Yahoo Finance 10 Least Regulated Industries and Businesses
In this piece, we will take a look at the ten least regulated and industries. For more industries, head on over to 5 Least Regulated Industries and Businesses.
The relationship between the corporate sector and the government is a love-hate affair. At one end, companies are often eager to gain subsidies and favorable capital use regulations from the government. On the other, the government is the only entity capable of preventing abuses of power from companies to ensure that both the consumer and workers remain insulated against the ill effects of potential corporate greed.
In fact, history is full of examples of governments interfering to break up monopolies and ensure that markets remain unconcentrated in the hands of a few firms. The biggest example of a monopoly comes from the Gilded Era of U.S. history. This era followed the most tumultuous time in American history, namely the civil war of the 1800s. The bloodiest conflict in human history saw massive bloodshed and massive costs with the Treasury Department estimating that this war cost $5.2 billion to fund and on a side note, also led to the creation of what is known as the greenback dollar today.
After the war, and once the Reconstruction Era ended, the American economy boomed. This led to America becoming the world's premier industrial economy, surpassing Great Britain which had led previously. At the same time, since the U.S. was unaccustomed to big business back then, this also led to the creation of some of the world's biggest monopolies. Three of these are the most well known, namely Standard Oil, Carnegie Steel, and the American Tobacco Company. All three of these firms had controlled nearly all of their markets which led them to create devastating policies aimed at stifling competition.
For instance, Standard Oil, known for its owner John D. Rockefeller (whose net worth amounted to 3% of the U.S. GDP back then, with some estimates suggesting that he would be worth as much as $400 billion today), ended up controlling 91% of U.S. oil production and 85% of the total sales. Using today's estimates of the size of the American market, data from the Energy Information Administration (EIA) shows that Americans consumed 7.4 billion barrels of petroleum in 2022. Using a price of $74 per barrel for Brent crude, this leads to a value of $548 billion for America alone. 85% of this figure is $461 billion, making Standard Oil comparable to Saudi Aramco, the world's foremost oil supplier that raked in a record $604 billion in revenue during its fiscal year 2022.
Okay, so Standard Oil would have been rich. What's wrong with that? This question brings us to the importance of regulating the corporate world. Well, Standard Oil's monopoly did not directly harm the customer but it drove competitors out of the market by using its scale to drive down prices so that consumers would prefer its products and smaller competitors would be unable to maintain healthy business margins. In the long run, though, this does harm consumers since a lack of alternatives forces them to be left at the mercy of only one firm which can then decide to do whatever it wants.
Standard Oil's actions contributed to the passage of the Sherman Antitrust Act which then also led to a lawsuit against one of the world's largest technology companies today, Microsoft Corporation (NASDAQ:MSFT). Microsoft came in the cross hairs of the U.S. government in the 1990s after it was accused of using its dominant market position in the computer operating system market to force users to also use the Internet Explorer browser. In fact, the case led the District Court to recommend a breakup of the company, especially since it controlled nearly all of the operating system market and had used this position to harm consumers - in violation of the Sherman Antitrust Act. However, fortunately for the firm, the Circuit Court overturned this decision, and the Justice Department negotiated a settlement with the firm.
Now let's take a look at the flip side. While regulations have benefits, especially those in the pharmaceutical sector that control the manner in which substances are developed and distributed, their very nature also affects business operations. One such segment that sees some negative outcomes is the financial industry. The 2008 financial crisis and the Great Recession was the worst disaster in modern economic history and some of its effects are still felt even today. The regulations that came into place as a result also ended up affecting the pension fund segment, according to McKinsey. This, according to the firm, is due to the fact that the funds had to set aside larger amounts of capital as a safety buffer which ended up affecting their capability to make long term investments.
Microsoft is yet again facing the wrath of regulators as it struggles to get the final approvals for its deal to buy Activision Blizzard, Inc. (NASDAQ:ATVI). This deal was dealt a setback in May 2023 when the U.K.'s Competition and Markets Authority (CMA) blocked the deal. Sharing the rationale behind the decision, the CMA outlined:
The UK cloud gaming market is growing fast. Monthly active users in the UK more than tripled from the start of 2021 to the end of 2022. It is forecast to be worth up to ￡11 billion globally and ￡1 billion in the UK by 2026. By way of comparison, sales of recorded music in the UK in 2021 amounted to ￡1.1billion.
Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.
Microsoft already accounts for an estimated 60-70% of global cloud gaming services and has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).
The deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft. The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.
The cloud allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play. Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities.
With these details in mind, let's take a look at some of the least regulated industries.
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Our Methodology
To compile our list of the least regulated industries, we used data from QuantGov.org's RegHub database that searches federal and state regulations for terms such as 'hall, must, may not, required, prohibited' and classifies them according to industry codes from North American Industry Classification System (NAICS). For our coverage of the least regulated industries, we have used the two digit NAICS classification, since it offers a highly compact view of the industries.
Least Regulated Industries and Businesses
10. Utilities
Number of Federal Regulations in 2020: 49,609
The utility industry is at the heart of every country's economy and national security. Power grids and dams are sensitive installations, and they are considered fair game during a time of war due to their potential of disrupting an enemy's industrial capacity. This market is made up of a variety of players, such as natural gas and electricity suppliers. According to the Labor Department, there were half a million people employed in the U.S. in this sector as of January 2023 - remaining relatively static over the year.
9. Health Care and Social Assistance
Number of Federal Regulations in 2020: 46,079
The Health Care and Social Assistance and social assistance sector is one of the biggest in America. America is famous throughout the world for its high healthcare costs. Americans are also often left bearing ludicrous costs for simple facilities such as having to go to the emergency room.
8. Public Administration & Government
Number of Federal Regulations in 2020: 29,924
A rather interesting case study involving regulations comes in the form of public administration and government. Essentially, it's about the sector responsible for making regulations also being regulated itself. Public administration is governed by a variety of regulations.
7. Arts, Entertainment, and Recreation
Number of Federal Regulations in 2020: 29,252
The arts industry is naturally one of the more popular ones. Firms are regulated on what content they can produce and stopped from copying others.
6. Mining, Quarrying, and Oil and Gas Extraction
Number of Federal Regulations in 2020: 22,778
The mining and oil industry, like utilities, is central to progress. It also sees some of the loudest calls for regulations since firms in the industry often end up harming the environment.
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Disclosure: None. 10 Least Regulated Industries and Businesses is originally published on Insider Monkey.