THE LEGAL ENVIRONMENT OF BUSINESS
The Legal Environment of Business
There are various laws that are used to ensure that the business works in the right way. These laws are put in place to regulate the way the business is done and are meant to curb unethical business activities. Therefore, there is need to look at the laws and the reason why they were passed. In this case, we will look at the law that regulates businesses in United State of America. The paper outlines various laws that regulate businesses, their intended purpose in the business, and how they affect the business.
Types of the law that affect the business
The main laws that affect the business include consumer protection law, antitrust law, environmental law and the law that protect the public interest. The laws that affect business occupations according to Alexander et al. (2011) are occupational qualifications, diversity laws, employee’s health and safety. Laws that affect the business organization are incorporation law, bankruptcy, patents law, copyrights and trademark law. All these laws affect the business in one way and the other and should be adhered to at all cost to ensure that the business function is regulated.
The initial reason of establishing this law was to check the issue of the monopoly that had affected the business sector for a long time. The law started after the civil war with an increase in petroleum, cotton and other agricultural products. The Sherman act of 1890 made a declaration that restraint of trade or other related actions by monopolies were illegal (Earl, 1978).
Objectives of the antitrust law are the Countering Unfair Competition, protecting the rights, priorities and interests of businesses and consumers by enhancing fair competition for better economic growth. There are two categories of unfair competition the traditional ones that are the likes of the counterfeits, bribes and adverts contrary to the product. The other category is by the government by certain persons in power who misuse their power to access of institutions or generally interference with the economy to a point that it is seen as sabotage to the local producers or manufacturers. The government however cannot sue or charge themselves and so they are at liberty to go free on unfair completion. Termination of monopolies could boost the productivity and quality of products produced.
According to Earl (1978) the antitrust laws are meant to deal with some four serious vices, which include:
The avoidance of entry to agreements, which hamper free and fair competition and lead to eventual unsuccessful business.
Regulation of monopolies or bigger and dominant companies from preventing small-scale companies being competitive.
Feasible competition is enhanced in the Oligopolistic industries.
Merging companies need to be monitored to concentrate on production and handle effectively the economic pressures.
This was later amended by the Robinson-Pitman Act was more of an amendment of the Clayton Act mainly dealing with the noncompetitive procedures used in the discrimination of the equity in distribution.
For example in US, capitalist like John Rockefeller had for a long time enjoyed monopoly. They had build up trust in their customers by forming different organization to ensure that they disguise people and ensure that they monopolize the market keeping the price of their services high. This ensured that they limited supply hence resulting into high price of the products in the market. After such unethical behaviors were well understood by people, there was needed to form mistrust laws to regulate such behaviors in the business sectors. The law ensured that it regulated one or more company to conspire and thus limiting the supply and controlling prices of the products. This law in most of the country came amid big blow that it caused to big business that had formed their bases in monopoly. In a country like United State, it ensured that the violators received very severe penalties. OPEC, which is an international organization that regulate oil production in the world ensure that it control the amount of oil that each country in the world produces (McGraw-Hill, 2002). This ensures that there is no monopoly in the production of oil by any country.
The formation of the antitrust laws in the US made so many governmental agencies to be created to ensure that they oversee the corporate behaviors and the way business is conducted in the country. These agencies were formed to ensure that they follow the way the law is undertaken in the country. One of the most important agencies in the country is Securities and Exchange Commission (SEC). This agencies is mandated tom investigate the companies that are misbehaving and carrying out their duties against the law that is put in place.
An example of a company that has been in investigation under these agencies is Microsoft Company. SEC agency has also the ability of forming other regulations to ensure that they regulate any emergence of undue commercial behavior that may be illegal. It is capable of imposing severe injunctions on the companies that violated the law. They are can even decide to impose lawsuit ion these companies. The agency is mandated to manage other agencies that are responsible in the regulation of a specific business practice.
To show the way the way the legal business environment is affected, an example of Arthur Andersen-Enron Company is checked. The company happened to have a scandal in 2002 that made the accounting company to be put under spotlight. The scandal was discovered after an audit firm from industry regulatory committee conducted it audit. Pressure build up from Congress Party and made SEC to put in place a new watchdog to ensure that it oversee auditing process in the country. Some of the sanctions that ASEC Agency imposed to the company were that the company should not be involved in any auditing process for five years.
The idea behind the injunction was to ensure that any other company should be held in any irregularities when doing their functions. They ensured that the managers of these companies are able to follow the law at all level of their work. Such injunctions made the companies to fear if they became a law, as they would cost them a great loss by costing their long-term clients and probably eventually collapsing.
Consumer safety laws
This is a law that protects the consumers of the products from intoxicated products that may eventually turn to be hazardous to the human life (Reed, 2004). To ensure that the law is understood on the way they affect the business, some of the case studies in US are covered. One of them is about the snail oil. The company that was selling noxious tonic s in US in late 1800 ensured that there is need for consumer safety laws. This is because what they sold at that time was health in the human life hen used in small quantities. Nevertheless, some others were poisonous and resulted to very many deaths. Another case that ensured that the law to protect the consumer was paramount was about Kansa Pharmacist who pledged guilty of having diluted chemotherapy drug of around thirty-four people to get profit out of it in 2002.
