LEARNING OBJECTIVES
- Compare the public interest and public choice theories of regulation.
- Discuss the costs and benefits of consumer protection laws.
- Discuss the pros and cons of the trend toward deregulation over the last quarter century.
Antitrust policies are primarily concerned with limiting the accumulation and use of market power. Government regulation is used to control the choices of private firms or individuals. Regulation may constrain the freedom of firms to enter or exit markets, to establish prices, to determine product design and safety, and to make other business decisions. It may also limit the choices made by individuals.
In general terms, there are two types of regulatory agencies. One group attempts to protect consumers by limiting the possible abuse of market power by firms. The other attempts to influence business decisions that affect consumer and worker safety. Regulation is carried out by more than 50 federal agencies that interpret the applicable laws and apply them in the specific situations they find in real-world markets. Table 16.2 lists some of the major federal regulatory agencies, many of which are duplicated at the state level.
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Financial Markets |
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Federal Reserve Board |
Regulates banks and other financial institutions |
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Federal Deposit Insurance Corporation |
Regulates and insures banks and other financial institutions |
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Securities and Exchange Commission |
Regulates and requires full disclosure in the securities (stock) markets |
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Commodity Futures Trading Commission |
Regulates trading in futures markets |
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Product Markets |
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Department of Justice, Antitrust Division |
Enforces antitrust laws |
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Federal Communications Commission |
Regulates broadcasting and telephone industries |
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Federal Trade Commission |
Focuses efforts on consumer protection, false advertising, and unfair trade practices |
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Federal Maritime Commission |
Regulates international shipping |
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Surface Transportation Board |
Regulates railroads, trucking, and noncontiguous domestic water transportation |
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Federal Energy Regulatory Commission |
Regulates pipelines |
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Health and Safety |
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Occupational Health and Safety Administration |
Regulates health and safety in the workplace |
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National Highway Traffic Safety Administration |
Regulates and sets standards for motor vehicles |
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Federal Aviation Administration |
Regulates air and traffic aviation safety |
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Food and Drug Administration |
Regulates food and drug producers; emphasis on purity, labeling, and product safety |
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Consumer Product Safety Commission |
Regulates product design and labeling to reduce risk of consumer injury |
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Energy and the Environment |
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Environmental Protection Agency |
Sets standards for air, water, toxic waste, and noise pollution |
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Department of Energy |
Sets national energy policy |
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Nuclear Regulatory Commission |
Regulates nuclear power plants |
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Corps of Engineers |
Sets policies on construction near rivers, harbors, and waterways |
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Labor Markets |
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Equal Employment Opportunity Commission |
Enforces antidiscrimination laws in the workplace |
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National Labor Relations Board |
Enforces rules and regulations governing contract bargaining and labor relations between companies and unions |
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