2.5.2 Legislation

• Legislation Impacting Firms


  -Consumer protection

  -Employee protection

  -Environmental protection

  -Competition policy

  -Health and safety
• Legislation


  Laws and regulations passed by governments that require firms to conduct their behaviour in a particular way
• Consumer Protection


  Aims to ensure consumers are treated fairly by the companies eg. product safety, product quality, consumer rights and product information (Consumer Rights Act 2015)
• Employee Protection

  Works to prevent the exploitation of workers eg. pay and working conditions, equality of employment, the right to belong to a union and contracts
• Impacts of Consumer Protection on Firms


  -Increased business expenditure which may lead to reduced profitability

  -No business gets an unfair advantage by making false claims or taking shortcuts
• Environmental Protection


  Holding firms responsible for their environmental impact eg. pollution, destruction of wildlife, traffic congestion, air quality and resource depletion
• Impacts of Environmental Protection


  -Firms may be fined or forced to cease commercial activity until issues are resolved
• Competition Policy


  Protecting consumers and firms by restricting anti-competitive practices eg. abuse of market power, anti-competitive acquisition activity and cartel activity and collusion.
• Cartel


  A group of businesses working together to increase profits and dominate the market
• Collusion


  Firms collaborating to gain a competitive advantage eg. price fixing, secret meetings, insider trading, non-competitiveness and disruption of the market equilibrium
• Impacts of Competition Policy


  -The Competition and Markets Authority may prevent a merger or instruct a business to dispose of subsidiaries to correct the market if a firm has acted in an anti-competitive manner
• Health and Safety Policies


  Firms operate to protect the physical and mental health of its employees, contractors and customers eg. breaks, managing temperature and noise, safety equipment, hygienic and safe conditions and preventing stress
• Impact of Health and Safety Policies


  -Increased costs of training

  -Increased worker downtime

  -Time is spent organising manuals, signs and safety documents

  -Cost of maintaining safety equipment

  -Creating a code of practice

  -Fines and prosecution for serious health and safety breaches
• Benefits of Consumer Protection


  -Encourages consumers to buy expensive items as they feel secure

  -Encourages firms to produce high-quality products which can be a USP and lead to increased customer loyalty
• Benefits of Environmental Protection

  -Increased publicity for firms sustainability can be a USP

  -Charge higher prices since their product is premium

  -Firm gains sustainable practices so will survive longer