7.4 Political & Legal change (Analysing external position) Flashcards
The legal environment: Law
The law is a framework of rules governing the way out society operated.
3 elements of law
Competition law
Employment of labour
Environmental issues
Competition law
Intended to protect businesses and consumers from effects of anti-competitive practices.
Fair practices and fair competition bring benefits.
Cartel activity
2 or more businesses work together to limit extent of competition that happens in a market.
(anti competitive practice)
Negative outcome of Cartels
Customers disadvantaged mainly through higher prices.
Economy damaged through lack of competitiveness.
Abuse of a dominant market position
European court defined as a ‘position of economic strength that enables it to prevent effective competition being maintained ultimately to the disadvantage of its customers.’
Abuse of dominant market position takes the following forms:
1- imposing unfair prices & trading conditions.
2- Limiting production to prejudice of customers i.e forcing prices up.
3- imposing unfair & inconsistent terms on different trading partners.
Mergers and takeovers
These have the potential to provide businesses with high degree of market power- they create larger enterprises.
Can also lead to reduction of competition within a market.
To prevent Mergers and Takeovers
All potential mergers and takeovers are subject to scrutiny from “Monopolies and Mergers commission”
3 Key competition laws
Competition Act 1998
Enterprise Act 2002
Enterprise and Regulatory Reform Act 2013
“Act”
Written in the UK
“Regulations”
Written in the EU
Competition Act 1998
prohibits cartels and abuse of dominant market position, penalties for breaching this act (breaking law) can be a fine of up to 10% of their global revenue.
Enterprise Act 2002
Upgrade of Competitions Act, strengthens position of authorities to impose the law.
Enterprise and Regulatory Reform Act 2013
Wide ranging and allows financial support for environmentally friendly practices.
Labour market laws are divided into 2 categories:
1) Those related to individuals employees
2) Those that apply collectively or to groups
5 Individual labour laws
Working time regulations 1998 (EU)
National minimum wage act 1998 (UK)
Employment equality (age) regulations 2006 (EU)
Equalities Act 2010 (UK)
Enterprise and regulatory reform act 2013
Working time regulations 1998
Sets a limit on hours employees can be required to work each week up to 48 hours.
Employees are entitled to 4 weeks paid annual leave.
National minimum wage act 1998
Employers must pay a set minimum wage depending on employees age.
Employment equality (age) regulations 2006
It is unlawful to discriminate against workers under age of 65 on grounds of age in terms of employment, access to training, and redundancy.
Equalities act 2010
Replaced number of earlier anti discrimination laws to simplify it under one act.
Relates to protected characteristics which cannot be used to treat people differently or unlawfully;
Age, disability, race, religion/beliefs, sex & sexual orientation, pregnancy/maternity, marriage & civil partnership
Enterprise and regulatory reform act 2013
Imposed additional charges on employers who were found to have discriminated on grounds of protected characteristics up to £85,000.
Collective labour laws
Group of laws that apply to industrial relations and collective bargaining and trade unions.
Collective bargaining
Process of negotiating terms of employment between employer and their employees.
Employment act 1980
Employers were no longer obliged to negotiate with unions under this act.
Restricted ‘picketing’ to employees own workplace.
(group of people standing outside workplace preventing entry)
Trade unions were only permitted if they supported 80% or more of workforce.
Trade union act 1984
This law made a ‘secret ballot’ of employees a legal requirement before any industrial action was lawful.
Trade union reform and employment rights act 1993
Unions required to give employers minimum of 7 days notice before taking official industrial action under this act e.g strikes.
Employment relations act 1999
Under this act a trade union with membership exceeding 15% of employees can demand union recognition with right to introduce collective bargaining (negotiating terms of employment)
Unfair dismissal
Termination of a workers contract of employment without a legal reason.
Only apply to works that have been in employment for 1 year or over.
Reasons of FAIR dismissal:
Job no longer exists. (redundancy)
Gross misconduct. e.g theft, violence
Failing to carry out duties in satisfactory manner.
Another substantial reason. e.g ending of a temporary contract.
Health and safety legislation
Health and safety act 1974 gave employers legal obligation to ensure all employees are safe guarded at work, welfare protected also.
Environmental legislation
When firms are found guilty of polluting environment as well as negative publicity.
Can be fined under: Environmental Protection Act 1991 & Environment Act 1995 (stricter fine)
Political environment
The government actions that impact on strategic and functional decisions made by businesses.
Actions can be taken by local, national or international authorities.
Impacts of political environment
will impact on competitive environment and infrastructure that allows businesses to operate effectively.
Government policy: Policy areas
Policies affecting enterprise.
Policies affecting regulation of markets.
Policies affecting country’s infrastructure.
Issues relating to environment policies on international trade.
Policies affecting enterprise
Uk government seeks to establish an enterprise friendly environment- encourages entrepreneurs to innovate & expand business.
do this in 2 ways:
1) offer financial support for new businesses
2) offer non-financial support for new entrepreneurs
Policies affecting regulation of markets
Regulation is enforcement of principles/rules to create fair environment where all businesses have opportunity to thrive.
includes
1) imposing ‘windfall taxes’
2) controlling prices
3) regulating privatised industries
4) self regulation
Windfall taxes
Taxes on profits considered ‘excessive’, can be used to provide enterprise friendly economy.
Controlling prices
Used by government to prevent exploiting customers and control inflation.
Regulating privatised industries
Previously state owned enterprises that have been sold off as PLC’s, they are regulated by government to prevent them abusing market position.
Self regulation
All businesses within a market agree to abide a ‘code of conduct’.
Policies affecting a countries infrastructure
Uks infrastructure made up of: road, rail, airports etc…
Improving infrastructure creates physical environment where businesses can thrive, be successful, create jobs & contribute to growth of economy.
Issues relating to the environment
UK and EU agreed through policy as well as legislation to encourage businesses to reduce negative impact on environment and look longer term at more sustainable growth.
Policies on international trade:
‘open economy’
Economy must trade e.g UK must import & export with other countries.
Greater freedom of trade ‘World Trade Organisation’
Responsible for encouragement on greater freedom of trade through abolition of tariffs (tax paid if buying from another country) and quotas(restricted amount).
impact of tariffs and quotas
Made trade more difficult
European union (EU)
27 countries (was 28 with UK)
Group of 27 European nations formed a trade bloc to promote tariff free trade within Europe.
Trade as one bloc with rest of world.
Benefits of EU (and being any part of free trade)
-easier and cheaper to sell products abroad
-for UK, potential markets of 500 mill people
-increases sales and increases economies of scale
-countries trade as one bloc in global market.
Brexit
in 2016 UK had referendum on EU membership and voted to leave, no longer have benefits of being part of trading bloc and over coming years, have to negotiate own trade agreements with countries throughout world.
