Federal, state, and local governments have established regulatory agencies to enforce laws. At the federal level, the Federal Trade Commission (FTC) wields the broadest powers of any agency to influence marketing activities. It has the authority to enforce laws regulating unfair business practices and can take action to stop false and deceptive advertising. The Federal Communications Commission regulates communication by wire, radio, and television. Other federal regulatory agencies include the Food and Drug Administration, the Consumer Products Safety Commission, the Federal Power Commission, and the Environmental Protection Agency.
The FTC uses several procedures to enforce laws. It may issue a consent order through which a business accused of violating a law can agree to voluntary compliance without admitting guilt. If a business refuses to comply with an FTC request, the agency can issue a cease-and-desist order, which gives a final demand to stop an illegal practice. Firms often challenge cease-and- desist orders in court. The FTC can require advertisers to provide additional information about products in their advertisements, and it can force firms using deceptive advertising to correct earlier claims with new promotional messages. In some cases, the FTC can require a firm to give refunds to consumers misled by deceptive advertising.
The FTC and US. Justice Department can stop mergers if they believe the proposed acquisition will reduce competition by making it harder for new companies to enter the field. In recent years, these agencies have taken a harder line on proposed mergers, especially in the computer, telecommunications, financial services, and health-care sectors.
Removing regulation also affects the marketing environment. Deregulation of the telecommunications and utilities industries has changed the competitive picture considerably. No longer do utilities have the exclusive right to operate within a territory. As Figure 2.5 reveals, natural gas utilities like Mobile Gas compete with the local electric company in supplying homeowners and businesses with energy needs for heating, cooling, and preparing meals. Because of deregulation, they also compete with other gas companies. Since 1993, natural gas distributors have been able to send gas through local pipelines, similar to the way long-distance phone companies use local lines and compete with other companies around the country. The Archdiocese of Chicago saved $8 million by purchasing gas from Houston’s Enron Corp. rather than its local utilities. Customers of KN Energy in southeastern Wyoming can choose from among 12 competing gas companies.
This kind of restructuring in the utility industry after 90 years of monopoly will affect many different sectors. If power costs drop the expected 20 percent due to deregulation of the generation process, businesses and individuals will have more money to spend on other things. Competition will improve efficiency in what had become a complex and inefficient market. Consolidation of the industry will increase due to mergers between utility companies.
The latest round of deregulation brought the passage of the Telecommunications Act of 1996. This law removed barriers between local and long-distance phone companies and cable companies. It allowed the seven regional Bell operating companies and GTE Corp. to offer long- distance service; at the same time, long-distance companies—such as AT&T, WorldCom, and Sprint that control over 90 percent of this market—gained authority to offer local service. Cable companies can offer phone service, and phone companies can get into the cable business. The change promises huge rewards for competitive winners. Just capturing 20 percent of the local calling market, for example, is worth $15 billion to $20 billion per year to AT&T.