Business Administration &
Management
Mr. Bernstein
Regulations Maintaining Competition,
pp 165-170
March 2016
Business Administration &
Management
Mr. Bernstein
Regulations – Worth the Costs?
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Business Administration &
Management
Mr. Bernstein
Regulations which Maintain Competition
What is a monopoly?
Where do do monopolies exist?
New technology (ie Microsoft Windows)
High fixed-cost ventures (ie Utilities, Railroads)
Former monopolies: Telephone, Post Office
Are monopolies illegal?
How can monopolies be created within a competitive
system? What anti-competitive practices could be
economically favorable to large businesses?
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Business Administration &
Management
Mr. Bernstein
Regulations which Maintain Competition
How can a business create a monopoly?
Lower prices until competitors are bankrupt
Collude with competitors
Merge with rivals to eliminate competition
Offer uneven pricing to drive out local competitors
Gaining control of a commodity in a region to create a
scarcity (“cornering a market”)
Spend heavily on false advertising
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Business Administration &
Management
Mr. Bernstein
The Natural Monopolist with and w/o Regulation
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Business Administration &
Management
Mr. Bernstein
Regulations which Maintain Competition
Interstate Commerce Act, 1887
First Federal regulation of monopolies
Sherman Act, 1890
Outlawed collusion
Clayton Act, 1914
Bans mergers which overly reduce competition
Forbids bundling which overly reduces competition
Robinson-Patman Act, 1936
Bans price discrimination for same product
Wheeler-Lea Act, 1938
Outlaws false advertising
FTC – Federal Trade Commission
Industry specific agencies list in Figure 7-2 on p. 169
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Business Administration &
Management
Mr. Bernstein
Bankruptcy
Legal process that allows liquidation of assets to pay off
debts.
Chapter 11 Bankruptcy allows continuation of operations
while a restructuring of finances is designed and
implemented.
Bankruptcy laws provide an orderly process which gives
potential lenders or investors greater comfort to work with
higher-risk businesses.
Bankruptcy laws allow restructuring of businesses in a way
which is less disruptive to employees and other
stakeholders.
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