Page 34 - FINAL CFA II SLIDES JUNE 2019 DAY 4

LOS 13.g: Describe anticompetitive behaviors targeted by READING 11: CURRENCY EXCHANGE RATES: UNDERSTANDING EQUILIBRIUM VALUE
antitrust laws globally and evaluate the antitrust risk
associated with a given business strategy.
MODULE 12.3: GROWTH AND CONVERGENCE THEORIES

ANTITRUST REGULATION
Work to promote domestic competition by monitoring and restricting activities that reduce or distort competition.
Regulators often block a merger that leads to excessive concentration of market share.

Anticompetitive behavior such as discriminatory pricing, bundling, and exclusive dealing is often also prohibited.

Internationally, companies need to evaluate their product and marketing strategies in the context of multiple (and varying) regulatory
regimes. For example a multinational company may be subject to U.S. antitrust laws as well as to EU antitrust laws.
When evaluating an announced merger or acquisition, an analyst should consider the anticipated response by regulators as part of
the analysis.

LOS 13.h: Describe benefits and costs of regulation.

The cost of regulation is not limited to the implementation cost (i.e., the cost of operating a government agency to provide
monitoring and supervision); an analyst should also consider the cost of the regulation to the private sector.

Regulatory burden (also known as government burden) refers to the cost of compliance for the regulated entity. Regulatory
burden minus the private benefits of regulation is known as the net regulatory burden.

Regulators should be aware of unintended consequences of regulations. For example, regulations mandating an increase in
automobile fuel efficiency standards may encourage consumers to drive more, reducing the effectiveness of the regulation.
Regulatory burden is generally difficult to measure as it includes the indirect costs related to changes in economic behavior.
Regulatory costs are difficult to assess before a regulation is put in place. For this reason, many regulatory provisions include a
‘sunset clause’ that requires regulators to revisit the cost-benefit analysis based on actual outcomes before renewing the
regulation.