporations which would create less competition and the formation of interlocking directories.
The Federal Trade Commission Act of 1914 was created to give the “FTC power to investigate unfair competitive practices on its own incentive or at the request of injured firms. ” (McConnell, Brue & Flynn, 2011, p. 376). The final piece of legislation of the Anti-Trust law is The Celler-Kefauver Act of 1950 which amended Section 7 of the Clayton Act. “The Clayton Act now prohibits anticompetitive mergers no matter how they are undertaken. ” (McConnell, Brue & Flynn, 2011, p. 376). This Act closed a loophole in Section 7 of the Clayton Act.
The three main regulatory commissions are: Federal Energy Regulation Commission established in 1930; Federal Communication Commission established in 1943 and; State public commissions. The FERC governs electricity, gas, gas pipelines, oil pipelines, and water power sites. The FCC has jurisdiction over communications which include telephones, televisions, cable TV, radio, telegraphs, CB radios and ham operators. The State public utility commission has jurisdiction over electric, gas and telephones. The functions of the 5 main Federal Regulatory Commissions are as follows:
Food and Drug Administration has jurisdiction of the safety and effectiveness of food, drugs and cosmetics Equal Employment Opportunity Commission has jurisdiction of hiring, promotion and discharge of workers; Occupational Safety and Health Administration has jurisdiction over industrial health and safety The Environmental Protection Agency has jurisdiction over air, water and noise pollution and The Consumer Product Safety Commission has jurisdiction for the safety of consumer products. REFERENCES McConnell, C. , Brue, S. , & Flynn, S. (2011). Economics. (19th ed. ). New York: McGraw-Hill/Irwin.