Page 375 - Encyclopedia of Business and Finance

eobf_G 7/5/06 3:03 PM Page 352

Government Role in Business

chairperson of the commission and guides the agency’s to provide a much broader coverage of monopolies regard-
daily operations. less of industry. The ICC was disbanded at the end of
The FTC was originally created to enforce the provi- 1995.
sions of the Sherman Antitrust and Clayton Acts. The
FTC has the power to investigate unfair competitive prac- Federal Communications Commission. The Federal
tices on its own. Firms may also petition the FTC to Communications Commission (FCC) monitors and reg-
investigate alleged unfair competitive practices of which it ulates citizens band radio, radio, telegraph, telephone, and
might otherwise be unaware. The agency can hold public television operations. It has broad powers to set acceptable
hearings to investigate the alleged infractions, and it may standards for television regarding language, nudity, vio-
also issue cease-and-desist orders when it believes unfair lence, or other material that may be perceived as inappro-
competitive business practices are being used. Since the priate by the general public. For example, television shows
enforcement powers of the FTC and Department of Jus- that are adult-oriented or contain violence are typically on
tice overlap, the two agencies often work together to solve later in the evening so that children are less likely to see
problems. them. In addition, television shows often warn viewers
about their content through a rating system; since the rat-
Wheeler-Lea Act of 1938. The U.S. Congress responded ing is displayed on the screen, viewers can make an
to public complaints about improper and deceptive adver- informed decision before watching a particular program.
tising by passing the Wheeler-Lea Act of 1938, which The FCC also has the power to fine broadcast com-
empowered the FTC to investigate businesses that engage panies that use inappropriate language in their program-
in deceptive business activities or companies that use mis- ming. Since most television and radio stations know what
leading or less than truthful advertising to entice con-
are considered acceptable standards, fines are rarely issued.
sumers into their stores. A common deceptive practice
When fines are issued, however, a television or radio sta-
that some companies have used is called bait and switch. tion may take the FTC to federal court to appeal the deci-
This practice refers to advertising a product at an sion. Broadcast companies that fight the FCC over a
extremely low price to draw customers into a store but in
show’s content normally argue that the First Amendment
reality having very little or none of the product available.
gives them the right to broadcast the contested material.
Store employees then attempt to sell customers a more For more information regarding the FCC, visit its Web
expensive product. This is but one example of what the site (http://www.fcc.gov).
FTC may investigate.
Food and Drug Administration. The Food and Drug
INDUSTRY-SPECIFIC FEDERAL
Administration (FDA) is responsible for ensuring the
AGENCIES
safety of cosmetics, drugs, and food. One of the most
Federal legislation has created agencies to monitor and important functions of the agency is new drug approval.
regulate particular industries because of concern over The FDA requires pharmaceutical companies to provide
industry-specific practices, among them the Interstate detailed scientific data regarding new drugs prior to
Commerce Commission, the Federal Communications approval. Specifically, the FDA will review the potential
Commission, and the U.S. Food and Drug Administra- benefits and negative side effects of all proposed drugs.
tion. The agency reviews the information submitted by the
pharmaceutical company and may also conduct its own
Interstate Commerce Commission. In 1887 Congress tests if additional study is deemed necessary.
passed legislation creating the Interstate Commerce Com- The FDA is extremely important to the business
mission (ICC). Originally, only railroads were regulated, community because if it rejects a new drug, the pharma-
but as modern transportation methods developed, other
ceutical company developing it cannot sell it. FDA regu-
transportation modes were added to its list of responsibil-
lators must balance the interests of the general public with
ities. The primary purpose of the ICC was to monitor those of the pharmaceutical company. The FDA does not
such items as the prices charged by railroad companies,
endorse new drugs; rather, it approves them, stating that
which may have had a monopoly in some parts of the
they are thought to be safe.
country. The commission could take corrective action,
such as price modification, if it found that a railroad or
other interstate business was engaging in monopolistic INTERNET ACTIVITIES
business activities and charging high prices for its services. As business via the Internet increases, so too have the reg-
Since this act applied to a limited number of industries, ulations that govern its practice. One such regulation is
Congress later passed the Sherman Antitrust Act of 1890 the Anticybersquatting Consumer Protection Act.

352 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION