12: Regulation Flashcards
What is regulation, and the two reasons for it?
Any form of state interference with the operation of the free market
- address market failure
- protect the public interest
How does regulation address market failure?
Fails to result in economic effeciency
Regulation of:
- imperfect competition
- externialities
- imperfect information
- equity
What are the four regulatory bodies?
Environmental Agency
Information Commission - GDPR etc
Takeover Panel - takeovers and mergers
Competition and Markets Authority
- Investigates breaches of Competition Act and Enterprise Act
Financial services regulated by Financial Conduct Authority
What are the two things the Competition Act 1998 prohibits?
Anti-competitive agreements
Abuse of a dominant position
- collusion
- unfair selling price
- restricting production
- applying different trading conditions
- supplementary conditions to contracts
Can be fined 10% of worldwide revenue
What is a cartel and where is it likely to occur?
Agreement among supposedly competing firms
- few competitors in the industry
- little product differentiation
- communication with competitors
- recession
- industry has excess capcity
The four business responses to regulation?
Non-response - consequences
Mere compliance - pass on costs
Full compliance - company adapts
Innovation - triggers new products
5 types of regulation of people? (or the bad things they can do)
Insider trading
- Criminal Justice Act 1993
Market abuse - distorting or misleading prices
- Financial services and markets act 2000
Fraudulent trading
- intend to defraud creditors during insolvency
Wrongful trading
- trading despite the company cannot avoid insolvency
Money Laundering
- Proceeds of Crime Act 2002 and MLR 2007
3 international regulators of trade?
WTO
EU
Regional trading orgs
5 advantages of international free trade?
Specialisation
Transfer raw materials
Increased competition
Larger markets
Trading links
5 barriers of international free trade?
Tariffs or customs duties
Import quotas
Embargoes
Hidden subsidies
Import restrictions
What is a market failure caused by externalities?
Carbon emissions
Example of innovation instead of just full compliance?
When a company explicitly ‘exceeds’ the requirements of new regulation
What will import quotas lead to?
Suppliers both in the UK and abroad enjoying a higher price
What kind of market failure does any certain legislation address?
Market imperfections
Abuse of a dominant position?
Limiting production markets to the prejudice of customers
Applying different trading conditions
Attaching unrelated supplementary conditions
What does regulation intend to address?
The information inadequacies that cause market imperfections
What does Takeover and Mergers regulation do?
To make sure takeover activity does not undermine competition in the Uk
What regulation looks after insider trading?
FCA’s Code of Market
Investigations into the financial statements is done by….
The financial reporting review panel
