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
