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Page 7-1
CHAPTER 7
BUSINESS-GOVERNMENT RELATIONS
INTRODUCTION
Governments seek to protect and promote the public good and in these roles establish
rules under which business operates in society. Therefore, a government’s influence on
business through public policy and regulation is a vital concern for managers.
Government’s relationship with business can be either cooperative or adversarial.
INTRODUCTORY CASES
Regulating Uber in Europe and the e-Cigarette Industry in the U.S.
What prompted or compelled governments to become more involved in the status of
employees or the sale of a consumer product? How do these government’s actions affect
businesses and what they are permitted to do? How did these actions affect competition
or society and the public’s health? Did government’s involvement promote or harm
companies or allow other firms to maintain their competitive advantage? Were these
efforts by the governments necessary and effective, or can this only be answered in time?
Teaching Tip: Opening Cases – Regulating Uber in Europe
Both introductory cases, the regulation of Uber in Europe and the
control over the e-cigarette industry in the U.S., are ongoing issues.
Students may want to research recent updates to the cases or investigate
how governments have handled these emerging cases.
There are numerous videos available through the Internet, such as
CNBC’s coverage of this topic, found at:
Teaching Tip: Opening Case - Controlling e-Cigarettes
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CHAPTER OUTLINE
I. HOW BUSINESS AND GOVERNMENT RELATE
A. Seeking a Collaborative Partnership
B. Working in Opposition to Government
C. Legitimacy Issues
II. GOVERNMENT’S PUBLIC POLICY ROLE
A. Elements of Public Policy
Teaching Tip: How Business-Government Relate
The proper role of government is always a matter of debate. Should
government take a pro-business (or collaborative partnership) or an
anti-business (or opposition to the government) role? A simple
exercise that can provoke some classroom enthusiasm is to split the
Teaching Tip: Public Policy
New public policy issues abound frequently. This might afford an
opportunity to have students scan the Internet or social media sites to
You might also challenge students to identify a public policy issue
emerging in another country. How is the public policy process
different across nations? Who are the major actors in the public policy
process in another country and how does this differ from the major
actors in your own country?
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Social assistance policies
III. GOVERNMENT REGULATION OF BUSINESS
A. Market Failure
B. Negative Externalities
C. Natural Monopolies
D. Ethical Arguments
E. Types of Regulation
Economic regulations
Teaching Tip: Social Assistance Policies
Social assistance policies, such as health care, are very important to
individuals and families. It is likely that the Obama Administration-
induced health care reform will remain an active controversial issue for
many years. Ask students to identify an elderly relative – such as a
grandparent or neighbor – or someone without health care insurance at
work. What is their opinion about health care reform, as compared to
someone who is covered through their employer?
mandated by the U.S. federal government?
Teaching Tip: Natural Monopolies
Students should be able to easily recognize natural monopolies – cable
television, electricity, railroads. Identify another common product or
Teaching Tip: Opening Case – Trade Policy
Given the current regulatory climate in the U.S., do the current efforts
at imposing tariffs or other trade barriers constitute a “trade war?”
Who benefits and who loses during a trade war?
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Antitrust: A special kind of economic regulation
Social regulations
F. The Effects of Regulation
The costs and benefits of regulation
Continuous regulatory reform
IV. REGULATION IN A GLOBAL CONTEXT
Teaching Tip: The Climate of Antitrust
There appears to be numerous examples of questions of antitrust, or
lack of competition, arising from proposed or approved mergers among
Teaching Tip: How Much Regulation?
The issue of the costs of regulation is often a political one. Student
may locate political positions that favor or oppose large government.
question.
Teaching Tip: “De-” or “Re-” Regulate?
The United States has experienced a cycle of deregulation, then
reregulation. Which part of this cycle are we current in, and are there
signs of moving into the next phase of this cycle? (Students could be
Teaching Tip: International Regulatory Control
It seems reasonable to assume that some sort of regulatory control is
necessary. What happens when trade involves more than one country?
Can there be an international regulatory body? Does it already exist?
as well as weaknesses.
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GETTING STARTED
KEY LEARNING OBJECTIVES
LO 7-1: Understanding why sometimes governments and business collaborate and
other times work in opposition to each other.
LO 7-2: Defining public policy and the elements of the public policy process.
LO 7-3: Explaining the reasons for regulation.
LO 7-4: Knowing the major types of government regulation of business.
Regulation can take the form of laws affecting an organization’s economic operations
LO 7-5: Identifying the purpose of antitrust laws and the remedies that may be
imposed.
LO 7-6: Comparing the costs and benefits of regulation for business and society.
LO 7-7: Examining the conditions that affect the regulation of business in a global
context.
Page 7-6
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw-Hill Education.
The global regulation of business often occurs when commerce crosses national borders
or the consequences of unregulated business activity by a national government are so
large that global regulation is necessary.
KEY TERMS AND CONCEPTS USED IN THE CHAPTER
antitrust laws
cost-benefit analysis
deregulation
Dodd-Frank Act
natural monopoly
negative externalities
predatory pricing
public policy
regulation
reregulation
INTERNET RESOURCES
www.cato.org Cato Institute
www.consumerfinance.gov U.S. Consumer Financial Protection Bureau
Page 7-7
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw-Hill Education.
www.reginfo.gov U.S. Office of Information and Regulatory Affairs
www.regulations.gov Regulations.gov
www.un.org/en/law International Law, United Nations
www.usa.gov Online Guide to Government Information and Services
DISCUSSION CASE
SHOULD FACEBOOK BE REGULATED?
Discussion Questions
1. Do you believe the government (in the United States and other countries) should
regulate Facebook to protect its users’ privacy? Why or why not?
2. Do you believe that Facebook’s actions so far exemplify working in collaboration with,
or in opposition to, government? Why?
Teaching Tip: The Regulation of Facebook
Some of the more interesting arguments or perspectives focusing of the
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw-Hill Education.
3. What elements of the public policy process are seen in this case: public policy inputs,
goals, tools, and effects?
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw-Hill Education.
4. Of the reasons described in this chapter to justify government regulation: market
failure, negative externalities, natural monopolies, and ethical arguments, which
reasons are relevant in this case?
