EGT1 – Task 309.1.3
EGT1 Task 309.1.3
Government regulation in business today is vital because it attempts to create a level playing field for companies competing against one another and regulate honest business practices toward the consumers. It is important to for any business to understand how government regulation affects their industry and how they intend to run their company.
Industrial regulation is the government regulation of an entire industry. The purpose of industry regulation is for a an entity to watch an industry’s prices and products to make sure that they do not create a monopoly or take advantage of consumers. There are basically two kinds of regulation, price regulation and social regulation. Price regulation is regulation directed towards industries that have tendencies that may produce a monopoly. The industries that price regulation agencies monitor are: the Federal Energy Regulatory Commission (FERC), which are basically responsible for monitoring gas and oil pipelines and other energy based industries; the Federal Communications Commission (FCC), who are supposed to regulate television, telephones, and other areas of communication; and the Securities and Exchange Commission (SEC), who regulates financial markets. Social regulation monitors the conditions where goods and services are produced, the safety of those items produced, as well how the production of those good might affect society. The industries that social regulation agencies are worried about are: the Food and Drug Administration (FDA), Environmental Protection Agency (EPA), and the Equal Employment Opportunity Commission (EEOC). The main purpose behind these organizations is; to stop monopolies from being formed and to control the pricing of the products or services because these industries have elements that may potentially create a monopoly. The affect that government industrial regulation has on the market will vary depending on several different variables such as how antitrust laws are interpreted, the administration enforcing the laws, taxation, and how strictly the laws are enforced. The purpose of the government regulation is to ensure monopolies aren’t formed and to make sure that prices and products aren’t taking advantage of customers. They also want to make sure that oligopolies are not formed to make sure there is not too much power over pricing and also to promote fair and healthy market competition. Depending how the laws are enforced will help decide how much of an impact there is to a certain market. The idea is to strive for equality and integrity in certain industries. Knowing how courts are interpreting antitrust laws and how they affect a firms specific industry is important to understand when making business decisions for a company along with knowing the boundaries for where regulatory agencies may consider a monopoly or oligopoly could potentially be formed by having too much control. Social regulation is served with monitoring the conditions under which goods and services are produced, the safety of the goods being produced, and any effects production may have on society. The social regulatory agencies are; the Food and Drug Administration (FDA), the Environmental Protection Agency (EPA), and the Equal Employment Opportunity Commission (EEOC). Social regulation is different from pricing regulation because social regulation applies to almost all firms and is not designed for the specific purpose of stopping a monopoly. One example would be when the Occupational Safety and Health Administration (OSHA) decide to issue a requirement that all workers have periodic break from work, it would apply to all firms in the United States who are under OSHA’s control. On the other hand, pricing regulation would not. People who are opposed to social regulation believe that regulation carries a steep administrative cost and that those costs actually hurt consumers more than the regulation...
Cited: Colander, David C. Economics: Eighth Edition San Francisco: McGraw-Hill Irwin 2010.
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