1. Reforming the Regulatory Process
Part 4
Chapter Ten
Reforming the Regulatory Process

2. Chapter Ten Learning Objectives
Become familiar with identified shortcomings of federal regulations.
Recognize those things that ONLY government can do.
Learn what efforts are being made to reform federal regulations and the principles that drive these efforts.
Look at regulatory reform activities in other countries.
Recognize the differences between the Sherman Act and the Clayton Act, and what types of organizations are exempted from their legal controls.
Learn the purpose of the Federal Trade Commission Act and the Hart-Scott-Rodino Antitrust Improvement Act.
Look at two theories of antitrust.
Recognize new challenges to Antitrust laws.

3. Shortcomings of Federal Regulations
Poorly drafted basic legislation
Insufficient budgets
Legislative excess that overloads agencies with impossible tasks and denies them money to carry out tasks
Contradictory laws and regulations
Lax administration, incompetent bureaucrats
Interference of special interests in implementation

4. ONLY Government CAN:
Set forth national goals and work out the necessary compromises to reconcile conflicts among various interests.
Set priorities among various energy resources.
Develop the ground rules under which private industry must work.
Formulate a national policy on the environment that will strike a sensible and workable balance between environmental risk and economic risk.
Establish and maintain our national security.
Establish and control our foreign policy.
Establish and control our tax policies to fund the benefits and protections enjoyed by all of us.

5. Reforming Regulation (more)
Stress comparative advantages of government and business
Rely more on the free market
Privatize government-owned property and services
Deregulate selected industries
Introduce more incentive controls

6. Reforming Regulation (continued)
Improve administration of the regulatory process
Modify basic statutes
Improve administration
Coordinate regulatory mandates
Reduce paperwork
Throw out flapdoodle standards
Speed decisions
Write regulations in plain language

7. Regulatory Reform in Foreign Countries
The Organization for Economic Co-operation and Development has studied in detail the regulatory reforms in 16 countries.
Governments throughout the world are reducing controls over their economies.
None approach the degree to which the United States has reformed its regulatory system.

8. Antitrust Laws (more)
1. SHERMAN ANTITRUST ACT (1890) defined “every contract, combination in the form of the trust or otherwise, or conspiracy, in restraint of trade or commerce … shall be deemed illegal.”
2. CLAYTON ANTITRUST ACT (1914) named specific monopolistic practices as prohibited by law. Price discrimination, exclusive and tying contracts, and interlocking directorates are illegal when the effects might be to lessen competition or tend to create a monopoly.

9. Antitrust Laws (continued)
3. FEDERAL TRADE COMMISSION ACT (1914) established an agency to continuously supervise and administer the antitrust laws to stop “unfair or deceptive acts or practices in commerce.”
4. HART-SCOTT-RODINO ANTITRUST IMPROVEMENT ACT (1976) requires companies to notify the FTC and DOJ of an intention to merge if their valuations exceed specific amounts.

10. SPECIFIC EXEMPTIONS to the Antitrust Laws
Labor Unions
Agricultural Cooperatives
Insurance Industry
Baseball
Certain Joint Export Activities
Certain Joint Research Efforts

11. Two Theories of Antitrust
The Structure Theory The Performance Theory
Structure is a reliable index of monopoly power
Concentrated sales and assets indicate monopoly power
Competition is spurred when concentration is broken apart
Efficient performance leads to innovation, lower cost, lower prices, higher profits
High profits result from efficiency, not monopoly power
Concentration numbers shrink in global markets

12. Challenges to Antitrust Enforcement
Mergers
High-Technology Industries
Globalization

13. Mergers and Acquisitions Involving U.S. Firms
Figure 10.1
Sources: Mergerstat; and Economic Report of the President (Washington, DC: Government Printing Office, January 2001), p.41.

14. Top 10 Mergers from July 1998 to January 2000
Table 10.1
Source: J. Fred Weston and Samuel C. Weaver, Mergers and Acquisitions (New York: McGraw-Hill, 2001), p.3. Reproduced with permission.