TYPES OF COMPETITION

• Perfect Competition – a large number of companies all producing essentially the same product. No company has any control over price.

• Imperfect Competition – a situation in which a company has enough control over the market to influence price.

Types of Imperfect Competition• Monopoly – a market in which a single seller dominates

the market.• Monopolistic Competition – many companies compete

in an open market to sell products that are similar, but not identical. (restaurants/clothing)

• Oligopoly – a market dominated by a few large, profitable firms. (70-80% of the output) (airlines/automobiles)

Mergers• Merger – when two businesses come together to

form one business.

Types of Mergers• Horizontal Merger – when two businesses who are

competing come together.• Vertical Merger - when two businesses that are in

different steps of an operation come together.• Conglomerate Merger – when two businesses that

are in unrelated markets come together.• Takeover – when one business buys more than ½ the

stock of another business on the open market.

What is the correlation between mergers and competition?

GOVERNMENT REGULATION

Regulation • Process by which the government passes laws, and

the executive branch enforces policies designed to oversee business activity.

• Regulation became prevalent during the industrial revolution. Regulation includes making the workplace safer, keeping the marketplace competitive, overseeing the stock market, and protecting the environment.

Deregulation• Process by which the government becomes less

involved in controlling business activity. Some politicians feel that regulation tends to hinder economic growth.

Anti-Trust Legislation• Definition - Anti-trust legislation is legislation

designed to break up existing monopolies and prevent the formation of new monopolies to increase competition in the marketplace.

Examples

• Sherman Antitrust Act (1890) - legislation outlawed agreements and conspiracies that restrain interstate or foreign trade.

• Federal Trade Commission Act (1914) – created the Federal Trade Commission (FTC) – gave power to bring cases against private businesses engaged in unfair trade practices.

• Clayton Act (1914) – restricted the practice of selling goods to different buyers at different prices.

• Hart-Scott-Rodino Anti-Trust Improvement Act (1976) - outlawed mergers which substantially lessen competition.

• Environmental Protection Agency (EPA) – Agency was created to reduce pollution, and enforce federal environmental laws and policies.

• Federal Communications Commission (FCC) – Agency regulates radio, television, phone, telegraph, and satellite industries.

• Food & Drug Administration (FDA) – Agency was created to monitor the safety and health of all foods and drugs.

• Federal Trade Commission (FTC) – Agency was created to monitor business practices. FTC is in charge of stopping monopolies from forming, and maintaining a competitive marketplace.

• Interstate Commerce Commission (ICC) – Agency was created to monitor all surface transportation (ground).

• Nuclear Regulatory Commission (NRC) – Licenses and regulates civilian uses of nuclear energy in order to protect public health and safety, as well as the environment.

• Occupational Safety & Health Administration (OSHA) – This agency was created to oversee workplace safety. The agency does periodic checks of businesses to ensure the safety of workers.

• Securities & Exchange Commission (SEC) – This agency monitors the stock market. The agency enforces policies to provide fair trade practices in the various stock exchanges.

• Federal Deposit Insurance Corporation (FDIC) – This agency was created to maintain stability and public confidence in the nation's financial system by insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, and managing receiverships.