Regulations Equals Monopoly?

Independent gas stations are facing one of the hardest crisis since 1970s. In California, Philip Elder, the gas station manager, claimed that regulations squeezing him too hard. Gasoline sales down, economic down term and new regulations almost push his Independent gas stations out of business. Under the new regulations, Philip Elder need to invest $11,000 per pump to meet the air-resources agency requirement before May 15.

Gas station industry has a similar market structure as beer industry. Beer industry looks like a perfect competition but actually it isn’t. Few big firms control more than half market share. Market power is highly concentrated into few big firms. Under the new regulations, independent gas stations will be hurt and they will become victims. Probably, big firms are the winners under this regulation because big firms can keep expanding their business and they have less competition. In short, regulations have tendency to push small firms out of business and push industry closer to monopoly side.

In this case, government has the responsibility to correct the side effect from the regulations. As Philip Elder pointed out, loans only the things they request.

Ka Wa Chan

NFL and Others Hope for a Favorable Supreme Court Ruling

June 29—Supreme Court Justices agreed to hear an antitrust case against
the National Football League regarding its exclusive licensing
agreement with Reebok. Having been thrown out at the federal appeals
level, American Needle Inc. has been seeking Supreme Court intervention
to its lost right to sell hats with NFL logos, alleging that the
NFL-Reebok deal violates antitrust regulations.

In taking a seemingly strange course of action, the NFL (along with the
NBA and the NHL) echoed American Needle’s requests for a S.C. ruling,
hoping that our highest court will extend its 1972 antitrust exemption
for Major League Baseball to their respective leagues. Antitrust
immunity, if asserted, will solidify Chicago Circuit Court’s previous
judgment warranting collusive marketing practices between the 32 NFL
teams and will provide precedent preempting costly, timely, and arduous
antitrust suits in the future.

Support for freeing our largest professional sports leagues from
antitrust regulation will largely depend on how the Supreme Court
defines the market in which they participate. Exemption is most likely
to be granted should markets be defined in terms of the broader scope
of the entertainment industry as a whole. Such market definition is
certainly feasible if sports are seen as sufficiently substitutable
with other forms of live and televised entertainment; the compass of
which can be extended to include live concerts, movie theaters, theater
productions, and beyond.

Increased inclusion of firms said to be competing within the same
market affords for increasingly conservative estimations of HHI and
price-cost margin—lower values for which indicate lesser concentrated
markets limiting firms’ ability to price above marginal cost, and
consequently their incentive for anticompetitive pricing strategy. The
computation of such indices represent potentially significant weight on
DOJ judgment, as there have been numerous rulings previous setting
precedent that defines anticompetitive behavior in terms of higher
price-cost margins and regards 1000 as the critical value for HHI,
maintaining higher industry concentrations are characterized by an
exceedingly undesirable ability for monopolistic behavior.
It should therefore be evident that the extent to which the market for
professional sports is defined from a macro perspective, judgment will
be more inclined to rule in favor of exempting sports leagues from
antitrust regulations within their boundaries.

Authors:
Brian McGuckin
Ka-Wa Chan

Article:
http://www.bloomberg.com/apps/news?pid=20601205&sid=aBLIFIr.jAhE

Regulation and Google

Google is taking an offensive against government regulators who are claiming that the internet search engine is an unshakeable monopoly. Google’s rivals claim that Google’s market power has decreased competition for ad revenues in the market. Google believes that its market extends beyond search engine websites and considers all advertising to be in direct competition. Competitors range from Amazon.com and Web.md to television and radio advertising.

Google attained its market power by delivering better products and continued growth through innovation. Several of Google’s programs, such as Google Analytics, have caused controversy. Many claim that this information collecting program violates their privacy rights granted in the constitution. Despite these hurdles, Google has continued to innovate and dominate the internet search market. Currently, 2/3 of all internet searches are made using Google.

