Relationship between Regulation and Market Structures

Relationship between Regulation and Market Structures

Introduction

“Federal Trade Commission” and “Antitrust Division of the U.S. Department of Justice” refers to the two agencies that are responsible for implementing antitrust laws for the purpose of protecting consumers. The purpose of this essay is to study the state regulation and the competitive environment for business. It also aims to comprehend the effect of such regulations on the market structure.

Antitrust Laws

“The Sherman Anti-Trust Act 1890”

The purpose of this act was regulating the interstate commerce and prohibiting trusts. As implied by this act, the Federal Government has the right to institute proceedings for the purpose of dissolving trusts (FTC, 2010).

“The Clayton Antitrust Act 1914”

The purpose of this act is to address themes including price discrimination, price fixing, tying contacts and unjust business acts. The themes mainly include the one that were not addressed by the Sherman Act.

“Federal Trade Commission Act 1914”

This Act is responsible for establishing the “United States Federal Trade Commission.” The purpose of FTC is to safeguard the consumers from unjust, inappropriate and predatory business acts.

“Robinson-Patman Act of 1936”

The purpose of this act is to limit the ability of the large buyers to acquire considerable price discounts. The fundamental goal was to safeguard small scale businesses from the price discrimination on the basis of quantity (FTC, 2010).

Purpose of Industrial Regulations

Oligopoly

An oligopoly market structure refers to the market in which a small group of sellers has got sound control and command on the huge majority of the market. Regulations affect oligopolies in circumstances where the industrial regulations prohibit the formation of alliances and lobbies and declare it as illegal. Regulation pertaining to oligopolies leads to a competitive market structure (Gitman & McDaniel, 2013).

The usual conduct of an oligopolist will be producing less and charging more prices, which can lead to negative implications on the society. This results in the transfer of wealth from the larger society to the oligopolist. The eventual impact is the scarcity of products and services which are required by consumers in the economy. Owing to this reason, industrial regulations are essential for a market structure which is oligopolistic since it declares the formation of lobbies as illegal (Gitman & McDaniel, 2013).

Monopoly

A monopoly market structure refers to a market where there is only one seller which commands the entire market. The seller who enjoys monopoly can earn the highest probable profit ...