Gov. Regulations Of Business Essay, Research Paper

Government Regulation of Business I. Authority of Government to Regulate Business 1) Authority derived from statutes passed by Congress or state legislatures. 2) Police Power- Under our Federal system, state and local governments have a basic power to provide for the general welfare of the public. a. power to regulate business activity to promote the public interest is controlled by this 3) Intrastate Commerce – State and local governments may only regulate business activity conducted solely within that governments boundaries a. State and local governments may not regulate areas of business already regulated by the federal government 4) Interstate Commerce – Business activity conducted in more than one state, this is regulated by the federal government. a.This comes from the Commerce Clause of the constitution of the United States : “Congress shall have the power to regulate commerce with foriegn nations, among the several states, and with Indian tribes.” II. Areas of Government Regulation a. Most important areas- preventing monopoloes, maintaining fair competition, taxation, regulating public utilities, and preserving the general welfare and environment A. Preventing Monopolies 1) Monopoly – a condition in which competition is suppressed by act or agreement. 2) Antitrust Laws – State and Federal governments have enacted laws to prevent monopolies a. Most Antitrust activity is at a federal level. b. Based upon Sherman Act, passed by congress in 1890. (this law prohibits any monopolies or any acts that might lead to monopolies) c. The Clayton Act, enacted in 1914, prohibits a merger of corporations in interstate commerce if it would tend to create a monopoly. 3) Only the Monopolies that arise from unlawful or unreasonable acts are prohibited B. Maintaining Fair Competition 1) The Sherman Act prohibits any combination or conspiracy in restraint of trade. 2) Most common is price fixing. a. Price fixing is a violation of the Sherman act regardless of whether the prices set are fair or unfair. 3) The Clayton act also also prohibits certain practices that might lesson compitition. a. This Includes price discrimination and buying stock in another corporation if that might lesson competition 4) The Robinson- Patman Act, an amendment to the Clayton Act, was enacted in 1936 a. This Act prohibits specific types of price discrimination, such as selling goods and services at prices designed to eliminate competition. 5) Other unfair methods of compitition are prohibited by the Federal Trade Commission Act of 1914. a. Business defamation – spreading a rumor to damage a companies reputation. b. Malicious compitition – acts done solely to eliminate a competitor 6) There are certain exceptions in the antitrust laws based on policy decisions that are in the publics interest.

a. ex. Labor Unions farmers’ cooperatives, and professional sports orginazations 7) Fair Compitition is also maintained by the government by making people aware of the prices of goods. a. Local governments often require labels and/or signs that are clearly marked to indicate the total and unit costs of various products. C. Regulating Through Taxation 1) Income Tax a. a tax on income limits the amount a business may spend or may return in the form of profits 2) Sales Tax a. although it is paid by the consumer it effects sales and therefore the profits of the business D. Regulating Public Utilities 1) Allowed to operate as a monopoly a. This causes them to be regulated very closely by rate charging, profits, and advertising E. Preserving The General Welfare And the Environment 1) Liscensing a. Some proffesions require a license (Attorneys, Doctors, Accountants..etc.) b. This is done to make sure only qualified people may do certain jobs. c. Must meet a certain standard 2) What products a business can sell and when a. Sunday laws – limited business may be done on a Sunday b. Vendors may not sell Alchohol and cigarettes to minors 3) Location, Disposal, and Energy sources a. A company must be placed in the right area for the right type of work due to noise and other factors b. Companies may not dispose of wastes in places were it may effect wildlife in any way c. Using certain fuels may cause pollution nuisances III. How Government Regulations Are Enforced a. Three different groups can enforce – agencies, courts, and the public A. Administrative agencies 1) Administrative agencies – government bodies created by Congress or a legislature to act in the public interest. a. They have legislative, executive, and judicial powers. b. legislative- agencies make rules, set rates, and establish standards c. executive – they enforce their own rules d. judicial – determine whether their rules have been violated and impose penalties for any violations discovered 2) Exist in all levels of Government a. Local – zoning boards, tax assessment review boards, and bridge and tunnel authorities b. State – public Utilities commissions, professional licensing boards, and transportation authorities c. Federal – agencies are apart of larger government units. 3) Independent regulatory agencies a. Most active and powerful agencies b. Created by Congress c. Do not report to anyone unless powers are abused d. Example = FCC (Federal Communications Commission) e. They can impose fines or get a court order to stop any violations (They may revoke the liscence or refuse to renew a current liscence) 4) Members of the Public a. Represented by attourney general of the state. b. Treble Damages – Can get up to three times the amount of damage sustained as a form of punitive damages