Government Regulation of Business – Flashcards

• The Sherman Act was one of the first national laws designed to regulate competition. Because this statute was aimed at the Standard Oil Trust and other similar organizations, it was termed antitrust legislation. • Congress passed the Clayton Act in part because the courts were not enforcing the Sherman Act as strictly as it had intended. The purpose of the Clayton Act was to clarify the earlier statute.

• Section 1 of the Sherman Act prohibits all agreements "in restraint of trade." • Section 2 of the Sherman Act bans "monopolization".the wrongful acquisition of a monopoly. • The Clayton Act prohibits anticompetitive mergers, tying arrangements, and exclusive dealing agreements. • The Robinson-Patman Act bans price discrimination that reduces competition.

• Under §2 of the act, it is illegal to monopolize or attempt to monopolize a market. To monopolize means to acquire a monopoly in the wrong way. • Predatory pricing occurs when a company lowers its prices below cost to drive competitors out of business. Once the predator has the market to itself, it raises prices to make up lost profits—and more besides. • A tying arrangement is an agreement to sell a product on the condition that the buyer also purchases a different (or tied) product. A tying arrangement is illegal under §3 of the Clayton Act and §1 of the Sherman Act.if: a) The two products are clearly separate b) The seller requires the buyer to purchase the two products together c) The seller has significant power in the market for the tying product, and d) The seller is shutting out a significant part of the market for the tied product.

Congress created the FTC in 1915 to regulate business. Although its original focus was on antitrust law, it now regulates a wide range of business activities that affect consumers, everything from advertising to consumer loans to warranties to debt collection practices

Under the FTC Act, an advertisement is deceptive if it contains an important misrepresentation or omission that is likely to mislead a reasonable consumer. FTC rules prohibit bait and switch advertisements: a merchant may not advertise a product and then disparage it to consumers in an effort to sell a different item. The FTC has established guidelines on mail or telephone order merchandise. The FTC prohibits telemarketers from calling any telephone number listed on its do-not-call registry. A salesperson is required to notify the buyer that she has the right to cancel the transaction prior to midnight of the third business day thereafter

TILA applies to a transaction only if all of the following tests are met: • It is a consumer loan. That means a loan to an individual for personal, family, or household purposes but not a loan to a business. • The loan has a finance charge or will be repaid in more than four installments. Sometimes finance charges masquerade as installment plans. • The loan is for less than $25,000 or secured by a mortgage on real estate. I • The loan is made by someone in the business of offering credit.

The Act does require any supplier that offers a written warranty on a consumer product that costs more than $15 to disclose the terms of the warranty in simple, understandable language before the sale.

The Consumer Product Safety Act of 1972 (CPSA) was created to prevent injuries in the first place. This act created the Consumer Product Safety Commission to evaluate consumer products and develop safety standards.

In 1970, Congress created the Environmental Protection Agency (EPA) to consolidate environmental regulation under one roof. When Congress passes a new environmental law, the EPA issues regulations to implement it.

Under the Clean Air Act of 1970, the Environmental Protection Agency must establish national ambient air quality standards for both primary and secondary pollution. States must produce implementation plans to meet the EPA standards. Power plants may trade emission allowances.

The Clean Water Act prohibits the discharge of pollution into water without a permit from the EPA. States must set EPA-approved water quality standards and develop plans to achieve them. The Clean Water Act also prohibits any discharge of dredge and fill material into a wetland without a permit.

The Ocean Dumping Act prohibits the dumping of wastes in ocean water without a permit from the EPA.