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Part 3 - Government Regulation
Chapter 18
24
Economics
Undergraduate 3
05/02/2014

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Term
antitrust policy
Definition
The use of antitrust laws to promote competition and economic efficiency
Term
industrial regulation
Definition
The older and more traditional type of regulation in which government is concerned with the prices charged and the services provided to the public in specific industries, in contrast to social regulation
Term
social regulation
Definition
Regulation in which government is concerned with the conditions under which goods and services are produces, their physical characteristics, and the impact of their production on society; in contrast to industrial regulation
Term
Sherman Act
Definition
The Federal antitrust act of 1890 that makes monopoly and conspiracies to restrain trade criminal offenses
Term
Clayton Act
Definition
The Federal antitrust law of 1914 that strengthened the Sherman Act by making it illegal for firms to engage in certain specified practices
Term
tying contracts
Definition
A requirement imposed by a seller that a buyer purchase another (or other) of its products as a condition for buying a desired product; a practice forbidden by the Clayton Act
Term
interlocking directorates
Definition
A situation where one or more members of the board of directors of a corporation is also on the board of directors of a competing corporation; illegal under the Clayton Act
Term
Federal Trade Commission Act
Definition
The Federal law of 1914 that established the Federal Trade Commission
Term
cease-and-desist order
Definition
An order from a court or government agency to a corporation or individual to stop engaging in a specified practice
Term
Wheeler-Lea Act
Definition
The Federal law of 1938 that amended the Federal Trade Commission Act by prohibiting and giving the commission power to investigate unfair and deceptive acts or practices of commerce (such as false and misleading advertising and the misrepresentation of products)
Term
Celler-Kefauver Act
Definition
The Federal law of 1950 that amended the Clayton Act by prohibiting the acquisition of the assets of one firm by another firm when the effect would be less competition
Term
Standard Oil Case
Definition
A 1911 antitrust case in which Standard Oil was found guilty of violating the Sherman Act by illegally monopolizing the petroleum industry. As a remedy the company was divided into several competing firms.
Term
U.S. Steel case
Definition
The antitrust action brought by the Federal government against the U.S. Steel Corporation in which the courts ruled (in 1920) that only unreasonable restraints of trade were illegal and that size and the possession of monopoly power were not by themselves violations of the antitrust laws
Term
rule of reason
Definition
The rule staqted and applied in the U.S. Steel case that only combinations and contracts unreasonably restraining trade are subject to actions under the antitrust laws and that size and possession of monopoly power are not illegal
Term
Alcoa case
Definition
A 1945 case in which the courts ruled that the possession of monopoly power, no matter how reasonably that power had been used, was a violation of the antitrust laws; temporarily overturned the rule of reason applied in the U.S. Steel case
Term
DuPont cellophane case
Definition
The antitrust case brought against DuPont in which the U.S. Supreme Court ruled (in 1956) that while DuPont had a monopoly in the narrowly defined market for cellophane, it did not monopolize the more broadly defined market for flexible packaging materials. IT was thus not guilty of violating the Sherman Act
Term
Microsoft case
Definition
A 2002 antitrust case in which Microsoft was found guilty of violating the Sherman Act by engaging in a series of unlawful activities designed to maintain its monopoly in operating systems for personal computers; as a remedy the company was prohibited from engaging in a set of specific anticompetitive business practices
Term
horizontal merger
Definition
The merger into a single firm of two firms producing the same product and selling it in the same geographic market
Term
vertical merger
Definition
The merger of one or more firms engaged in different stages of the production of a final product
Term
conglomerate merger
Definition
The merger of a firm in one industry with a firm in another industry (with a firm that is not a supplier, customer, or competitor)
Term
per se violations
Definition
Collusive actions, such as attempts by firms to fix prices or divide a market, that are violations of the antitrust laws, even if the actions themselves are unsuccessful
Term
natural monopoly
Definition
An industry in which economies of scale are so great that a single firm can produce the product at a lower average total cost than would be possible if more than one firm produced the product
Term
public interest theory of regulation
Definition
The presumption tht the purpose of the regulation of an industry is to protect the public (consumers) from abuse of the power possessed by natural monopolies
Term
legal cartel theory of regulation
Definition
The hypothesis that some industries seek regulation or want to maintain regulation so that they may form or maintain a legal cartel
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