Assume that the The World Steel industry wants to expand and that its only optio
ID: 1235108 • Letter: A
Question
Assume that the The World Steel industry wants to expand and that its only option is a merger. Now the industry is confronted with government regulations to oversee the merger.
Explain why government regulation is needed, citing the major reasons for government involvement in a market economy.
Justify the rationale for the intervention of government in the market process in the U.S.
Assuming that the merger faces some threats and that the industry decides on self-expansion as an alternative strategy, describe the additional complexities that would arise under this new scenario of expansion via capital projects.
Analyze how the different forces will come together to create a convergence between the interests of stockholders and managers.
Speculate about the implications for the goals of the firm as to whether to maximize the industry
Explanation / Answer
Today, the FTC and the Department of Justice continue to oversee violations of antitrust laws. Both agencies confer with one another prior to an investigation so that they do not overlap. Over the years, however, the FTC has adopted a specialty in the types of cases it investigates, primarily those within the industries of health care, pharmaceuticals, professional services, food, energy and technology.41 There are three core factions of the FTC: the Bureau of Competition, the Bureau of Consumer Protection and the Bureau of Economics. The Bureau of Competition (BC) serves as the “antitrust arm” of the FTC. It can be considered the enforcement division, concerned primarily with sustaining a fair competitive market and “championing the rights of American consumers.” The BC is responsible for reviewing mergers and acquisitions, exploring abuses of market power and pursuing violators in federal court or before the FTC’s administrative law judges.42 The Bureau of Consumer Protection (BCP) “works for The Consumer to prevent fraud, deception and unfair business practices in the marketplace.” It functions as the agency’s earpiece, promoting integrity in the market and providing free information on how to file a complaint against dishonest corporations.43 The Bureau of Economics (BE) is essentially the research division of the FTC. It conducts studies on the impact of government regulation and offers economic analyses to support ongoing FTC investigations. The BE also produces and distributes financial policy recommendations to legislators, the president and the general public, urging them to protect the rights of consumers.44 During an FTC investigation, the agency may try to work with a corporation accused of breaching antitrust laws by issuing a voluntary compliance agreement. While this arrangement does not necessarily force the corporation to admit guilt, the company must agree to discontinue questionable practices or seek to assuage the FTC’s concerns. Otherwise, companies could face years of injunctions and serious legal consequences.