Legislation (Edexcel A Level Business)

The Effects on Businesses of Legislation

• Legislation refers to laws and regulations passed by governments that require businesses and individuals to conduct their behaviour in a particular manner

• There are five areas of legislation that have significant impacts on businesses

  • Consumer protection

  • Employee protection

  • Environmental protection

  • Competition policy

  • Health and Safety

The effects on businesses of consumer protection laws

• Consumer protection legislation aims to ensure that consumers are treated fairly by the companies with which they interact

• Legislation covers areas including

  • The safety of products

  • The standard and quality of products

  • The rights of customers if they are unhappy with their purchase

  • The product information that must be given to customers

• Meeting the requirements of each of the above laws results in increased business expenditure, which may reduce profitability

• Consumer protection legislation aims to provide a level playing field for businesses, ensuring that no business can gain an unfair advantage over rivals by taking shortcuts or by making false claims about its products

The effects on businesses of employee protection laws

• Employee protection legislation aims to prevent the exploitation of workers

• Legislation covers areas including

  • Pay and working conditions

  • Equality of employment rights for marginalised groups (e.g. those with disabilities) to avoid discrimination

  • The right to belong to a  trade union and take industrial action

  • Contracts and termination of employment

The impact of employee legislation on business

The effects on businesses of environmental protection laws

• Environmental legislation aims to hold businesses responsible for their environmental impact

• Legislation covers areas including

  • Pollution

  • Destruction of wildlife

  • Traffic congestion

  • Air quality

  • Resource depletion

• Businesses that fail to adhere to these laws may be fined or forced to cease commercial activity until they resolve problems they have caused

The effects on businesses of competition policy laws

• Competition legislation aims to protect the interests of both consumers and businesses by restricting anti-competitive practices

• Legislation covers areas including

  • Abuse of market power so as to limit monopoly power

  • Anti-competitive acquisition activity

  • Cartel activity and collusion

• Where the Competition and Markets Authority judges that a business has acted or may potentially act in an anti-competitive manner it may take steps such as preventing a merger or instructing a business to dispose of  subsidiaries in order to correct the market

The effects on businesses of health and safety legislation

• Health and safety legislation requires businesses to operate in a way that protects the physical and mental wellbeing of its employees and contractors, as well as its customers

• Legislation covers areas including

  • The provision of adequate breaks and rest periods

  • Temperature and noise levels

  • The provision of safety equipment

  • Hygienic, safe and sanitary conditions

  • Preventing stress

• Implementation of procedures and equipment required to maintain healthy and safe business premises and working conditions are likely to incur financial and time costs

  • Staff training and supervision

  • Changes to working hours and rest provisions

  • Arrangement of manuals, signage and safety documentation

  • Purchase and maintenance of safety equipment

  • Drawing up and implementing code of practice

• Serious health and safety breaches can lead to fines or investigation by the Health and Safety Executive and, in some cases, can lead to prosecution