2. Controlling Monopolies
• A monopoly exist when only one company provides a
product or service without competition from other
companies.
• Without competitors, the one producer can control the price of
the product or service
• By controlling the supply of an item, a single producer can set
a price that will generate the greatest profit
4. Natural Monopolies
• A Natural Monopoly is one that usually involves providing
public services, such as public utilities, which have a
fairly stable demand and are costly to create.
• For example, a natural gas company must build hundreds of
miles of pipelines along streets and roads in order to deliver
gas to homes and industries to fuel furnaces and stoves.
• The cost and complexity of having multiple gas companies is
much of a hassle so the government grants a monopoly to one
company, regulates their prices, and influence other company
policies
5.
6. Promoting Fair Competition
• One way to promote competition is to limit the number
of monopolies created and controlled by government
• The federal government supports business practices that promote
competition
• They discourage monopolies
• Therefore the government has passed important laws and created
agencies to enforce these laws against corrupt monopolies
7. Fair Competition Acts
• Sherman Antitrust Act-primary
purpose is to discourage monopolies by outlawing business
agreements among competitors that might tend to promote
monopolies
• Clayton Act-
Forbids corporations from acquiring ownership rights in other
corporations if the purpose is to create a monopoly or discourage
competition.
8. …………….. More Acts
• Robinson- Patman Act –
This act amended the portion of the Clayton Act dealing with the
pricing of goods. The main purpose in the pricing provisions in
both laws is to prevent price discrimination.
• Wheeler-Lea Act-
This law made unfair or deceptive acts or practices, including false
advertising, unlawful.
• Federal Trade Commission and other Federal Agencies-
The FTC administers most of the federal laws dealing with fair
competition as do agencies like the FAD, FCC, FDA, NRA, and
the SEC
9. Providing Bankruptcy Relief
• Bankruptcy –
Is a legal process that allows the selling of assets to pay off
debts
The free-enterprise system permits unsuccessful business to file for
bankruptcy as a means of protecting owners and others
