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All market-based economies operate against a background of laws and regulations, including laws about enforcing contracts, collecting taxes, and protecting health and the environment. The government policies discussed in this chapter—like blocking certain anticompetitive mergers, ending restrictive practices, imposing price cap regulation on natural monopolies, and deregulation—demonstrate the role of government to strengthen the incentives that come with a greater degree of competition.

More than cooking, heating, and cooling

What did the Federal Trade Commission (FTC) decide on the Kinder Morgan / El Paso Corporation merger? After careful examination, federal officials decided there was only one area of significant overlap that might provide the merged firm with strong market power. The FTC approved the merger, provided Kinder Morgan divest itself of the overlap area. Tallgrass purchased Kinder Morgan Interstate Gas Transmission, Trailblazer Pipeline Co. LLC, two processing facilities in Wyoming, and Kinder Morgan’s 50 percent interest in the Rockies Express Pipeline to meet the FTC requirements. The FTC was attempting to strike a balance between potential cost reductions resulting from economies of scale and concentration of market power.

Did the price of natural gas decrease? Yes, rather significantly. In 2010, the wellhead price of natural gas was $4.48 per thousand cubic foot; in 2012 the price had fallen to just $2.66. Was the merger responsible for the large drop in price? The answer is uncertain. The larger contributor to the sharp drop in price was the overall increase in the supply of natural gas. More and more natural gas was able to be recovered by fracturing shale deposits, a process called fracking. Fracking, which is controversial for environmental reasons, enabled the recovery of known reserves of natural gas that previously were not economically feasible to tap. Kinder Morgan’s control of 80,000-plus miles of pipeline likely made moving the gas from wellheads to end users smoother and allowed for an even greater benefit from the increased supply.

Key concepts and summary

The U.S. economy experienced a wave of deregulation in the late 1970s and early 1980s, when a number of government regulations that had set prices and quantities produced in a number of industries were eliminated. Major accounting scandals in the early 2000s and, more recently, the Great Recession have spurred new regulation to prevent similar occurrences in the future. Regulatory capture occurs when the industries being regulated end up having a strong influence over what regulations exist.


Bishop, Todd. 2014. “Microsoft Exec Admits New Reality: Market Share No Longer 90% — It’s 14%.”GeekWire. Accessed March 27, 2015. http://www.geekwire.com/2014/microsoft-exec-admits-new-reality-market-share-longer-90-14/.

Catan, T.,&Dezember, R. “Kinder-El Paso Merger to Face Antitrust Scrutiny,” Wall Street Journal . October 19, 2011.

Collins, A. “Tallgrass Energy to Acquire Kinder Morgan Assets for $1.8B.” The Middle Market , Accessed August 2013. http://www.themiddlemarket.com/news/tallgrass-energy-to-acquire-kinder-morgan-assets-for-1-point-8-billion-232862-1.html.

Conoco Phillips. “Why Natural Gas.” Accessed August 2013. http://www.powerincooperation.com/en/pages/useful.html?gclid=COXg7rH3hrgCFWlp7AodtkgA3g.

De la Merced, M. (2012, August 20). “Kinder Morgan to Sell Assets to Tallgrass for $1.8 Billion.” The New York Times . August 20, 2012.

The Federal Trade Commission. n.d. “The Federal Trade Commission’s (FTC) Mission.” Accessed March 27, 2015. https://www.ftc.gov/system/files/documents/reports/2014-one-page-ftc-performance-snapshot/150218fy14snapshot.pdf.

Kahn, C. “Kinder Morgan to Buy El Paso Corp. for $20.7B.” USA Today . October 17, 2011.

Kinder Morgan. (2013). “Investor Information.” Accessed August 2013. http://www.kindermorgan.com/investor/.

Rogowsky, Mark. 2014. “There'd Be No Wireless Wars Without The Blocked T-Mobile Merger, So Where Does That Leave Comcast-TWC?” Forbes.com. Accessed March 12, 2015. http://www.forbes.com/sites/markrogowsky/2014/08/27/t-mobile-and-sprint-continue-to-battle-thanks-to-the-government/.

U.S. Energy Information Administration (a). “Natural Gas Consumption by End User.” Accessed May 31, 2013. http://www.eia.gov/dnav/ng/ng_cons_sum_dcu_nus_a.htm.

U.S. Energy Information Administration (b). “Natural Gas Prices.” Accessed June 28, 2013. http://www.eia.gov/dnav/ng/ng_pri_sum_dcu_nus_a.htm.

The Wall Street Journal. 2015. “Auto Sales.” Accessed April 10, 2015. http://online.wsj.com/mdc/public/page/2_3022-autosales.html.

Questions & Answers

what is scarcity
Bonny Reply
what is demand
Sophia Reply
demand means that's good demand according to your needs is called demand
needs of people ar called demand
what's the difference between opportunity cost and production possibility curve?
apportunity cost means a goods which can be replace by other goods without any ease of saticfaction
what is economocs
Bonny Reply
Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.
It deals with making choices in the face of scarcity
what is perfect complements?
Bilal Reply
explain the return to scale with the help of mathematical expression
what is scarcity
difference between fixed policy and monetary policies
Doris Reply
explain why the ppc curve slopes downward?
Osei Reply
As you shift you attention to producing more of one good the graph will represent the trade-off of of the limitations of time or resources producing one verses the other good. The first 2 end points represent that you are using all your resources to only produce one good.
what is perfect complements?
determination of perfect competition
Mumbere Reply
How can economics be important to us
Obed Reply
how can economics be important to us
economics is important on expenditure analysis
because it is to make choice
Economics also provide the individuals the opportunity to make significant contributions to make social and economic development in their country
Economic is important because of the fact of scarcity and desire for efficiency...
it enable us to make rational choice
what is unemployment
unemployment occurs when a person is actively searching for employment is unable to find work .....
unemployment occurs when an individual is willing and capable to work but is unable to attain a job.
It is important because economics provide solutions about scarcity.
which of the following measures will the government take during inflation?
Price falls and demand is inelastic Please define it with an example and diagram.
Muhammad Reply
difference between nominal gdp and real gdp
Sakshi Reply
main is adjustment for inflation
what are the factors of production
Sheku Reply
capital, labor, technology
is economic a science
Emmanuel Reply
as economic a science
yes because it study human behavior
yes it deal with human activity and the welfare of people in the country
yes because it uses scientific methods of solving problems
yes because it uses scientific methods in solving problems
pls can I ask a question
Pls what are the characteristics of opportunity costs
identify the type of price elasticity of demand
economic is a science
what is monopoly
Is Economics a Science
Albert Reply
what is scarcity
Edmore Reply
Scarcity is the limitedness of resources relative to human wants. In economic sense means that the available resources are not sufficient to satisfy all human wants.
Moreover, Fiscal policy deal with government revenue and expenditure. Government expenditure puts money in public hands while government revenue withdraws the money. Role of fiscal policy is to reduces money circulation as a means of reducing demand.
What is an inflationary spiral?
Suppose that you 're nominated as a Minister of Finance in your country's. How can you finance a deficit budget?
is economic a science
yes because we studying human behaviour
what are the factors of production
pls Emmanuel adjei do we know each other
Emmanuel adjei pls did u attend living God school
Can you explain the terms 'fiscal deficit' and 'fiscal policy'?
Brahmani Reply
fiscal deficit refers to the government expenditure exceed expected to the government revenue
fiscal deficit is like budget deficit
fiscal policy it occurs when the government takes and maintain the strategic to resolve the inflation.

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