Financial Reform Act - Essay Example

Financial Reform Act Affiliation: Business enterprises are influenced by myriad number of factors, within and without the industry in which they operate. Every player in a profit-driven enterprise seeks to maximize profitability subject to the regulatory measures and policies. For this reason, business operators set goals and objectives that they seek to achieve both in the short run and in the long run. Variations in these goals and objectives result in business operations that differ from one player to another.

Therefore, business enterprises grow, develop, and expand at different rates, and so do their competitiveness in the industry. Free market operations allow operators in different markets and industries to compete fairly. However, some firms outperform others in one way or another, thereby establishing some form of dominance in the markets or in the industries at large. At the height of achieving this are merger, acquisition, and cartel activities (Areeda & Hovenkamp, 2011). These activities translate to the creation of firm(s) that can hardly fail even in the event of dismantling them.

Consequently, market competition is affected. Dominance by large firms could result in unfair competition practices that could force small operators out of business. The complexities surrounding the creation of large firms that are considered “too big to fail” should be clearly monitored. In circumstances where the creation of large firms threaten the operations of relatively small firms, the establishment of “too big to fail” firms should not be allowed. Market competition should be enforced to ensure that large firms do not take advantage of emerging, small, and growing firms (American Bar Association, 2006).

In so doing, both the smaller firms and the consumers are safeguarded from exploitation by the larger dominant firms. On the other hand, the creation of “too big to fail” firms should be allowed in situations where rival firms are lacking or where the product line in an industry is too risky to have many operators. While this move could be profitable for few dominant firms in that line, regulatory measures must be available to protect the overall welfare of the public. This is due to the fact that such firms could prove to be exploitative to the consumers or the general public.

It has been observed from time to time that the failure of some, if not all, big companies could be devastating for an economy. For this reason, salvaging some firms in the verge of collapsing has been deemed as a necessary move by the government. Bailouts or nationalization of firms have been the most common practices used by the government to salvage giant firms (Posner, 2001). While these practices are beneficial to the economy in terms of continued revenue generation and keeping the labor force employed, anti-trust should be strictly enforced to ensure that all industry players engage in market competition.

Firms should be responsible for their economic operations and performance. Firms that become too large enjoy economies of scale, allowing them to significantly reduce their operational costs, improve product quality, and establish consumer friendly pricing policies (Areeda & Hovenkamp, 2011). They also contribute to the continuous growth and development of the economy. On the same note, they influence labor market trends, over and above offering wide range of products to consumers at favorable prices.

However, these benefits need to be evaluated against the impacts large firms have on market competition. References American Bar Association. (2006). Antitrust Law and Economics of Product Distribution. New York: American Bar Association. Areeda, P. & Hovenkamp, H. (2011). Fundamentals of Antitrust Law. New York: Aspen Publishers Online. Posner, R. (2001). Antitrust Law. Chicago: University of Chicago Press.