While the first step to regulating problematic markets is to write laws and precedents that can be used to punish firms who are caught in wrongdoing, however, a policy is only as strong as its enforcement. The government may even struggle to agree upon regulations to put on business because even if the regulation provides great social incentives, they ultimately always come at the expense of efficiency and higher prices.
2 Key Factors
1. The difficulty of measuring wrongdoing and enforcing penalties requires objective analysis. That means that for every firm, and every location a firm owns, an objective worker must survey, analyze, and investigate to confirm if a firm has engaged in wrongdoing. Firms can also limit access to regulators, by using trade secrets and privacy concerns as reasons. Additionally in the U.S corporations are allowed to donate to political campaigns, giving them tremendous influence over what regulation is passed or made enforceable.
2. The difficulty of regulating a competitive market is it's difficult to determine what practices benefit the customer enough to not be considered anti-competitive. For example, corporate mergers do have a direct increase in efficiency and consumers experience lower prices. In the long run, though, corporate consolidation can result in monopolistic behavior and suffer from low quality and price efficiency due to lack of competition.
