1. Section 30.1

2. Corporate Regulation and Expansion Chapter 30
Section 30.1
Government Regulation of a Corporation
Section 30.2
Corporate Expansion and Dissolution

3. What You’ll Learn
How to identify the source of the federal government’s power to regulate business (p. 647)
How to identify the two statues that regulate the sale of securities (p. 647)

4. What You’ll Learn
How to identify the statutes that regulate antitrust activities (p. 649)
How to identify the statutes that regulate energy and the environment (pp. 651 & 652)

5. Why It’s Important
Understanding how the government regulates corporate activities will help you protect your rights as a corporate shareholder, especially if a corporation gets involved in antitrust activities.

6. Legal Terms
commerce clause (p. 647)
security (p. 648)
Securities and Exchange Commission (SEC) (p. 648)
registration statement (p. 648)
prospectus (p. 648)

7. Section Outline Regulating Corporate Growth
Business and the Constitution
Securities Regulation

8. Section Outline Antitrust Laws Sherman Antitrust Act Clayton Act
Federal Trade Commission Act
Robinson-Patman Act
Later Amendments

9. Section Outline Other Forms of Regulation Energy Regulation
Environmental Protection Regulation

10. Pre-Learning Question
Why does the government regulate corporate growth?

11. Regulating Corporate Growth
There are different points of view about corporate growth.
Growth and expansion are good as long as it does not restrain competition.

12. Regulating Corporate Growth
Expanding a corporation does not necessarily increase productivity and may actually reduce competition.
Expansion allows for economies of scale and may save a fading company.

13. Regulating Corporate Growth
The federal government has passed a series of acts to regulate corporate expansion.
These acts seek to protect the interests of both the corporations and shareholders.

14. Pre-Learning Question
Where does the federal government get the authority to regulate business?

15. Business and the Constitution
The federal government derives its power to regulate business from the Commerce Clause of the United States Constitution.

16. Business and the Constitution
The Commerce Clause says Congress has the power to regulate commerce “among the several states,” meaning the federal government has the power to regulate interstate commerce.

17. Business and the Constitution
Because the U.S. Supreme Court gradually enlarged the scope of the government’s power to regulate business, the federal government can regulate any business activity that affects interstate commerce.

18. Pre-Learning Question
What are securities?

19. Securities Regulation
After the stock market crash of 1929, Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934.

20. Securities Regulation
The Securities Act defines a security as a money investment that seeks to make a profit solely because of another’s efforts.

21. Securities Regulation
A security could be
corporate stocks
interests in savings and loans
interests in racehorses or sports teams
the sale of coins

22. Securities Regulation
The Securities Exchange Act created the Securities and Exchange Commission (SEC) in 1934 to administer federal securities law.

23. Securities Regulation
A crucial function of the agency is making sure that potential investors are informed about the nature of their investments. To accomplish this, companies must file a registration statement and a prospectus with the SEC.

24. Securities Regulation
The registration statement is a general description of the securities and of the company making the offer.

25. Securities Regulation
The prospectus contains a detailed view of the stock offering for potential investors.

26. Securities Legislation
30.1
Securities Legislation
Securities Act of 1933
Regulates the issuance of new securities.
Securities Exchange Act of 1934
Established the Securities and Exchange Commission; deals with subsequent trading in securities.
Williams Act of 1968
Requires stricter reporting and procedural requirements

27. Pre-Learning Question
Why has Congress enacted antitrust laws?

28. Antitrust Laws
During the 1800s, many large corporations in the U.S. attempted to form monopolies.

29. Antitrust Laws
One way to do this was to form a trust, in which the voting power of the stock of various companies would be transferred to a single trustee. Eventually, “trust” came to describe all monopolies.

30. Antitrust Laws Congress has since enacted several antitrust laws.
Sherman Antitrust Act
Clayton Act
Federal Trade Commission Act
Robinson-Patman Act

31. Sherman Antitrust Act
Congress passed the Sherman Antitrust Act in 1890 to try to stop the formation of monopolies.

32. Clayton Act
Congress passed the Clayton Act in 1914, which made specific practices illegal. One example is selling goods on the condition that a buyer will not buy products from the seller’s competition.

33. Federal Trade Commission Act
This act, passed in 1914, was designed to protect businesses from the wrongful acts of other businesses. It stated, “Unfair methods of competition in commerce are hereby declared unlawful.”

34. Robinson-Patman Act
This act is an amendment to the Clayton Act and deals with pricing discrimination as well as requires all sellers to treat all buyers equally.

