Chapter 5 Government Regulation of Competition and Prices Twomey, Business Law and the Regulatory Environment (14th Ed.)

Government Involvement in Business [5-1] Chapter 5 Government Involvement in Business [5-1] Cosmetics Food Create a National Currency Prohibit False Advertising Set Health and Purity Standards Drugs Regulation of Production, Distribution, and Financing Maintain Federal Reserve Bank Compete with Private Enterprises Encourage and Assist Unattractive Enterprises Regulate Interstate Transportation & Communication Establish Standards for Weights & Measures (c) 2000 West Legal Studies Chapter 5 1

Government Regulation of American Life Private Life Regulation Prohibited Business Life Regulation Allowed Private Life Regulation Allowed (c) 2000 West Legal Studies Chapter 5

Chapter 5 Summary Regulation by government has occurred primarily to protect one group from the improper conduct of another group. Until the middle third of this century, regulation of business was primarily directed at protecting competitors from misconduct of other competitors. Beginning with the middle third of this century, regulation expanded in the interest of protecting consumers. (c) 2000 West Legal Studies Chapter 5

Chapter 5 Summary [2] In the last 100 years, the federal government has regulated advertising and food, drugs, and cosmetics. This protects consumers from false claims and from untested and possibly unsafe drugs. Unfair methods of competition are prohibited. (c) 2000 West Legal Studies Chapter 5

Chapter 5 Summary [3] Prices have been regulated both by the setting of the exact price or a maximum price and by prohibiting discrimination as to prices. Price discrimination between buyers is prohibited when the effect of such discrimination could tend to create a monopoly or lessen competition. Certain exceptions are made where the circumstances are such that the price discrimination does not have the purpose or result of harming someone else. (c) 2000 West Legal Studies Chapter 5

Chapter 5 Summary [4] The Sherman Antitrust Act prohibits conspiracies in restraint of trade and the monopolization of trade. The Clayton Act prohibits mergers or the acquisition of the assets of another corporation when this conduct would tend to lessen competition or give rise to a monopoly. (c) 2000 West Legal Studies Chapter 5

Chapter 5 Summary [5] Violation of these statutes subjects the wrongdoer to criminal prosecution and suit by persons harmed for treble damages. The application of these laws is modified to some extent by express exceptions and by the Supreme Court’s approach to antitrust cases. (c) 2000 West Legal Studies Chapter 5

Chapter 5 Summary [6] Many of the regulations imposed by the federal government are paralleled or duplicated by state laws similarly regulating local matters. State action is restricted by the limitations arising from the Constitution and by the doctrine of the supremacy of federal law. (c) 2000 West Legal Studies Chapter 5