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

2. 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.

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

4. 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

5. Historical Waves of Government Regulations of Business
Figure 9.1

6. 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

7. 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

8. 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.

9. 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

10. 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.

11. 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.