7.4 - Political and legal change

• Single Market


  Trade between member states is Easy
• European Single Market


  • Very few trade barriers between EU member states
  • Firms in EU countries don't pay tax when they import goods from other EU countries
  • Provides easy export opportunities for firms in the EU
• Single market smooths out price differences between member states

  1. Producers can look for the highest selling price within the EU

  2. Consumers can look for the lowest purchase price within the EU

  3. When price in part of EU is high, producers flood that area with their product, driving down prices

  4. Low prices attract more buyers to the market, pushing prices up
• EU customs union


  Same customs duties apply to all goods entering the EU, regardless of non-member country of origin or EU country of destination
• Freedom of movement within the EU

  • For all raw materials, finished goods and workers
  • EU citizens can work in any country in the EU
  • Businesses have the opportunity to expand into other EU countries
• Common policies on product regulation

  • How food should be labelled
  • How much energy appliances can consume
  • Businesses have to take these regulations into account when making functional decisions such as designing products and packaging
• EU banned vacuum cleaners of more than 1600 watts in 2014
• Common law or policy

  One that's the same in all EU countries
• Fair competition


  • Companies are motivated to provide good quality products for reasonable prices
  • Customers will simply go elsewhere if they don't
  • Competition encourages companies to innovate and develop new products
  • Provides customers with choice by product differentiation
• Competition Act 1998 (UK)


  Sets out the laws on competition and what constitutes unfair business practices
• Competition and Markets Authority (CMA)

  Prevents companies breaking competition laws
• EU competition law


  • Regulates competition across the EU
  • Companies breaking the laws can be given big fines or even be criminally prosecuted
• Businesses need to understand competition laws

  • So they don't break them
  • So they can watch out for competitors breaking them and report them
• Competition law prohibits


  • Businesses conspiring to fix prices
  • Businesses conspiring with competitors to limit production so higher prices can be charged due to shortage
  • Businesses dividing up the market to avoid having to compete
• Dominant position


  Businesses have a dominant position if they have a market share of at least 50%
• Laws to stop businesses abusing dominant position

  • Dominant businesses can't demand exclusivity from wholesalers or retailers
  • Dominant businesses can't demand retailers must buy a second type of product to buy the popular product they actually want (tying)
  • Businesses can't sell goods at a loss to force smaller competitors out of the market (predatory pricing)
• Monopoly


  • When one business has complete control over the market
  • There's no competition and customers have to pay whatever price the monopoly sets
• CMA


  Can prevent monopolies from occurring by stopping takeovers and mergers
• This will affect the strategy of a business, as they will have to use other methods of growth to expand their business
• The Law


  Protects the Community and the Environment
• Industries which release waste into the water or land

  1. Regulated by the Environment Agency

  2. Businesses have to ensure their production processes don't cause unnecessary pollution, or risk heavy fines
• Industrial processes which only release pollution into the air

  1. Regulated by local authorities

  2. Businesses must get authorisation from the local council before carrying out processes which create smoke or make noise

  3. Environmental health officers can force factories to stop making noise at night if it's disturbing local residents
• Examples of specific laws and directives that affect businesses

  • EU directive on Waste Electrical and Electronic Equipment (WEEE)
  • Landfill Tax
  • EU Packaging Waste Directive
  • Climate Change Act
• EU directive on Waste Electrical and Electronic Equipment (WEEE)


  • Forces businesses in the EU to increase recycling of waste electrical and electronic equipment
  • Manufacturers have had increased responsibility for ensuring that goods such as computers, TVs and VCRs are recycled once they've come to the end of their useful life since August 2005
• Landfill Tax


  • Introduced in 1996 to reduce the amount of waste being dumped into landfill sites
• EU Packaging Waste Directive

  • Forces businesses in the EU to increase the recycling of packaging
  • There are targets for the percentage of wood, paper, glass and plastic that must be recycled
• Climate Change Act


  • Requires UK PLCs to report their greenhouse gas emissions in their annual reports
  • The idea is that if these are made public, companies are more likely to try to reduce them
• Businesses must factor in the cost of complying with these laws in any decisions they make
• Decisions about the materials or processes used might also be influenced by environmental laws
• Some businesses are able to turn these restrictions into unique selling points of their products
• The Law


  Protects Customers and Consumers
• Laws that protect customers and consumers

  • Trade Descriptions Act (1968)
  • Sale of Goods Act (1979)
  • Sale and Supply of Goods Act (1994)
  • Sale and Supply of Goods to Consumers Regulations (2002)
  • Consumer Protection Act (1987)
  • Data Protection Act (1998)
• Trade Descriptions Act (1968)

  • Ensures that businesses don't mislead consumers with false descriptions on packaging or advertising materials
• Sale of Goods Act (1979), Sale and Supply of Goods Act (1994), and Sale and Supply of Goods to Consumers Regulations (2002)


  • Set out the rights of customers
  • Goods must be fit for their purpose and of satisfactory quality
• Consumer Protection Act (1987)


  • Says that new consumer goods must be safe
  • There are also other, more specific regulations, e.g. sofa and chair cushions must be made of fire resistant materials
• Data Protection Act (1998)

  • Prevents the misuse of data
  • Stops businesses holding onto customer data that they don't need
  • Stops them from changing or destroying data
• Labour Laws


  Control what rights Employees have
• Employee rights


  • Legal right to fair treatment while at work, and also while looking for employment
• Equality Act 2010


  Protects employees from discrimination based on age, gender, race, religion, disability, pregnancy, etc. These things are known as 'protected characteristics'
• The Equality Act 2010 simplified things by replacing several previous anti-discrimination acts, such as the Race Relations Act (1976) and the Sex Discrimination Act (1975). It reflects the content of the EU's Equal Treatment Directive.