East Texas View: Let's Talk Money!

East Texas View: Let's Talk Money!

Lydia Grathree

ECO/415

October 10, 2011

Blake Bennett

East Texas View: Let's Talk Money!

Hi and welcome to East Texas View. I am your host Lydia Grathree and today I have with me Representative Nick Perry of Smalltown, Texas and CEO of G-3 Trucking Ernest Anderson. Today we will discuss the relationship between government, the economy, and Lowe's. Our panel will discuss what type of situations might Lowe's run a high risk of violating antitrust laws? How might the government react to assure fair competition within Lowe's given market? In what ways might Lowe's create a benefit externality? In what ways might it create a cost externality? How might the government respond to the externalities created by Lowe's?

We will begin this discussion with the opinion of our government official Mr. Perry. Representative Perry what type of situations might Lowe's run a high risk of violating anti-trust laws?

Well Ms. Grathree, Lowe's is a huge company with stores in very different locations. The risk of violating anti-trust laws grows as a company does. Acquiring other smaller company's like the corner parts store can cause some problems for a company such as Lowe's. Especially when they have contracts with competition of the hardware giant. For example when Lowe's acquired Eagle Hardware and Garden they waited out the Federal Trade Commission so that they could be in compliance with anti-trust laws. Company's have to practice patience, especially dealing with the government. Not moving beyond the boundaries of the law.

Well Mr. Anderson do you agree with Representative Perry?

Well Ms. Grathree I would have to agree that it is important for a company to practice patients when it comes to dealing with the government. The Federal Trade Commission is one of the departments that are set up to protect consumers, as a CEO I have to deal with making sure that our company stays in compliance and in good standing with them.

Okay Mr. Anderson give us an example of how Lowe's can create a benefit externality or a cost externality.

Ms. Grathree, if I was running a company like Lowe's the easiest way to create a benefit externality is to purchase suppliers. When you purchase your suppliers you gain products that at once you had to pay for. Of course in the beginning it would be a cost externality however in time that would defiantly change to a benefit. Having a ready supply of wood for instance, while eliminating the competition, would help Lowe's continue to grow and cut cost.

Wow, Mr Anderson seems like you have given a lot of thought to what it would take to create a benefit externality. What about you Representative Perry, how do you think the government would respond to these externalities?

Ms. Grathree I believe that the government would try to keep Lowe's for becoming a monopoly. Since the early nineteenth century government has been trying to keep "merger to monopoly" out of big business. I would say that buying their suppliers might give them benefit externalities they would like but also put others at their mercy. Government would probably have to put restrictions on productions or impose some taxation onto the company. According to Keat and Young, "A third, rather new way, under the 1990 Clean Air Act, is for the government to set maximum pollution levels, and then sell licenses to companies to give them the right to pollute." So their are some things that government can do to slow progress down.

Okay Repersititive Perry what is the importance of the government as a buyer in a market economy? From both a governmental and a business perspective.

I would say that the first and most important function of our government is to provide the economy with a legal structure. Without this an economy may collapse. Ensuring property rights, providing enforcement of contracts, and acting as referee and imposing penalties are the functions that are required of a government. For our government to be able to do this they have to create regulations, legislation, and a means to ensure product quality, definitions of ownership rights and enforcement contracts. The FDA, FED and SEC are examples of how government is used to achieve these task. On a personal note, it is important that businesses have some consequences to their action, so us little guys do not get run over.

Same question Mr. Anderson.....

Well Ms. Grathree, I would have to say that as one of those little guys...government can also make it hard for us. As a honest and hardworking business owner I know that the government is trying to keep every thing above board but sometimes they seem to hurt the little guys more than big businesses. With so many regulations it is hard for smaller businesses to compete with the bigger ones, since money is always at the root. However, as a consumer, I do agree that with out them many consumers would get taken advantage of, without a second thought. Some, not all mind you, businesses are out to make money and do not care if others including consumers get hurt in the conquest. However there are those who take pride and help in their communities and cities and even our nation.

Well Mr. Anderson seems like you are both passionate about what government has to offer, in what ways might Lowe's do business with the government?

Lowe's could bid for government contracts to supply tools or equipment. They could even bid with other contracting company's to supply for the company's that win government bids towards building government buildings, such as schools. By biding they are scrutinized the same as all the other company's that bid, judged by the same rules so to speak.

Okay, Representative Perry from the government's perspective, what might be the benefits and drawbacks of buying from the company?

Honestly, done right it could benefit both the government and the company, however their can always be accusations of favoritism Being a representative I understand that it can hurt when company's and the public think that government is playing favorites.

Mr.