The U.S. Federal Trade Commission would like to have us believe that the regulation of the price cannot affect business practice. That is a fallacy and in fact the opposite is true. That is why I have prepared this article. It will show that there are two distinct regulations that prevent businesses from establishing monopolies and prevent them from fixing prices in a manner which is unneeded. The purpose of this article is to help educate the reader on this matter and also to encourage those who are involved in the business community to speak out against such actions.
One of the two regulations which prevent businesses from establishing monopolies is the Clayton Act. This acts as the founding document for the Food and Drug Administration (FDA). Part of its purposes is to prevent the monopolization of certain forms of commerce by a large company. In other words, if a large corporation believes they have an unfair advantage over their smaller counterparts they are within their rights to consolidate all of the companies manufacturing a product into just one large entity.
The second regulation that prevents businesses from establishing monopolies is called the Price Dispute Clause in Product Ingredients Regulations. This part of the law makes it illegal for a company to charge more for a product than they need to. The problem with this clause is that it doesn’t actually apply to most items in the market place. In order to figure out what the exact definition of a regulated item is you have to look at the definition in the FDA’s own handbook which can be found at:
Unfortunately for the government and most businesses, determining the appropriate definition of a product is not a very simple process. First, there needs to be some objective knowledge about what the products do and how they work in order to determine whether or not they are truly necessary. Once this information has been ascertained, a determination is made as to how to regulate these products so that consumers are not harmed by them. For example, food products need to be able to resist excessive quantities of heat in order for them to maintain the shelf life they require. Similarly, there needs to be a knowledge as to what quantity of the products that fall within a controlled category will pose a risk to public safety.
It has long been recognized that a business can be considered a monopoly under certain circumstances. A monopoly is when a business produces a product that has a price that is higher than the price that competitors are allowed to charge. This situation tends to result in less overall competition as consumers tend to flock towards those businesses that do not face any difficulty in obtaining items necessary for their everyday living. In short, consumers tend to get what they pay for, and they tend to get it cheaper from a business that has established itself as a monopoly.
The most common example of a business that has become a monopoly in some manner relates to the grocery market. If a business is able to control the amount of money that it charges consumers for the goods or services it offers, then it has become a monopoly. A related example of this problem pertains to the airline industry. There is no other entity that can offer customers the same benefits as airlines can. In this case, the regulations on prices that apply to the airline industry to limit consumer choices and inhibit growth within the industry.
The second situation that describes an undesirable regulation is when government regulators fail to properly assess the costs of regulation. Costs are always factored into any regulatory activity and they cannot be ignored by the businesses involved. For example, an airport that wishes to charge fees for its services must take into consideration the added costs that it will incur if it decides to implement such a policy. Likewise, consumers who choose to travel using a certain mode of transport will also need to consider the impact of that choice upon the costs of their journey. The introduction of a surcharge or cap on air fares would likely have a significant adverse effect on the profitability of a business.
The last example relates to the lack of competition because of excessive regulation. When consumers are subject to a number of different businesses that control the prices they pay for a good or service, they are not under any real threat of losing business. Businesses cannot compete with one another on price when they are forced to “play within the same box” and accept any regulation imposed by the authorities. To maintain a competitive edge over other businesses, consumers must be offered access to numerous pricing options without having to deal with unnecessarily high prices.