Introduction
Market structures are dependent on various factors ranging from the number of firms operating in a certain market to the market power enjoyed by specific firms. In that respect, different markets require different regulations in a bid to achieve efficiency in terms of competition fairness and service to consumer as well as social interests. Thus, the structure differences call for different types of regulations including industrial and social regulations all of which have different purposes. In addition, enforcing the laws requires specific authorities which have mandates to ensure that market and social efficiency is achieved. In that consideration, this analysis seeks to demonstrate how market structures relate to regulation as well as regulations effects on the market. To achieve the objective, the analysis begins by describing the relationship between market structures and regulation and then provides a summary of the four US antitrust laws. Further, the analysis explains the purpose of industrial regulation in both oligopoly and monopoly markets in addition to stating the functions of the major three federal and state regulatory commissions governing industrial regulation. Finally, the analysis describes the functions of social regulation and also states the specific functions of five federal commissions responsible for social regulation.
Discussion
- Relationship between regulation and market structure as well as regulation’s effect on market.
Market structures are defined by the number of the firms operating as well as the market power that the firms have. Thus, those aspects determine the competitive nature of a market hence defining them as monopoly, oligopoly or competitive. On the other hand, regulations focus on ensuring that there is fair competition in the markets by enacting policies that seek to enforce fair practices by all firms including those which have significant market power. In addition, regulation can affect the market by providing power to some firms in some structures like monopoly markets where government protection through regulation can discourage competition. Equally, regulation can change less competitive markets like oligopoly to become more competitive by enhancing fair competitiveness between. (Barron & Lynch, 1989)
- Antitrust laws summary
Antitrust laws refers to laws that have been enacted by government to regulate commerce and trade and prevent unlawful practices like price fixing, restraints and collusion by firms to operate as monopolies. Thus the laws seek to enhance competition and production of suitable quantity and suitable pricing. In that respect, the four federal antitrust laws can be summarized as follows
- Sheraton Act that is a federal antitrust premier law which acts as the principal antitrust statute in US providing remedies for antitrust violations including criminal and civil penalties. The Act is the original charter of competition and marketplace law.
- Clayton Act that imposes restrictions on acquisitions and mergers and which acts as a supplement to the Sheraton Act in prohibiting market practices that could stifle competition.
- Robinson-Patman Act which is a federal statute that seeks to prohibit unacceptable business practices like price discrimination and price fixing while serving as a supplement to Clayton and Sheraton Acts.
- Federal trade commission Act which is the Act that set up the Federal Trade Commission as a regulatory authority that is mandated to foresee the enforcement of Clayton, Sheraton and Robinson-Patman Acts. The Act further authorizes the Federal Trade Commission to test antitrust policy limits. (Hylton, 2003)
- Intended purpose of industrial regulation
Industrial regulation seeks to achieve different objectives depending on the nature and the structure of the targeted market. In that respect, the purpose differs when addressing a competitive market from the purpose on a less competitive market. Thus, such regulation and purposes can be demonstrated through analysis of regulations’ application in oligopoly and monopoly markets.
- Oligopoly markets are characterized by a few significantly large firms that have a control of significant market share. In that respect, the market has few dominant firms; a fact that may reduce competition if the large firms engage in unfair practices to keep competitors out of the market. Thus, regulation in the market seeks to ensure that there are no unfair practices that are meant to keep away competitors.
- Monopoly markets are usually characterized by a single firm that serves the market in a given operation, Such firms usually enjoy market control power hence can decide to produce inefficient output below the market demand and charge a high price to maximize its profits. It is such cases that industrial regulation seek to control and prohibit in order to ensure that the firm produces socially optimal output at suitable prices. (Barron & Lynch, 1989)
- Major functions of the three US federal and state regulatory commissions
There are several federal and state commissions set up and mandated to regulate operations in different industries and market operations with a view of achieving fairness and enhancing standard operations. The three key commissions and their functions are
- The federal Trade commission that has the mandate to ensure there is fair competition in the market in a bid to protect consumers from unfair practices.
- Interstate commerce commission that is responsible for enforcing federal laws which relate to transportation which cuts across the states.
- The federal communications commission that has a responsibility of regulating foreign and interstate communication by telephone, radio, television and telegraph in order to ensure fair and standard market practices. (Posner, 2001)
- Purpose of social regulation for all market structures
Market structures tend to differ in respect to their effect on the social welfare as well as on the society. In that respect, regulation seeks to ensure that social interests are served in all market structures through operations and practices that address public concerns. Thus social regulation seeks to prohibit operations that are harmful to the public and the society interests at large. Such regulations mainly relates to safety, health and environment with an example of limiting the quantity of harmful chemicals that firms can use in their operations in order to reduce possible safety, health and environmental hazards. In addition, the social regulations may require businesses to educate the public on the effects of their operations as well as products through means like labeled packaging. (Barron & Lynch, 1989)
- Major functions of five US federal regulatory commissions governing social regulation.
Federal regulatory authorities mandated to govern social regulation seek to ensure that the society’s welfare is addressed in market practices. Such commissions and their specific mandates include:
- Consumer product safety that has a responsibility to ensure that federal safety standards are adhered to.
- Food and drug Administration that has the function of administering food purity guidelines and laws set by the federal authority in addition to conducting cosmetic and drugs safety tests.
- Environmental protection agency that is mandated with establishing and enforcing environmental standards
- Equal employment opportunity commission which serves to ensure fairness in employment by administering and enforcing the Fair employment 1964 Civil Rights Act.
- Occupational safety and health Administration that is responsible for developing and enforcing federal regulations and standards in enhancing working conditions. (Posner, 2001)
Conclusion
The analysis has clearly demonstrated that regulations and their purposes vary depending on the market structure in focus. Further, the analysis has shown that there are different authorities mandated with enforcing different types of regulations with some being responsible for industrial regulation while others are mandated to enforce social regulation. Thus, the relationship between market structures and regulation has been demonstrated as one that is subject to market factors as well as intended regulation purposes.
References
Barron, J. & Lynch, G. (1989). Economics. London: Richard D. Irwin Inc.
Hylton, K. N. (2003). Antitrust Law: Economic Theory and Common Law. New York:
Cambridge University Press.
Posner, R. A. (2001). (2nd Ed.). Antitrust. Chicago: University of Chicago Press.