35. Later Amendments
The Federal Trade Commission Act was amended in 1938 and The latest amendments provide protection to consumers as well as business people.

36. Antitrust Legislation
30.1
Antitrust Legislation
Sherman Antitrust Act of 1914
Prohibits contracts and combinations in restraint of trade; also prohibits monopolies, attempts to monopolize, and conspiracies to monopolize.
Clayton Antitrust Act of 1914
Prohibits specific practices such as tying agreements and interlocking directorates.
Federal Trade Commission Act of 1914
Established the Federal Trade Commission; promotes free and fair competition, and prohibits unfair and misleading practices.
Robinson-Patman Act of 1936
Deals with product pricing; advertising and promotional allowances.

37. Name the acts described below.
This law was enacted by Congress to try to stop the formation of monopolies.

38. ANSWER
The Sherman Antitrust Act.

39. This act created the Securities and Exchange Commission to administer federal securities law.

40. ANSWER
The Securities Exchange Act.

41. In general, this act requires sellers to treat all buyers equally.

42. ANSWER
The Robinson-Patman Act.

43. Pre-Learning Question
What are some other ways government regulates corporate activities?

44. Other Forms of Regulation
The government also regulates the impact that corporate activities have on energy conservation and environmental protection.

45. Energy Regulation
The energy crisis of the 1970s brought about the creation of several federal agencies.
Department of Energy
The Federal Energy Regulatory Commission
The Nuclear Regulatory Commission

46. Federal Energy Regulatory Commission
The Federal Energy Regulatory Commission (FERC) controls the wholesale price of natural gas and electricity sold for use in interstate commerce.

47. Nuclear Regulatory Commission
The Energy Reorganization Act created the Nuclear Regulatory Commission (NRC), which regulates the licensing, constructing, and opening of nuclear reactors.

48. Environmental Protection Regulation
The Environmental Protection Agency (EPA) is responsible for implementing the Environmental Policy Act, as well as other environmental laws.

49. National Environmental
Policy Act
Congress passed the National Environmental Policy Act in 1969 to establish a national program to fight pollution and clean up the environment.

50. Environmental Protection
Agency
In 1970, the EPA received the authority to administer all major federal antipollution programs dealing with air, sold waste, toxic substances, and pesticides.

51. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
What is the source of the federal government’s power to regulate business?

52. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
The Commerce Clause of the U.S. Constitution. The Commerce Clause states that Congress has the power to regulate commerce, “among the several states.”

53. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
What are the two statutes that regulate the sale of securities?

54. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
Securities Act of 1933 and the Securities Exchange Act of 1934.

55. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
What are the statues that regulate antitrust activities?

56. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
The Sherman Antitrust Act, the Clayton Act, the Federal Trade Commission Act, and the Robinson-Patman Act.

57. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
What are the statutes that regulate energy and the environment?

58. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
Among the acts that regulate energy and the environment are the Energy Reorganization Act and the Environmental Policy Act.

59. Critical Thinking Activity Government Regulation
Section Assessment
Critical Thinking Activity
Government Regulation
What justifications can you give for the federal government becoming extensively involved in the regulation of energy and the environment?

60. Critical Thinking Activity Answer Government Regulation
Section Assessment
Critical Thinking Activity Answer
Government Regulation
Answers will vary but should include that two justifications are the energy crisis of the 1970s and the need to control pollution.

61. Legal Skills in Action Responsibilities of the SEC
Section Assessment
Legal Skills in Action
Responsibilities of the SEC
Your grandfather is thinking about investing part of his savings in a new corporation that is about to place its stock for sale on the stock exchange.

62. Legal Skills in Action Responsibilities of the SEC
Section Assessment
Legal Skills in Action
Responsibilities of the SEC
Write him an message in which you explain the responsibilities of the Securities and Exchange Commission.

63. Legal Skills in Action Responsibilities of the SEC
Section Assessment
Legal Skills in Action
Responsibilities of the SEC
Make certain to mention the purpose and nature of a registration statement, as well as the purposes of a prospectus.

64. Legal Skills in Action Answer
Section Assessment
Legal Skills in Action Answer
Responsibilities of the SEC
s should include that the SEC is responsible for making sure that potential investors are informed about the nature of their investments;

65. Legal Skills in Action Answer
Section Assessment
Legal Skills in Action Answer
Responsibilities of the SEC
that the registration statement is a general description of the securities and of the company making the offer; and that his prospectus will contain a detailed view of his potential stock.

66. End of Section 30.1