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    Regulatory Agencies

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    13. Most regulatory matters are settled informally; only a small number result in litigation. When a company is in a dispute with a federal agency, it knows that if it does not reach a settlement, there can be costly litigation. From the perspective of the government agency, the litigation is costless-the taxpayers foot the bill. Agencies know that the threat of costly litigation enhances their chance of extracting a settlement from the company.

    QUESTION
    Should the government use this leverage to extract more in a settlement than it knows it would be likely to get in a court-resolved dispute?

    14. Suppose you are an administrator at the Environmental Protection Agency. It has been reported that a plant in a small town is in violation of the environmental laws. If you enforce the laws' requirements, the plant will be forced to shut down. The plant is the major source of employment for the town, and its closure would impose severe economic hardships.

    QUESTION
    Should that fact play a role in regulatory enforcement?

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    https://brainmass.com/business/business-law/regulatory-agencies-231914

    Solution Preview

    13. Most regulatory matters are settled informally; only a small number result in litigation. When a company is in a dispute with a federal agency, it knows that if it does not reach a settlement, there can be costly litigation. From the perspective of the government agency, the litigation is costless-the taxpayers foot the bill. Agencies know that the threat of costly litigation enhances their chance of extracting a settlement from the company.

    QUESTION
    Should the government use this leverage to extract more in a settlement than it knows it would be likely to get in a court-resolved dispute?

    In many instances, major companies have in-house counsel and the cost to the business is also costless, as the attorney (in most cases - attorneys) is already in-house and on the payroll. The settlements are done to protect the business overall. "Critics of regulation through litigation decry its potential to generate suits against entire industries, ...

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    The solution addresses Should the government use this leverage to extract more in a settlement than it knows it would be likely to get in a court-resolved dispute?

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