Competition and Regulation
The “Industrial Revolution” brought more than just change to the agricultural environment of America, it brought change to the business environment as well. New industries such as railroads, petroleum, coal, and meatpacking began to be “monopolized” (either as pure monopolies or oligopolies), and achieving such dominance, these businesses began implementing questionable production, employment, and pricing tactics. Not surprisingly, these practices lead to a public revolt against monopolies, which resulted in government intervening on behalf of the complainants.
Define Industrial Regulation
Two solutions were implemented to deal with oligopolies and monopolies— antitrust laws prohibiting monopolies were passed and regulatory agencies were formed to evaluate and/or regulate corporate organizations. Both solutions seek to increase competition and protect the public from unscrupulous business practices.
The Federal Trade Commission was formed through the Federal Trade Commission act of 1914 and gave government regulatory power over corporate mergers, and/or acquisitions, and the ability to investigate businesses for unfair approaches to competition or shady behavior.
Essentially the desired impact of antitrust legislation and industrial regulation is to provide higher quality products and/or services at a better price to the consumer. Experience has shown that monopolies and oligopolies become abusive without governing laws and regulations. In most cases, the desired market structure is one that allows free competition as a way of achieving efficiency. There are however instances where a monopoly, natural monopoly, or oligopoly provide the best results for the consumer (we will discuss natural monopolies later in the document).
Some companies with a monopolistic structure (i.e. overwhelming market share) may not be monopolistic in behavior (i.e. uncompetitive prices, deceptive practices, or abusive behavior). For this reason, industrial regulation is necessary so as to allow companies that are providing better products and services at the most competitive prices to not be negatively impacted by impartial application of anti-trust laws, lest such application result in less competitive pricing for inferior products and services for society.
At the same time, there are industries where barriers to entry are high enough to create an oligopolistic structure (i.e. railroads, airlines, cable, etc.). In these instances it is necessary that the laws allow and regulate their existence. This is also done through industrial regulation.
Define Social Regulation
As mentioned previously, industrial regulation followed the industrial revolution and as a result saw the greatest activity during the late 1800’s and early 1900’s. While there have been additions, changes, and adaptions since then most of the “discovery” was done by the mid 1900’s. Social regulation began in the 1960’s and saw a boom in activity during the 1980’s. Of the two, social regulation sees more active change and growth today.
Where industrial regulation has specific application to specific industries, social regulation is universally applied throughout all, or most of all the industries. This is because the regulations are intended to deal with the broader impact of businesses on their workers, the consumers, and the environment.
Because social regulation is more focused on the physical qualities (i.e. safety) of products, proper working conditions, and the product’s impact on society, these regulations tend to impact day-to-day production and usually govern things such as:
* Safe, clean, and healthy working environments
* Discrimination – Equal Opportunity Employment
* Reducing/controlling pollution and other environmental impacts * Product design (safety)
While there is little argument about the need for social regulation, there is active debate about how much is...