What Happens after a Bill has Been Enacted? REGULATION

1. What Happens after a Bill has Been Enacted?REGULATION Self-Executed Federally Enforced Administratively Executed/Federally Enforced

2. Self-Executed Regulation • Defendant takes some action that violates a duty laid out in statute that harms Plaintiff • Plaintiff brings civil action (takes the offender to court -- case or controversy) • Seeks damages and/or a court order • Court (judge & jury) decides on the basis of adversarial process, court’s decision enforced by state Anti-Trust Example

3. What is Regulating? The general meaning of the word is making orderly or organizing. The specific meaning of the word is the imposition of rules by government, backed by penalties, that are intended to modify the economic behavior of firms and individuals

4. Federally Enforced Regulation • Defendant takes some action that violates a duty laid out in statute • State (Department of Justice) brings civil and/or criminal case against Defendant • Seeks penalties (fines, jail, corporal punishment) and/or a court order • Court (judge & jury) decides on the basis of adversarial process, court’s decision enforced by state Anti-Trust Example

5. Administratively Executed/Federally Enforced Regulation Administrative regulation means issuing permits • An administrative agency requires firms and/or individuals to have permits in order to carry out particular activities or behaviors • It grants the permit if (and only if) firms and/or individuals agree to abide by certain specified terms, conditions, or rules • It makes sure that nobody who lacks a permit performs the regulated activities or behaviors and enforces compliance on the part of permit holders • It sanctions violators -- imposes fines or, in extreme cases, withdraws permit

7. Sherman Act: Section 1 (Conspiracy section = requires two persons to violate) • Per se violations (i.e., evidence of these behaviors is sufficient to establish case) • Agreements among potential competitors at the same level (Horizontal arrangements) • to fix prices--explicit or implicit • to divide markets • Group boycotts

8. Sherman Act: Section 1 (cont.) • Rule of reason offenses • Vertical arrangements) • Resale price maintenance agreements • Tying arrangements (may also violate Clayton Act) • Exclusive dealing arrangements (ditto) • Requirements Contracts (ditto)

9. Sherman Act: Section 2 Anti-monopoly Section (involves one legal person and requires evidence of intent to monopolize <anticompetitive acts> and success <dominant market share> • Drive competitors out of business • Market definition

10. Sherman Act: Criminal Procedure Criminal suit Must be brought by Justice Department • Pleas • not guilty • guilty • nolo contendre • Criminal conviction is prima facie evidence for civil suit • Penalties • individuals--3 years in federal prison and/or $350k • business entities--fine up to $1M

11. Sherman Act: Civil Procedure May be brought by any person (or group of persons) damaged by the offense • Suit is brought in federal district court in district where alleged offense occurred • Private remedies • triple damages, plus court costs, attorney's fees, simple interest • divestiture • injunction • Seizure of goods

12. Clayton Act**as amended by Robinson Patman Act, Kefauver-Celler Amendments, Hart-Scott-Rodino Anti-trust Improvements Act 1976 Enforced by DOJ and Federal Trade Commission • Section 2--prohibits price discrimination • Prima facie case requires: Saleof goods of like grade and quality in same market at different price that injures competition (competitors) • Defenses include: Cost justified, Meeting competitors' price, Perishable goods, Unlike grade or quality

13. Clayton Act (cont.) Section 7 prohibits mergers likely to injure competition (HSR = not competitors = consumer welfare/efficiency) • Defenses • Failing company • No substantial lessening of competition • DOJ rules--horizontal mergers/market share and contestability, HHI = sum of squared |shares| • Prior approval, waiting period • Procedures--same as under Sherman Act, plus FTC Administrative Procedures • Remedies: same as under civil parts of Sherman Act

14. The Federal Trade Commission (America's nanny) • Created in 1914 by the FTC Act to protect the consumer (pocketbook) against “unfair methods of competition" • FTC Act amended by Wheeler-Lea Act "to cover unfair or deceptive acts or practices" Gave FTC broad latitude to define its responsibilities and the power to regulate advertising to prevent 'false and misleading claims' • FTC also enforces Clayton Act, Robinson-Patman Act, Magnuson-Moss Warranty Act, Truth in lending, Fair Credit Reporting, and Fair Packaging and Labeling Acts

15. FTC has Five commissioners, One chair, appointed by President for 7 year staggered term, only 3 from same political party, & Ten regional offices, staff, budget, etc. • Procedures • Informal complaint (can be by FTC, consumer, other government agency) • After investigation. FTC files formal complaint • Hearing held before Administrative Law Judge who issues decision • Commission decision -- Cease and desist order, corrective advertising (Civil penalties can be imposed for order violations) • Respondent can petition Fed. Court of Appeals for relief • FTC must petition Federal Courts to enforce order