Legislation and regulation

A number of laws exist to protect consumers from unfair and anti-competitive trading and to safeguard the environment from abuse by business.

Underpinning government competition policy is a view that anti-competitive and restrictive behaviour by dominant firms in markets is against consumers' interests. Legislation and government action to increase the degree of competition in markets has, therefore, aimed to control monopolies and mergers.

Merger activity refers to all forms of amalgamation between firms. Amalgamation occurs when two or more firms join together to form a larger enterprise. There are two main ways business amalgamation can take place: takeover or merger.

A takeover occurs when one company buys control of another through the acquisition of shares in the ownership of that company. Takeovers can be hostile or friendly. A hostile takeover occurs when managers and shareholders in a company resist another firm's bid for ownership. This will normally require the predator company to raise additional funds to purchase ownership. A friendly takeover occurs when one firms invites or allows another to take control. This may be because the firm cannot raise the necessary finance to expand or is struggling to survive in a competitive market.

A merger occurs when two or more firms agree to join together to form a new enterprise with a new legal (id)entity. This is usually done by shareholders of the merging companies exchanging their existing shares for new shares in the organization. The name of the newly created enterprise will normally reflect the names of the merging companies.

The main reason for amalgamation between two or more organizations is to expand market share and increase market power. Other reasons for mergers may include:

· to enter a new market, for example, in the form of a joint venture

· to defend market position by warning off competition or countering the threat of a hostile takeover by a rival

· to secure the supply chain by merging with a supplier

· to enjoy economies of large scale production

· for the purpose of asset stripping, i.e. buying another company at a market value which is less than the value of its total assets. The asset stripper will then close down any loss-making operations and sell off the more lucrative parts of the acquired firm at a profit.

A merger or takeover falls within the scope of legislation if it results in a combined market share exceeding an allowed value, or if the gross value of combined assets is over a certain value (25%, or 30 million pounds in the UK, for example).

Other laws deal with consumer protection. A number of organizations exist to advise consumers and protect their interests from large powerful producers who may be tempted to misinform or be economical with the truth. A large number of laws exist relating to safety, price, advertising messages, choice, and quality of goods and services. The basis of the law relating to the sale and advertising of products has now changed from ‘let the buyer beware’ to ‘let the seller beware’.

A vast array of rules and regulations apply to business activities, from the conditions in licenses for public houses and taxies, to shop opening hours, health, safety, and environmental standards. Some of the regulations are clearly out of date and need to be replaced, whereas others are thought to be too restrictive and reduce the competitiveness of the firms.

Laws have been passed which make it illegal to pollute the environment. They set limits on the type and amount of pollutants firms can discharge into the atmosphere, soil, and water. Many firms are now voluntarily developing their own codes of practice regarding the environment due to pressure in the market from consumers.

Дата добавления: 2015-12-08