There are two main differences between economic regulation and social regulation. First, economic regulation applies only to firms in certain industries and social regulation applies to all firms in any industry in the economy. Traditionally, economic regulation focused on the control of natural monopolies, such as electric utilities, and then has been extended to some other industries, such as transportation and financial services. Another difference is that economic regulation is the government control over prices, outputs and conditions on entry to certain industries. On the other hand, social regulation means the government control over private companies in order to achieve social goals. Thus, social regulation focuses on environmental controls, public's health and safety, product safety and production effect on society. Moreover, the difference between two types of regulation is that there has been a great public demand for social regulation in recent years and a decline in economic regulation.
Antitrust policy is another form of government regulation and it differs from other types of regulation in a way that its main focus is on the protection of free competition on the market. Antitrust policy prohibits business practices or mergers that could limit competition. Thus, the difference is that economic and social regulation focuses directly on the protection of consumers' interests, and antitrust policy, first of all, acts to protect interests of other competitors to ensure that there is free competition on the market. Although, in the ideal world, free competition always works to the benefit of the consumers. So, by protecting the interests of smaller competitors, antitrust policy protects the interests of consumers as well.
Several social regulatory agencies have been established to address specific social problems, such as pollution, discrimination, product quality and safety, and worker safety.
For example, the Federal Trade Commission regulates information in advertising and sets restrictions on labeling. Environmental Protection Agency controls pollution. Consumer Product Safety Commission controls the quality and safety of goods and products. Occupational Safety and Health Administration controls production conditions and mandates companies to reduce risks that workers may encounter in their jobs. (Taylor)
Public transportation can provide an example of economic regulation. For regulation purposes, government can impose maximum and minimum rate of fare in order to control unreasonable price increases. The regulation of rail transportation has a longest history as the U.S. government began to regulate the rail rates in the 19th century. A special federal regulatory agency, the Interstate Commerce Commission (ICC), was created, which had the power to set maximum rates for the railroads. During that period, all rail rates were regulated, and a complicated system of rail tariffs was developed by ICC. In the late 1970s, however, the process of deregulation of the railway industry started. Nowadays a new regulatory agency – the Surface Transportation Board (STB), which is the successor of ICC, may take regulatory actions over a rail rate only if the rail carrier has market dominance, so, in practice, only few rail rates are regulated. (Calderwood)
The antitrust policy example can be a division of Kodak. Through the years, Kodak has controlled a significant part of the film and camera industry, and, because of its dominance on the market, has seen many antitrust accusations. Several antitrust lawsuits were won by Kodak, and two lawsuits, which were brought by the US government in 1921 and in 1954, resulted in two consent decrees. In accordance with the 1921 decree, Kodak was prevented from selling private-label film under its own label. Another case happened in 1954, when Kodak was accused of violating the antitrust policy by product “tying” and was forced to license the color film processing to third parties. (Famous Antitrust Cases)
Antitrust policy is necessary because the very existence of it discourages companies from business practices that can be potentially harmful for economic efficiency of the market. Under antitrust policy, having a monopoly is not unlawful, but it is illegal to acquire monopoly power using business methods that reduce competition. Thus, antitrust policy is necessary when companies carry out business activities aimed at destroying their business rivals. Antitrust policy is also necessary to prevent anti-competitive mergers when two or more competitors agree to merge or unite, and this can result in diminishing competition on markets. It is also illegal under the antitrust policy for two or more firms to conspire in order to gain monopolistic power or agree to manipulate their prices.
It is obvious that Google has gained a dominant position in the search industry, but this market dominance has been obtained because its superior products and not through antitrust violations. I personally defend the statement B: Google should not be penalized for its success. According to antitrust policy, being a monopoly is not illegal, it only becomes illegal if monopoly power was obtained by anti-competitive means. But, as Google stated on its blog, their “success has been earned the right way –through technological innovation and great products” (Holtz). And besides, Google is not the only search engine on the Internet. If someone does not like Google because of its overwhelming success, there are also other search engines to choose from, like Bing, for example. It is also true that having a dominant position on the market, Google can allocate bigger resources for innovation and development. Google's competitors at the same time have to make greater efforts to become more innovative and constantly improve their products, but this is a natural process of the marketplace which always brings more benefits to the society.
- Bradley, Tony. PC World.Antitrust Accusations: Google is the New Microsoft. Retrieved from http://www.pcworld.com/article/190168/Antitrust_Accusations_Google_is_the_New_Microsoft.html
- Calderwood, James. Legal Briefs: Should rail rates be regulated again? MH£L. Material Handling £ Logistics. Retrieved from http://mhlnews.com/transportation-amp-distribution/legal-briefs-should-rail-rates-be-regulated-again
- Famous Antitrust Cases. HG.org. Legal Resources. Retrieved from http://www.hg.org/article.asp?id=6025
- Holtz, Julia. Committed to Competing fairly. Google. Europe Blog. Retrieved from http://googlepolicyeurope.blogspot.com/2010/02/committed-to-competing-fairly.html
- Taylor, John. Economic Regulation Versus Social Regulation. Principles of Microeconomics, 3d ed. Retrieved from http://college.cengage.com/economics/taylor/econ/3e/micro/students/add_topics/ch12_econ_reg.html