Chapter 12 - External regulations of business Flashcards
What are the regulatory bodies involved with environment agency?
- Environment Agency
- Information Commissioner
- Takeover panel
- Competition and Market Authority (CMA)
What is the Environment Agency?
Oversees environmental regulation
What is the information commissioner?
Responsible for enforcing rules brought in by Data Protection Act 1998 and the freedom of information Act 2000
What is the takeover panel?
Independent body that enforces City code on takeovers and mergers for listed companies - prevents competition in the UK
What is the Competition and Markets Authority (CMA)
- Investigates those suspected of breaching competition Act (e.g. price fixing, cartels, bausing a dominant position) and the enterprise Act 2002
- The CMA has powers to enter premises and demand documents as part of an investigation
- Impose fines
- Disqualify directors
How is competition regulated in the UK?
- Competition Act 1998 which prohibits Anti-competitive agreements and Abuse of a dominant market position
Which Chapter of the Competitive Act 1988 is involved with Anti competitive agreements
Chapter 1: Anti - competitive information
Act prohibits forming anti competitive agreement. Such agreement could be formal or informal
Which Chapter of the Competitive Act 1988 is involved with Abuse of a dominant position
Chapter 2: Abuse of a dominant position
Chapter 2 act prohibits abuse of a dominant position either by one firm or by a group of firm
Dominant positions = can behave independently of the competition
What defines a business with a dominant position
Have high market share
few competitors
little potential for competitors
What are the typical types of abuses?
- Unfair selling prices
- Restricting production
- Applying different trading conditions to equivalent transactions
- Attaching unrelating supplementary conditions to contracts
What % of a fine is given to company for breaching?
10% of worldwide revenue
What is a cartel?
Formal or informal agreement among supposedly competing firms
What % of a fine is given to cartels?
10% on worldwide revenue
What are the conditions that cartel activity can occur
- Few competitors in industry
- Little product differentiation
- established communication with competitors
- recession
- industry has excess capacity
What are the business responses to regulation
- no response = face consequences of fines
- more compliance = comply but pass cost to customers
- Full Compliance = Behaviour is changed as the company adapts their products to meet compliance
- Innovation = Porter believed that regulation triggers the need for new products and methodologies
