This document provides an overview of government regulation of corporate business in the United States. It covers the development of federal and state power to regulate business, securities laws like the Securities Act of 1933 and Securities Exchange Act of 1934, antitrust laws like the Sherman Antitrust Act, and the role of agencies such as the SEC and FTC. It also discusses corporate expansion tactics, their treatment under securities and antitrust laws, and circumstances for involuntary or voluntary corporate dissolution.

1. Government Regulation
of Corporate Business
Chapter 28

2. Learning Objectives
1. Explain the development of the federal
government’s power to regulate business.
2. Describe the source of state power to regulate
business.
3. Explain how the Securities and Exchange
Commission prevents unfair practices.
4. Explain per se antitrust violations of antitrust law.
5. Explain the rule-of-reason standard in antitrust
law.
2

3. Learning Objectives (cont.)
6. Outline the general provisions of all Post-Sherman
antitrust laws.
7. Define the various techniques of corporate expansion.
8. Contrast the interest of the Securities and Exchange
Commission with that of the Federal Trade
9. Commission in corporate expansion.
10.Identify the two ways that a corporation may undergo
dissolution.
11.Explain the circumstances under which a limited liability
company may undergo dissolution.
3

4. Business and the Constitution
• Commerce Clause
– states that “Congress shall have the Power...
To regulate Commerce with foreign nations, and
among the several States.”
4

5. The Judicial–Economic System
• Reasoning by Analogy
• Balancing Individual and Regulatory
Justice
• Controlling Legal Change
5

6. Balancing Individual and Regulatory Justice
• Individual justice
– justice meted out to the people in the case before
the judge.
• Regulatory justice
– a fair and balanced interpretation of the law that
evolves from and is consistent with previous law
6

7. State Regulatory Power
• Police power
– the state’s authority to restrict private rights to
promote and maintain public health, safety,
welfare, and morals.
• A state has police power simply by virtue
of its existence as a legitimate
governmental authority.
7

8. Securities Regulation
• Security
– a monetary investment that expects a return solely
because of another person’s efforts.
8

9. Securities Act of 1933
• Registration statement
– contains detailed information about the
corporation, including data about its management,
capitalization, and financial condition.
• Prospectus
– contains much of the same information but in a
condensed and simplified form.
9

10. Securities Exchange Act of 1934
• The Securities Exchange Act of 1934
– established the SEC
– requires periodic reports of financial information
concerning registered securities, and it prohibits
manipulative and deceptive actions in the sale and
purchase of securities.
10

11. Securities and Antitrust
Regulations
11

12. The Wall Street Transparency and Accountability Act
• Derivative
– a financial tool the value of which emerges from a
variable item, such as an interest rate, a stock
index, or a commodity like fuel or crops
12

13. The Wall Street Transparency and Accountability Act
• Security-based swaps
– “swaps based on (1) a single security, (2) a loan,
(3) a narrow-based group or index of securities or
(4) events relating to a single issuer or issuers of
securities in a narrow-based security index.”
13

14. Title XI Investor Protection and Securities Reform Act
• Office of Investor Advocate (OIA)
– purpose is to help make the work of broker–
dealers and investment advisors ( IAs ) more
transparent
– gives the SEC the power to make new regulations
14

15. Title XI Investor Protection and Securities Reform Act
• Office of Credit Ratings
– purpose is to watchdog those organizations that
issue credit ratings
15

16. Antitrust Regulation
• Monopoly
– the exclusive control of a market by a business
enterprise
16

17. Sherman Antitrust Act
• The Sherman Antitrust Act (1890)
– prohibits contracts, combinations, and
conspiracies in restraint of trade
– also prohibits monopolization, attempts to
monopolize, and combinations or conspiracies to
monopolize any part of interstate or foreign
commerce.
17

18. Sherman Antitrust Act
• Per se violations
– the practice is so contrary to antitrust policy that
harm is presumed, and the practice is prohibited
18

19. Sherman Antitrust Act
• Rule-of-reason standard
– will stop certain practices only if they are an
unreasonable restriction of competition.
19

20. The Evolving Nature of the Twin Standards
• RPM agreement
– a retailer and a manufacturer agree that the
retailer will sell certain products at a price set by
the manufacturer.
• Quasi-RPM arrangement
– a manufacturer lets retailers know the price that it
expects to see on an item and then declines to sell
that item to any retailer that does not list the item
at that price
20

21. Clayton Act
• Congress passed the Clayton Act to police
specific business practices that could be
used to create a monopoly.
• Tying agreements, Interlocking
directorates
21

22. Clayton Act
• Tying agreements
– occur when one party refuses to sell a product
unless the buyer also purchases another product
tied to the first product.
• Interlocking directorates
– occur when individuals serve as directors of two
corporations that are competitors.
22

23. Robinson-Patman Act
• Robinson-Patman Act
– prohibits a seller from charging different prices to
different customers for the same product when
such differences might injure competition
23

24. Federal Trade Commission Act
• Federal Trade Commission Act
– establishes the Federal Trade Commission (FTC)
– declares that “unfair methods of competition, and
unfair or deceptive practices in or affecting
commerce are hereby declared unlawful.”
24

25. The Foreign Trade Antitrust Improvements Act
• The Foreign Trade Antitrust Improvements
Act (FTAIA)
– objective is to permit American companies
operating in foreign markets to have a fighting
chance against foreign competitors that are not
subject to the strict antimonopoly provisions of the
act.
25

26. Expansion Tactics and Securities Law
• Merger
– involves two corporations, one of which is
absorbed by the other
• Consolidation
– both companies disappear, and a new company
carries on the business under a new name.
26

27. Securities Law and
Corporate Expansion
27

28. Expansion Tactics and Securities Law
• Asset acquisition
– one corporation purchases all the property of a
second corporation
28

29. Expansion Tactics and Securities Law
• Stock acquisition
– the buyer purchases enough stock in a
corporation to gain voting control of that
corporation.
• Leveraged buyout
– a controlling portion of the stock in a corporation is
purchased by a group of shareholders
29

30. Expansion Tactics and Securities Law
• Tender offer
– the buyer makes a public offer to buy voting stock
in a target corporation.
• A successful tender offer occurs once the
buyer has purchased enough of the voting
stock to satisfy the original goal
30

31. Stock Acquisition Techniques
31

32. Post Offer Antitakeover Tactics
32

33. Pre-Offer Anti-takeover Tactics
33

34. Expansion Attempts
• Horizontal expansion
– occurs between companies that are involved in
the same business
– often result in monopolies.
• Vertical expansion
– occurs between companies that were in a
customer-supplier relationship.
34

35. Antitrust Law and
Corporate Expansion
35

36. Hart-Scott-Rodino Antitrust Act
• Hart-Scott-Rodino Antitrust Act
– designed to police any expansion attempts that
might harm competition in the marketplace.
– requires corporations that are setting up an
expansion attempt to notify the FTC before the
deal is completed.
36

37. The Tunney Antitrust Act
• The Tunney Antitrust Act
– requires that the DOJ defend its support of a
consent decree by filing the decree with the
federal court along with a complaint and a
competitive impact statement (CIS).
37

38. The Tunney Antitrust Act
• Competitive impact statement
– document that clarifies any potential antitrust
problems inherent within the proposed expansion
and the solutions to those problems suggested by
the decree
38

39. The Government and Corporate Dissolution
Grounds for involuntary dissolution at the
request of a shareholder include the
following:
•
•
•
•
Evidence of illegal, oppressive, or fraudulent acts.
A misapplication or waste of corporate assets.
A deadlock of directors that threatens irreparable harm.
Evidence that a dissolution is necessary to protect the
rights of the complaining shareholder.
39

40. The Government and Corporate Dissolution
• A corporation can be dissolved voluntarily by
the unanimous approval of the shareholders or
by a positive vote of the directors with the
approval of two-thirds of the shareholders.
40

41. Dissolution of a Limited Liability Company
• Circumstances of Dissolution
• Effects of Dissolution
41

42. Question?
In a _____________ a controlling portion of
the stock in a corporation is purchased by a
group of shareholders.
A. Asset acquisition
B. Debt acquisition
C. Leveraged buyout
D. Junk bond sale
42

43. Question?
Which law prohibits a seller from charging
different prices to different customers for the
same product?
A. Sherman Antitrust Act
B. Securities Act of 1933
C. Clayton Act
D. Robinson-Patman Act
43

44. Question?
What is the exclusive control of a market by
a business enterprise?
A. Parcheesi
B. Oligopoly
C. Panopoly
D. Monopoly
44

45. Question?
What monetary investment expects a return
solely because of another person’s efforts?
A. Stock
B. Share
C. Security
D. Allocation
45

46. Question?
What is a fair and balanced interpretation of
the law that evolves from and is consistent
with previous law?
A. Individual justice
B. Regulatory justice
C. Moral justice
D. Commercial justice
46

47. Question?
What is the state’s authority to restrict
private rights to promote and maintain public
health, safety, welfare, and morals?
A. Expert power
B. Political power
C. Police power
D. Military power
47