Although the world’s economy continues to struggle, Google has consistently obtained large profits and comes out with new and better programs annually. As Google continues to excel in the world market, it is able to employ and insure many people. Due to the current state of our nation, now is not the time to add regulations, costing large amounts of money that is not available. Google is a flourishing company that is not only popular, but has simply been successful due to hard work and shrewd business practices.
http://www.nytimes.com/2009/06/29/technology/companies/29google.html?pagewanted=1&_r=1&sq=google&st=cse&scp=2
Meredith Shores
Zach Ogaz

Regulating to minimize negative externalities

In a article i read on msnbc.com, the state of California passed regulation this week mandating that all new cars use heat reflective windows beginning in 2012. It starts with just windshields, but will expand to all car windows in following years. The main idea behind the regulation is to reduce the heat inside cars, especially parked cars, in order to reduce the use of air conditioning. Since air conditioning reduces gas mileage, if the use of air conditioning is reduced, cars will use less gas per trip, and emissions will be lowered overall.

In terms of economics, the main goal of the regulation is to minimize the negative externality of air pollution. By implementing mandates that try to reduce the use of air conditioning, California is attempting to decrease the level of air pollution, and is passing this regulation ex post to remedy the current problem. This is a good method for regulation, as we see there is a negative externality that lowers welfare, and we are fixing the problem. This prevents any further welfare loss, and there will be a lower cost to government and society. While an ex ante regulation would be more efficient economically, we can't forsee all problems, and therefore we need to observe the problem before we are able to fix it. This is the case with the problem of air pollution due to car exhaust. As well, an ex ante policy might be harder to implement, since firms will be more likely to fight it as it will increase production cost and there is no current problem to use as motivation, as the problem hasn't occured yet. At least with an ex post policy, there is a current externality that is a strong motivation for a policy.

As with most regulation, there are people against the policy, as the mandate increases the cost of production to firms, and firms are trying to minimize costs. Along with the car industry, the cell phone industry is against it, as they say that the thicker glass would block cell signals, and people would not be able to call from their car. Along with these people against it, the policy might not be effective in reducing pollution, as people will still choose whether or not to use air conditioning when they drive. Despite this, the policy was passed, and only time will tell if the regulation suceeds in its goal of reducing pollution.

http://www.msnbc.msn.com/id/31566034/ns/us_news-environment/

Tim Booth

Stock Options Opened for ‘Call Writing’

http://online.wsj.com/article/SB124595453317955285.html#articleTabs%3Darticle

 

The SEC has made a ruling that will allow employees to sell their stock options. Before this ruling, employees could not exercise their share holdings unless they owned actual shares.

 

There are pros and cons to this ruling that the SEC has passed.  The most obvious pro would be that now, the employees can create income for themselves through these stock options that their employer has given them.  If this ruling was passed earlier, a lot of people would have money to fall back on in these hard economic times that our country is dealing with at the moment.  That is, if they decided to exercises their rights to sell their stock.  Of course, many people lost a lot of money due to the fact that they couldn’t exercise their stock options before the market crashed in 2008 because it was illegal.  However, if they were allowed to exercise their stock options many people would have before their companies folded.  Since this was illegal, employees of the companies whose stock crashed didn’t even have an option to sell their stock, and ultimately lost all the money they had invested in the company they work/worked for.

 

The one downside to this law being passed is the purpose behind stock options.  Companies give employees these stock options so that their intentions are parallel with the stockholders of this company.  The question I pose is:  Will people that exercise their stock options have less interest in the path the company is taking?  And although I don’t think this will increase insider trading since scandals such as insider trading usually come from higher up on the chain, I do think that this could affect the allied interests between the employees and employers.

 

POSTED BY JASON KLETZKY and STEVE KILLION

New Regulation for Independent Retailer and Competitive Market

Israel's Communication Minister made a new regulation over cellular service companies that customer can have benefits of usage discounts whether they purchased cellular phone from cellular service companies or from the independent retailer. Customer could have benefits of usage discounts only by major cellular compaines before the reform of law.

In this case, Communication Minister of Israel is the regulator and cellular service companies are regulated. The Communication Minister looks like they want to protect individual retailer and make market more competitive. Reform of those law means that entry conditions of cellular service will be easier than before for third party retailer since third party's cost to enter cellular service market will not really decrease, but they expect to have more revenue since they have same ability to offer benefits to customers as major cellular service companies have.

Of course, major cellular service companies will not happy about reform of law. So now, they have plan to increase the price of SIM card doubled compared to before which customers can only buy that by major cellular service companies. Major cellular service companies don't want to decrease their revenue by reform of law. But if they keep oppose to Communication Minister's decision, nobody knows that Communication Minister would reform the law again that individual retailer can sell SIM card to customers

GooYong Chung
http://www.haaretz.com/hasen/spages/1095548.html

Alcohol Regulation

http://www.sciencedaily.com/releases/2009/06/090609103530.htm

This article is about the alcohol advertising industry in Australia. As of right now the advertisning industry for the alcohol industy is self regulated by the alcohol companies themselves. This was a bad idea to start. If you have a major industry in a country then there needs to be some sort of regulation placed on them. When you allow the industry itself to regulate what they do and how they go about it, that is asking for trouble. The Australian government should have regulated this industry from the start. Allowing the alcohol industry to regulate themselves means that they are able to advertise whatever they want where ever they want. They do not have any restrictions and are relying on morals and not government regulations. When you are dealing with people relying on their morals that is when people get into trouble. Everybody has their own opinion on what is acceptable and what is not. If the Australian government wants to get this under control then they need to make rules and laws on what and where they can advertise. The alcohol companies need to be under close watch on what they do or else it will start to get out of hand and more and more people will start to become upset about this.

Water Pollution, Conservation Bills Clear Senate Committee

Water conservation passes senate

James Petkovski

Jonathan Jackson

Joey Chadwick

A number of bills passed the Senate Environment and Public Works Committee on June 18^th. These bills were put forth to clean up and report overflow of sewage in the Great Lakes. The bills rose funding for these effort by close to doubling the cost put in. They were passed in hope of preserving these lakes and keeping them as a good tourism destination, where the social benefits will hopefully become greater than the cost.

This positive eternality is being used to greatly enhance the tourist industry. With the S.479 in act, “the bill helps fund a network of parks, refuges, museums, historic sites and water trails spanning the Chesapeake Bay watershed” (www.wwdmag.com). With cleaner lakes, the Committee is hoping that people will venture more towards these lakes, helping stimulate economy in these Great Lake states. They are hoping for a larger demand for visiting these tourist attractions, and with an increase in the demand for these attractions price can be increased, helping the industry grow, which in turn can be put to help keep the waters even cleaner.

Also another bill put forth was one to cleanup all “navigable waters” within “the waters of the United States” (www.wwdmag.com). Democrats claim that the word “navigable waters” should be removed from the bill, while Republicans disagree. By removing the word, the bill would be opening “the door for undue regulations on farmers, developers and other industry stakeholders” (www.wwdmag.com). Thus by helping out one industry, the bill will put restrictions and may hurt other industries. So this positive externality is now going to turn into a negative externality for other industries that would be affected by this bill having the word navigable removed.

These regulations put forth in these bills have both positive and negative externalities to offer. With some of these bills, a positive externality will help increase the tourism industry with the cleaning up and preservation of the Great Lake region. With the bill dealing with the waters of the United States, the removal of the word navigable may have some negative effects to other industries. In the end all these bills are put forth to help clean the water around the United States.

http://www.wwdmag.com/Water-Pollution-Conservation-Bills-Clear-Senate-Committee--NewsPiece18555

Regulations Increase Firms Burden during Depression

Under economic down term, more and more firms are going out of business. Gregg Industries, located in California, became one of the firms that closed down in this depression. However, Gregg Industries claimed that depression is not the only reason for it to close down. The main reason for them to close down and move which is onerous regulations and high taxes.

For this case, pollution is the externalities, which caused market failure. California State intended to remove the externalities by taxing and regulating the firms. According to supply and demand framework, when cost increases (more regulation and taxes), supply curve will shift to left. Quantity decreases and price of the goods increase. Supply curve shifts to left means that some of the firms go out of business. Price goes up means that less people can afford to buy the goods. Regulation makes consumers and firms worse off in this situation. Residents are the one who will be benefited from this regulation.

Air quality and quality of life in California may not be improved because firms cross the state boundary and build new factories next to California. Air quality will not be improved because air pollution can move back to California.

http://www.latimes.com/business/la-fi-factory23-2009jun23,0,3441163.story

Ka Wa Chan

Obama Praises Tobacco Bill But Struggles to Break Habit

Last Friday, President Barack Obama passed the regulation of tobacco and products struggling against a cigarette addiction, and signed the bill. The Tobacco control legislation was approved by House overwhelmingly a day earlier with help of the congressional effort. In this year (2009), some states of the United States have legislation pending to increase tobacco taxes. This use is the leading preventable cause of disease, disability, and death in the United States.

When the Food and Drug Administration examines the ingredients in tobacco products, they find countless ingredients that are extremely dangerous to your health. People, who smoke tobacco, are exposed to inhale tar, nicotine, carbon monoxide, and known poisons into the lungs. The goal of the Health public policy is to discourage the use of tobacco; also, this would be an increase in the state revenue. The nicotine in cigarettes is very addictive drug that causes changes in the brain and makes people want to use it more and more.

This decision will help a lot to the United States population, although, smokers probably don’t think that. The President Barack Obama had experienced these types of addictions which encourages to be in favor of the law. We think that Obama had taken this as a personal challenge because he feels the commitment with the country, since he knows that this addiction is only bad for humans and their surroundings. If he has been able to surpass this addiction, he wants others to do the same.

http://blogs.wsj.com/washwire/2009/06/12/10699/?mod=rss_WSJBlog?mod=washwire

Jason Spizer/Paulina E

Smells like regulation

Meredith Shores
Zach Ogaz

This week the FDA released a statement warning consumers about the possible loss of smell associated with using the nasal decongestant Zicam. Zicam is produced by the company Matrixx Initiatives, which also produces several other cold remedy medications. Zicam is a homeopathic cold remedy, meaning that it is taken in such minute doses that it presents no immediate danger to the general public or harmful side effects if the correct amount is taken. Because of this, one does not need a prescription and can simply buy it over the counter. There are no federal regulations requiring homeopathic cold remedies to meet certain standards and there are no federally mandated tests that must be performed before a product is mass produced and put on stores’ shelves.
However, due to the current situation, the FDA may find itself creating new regulations for over the counter medications that require firms to conduct extensive tests and present these results to the government before the product is mass marketed. This would unfortunately represent a large increase in the costs facing firms in this market, which would therefore raise the cost of their products. Then again, if these new regulations could help ensure the safety of all consumers, then it is of paramount importance that they are passed.

Gun policy sparks increase in demand

The article tells of how gun sales have gone us significantly since Obama has been president. It attributes this increased demand to new possible regulation, which would make background checks mandatory on all gun sales, instead of just on ones that are sold from licensed dealers. This article is a clear example of how some regulations work, and interestingly, what effect possible regulation can have.

By making gun permits mandatory to all gun sales, the regulation seeks to essentially screen everyone who gets guns, and make sure guns aren't sold to people who shouldn't have guns. This seems to me to be a logical policy; i know i don't want criminals, for instance, being able to buy guns, as that would only end in some very negative outcomes most likely. However, this proposed policy has had an immediate impact on gun sales. This jump in sales is directly due to the possible future higher cost of owning a gun. This higher price isn't monetary, but in time spent having a valid background check done, and the effort needed to get it done. People will buy them now rather then later to save money, which makes sense in terms of optimizing cost. More importantly, i believe this possible policy has most likely caused the people who don't have good backgrounds to purchase their guns now, as they wouldn't be able to if the new regulation passed. These people includes the criminals i mentioned earlier, as well as the other people who may not be criminals but due to their history probably shouldn't own guns. This proposed regulation has scared them into buying the guns now, so they have it while they can still get it. This, to me, seems like a bad aftereffect of a good policy.

In spite of this however, i think this regualtion still needs to go through. While it is our right to "bear arms" as the constitution states, i believe it is our responsibility to make sure people who get them are using them for correct purposes, and that we prevent sales to those who use them to hurt society. This policy would alleviate this problem. It is just very intersting to see how good regulations can produce bad immediate outcomes. It seems counterintuitive to the logical mind, but with some economical analysis, we can see how this can be.

http://www.npr.org/templates/story/story.php?storyId=105713194

Tim Booth

Google... The Peeping Tom of Our Daily Lives

In a recent study done by students attending the University of California, Berkley, much information was gained about how we are tracked in our internet use, who is tracking us, and if this is an infringement of our privacy.  By looking into sources of complaints filed to the F.T.C. they were able to obtain knowledge about the third parties that took information about the people visiting their web sites, the most common being Google.  The company has developed a product called Google Analytics, in which web producers can use on their sites to gain information about the people who visit their web page.  This information is also sent back to Google where they may use it as they please. “What is striking in the Berkeley students’ report is that in a sample of nearly 400,000 Web domains, Google’s presence remained high, at 88 percent”.  These trackers are everywhere and are storing information about its visitors constantly and at some point we need to draw the line.

           

            This is an invasion of privacy and is an issue that might bring up problems in the future.  The F.T.C. of the Bush administration usually took no action in cases such as this one, unless their was some harm being done.  However only recently have we discovered the extent at which our information was being collected.  The new F.T.C. under president Obama should take preventative action in this matter and look into regulating what sort of information is appropriate to be collected and how exactly this information is being used.  As Americans our privacy is very important to us especially in the era of identity theft.  This information has the potential to be used in a manner that could substantially effect our lives and is an aspect of the internet that the F.T.C. needs to address.

By: Stephen Killion and Jason Kletzky

http://bits.blogs.nytimes.com/2009/06/02/google-is-top-tracker-of-surfers-in-study/?scp=3&sq=FTC&st=cse

"New plan for Financial Regulation looks Burden for Financial institution?"

President Obama introduced his new plan for financial regulation. It will be sweeping regulation over financial industry since U.S recession in 1930s. Under his plan, the Federal Reserve can have more power over financial institutions whose failure can damage to financial system. Also, customer would more protected by new plan. So controlled financial institution will have hard time in short run, but will be more stable in long run which seems to president's plan.

Then, who will be opposite to new regulation?

probably, most financial institution would not happy about his new plan. Under federal bank's control and strong regulation, they will have more risk and less leverage, ultimately they will have less profit. For the time being, it would burden for financial institution while they were thinking that they could get out of financial crisis. But, it would make financial system more stable, can prevent future crisis. Since many of U.S financial institution system more stable, can prevent future crisis. Since many of U.S financial institution increased their profit by increase leverage which had high risk. As many of you realized from recent financial crisis, failing of financial institution will not only affect to themselves, but also will affect to whole financial system since they are too big and so interconnected to fail.

It looks like it will not take short-time to pass new plan. Many financial institutions will opposite president's new plan. However, many part of financial system should change. I am expecting this new plan passed as soon as possible so not only U.S overcome financial crisis, but also all over the world(include my country) can overcome financial crisis.


http://www.usatoday.com/money/companies/regulation/2009-06-17-obama-financial-reform-plan_N.htm

Gooyong Chung

Stricter US Tobacco Legislation May Have Additional Global Consequences

THE NEW YORK TIMES — On June 11th, the Senate approved The Family
Smoking Prevention and Tobacco Control Act, effectively tightening
legislative restraints on the already highly regulated tobacco
industry. (The House passed a similar bill). The bill allows the F.D.A.
to regulate nicotine and chemical content, ban flavorings, and further
restrict the marketing and advertising of tobacco products. However,
such strict regulation, which “stops (just) short of empowering the
F.D.A. to outlaw smoking or ban nicotine,” may create unintended
incentives for tobacco firms with potentially undesirable domestic and
global consequences.

The additional regulation raises compliance costs; which invariably
result in greater production costs, increased prices, higher
market-entry barriers, and decreased opportunity for product
differentiation—all of which point towards increased concentration and
reduced competition in US markets. Domestically, the regulation will
result in more favorable market conditions for established, large-cap
firms who—through enjoying larger customer bases, greater market power,
and lower average costs than smaller-cap firms—will remain relatively
unaffected and can engage in more monopolistic behavior.
Re-equilibration will lower quantity and raise price; producing happier
anti-smoking advocates, and perpetuating the ever-powerful industry giants.

Left to bear the brunt of regulation are smaller firms and (to a much
lesser extent) consumers. Supply and demand dictates that consumers
will decrease demand in response to higher prices. Specifically, the
article states that the officially estimated outcome “reduce(s) youth
smoking by 11 percent and adult smoking by 2 percent.” These estimates,
more than likely, are economically incomplete and exaggerating
benefits. For example, it is impossible to know whether the coefficient
of price elasticity of demand used in estimation accurately represents
the demand for tobacco’s highly inelastic nature. An underrepresented
inelasticity coefficient would overvalue quantity reductions and inflate
estimated social beneft.

Potential for further inaccuracy stems from the presumably performing
CBA pertaining only to US populations and markets. Tobacco, however, is
a tradable good—characterized (in part) by international trade and
opportunity for arbitrage of international regulation standards. It is
thus apparent that the US benefit-cost ratio—based on less than 5% of
the world’s population—offers a privatized view of social benefits;
and—by excluding the vast majority of market participants—an imprecise
assessment of total social benefits. It is entirely feasible for the
total (global) benefit to suffer should adversely affected US firms
take full advantage of differing production costs and market prices
created by regulatory disparities.

Historically, firms have behaved exactly as such. About 20 years, a
U.S. legislation tightening tobacco regulations provoked American firms
to invest heavily in foreign markets, particularly in developing
countries (which often have less or no regulation), to remain
profitable in the face of cost prohibiting regulations. Hong Kong,
which at the time did not have laws regulating firm behavior in tobacco
markets, proved especially appealing for market entry. Tobacco
advertising flooded Hong Kong, greatly increasing smoking rates and
incurring greater social costs on a much larger scale originally
intended. New legislation that further regulates an already highly
regulated industry will exacerbate issues of diminishing marginal
returns; accruing greater and greater costs that are more and more
unlikely to be offset by increasingly smaller social gains.

Authors:
Ka-Wa Chan
Brian McGuckin

Article:
http://www.nytimes.com/2009/06/12/business/12tobacco.html

Is “Fracking” Risky Enough To Warrant Federal Regulation?

A recent article in The Wall Street Journal noted that there is a lobbying fight brewing over a congressional effort to regulate the oil-and-gas industry practice of hydraulic fracturing, or “fracking,” in which water and chemicals, including various toxic substances, are pumped into drilled wells to create fissures in rock formations, freeing up trapped energy resources for extraction. Both sides have rolled out their traditional appeals: the oil-and-gas folks argue that additional regulations equal added costs that cut into consumer surplus, while environmental groups present warnings about potential externalities that result in an efficiency cost to society when not taken into account.

Those mantras are well-known. What are not completely understood are the risks associated with fracking because, as the article mentions, “… no large-scale studies have been done, leaving [the groups] to battle over anecdotal cases.” Anecdotes are not exactly the best foundation for economic analysis. The problem here is that if the federal government does not acquire the detailed scientific information necessary to evaluate the risk—as opposed to individuals or state governments that may not have the capacity or funds for adequate studies—there is a real chance that over-regulation could occur, and society will find itself expending too many resources to alleviate a minor risk or to diminish a risk beyond a point that is economically feasible in light of diminishing returns. Conversely, the research may reveal elevated risks that bolster the claim that the states are under-regulating, thus making the case for upped standards or more direct federal intervention. Either way, good information is crucial to crafting sound economic and government policy. (And it sure would be nice to have a more complete picture of what exactly is in “fracking fluids,” too. You know, just in case they, well, turn you yellow.)

Then again, it costs money to do scientifically-based risk assessments. And why not spend those resources on something like a multi-million-dollar lobbying and public-relations effort? The American oil-and-gas industry might want to take some cues from its counterpart in Australia if it’s looking for an idea for a soothing, tranquil advertisement:

See, don’t you feel better already? It got your mind off of the risks that may or may not exist with regard to the chances of sipping, say, some benzene in your water as a consequence of fracking, right? Although, now one probably can’t help but wonder about the risk of unmanned hot air balloons sweeping across the landscape and invading city centers and neighborhoods.

Post by Matthew Zawadski with support from Paola Durango.

Cap and trade, with handouts and loopholes

Currently legislators are debating the logistics of the American Clean Energy and Security Act. Various congressmen have proposed how pollution permits should be allocated. President Obama has already proposed a carbon emission tax but it was quickly shot down due to the negative stigma of tax increases. Obama’s other proposal of auctioning off permits and allowing trade of permits also hasn’t gained support. Henry Waxman and Edward Markey have created a plan that would give out 85% of the permits to firms and auction off the last 15% until 2030 when all permits would be auctioned off. This could prevent higher energy prices for consumers. This plan creates many issues though, since President Obama has planned for the pollution permit auction revenue in his budget. Another problem with the system is the way that permits are allocated, for instance oil companies only will get 2% of the permits although they value them more than most. The plan prevents permits from going to the firms that value them while an auctioning system would guarantee the most revenue from firms that need the permits the most. Waxman-Markey’s bill is the most popular proposal now yet it still needs more approval from environmentalists. Greenpeace currently refuses to back the bill until it promises to decrease pollution 20% below the 2005 level, though some moderate environmentalists support the ability of the bill to pass and suggest making it stronger in the future. Some Republicans snub the bill saying the changes would be negligible as long as China and India continue their levels of pollution. It is believed that if The United States does not have a Cap-and-Trade system in place by December’s global climate conference in Copenhagen, the chance of a global emission agreement will be fade. Until then Obama has settled on regulating the automotive industry by requiring mileage standards in order to reduce emissions.

Joseph Chadwick, Jonathan Jackson, James Petkovski

SEC vs. Evergreen Assets Management

Evergreen Assets Management, which was recently acquired by Wells Fargo, recently agreed to a 40 million settlement with the Securities and Exchange Commission. The groups reached a settlement to avoid a trial in which Evergreen would be charged for withholding valuable investment information from the majority of their shareholders.
The SEC monitors the buying and selling of stocks and bonds and makes certain that a company’s information is transparent to the public and its shareholders. Evergreen is being charged with “inflating by as much as 17 percent” the value of their company and its ranking among other related companies. This case is in direct violation of the Securities Act of 1933 which requires that shareholders are given perfect information as to the company’s financial stability and future ventures.
Due to the large monetary settlement, it was likely that Evergreen was guilty of some regulation violations typically monitored by the SEC. With the 40 million dollar settlement agreement Evergreen felt as if its probability of winning the case was not high enough to risk the trial. If this case had gone to trial, it is possible that Evergreen would have been forced to pay hundreds of millions in damages to its shareholders.
Despite the billions of dollars that have been lost recently due to unethical business practices and the lack of preventative regulation by the SEC, the shareholders that incurred financial losses are receiving their fair share of the 40 million settlement. The SEC is currently lacking the power to prevent all of the fraudulent information being released to shareholders. With their existing powers they are able to identify, prosecute, and seek retribution from violators post infringement. This raises the question of whether or not the SEC’s regulation should be expanded to be able to stop these types of crimes before they happen.

http://dealbook.blogs.nytimes.com/2009/06/08/evergreen-to-pay-40-million-to-settle-sec-case/?scp=5&sq=sec&st=cse

Zach Ogaz
Meredith Shores

Microsoft's browser problems not over

Struggles continue this week for Microsoft, which is continuing its legal battles with other browser companies in Europe. Specifically, Opera is contesting the most recent solutions that both Microsoft and the EU have suggested in the browser market overseas. Opera believes that Microsoft's proposed solution is not a viable solution to the anti competitive nature that it holds over the market.

This lawsuit has some very interesting economic implications. Opera is alleging that Microsoft's solution would do little to break the strong market control they have built due to their bundling strategy. Although they would no longer be able to bundle Internet Explorer (IE) with their operating systems, they would still seperately sell IE as a program available for the public. Due to brand loyalty, Microsoft may have still have an advantage over other, smaller browser companies. As well as this, Microsoft has raised the cost of entering the market, therefore creating a bigger barrier to entry. The other companies would have to find a way to distribute their program to the public, and this distribution would have a large cost. Because Microsoft is a very large corporation, they will have a much easier time distributing their browser, and this would constitute a competitive advantage over the smaller companies.

As the lawsuits continue, it is clear that Opera and the other smaller companies will try have Microsoft's market power lessened, allowing them to fairly compete in the market. One idea is to allow internet users to choose what browser they wish to use when they first connect to the internet. This idea would greatly decrease the barrier to entry, and would allow more firms in the market to compete for consumers. Along with the benefits for the firms, the expanded choice would increase the supply in the market, and the market would move more toward PE, and would also increase consumer surplus.

http://news.cnet.com/8301-13860_3-10262913-56.html

Tim Booth