Business Studies - External Influences - Businesses And The

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Business Notes Emma Rudd BMA
External Influences
Business and the Law
What is law?
The law is a framework of rules governing the way in which society operates.
Marketing, production, employment, relationships with customers and competitors
and even the establishment of the businesses itself are influenced by law.
Competition Policy
Competition policy is intended to create free and fair competition within the markets
and to provide customers with quality products at a fair price whilst allowing
producers the opportunity to earn reasonable profits.
Unfair competition can arise in a number of ways:
The abuse of monopoly power ­ the lack of competition means that monopoly
businesses have power to exploit customers by charging high prices and
supplying outdated products
Mergers and takeovers ­ These can create monopolies with the power to
exploit customers.
Restrictive practices ­ These exist when businesses interfere with free
operation of markets. Restrictive practices may take the form of producers
making agreements to share out a particular market between them or forcing
retailers to stock all of a firm's products by threatening to withdraw supplies.
Institutions and Competition Policy
The Competition Commission
The Competition Act established the Competition Commission. It inherited
many of the responsibilities previously carried out by Monopolies and Mergers
Commission. The commission conducts investigations into monopoly and
mergers situations at the request of the DirectorGeneral of Fair Trading.
The Office of Fair Trading
The Fair Trading Act 1973 established the Office of Fair Trading. It is
responsible for the production of consumer information and media relations in
the field of consumer affairs and competition policy. The Office of Fair
Provides legal advice on the application and enforcement of relevant
Protects consumers and promotes their interests
Is responsible for monitoring any possible anticompetitive actions
by businesses.
Key Competition Legislation
The Fair Trading Act
The Act established the Office of Fair trading, giving the organisation
responsibility for providing ministers with advise on legislation and action with
regard to monopolies, mergers and restrictive practices. It also created the
post of Director General of Fair Trading. The OFT has the authority to
supervise all aspects of competition policy, including the monitoring of changes
in the structure of markets and the referral of mergers or monopolies for
investigation by the Competition Commission.

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Business Notes Emma Rudd BMA
Restrictive Practices Acts
The UK government passed a series of restrictive practises acts to eliminate
behaviour preventing the free and fair operation of the markets. Restrictive
Practices are against consumers' interest as they normally result in higher
prices and products of inferior quality. The acts also established the
Restrictive Practises Court to investigate complaints.
The Competition Acts
These reinforce the UK's anticompetitive regulations.…read more

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Business Notes Emma Rudd BMA
The Trade Descriptions Act
The Trade Description act makes misleading descriptions of goods and
services an offence.
The Advertising Standards Authority
this body supervises the operation of this code of practise. It is an
independent body that protects the public and deals with complaints from the
The Impact of Consumer Protection Legislation
The increases in the scope of consumer protection have had a number of
implications for businesses.…read more

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Business Notes Emma Rudd BMA
Collective Labour Law
Over the last 20 years the law has played a more prominent role in relationships
between employers and trade unions. Some of the important pieces of legislation
are below:
Employment Acts
These acts reduced the power of trade unions in the work place, they allowed
employers to refuse to negotiate with unions, employees were only allowed
to picket their own place of work and unions could be held liable for damages
caused by industrial action.…read more

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Business Notes Emma Rudd BMA
offset some of the rise in costs. It also results in firms having a lower rate of
labour turnover, and a better public image.…read more


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