Federal Regulation of Business Part 4 Business and Government Chapter Nine Federal Regulation of Business

Chapter Nine Learning Objectives Become familiar with the history of the government’s role as both benefactor and regulator of business. Examine the reasons for governmental regulation of the private sector. Recognize the historical waves of governmental regulation of business and the reasons therefore. Recognize the legal basis of government regulation of business and review important judicial decisions. Understand the sequence of steps in Agency rule making and the costs and benefits of complying. Develop some comparative knowledge regarding government regulations in the United States versus other industrialized nations.

Reasons for Government Regulation of the Private Sector (more) Flaws in the market mechanism Natural monopoly Natural-resource regulation Destructive competition Externalities Inadequate information

Reasons for Government Regulation of the Private Sector (continued) Social, political, and other reasons Socially desirable goods and services Protecting individual rights and privacy Resolution of national and global problems Regulation to benefit special groups Conservation of resources

Historical Waves of Government Regulations of Business Figure 9.1

Major Federal Regulatory Agencies Classified by Dominant Orientation Major Federal Regulatory Agencies Classified by Dominant Orientation (more) Agency Date Established Predominantly Industry Food and Drug Administration (FDA) 1906 Federal Reserve Board (FRB) 1913 Federal Trade Commission (FTC) 1914 Federal Home Loan Bank Board (FHLBB) 1932 Federal Deposit Insurance Corporation (FDIC) 1933 Federal Communications Commission (FCC) 1934 Federal Aviation Administration (FAA) 1958 Federal Maritime Commission (FMC) 1961 Nuclear Regulatory Commission (NRC) 1975 Federal Energy Regulatory Commission (FERC) 1977 Table 9.1

Major Federal Regulatory Agencies Classified by Dominant Orientation Major Federal Regulatory Agencies Classified by Dominant Orientation (continued) Agency Date Established Predominantly Functional Securities and Exchange Commission (SEC) 1934 National Labor Relations Board (NLRB) 1935 Equal Employment Opportunity Commission (EEOC) 1964 Environmental Protection Agency (EPA) 1970 National Highway Traffic Safety Administration (NHTSA) 1970 Occupational Safety and Health Administration (OSHA) 1971 Consumer Product Safety Commission (CPSC) 1972 Mine Safety and Health Administration (MSHA) 1977 Table 9.1

Governmental Regulation of Business A Legislative and Judicial Summary Fundamental authority for business regulation is the Constitution of the United States … the commerce clause. Supreme Court decisions protected business in the early years of nationhood. Supreme Court decisions since 1877 have had more even-handed results.

Sequence of Steps in Agency Rule Making 1. Origin of authority A. Congressional Statute B. Other 2. Draft the regulation 3. OMB review 4. Publish draft in Federal Register 5. Revise draft regulation 6. Resubmit to OMB 7. Publish final rule in Federal Register 8. Implementation

Summary of Staffing of Federal Regulatory Activity (fiscal years, full-time-equivalent employment) Figure 9.2 Source: Melinda Warren and William F. Lauber, Regulatory Changes and Trends: An Analysis of the 1999 Federal Budget, Center for the Study of American Business, Washington University, Regulatory Budget Report 23, June 2000, p.3.

Comparative Regulatory Environments UNITED STATES: a regulated economy with great freedom on the part of entrepreneurs to enter and leave. GERMANY: has the highest wage rates of all of the industrialized nations. FRANCE: it is difficult to discharge unneeded workers. ITALY: it is difficult to discharge unneeded workers. JAPAN: has massive regulations but government collaborates with business. Regulations focus on helping business more than the consumers. Extensive import controls exist to protect domestic business from competition. MEXICO: has stringent antipollution laws but lax enforcement. CHINA: has highly centralized economic controls but has established a number of free enterprise zones to stimulate their economy.