Industrial Regulation | Quick Homework Help

Introduction

For a country’s economy to grow, the government has to involve itself in economic regulation and economic development. It can be defined as the governments deliberate actions aimed at influencing industrial economic activity. The regulations enable economies to sustain themselves in time of financial crisis. Whereas we can say that the institution of economic regulation is generally understood by many governments, it is clear that it has not been thoroughly researched. That is why we have some developing countries still on the verge of economic failure.

Industry regulation

This enterprise exists because of an organizations interest in broadening its market by altering service and product delivery to consumers. Industrial regulation consists of a number of economic aspects that are geared at regulating the market in a stable state to allow for perfect competition. The government may take action in the case of allocation inefficiency where the government identifies and eliminates obstacles to a competitive economy. The enterprise affects market by altering the market prices when similar industries are compared. The functions of the government include protecting its nationals from market instability, price gouging, and consumer exploitation. When one industry tends to exploit consumers, the government kicks in and regulates the prices for the whole industry, harmonizing the industry’s income and consumer needs. The regulatory process takes several measures in regulating the demand of consumer goods in the market. It can offer or take money from an industry; it can prohibit business trade or compel trade defining clearly its effects on who benefits from its regulation and who loses from the regulation.

The government has two main regulation objectives. These include the need to protect and benefit the nationals at large. Sometimes the regulations harm the consumer, and are perverse. The second objective is a result of political influences and the need to establish regulation based on political bias of a nation.

The entities affected by economic regulation are the consumer and the manufacturer. The consumer may benefit from lowered prices while the manufacturer gets paid to subsidize costs, or on the other hand suffer as the government raises prices to control the trade of a product from market. In such cases, the most affected business entities are monopolies and oligopolies, as they resemble each other in market trends. Oligopolies are formed by two or more firms intending to control the market. The government prohibits their market control to stabilize trade just like in monopolies.

Social regulation

This is the practice in which the government involves itself in the regulation of social problems such as pollution, discrimination, harmful corporate behavior, work safety, or product safety. The government only seeks to establish an environment that is socially acceptable. It does so by launching commissions and agencies to follow up on this, and to enforce these policies so that the social problems are eliminated. Some of the entities affected by social regulations include the employment sector, environmental organizations, and traffic regulatory boards. The health sector also becomes party to the involvement of these policies.

Natural monopoly

Some organizations require a very high cost to start up. We call this a high start-up cost. It therefore becomes difficult for anyone to start a similar venture, and as a result the venture becomes a monopoly in the sense that no other venture can come up to compete with it. The Government takes regulatory measures against exploitation intents of such companies to control the product or utility price for the consumer. Such monopolies are usually established as the first companies of their kind, and once they have been established, they gain a high percentage of the market share, and experience economies of large scale. The cost of production significantly drops to a minimum due to the experienced market share and high profits. In this sense, there is a high likelihood that anyone trying to venture into this industry would find it very difficult to invest the initial capital before establishing a market. That’s how a natural monopoly is created.

An example of such a monopoly is a public utility such as the electricity supply company. It spreads its services far and wide. The established market share is large, and for anyone to want to venture into this industry, they would be required to purchase cables and extension poles to supply in such a large area that the initial investor would feel the competition (Government, Industry and Privatisation, 2001).

Antitrust laws

These are regulations that are set up by the government to prevent people from creating monopolies. These laws regulate competition across specific sectors. They have their roots based on the Sherman Antitrust Act, and the general agreements on tariffs and trade. They comprise of Sherman Act, Federal Trade Commission Act, Clayton Act, and Sherman Anti-trust Act of 1890.

They have these main provisions:

• These laws ban discriminative behaviors from dominating firms that include abusive terms like predatory pricing, price extortion, or general practices that establish dominance.
• They offer remedies to merger acquisitions of large corporations or transactions that threaten competition process, and tend to form monopolies.
• They eliminate the possibility if businesses forming agreements that restrict free trading as is the case with cartels.
• They provide regulation of prices to avoid price discrimination.
• They regulate insurance programs to eliminate cases of consumer exploitation.

It is however argued by researchers that there can be a negative outcome from the protection laws, especially when the incompetent and inefficient businesses are kept in competition, or when the intervention practice costs more than the consumer stands to gain from such practice.

Regulatory Commissions

There are three main industrial regulatory commissions in the US. These are

1. Commodities future regulatory commission

How it works – This commission ensures that there is open operations and efficiency in planned future markets. It is headed by five presidential appointees as commissioners.

1. Consumer product safety commission

How it works – This commission’s work is to protect the public from harm arising from the various types of consumer products available in the market within its jurisdiction. It does so by inspecting production criteria of various industries in the US.

1. Securities and exchange commission

How it works – Its work is to establish rules and regulations compliant with DoID-Frank Wall Street reforms that establish public transparency and market accountability. It also ensures investors of protection of their input into financial systems.

Functions of Federal regulatory commissions of social regulation

The following are the commission set up to enforce social regulation:

1. 1.    Consumer Product Safety Commission

It is assigned the duty of protection the citizens from death and harm as a result of consuming a product in the market within the country. It also prohibits sale of items that can bring such risks as fire, electrical shock, harm to children, chemical hazards and mechanical hazards.

1. 2.    Occupational Safety and Health Commission

Its work is to decide the contents of penalties arising from inspections carried out at workplaces on American soil. This agency was created to function as an independent federal agency or administrative court to receive and adjudicate cases of safety and health implications at work places.

1. 3.    Equal Employment Opportunity Commission

The EEOC is an agency that concerns itself with the task of correcting wrongful discrimination from employers who seek to undermine the rights of individuals in the employment position. EEOC operates under the Civil Rights Act. A few other Acts are covered by the agency. The EEOC files suits against employees for discrimination in place of an employee. It also adjudicates federal agencies’ discrimination claims.

1. 4.    Environmental Protection Agency

It protects the rights of humanity as well as the environment by utilizing the latest available techniques. It enforces the legal arm to ensure that federal laws are dully applied to human and environmental issues. This eliminates environmental risks and maintains the ecosystem at a nature-friendly state.

1. 5.    National Highway Traffic Commission

This agency ensures that traffic safety regulations are followed and obeyed by all persons using the American roads, whether on the highways or in the suburbs, or while on foot or when riding a cart. This commission enforces the administrative force of the US to ensure there is little or no danger incurred to the citizens in whole.

Reference

Government, Industry and Privatisation. (2001). Regulation and Market Structure.  Retrieved March 25, 2011, from capdm demonstration:      http://www.capdm.com/demos/gi/gi/list-offigures.html