|Research and review credible sources to gain an understanding of the pros and cons of government intervention.|
The role of government in the economy is often debated by economists and business people. The debate ranges from having little to no government intervention to having a strong government presence in both business and social settings.Thinking through the pros and cons of government intervention, research and identify two government agencies, departments, or regulations where the government is heavily involved in the economy that you agree is helpful and necessary. Then, research and identify two government agencies, departments, or regulations where the government is involved in the economy that you disagree with and believe the free market would be better. Be specific in your selected government agencies, departments, or regulations. It may be possible to use the same government agency, department, or regulation for both sides. For example, the Environmental Protection Agency (EPA) may have regulations or interventions that you both agree and disagree with. Since EPA is used here as an example, do not use it in your assignment.For each selected example (four total),Assess the government intervention providing both the pros and cons.
Discuss whether you agree with the government intervention providing facts and support for your opinion.
Thoroughly explain and support your rationale.
Critique the influence of the political process (for example, lobbying) on each of your examples.
Bus Week 2
The government’s involvement in business can be beneficial in some aspects and a significant challenge in others. The two government agencies referenced in this short essay are the Federal Trade Commission and the Securities and Exchange Commission.
Federal Trade Commission
The Federal Trade Commission (FTC) protects consumers and competition by barring anticompetitive, deceptive, and unfair business practices. I agree with FTC’s legislation on consumer protection, particularly the Bureau of Consumer Protection. Consumers include children, who may need protection from companies who wish to use deceptive tactics to collect children’s data without their parent’s consent (Baine & Beato, 2022). FTC can use the courts to seek civil penalties and restitution for the harmed consumers (Waller, 2011). For example, FTC won two lawsuits against companies that failed to deliver personal protective equipment to consumers during COVID-19, deceiving consumers about their availability. The court awarded monetary relief to the FTC, which would provide refunds to consumers (FTC, 2022). Pro-consumer and privacy groups push senators to change specific FTC laws to favor consumers. For instance, various groups seek the provision of additional funding to the FTC to intensify its fight against unfair or deceptive trade practices.
I disagree with the FTC’s enforcement of antitrust laws prohibiting anticompetitive mergers. Antitrust laws allow the government to block certain mergers and often break up large firms into smaller ones (Lande & Vahessan, 2020). The benefit of antitrust laws is they protect competition, ensuring consumers get goods and services at lower prices. But, it has several cons, such as making mergers and acquisitions difficult, depriving consumers the power, encouraging government corruption, and discouraging innovation. The problem with this intervention is that companies get treated differently based on whether they reach a certain size through growth or merger. The law should address the size or market concentration rather than focusing on how a company got its dominant position (Young & Crews, 2019). Because senators enact most policies, companies and other organizations can influence them to make favorable policies that could encourage mergers and acquisitions in the future.
Securities and Exchange Commission
The framers of the SEC Act of 1934 wanted to protect investors and maintain a financially healthy economy. I agree with the commission intervention, particularly on protecting investors. The SEC Act of 1934 is specifically important because companies offering securities for sale to the public must tell the truth about their business (Gomes, 2007), the securities on sale, and the risks involved in such securities. Additionally, brokers, dealers, and exchanges must treat investors fairly and honestly. The SEC is also crucial in financial reporting, promoting clear, truthful, and well-timed giving out of financial reports. The Hertz Corp and Hertz Global Holdings Inc. agreed to pay $16 million to settle fraud and other charges brought by the Securities and Exchange Commission because of multiple inaccurate financial statements and disclosures (SEC, 2019). Some companies have adopted the “always-lobby” strategy, and others “free-ride” on this influence. The “always-lobby” group collaborate with the SEC and policymakers to create more favorable regulations that match their interests.
I disagree with the SEC’s new equity crowdfunding regulation adopted in 2015, which enacted the Jumpstart Our Business Startups (JOBS) Act. This regulation has several pros. For instance, companies have more potential funding sources and can raise money more quickly than with a joint venture. However, the cons of this regulation have a significant impact on the market. For instance, as a result of the legal and compliance protocols firms have to follow, getting funding from various investors is burdensome and consumes a lot of internal resources. Companies are accountable to several investors, many of whom have little experience in the process. There is also privacy conflict because as firms disclose financial statements, information about the firm’s officers and directors becomes available to competitors and investors. The partial retroactivity provision of the JOBS Act is associated with lobbying by specific firms that had already conducted their IPOs from July 2011 to December 2011. Other companies have remained politically active during and after the creation of the Act.
Baine, K., & Beato, A. (2022). Reflections on the Intersection of Privacy and Antitrust. Georgia State University Law Review, 38(4), 11.
FTC. (2022, August 1). Federal Trade Commission Scores Two Victories in Separate Actions Against Companies Who Failed to Deliver COVID Personal Protection Equipment During Early Days of the Pandemic. Federal Trade Commission. https://www.ftc.gov/news-events/news/press-releases/2022/08/federal-trade-commission-scores-two-victories-separate-actions-against-companies-who-failed-deliver
Gomes, A., Gorton, G., & Madureira, L. (2007). SEC Regulation Fair Disclosure, information, and the cost of capital. Journal of Corporate Finance, 13(2-3), 300-334.
Lande, R. H., & Vahessan, S. (2020). Preventing the Curse of Bigness Through Conglomerate Merger Legislation. Ariz. St. LJ, 52, 75.
SEC. (2019, February). SEC.gov | SEC Charges Hertz with Inaccurate Financial Reporting and Other Failures. Sec.gov. https://www.sec.gov/enforce/33-10601-s
Waller, S. W., Brady, J. G., Acosta, R. J., Fair, J., & Morse, J. (2011). Consumer protection in the United States: an overview. European Journal of Consumer Law.
Young, R., & Crews, W. (2019). The case against antitrust law: Ten areas where antitrust policy can move on from the smokestack era. Competitive Enterprise Institute.
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