Industrial regulations are those regulations in which “the government commissions regulate the price charged by natural monopolists”. (McConnell & Brue, 2008, p. 382) These regulations exist to ensure that natural monopolies are not charging consumers monopoly prices which in turn hurt the consumers as well as society as a whole. Industrial regulations affect the market by its regulation of the natural monopolies which in turn protects the markets consumers. These regulations also allow for a fair profit to the natural monopoly by setting a fair rate, protecting its consumers, but also a “fair return to the enterprises”. McConnell & Brue, 2008, p. 382) In terms of market structure, entities that are affected by industrial regulations include monopolies which do not allow for new entrants into the market making them the only option for consumers. With so much control industrial regulations are necessary and can affect these entities. These economic regulations are there to promote competition by taking the control of a particular market away from the monopoly by regulating prices that can resort to using abusive tactics to maintain the control.
Social regulations are those regulations that deal with the “conditions under which goods and services are produced, the impact of production on society, and the physical quality of the goods themselves”. (McConnell & Brue, 2008, p. 384) These particular regulations exist due to emphasis finally being placed on quality and better working conditions; not just the rate at which the products are sold or the profit due to the industry as is the case with industrial regulations. There is a great deal more entities affected by social regulations then by industrial regulations as these regulations affect all industries.
These regulations affect entities such as employers through the different regulatory commissions that create social regulations. For an employer these regulations can be anything from the safety of an employee, to the quality of its products, to the hiring practices of this particular firm. In some cases there are situations where for economic reasons an organization my exist in a monopolistic structure. These are termed natural monopolies and exist when “economies of scale are so extensive that a single firm can supply the entire market at a lower average cost than could a number of competing firms”. McConnell & Brue, 2008, p 381) These arise in areas such as public utility where it makes much more economic sense to have one electric facility providing service to a city at an average cost. A natural monopoly is justified according to economic theory in that if one particular firm can provide the amount of goods and /or services to a group at a fair price then it’s not necessary to have additional firms competing to provide the same good or service. There are four major pieces of legislation that collectively are known as Antitrust Laws.
First there is the Sherman Act of 1890 outlawed restraints on trade and monopolization. (McConnell & Brue, 2008, p 375) Due to the controversy over the interpretation of the Sherman Act of 1890, the Clayton Act of 1914 was introduced. This piece of legislation was an elaboration of the Sherman Act of 1890 that strengthened this act as well as outlawing price discrimination, prohibited tying contracts, and prohibited interlocking directorates. (McConnell & Brue, 2008, p 376) This Act was intended to not only strengthen the Sherman Act of 1890 but to discourage tactics used by monopolies.
The third piece of legislation making up the Antitrust Laws is the Federal Trade Commission Act of 1914. This Act was created to give the Federal Trade Commission the authority to investigate “unfair competitive practices on its own initiative or at the request of injured firms”. (McConnell & Brue, 2008, p 376) The Wheeler-Lea Act of 1938 amended this Act to establish the Federal Trade Commission as an antitrust agency as well as the authority to make “unfair and deceptive sales practices illegal”. (McConnell & Brue, 2008, p 376) Finally the Celler-Kefauver Act of 1950 was established as an amendment of the Clayton Act.
This particular Act prevents firms from acquiring the “physical assets of another firm when the effect would be reduced competition”. (McConnell & Brue, 2008, p 376) In addition, the Celler-Kefauver Act of 1950 prohibits anticompetitive mergers. (McConnell & Brue, 2008, p 376) The three main regulatory commissions of industrial regulation include the Federal Energy Regulatory Commission, the Federal Communications Commission, and the State Public Utility Commissions. Each regulatory commission regulates a particular area.
The Federal Energy Regulatory Commission regulates the interstate transmission of natural gas, oil, and electricity. This is accomplished by setting the rates/charges of the interstate transmission and sale. (Federal Register) The Federal Communications Commission regulates interstate and foreign communications through different types of media including internet, telephone, radio, and satellite. This commission governs this area through “assigning frequency, power, and call sign for radio” as well as the regulation of areas of media that may be “deemed indecent or illegal”. Encyclopedia of Business) Finally, the State Public Utility Commission regulates public utility services. Although individual states have their own State Public Utility Commissions their ultimate goals are to ensure that customers receive reliable and reasonably priced services. There are five primary federal regulatory commissions that govern social regulation each with a specific function. First, the Food and Drug Administration’s major function is to is ensure the safety of food, drugs, and cosmetics.
The second regulatory commission is The Equal Opportunity Employment Commissions major function is to ensure that employers are hiring, discharging, and promoting staff fairly. Thirdly, The Occupational Safety and Health Administrations main focus is “industrial health and safety”. The Fourth commission is the Environmental Protection Agency whose major function is to oversee noise, air, and pollution in water. Finally, the Consumer Product Safety Commissions major focus is as indicated in its name, consumer product safety. McConnell & Brue, 2008, p 383) Work Sited 1) Federal Communications Commission (FCC). (n. d. ) . In Encyclopedia of Business, 2nd ed. online. Retrieved from http://www. referenceforbusiness. com/encyclopedia/Fa-For/Federal-Communications-Commission-FCC. html 2) Federal Energy Regulatory Commission. (n. d. ). In Federal Register. The Daily Journal of the United States Government online. Retrieved from http://www. federalregister. gov/agencies/federal-energy-regulatory-commission 3) McConnell, C. , & Brue, S. (2008). Economics. New York, NY: