Chapter 4: Government Regulation of Business
The provisions of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) concern businesses and potential business owners, because under CERCLA:
??
When developing new rules, what process do administrative agencies most commonly use to solicit feedback and comments from the public regarding a proposed rule?
An informal notice and comment rule-making process, without formal hearings It is common for agencies to use informal notice and comment rule-making, whereby the public may provide comments on the proposed rule through a more informal process. Review the section "Administrative Agencies" in Chapter 4.
The _____ Act was the first national environmental law.
Clean Air The Clean Air Act was the first national environmental law. Under this law, the EPA sets minimum national standards for air quality and regulates hazardous air pollutants. Review the section "Environmental Protection" in Chapter 4.
The Kenton Mills frequently dumped its production waste into a nearby creek. Kenton Mills used Yodel Logistics to transport its material to the creek. After residents who lived near the creek complained of degradation of the creek, the EPA investigated and found that Kenton Mills's waste was hazardous and required immediate cleanup. Under the _____, both Kenton Mills and Yodel Logistics are liable to share the cleanup cost of removing the hazardous waste from the creek.
Comprehensive Environmental Response, Compensation, and Liability Act The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also called the "Superfund" law, seeks the cleanup of waste from previous activities and requires notification of the release of hazardous substances. Because CERCLA imposes liability on four groups of people—owners, operators, disposers, and transporters of waste—several parties could be liable for one site. Review the section "Environmental Protection" in Chapter 4.
The Cromwell Company, a food processing company has just released a new line of chewing gum called Immunity. To market the product, the company ran ads on their web site and on national television claiming that the gum helped fight cancerous cells in the body. After the ad was aired, a class action suit was brought against the Cromwell Company alleging false advertising. In order for the suit to be successful, it would be necessary to prove that the Cromwell Company violated the _____ Act.
Federal Trade Commission The Federal Trade Commission Act prohibits "unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce." In addition, this law prohibits false advertising. To prevent these unfair and deceptive practices, a federal administrative agency, the Federal Trade Commission, was established. Review the section "Antitrust" in Chapter 4.
Which of the following powers of a regulatory agency allows a business to enter the field being regulated?
Licensing power Licensing power of a regulatory agency allows a business to enter the field being regulated. Agencies such as the Federal Communications Commission, the Nuclear Regulatory Commission, and the Securities and Exchange Commission have licensing power. Review the section "Administrative Agencies" in Chapter 4.
Crawford Corporation wants to provide money transmission services to supplement its main retail business. In an effort to protect consumers, the state Department of Financial Institutions requires that Crawford submit evidence of financial stability and corporate governance procedures before allowing Crawford to begin money transmission services. This scenario is an example of what type of regulatory power over businesses?
Licensing power This scenario is an example of a regulatory agency's licensing power to allow a business to enter the field being regulated. Regulatory agencies regulate a variety of businesses and professions that serve the public in an effort to protect the interest of consumers. Review the section "Administrative Agencies" in Chapter 4.
Patt Chemicals, a pharmaceutical company, produced a lot of hazardous waste which it dumped at a landfill owned by Taikin Waste Disposal Company. Though dumping of hazardous wastes was not allowed at this landfill, the owner of Taikin allowed it. The waste was transported by contracting with Time Logistics Inc. After the owner of Taikin passed away and a new management took over, dumping of hazardous waste was not allowed in the landfill. Which of the following is true of the scenario if the EPA found that Taikin Waste Disposal Company violated CERLA and ordered a cleanup of the landfill site?
Taikin Waste Disposal Company is liable for the clean up and can take legal action to require Patt Chemicals and Time Logistics pay a share of the cost.
Assume that Lulu decides to buy a brand new car so that she will have better automobile emissions. Which is true about the federal Clean Air Act and new automobiles?
The Clean Air Act does cover automobile emissions. The Clean Air Act covers both mobile sources (such as automobiles and other vehicles) and stationary sources (such as electric utilities and industrial plants) of pollution.
Herman cannot certify that Lulu's vehicle passed the inspection. What Federal law allows the Environmental Protection Agency (EPA) regulate pollutants in the air?
The Clean Air Act. The Clean Air Act, as amended, provides the basis for issuing regulations to control multistate air pollution.
Herman said that one issue with Lulu's car exhaust was that it was too high in its level of carbon dioxide. Which of the following is true about carbon dioxide?
The EPA takes the position carbon dioxide constitutes a public danger. The Clean Air Act, as amended, however, does not specifically mention carbon dioxide emissions. Therefore, until 2009, the EPA did not regulate carbon dioxide emissions from motor vehicles. The EPA, after being sued by environmental groups, later concluded that greenhouse gases, including carbon dioxide emissions, do constitute a public danger.
The Food and Drug Administration (FDA) regulates the distribution of Gensol. The FDA is a federal executive agency. It has rules about off-label marketing of drugs. If Pharzime was to be accused of violating one of the FDA rules, which of the following is true?
The FDA could impose both civil sanctions against Pharzime and order that the activity be stopped. Federal regulatory agencies, like the FDA, have the authority to impose both civil sanctions against businesses which violate their rules as well as ordering that the violating activity be stopped through an injunction.
Which of the following is an example of a non-regulatory administrative agency?
The Farm Credit Administration
In the state of Harrington, there are three retailers that sell household items. Each of these three companies often tries to increase sales by providing more discounts or offers than the other two competitors. To end the frequent price wars, the executives of the three companies met and decided to set a minimum sales price that the three companies should follow. The companies agreed that none of them will go below the set minimum price, even if they could. Which of the following acts prohibits such an arrangement?
The Sherman Act Some activities are illegal under the Sherman Act without regard to their effect. Called per se violations, they include price fixing, group boycotts, and horizontal territorial restraints. Review the section "Antitrust" in Chapter 4.
While traveling up the Mississippi River, a tourist steamboat owned and operated by River Queen, LLC dumped pollutants into the water and disrupted the water chemistry. Mac Brown, a landowner whose property borders the river may sue River Queen under what law?
The Water Pollution and Control Act Mac may sue River Queen, LLC under the Water Pollution and Control Act (known as the Clean Water Act). The Clean Water Act seeks to restore the proper chemistry of U.S. waters and prevents the discharge of pollutants into interstate and navigable waters. The EPA and private citizens may sue on the basis of the act. Review the section "Environmental Protection" in Chapter 4.
Bristol Chemicals, a biotech company, is planning to start a manufacturing plant in the town of Rotterville. The proposed plant will be adjacent to a park. Fearing that the park will be negatively affected by the plant, the Rotterville Wildlife Association (RWA) petitioned the National Park Service (NPS) to investigate. The NPS investigated the impact the plant could have on the park and proposed a rule in favor of Bristol Chemicals. The NPS used a notice and comment rule making method to publish the rule. Which of the following is true with regard to this scenario?
The public is allowed to debate the rule after it has been published under the notice and comment rule. When an agency uses notice and comment rule making, it publishes a proposed rule, but does not hold formal hearings. After allowing time for comments from the public, the proposed rule could be published as proposed, changed, or entirely abandoned by the agency. Review the section "Administrative Agencies" in Chapter 4.
The Food and Drug Administration (FDA) regulates the distribution of Gensol. The FDA is a federal executive agency. It may hire scientists and researchers to investigate the safety of Gensol
True Agencies may hire researchers and scientists to study problems and to set standards which businesses must follow.
Most governmental regulation of businesses is done by:
administrative agencies
The Sherman Antitrust Act provides that anyone who monopolizes or tries to obtain a monopoly in interstate commerce is guilty of:
felony The most important antitrust law, the federal Sherman Antitrust Act, declares that, "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations is illegal." It further provides that anyone who monopolizes or tries to obtain a monopoly in interstate commerce is guilty of a felony. Review the section "Antitrust" in Chapter 4.
The AutoFix Company and Cars 4 U are the two biggest car parts providers in the town of Corlina. The AutoFix Company and Cars 4 U colluded to purposely decrease sales in order to drive the prices high. They also decided upon a fixed minimum price so that neither party sells below it. If a class action suit finds them guilty of price fixing, regardless of its effect, it would mean that both parties are have committed a _____ violation under the Sherman Act.
per se Some activities are illegal under the Sherman Act without regard to their effect. Called per se violations, they include price fixing, group boycotts, and horizontal territorial restraints. Review the section "Antitrust" in Chapter 4.
The Food and Drug Administration (FDA) regulates the distribution of Gensol. The FDA is a federal executive agency. It has rules about off-label marketing of drugs. In order for the FDA's rule to hold the weight of law, it must:
publish notice of the proposed rule and allow for comments before final publication. In order for a regulatory agency, like the FDA, to make rules that hold the weight of law, they must follow a rigid procedure in making those rules which include published the proposed rule and allowing for public comments prior to the final publication of the rule.
The Food and Drug Administration (FDA) regulates the distribution of Gensol. The FDA is a federal executive agency. Because it has rulemaking authority and may impose fines against businesses in violation, it is known as a:
regulatory agency. Regulatory agencies have rulemaking authority and may impose fines against businesses who violate those rules.
Turbo Company manufactures and sells aircraft engines to numerous foreign governments and private aircraft companies and is interested in expanding businesses operations into Africa and the Middle East. To ensure compliance with the Office of Foreign Assets Control (OFAC) regulations, prior to selling engines to new customers Turbo should:
screen each new customer against OFAC's lists of prohibited entities and specially designated nationals to avoid doing business with one of these. OFAC enforces economic and trade sanctions against foreign countries, terrorists, and other individuals and organizations deemed a threat to national security. OFAC regularly publishes lists naming individuals and organizations with whom American companies are prohibited from conducting business. Many businesses screen their customers against the names on OFAC lists to ensure they do not process transactions for prohibited individuals and entities. Review the section "Administrative Agencies" in Chapter 4.
Red Shoe Company and H.W. Mills Co, which together would have controlled 40 percent of the U.S. shoe market, attempted to merge. The federal government sought to prevent the merger on the grounds that it violated the Clayton Act, which prohibits corporations from acquiring other corporations where the effect of the acquisition might:
substantially lessen competition or tend to create a monopoly in the market The Clayton Act prohibits certain practices if their effect may be to substantially lessen competition or to tend to create a monopoly. Review the section "Antitrust" in Chapter 4.
The Food and Drug Administration (FDA) regulates the distribution of Gensol. The FDA is a federal executive agency. Its administrator is under the control of:
the President. Federal executive agencies, like the FDA, are under the control of the President.