Due to increased cases of the abuse of the law by the company to make profit, it really necessitated provision of consumer’s law. The most evident case in US was about the Metabolite International Company that happened in 2002. This company was the largest producer and seller of ephedrine. This drug was widely used for bodybuilding and weight loss. There were so many customers complain that were taken to tee company complaining of the side effect that the drug had.
Unfortunately, the company refused to give the customers’ complaint to the US Food and Drug Administration (FDA). However, Justice Department of US opened a criminal investigation towards this company that ensured that the company was forced to hand over the list of the complaints (Melvin, 2010). It was then found that there were so many complain that had been done to the company. It was noted that the drug had adverse effect on the people life. This had caused several deaths among other adverse reactions.
Due to lack of law that could have made the company to give out the complaints to the regulation body, the company had been able to get away with its irregularities. This necessitated formation of law that would ensure that they would deal with any unethical practices. Otherwise, to ensure that consumers were protected, the company was forced to pay the affected people. The government later banned ephedrine drugs. In addition, to ensure that this habit was not repeated, new laws to support the function of the regulation agencies have been put in place. There has a provision of FDA to have their police to create powers that would enhance their functions. This law affected some of the business that was not able to comply with it to a point of closing down.
Environmental protection law
This is a class of law that governs how the companies should behave towards natural environment. It is a core value for the government to protect the natural environments to ensure long time health for its people (Melvin, 2010). This is done to ensure that all the companies comply on the law that protects the environment. It came to being after the companies that were involved made susceptible not to protect the environment. From the year 200, the disposal cost of toxic and nontoxic waste increased significantly.
This is because a land that the company could have used form disposal purposes became more expensive and scarce. Therefore, to ensure that it was protected from being misused, laws were put in place to ensure that the environment is maintained. Waste products disposal were to be done using regulations that were [put in place. Laws to protect air pollution have been made stricter to ensure that acid rain has been minimized through stringent check of coal emissions. Laws were put in place top regulate the sea activities regulating the number of the fish that are supposed to caught from the sea. There was also enacting of oil drilling procedures to regulate the amount of the oil that ids to be processed to ensure that it is not hazard into the environment and the reservoirs are not depleted.
The law was to be put in place to ensure that there are regulation is done as some of the companies had started unethical behaviors of maximizing their returns at environmental expense and the people. This was meant to ensure that natural resources are made available to the future generation. It would also ensure that there is protection of the future economic status of the people. This is by ensuring that the companies are regulated to ensure that they do not exploit the environment hence affecting the future generation.
Legal regulations are put in place to ensure that this kind of behavior is checked. When the company are forced to pay real cost of obtaining inputs that are valuable and ensure that they dispose their waste products appropriately, the people are protected in expense of their business practice. This law ensures that such health problems that are experienced due to improper disposal of the waste products and depletion of resources that is being experienced are regulated (Alexander, et al. 2011). This cost is a part of the company operating cost that has to be considered as they comply with the law. This ensure that the company that comply to these rules enjoy management of resources making them have long time goals that have less environmental pollution as well as making sure that people health is protected.
Clean Air Act that was passed in 1990 by the congress party was one of the laws that ensured that this regulation was boosted. Through this law, the USA Environmental Agency put up limits that regulated the amount of pollution that could be released in the atmosphere (Earl, 1978). The law required that the company should be the one that incur the cost of regulating this. They were required to install cleaner burning equipment that would regulate the emissions. This harmonized the emissions rules in the entire states ion the US. The effect that this had in the business that would not comply with this rule was to close down.
International regulations has emerged of recent to ensure that different countries have come together to regulate the environment by ensuring that the business in their countries comply with different put laws. Such laws as postulated in the Kyoto protocol that is an amendment of the United Nation Treaty of the global warming has done great towards reinforcing this regulation. The countries work under the umbrella of the Kyoto protocol ensures that they reduce green house gases in their production process in their respective countries. The agreement has been ratified by 141 countries across the globe. Such treaty has affected the y the businesses in these countries are done in the pursuit of compliance of these laws.
Laws related to public interest that affect business environment
There are laws that have been put in place to ensure that by compliance by the business sectors they will benefit the public. public interest are set standard that are put in place by the legal bodies or by the court to ensure that certain business actions are evaluated according to their appropriateness and brought into a control (McGraw-Hill, 2002). Private’s benefits area measured against effects that are caused to the public at large by company pursuing a certain course of actions. If certain course of actions is thought by the court or judges that they will reduce the public welfare, it will not matter the way the private companies will benefit. These actions are termed to be illegal.
Public interest especially in US has taken a center stage in the business interaction with the public through their actions. This public interest ensures that the federal government especially of US determines the laws that will be put in place to ensure that it affect the actions that will be taken by the companies. Generally, the more developed the country is economically, the stringent the rules that regulate their public interest are to regulate economic activities. This make the companies involved to be always in pressure as they try to comply with such rules or otherwise they find themselves collapsing.
According to Reed (2004) Public interest law gives the public a provision of assessing the company’s behavior towards the stockholders to ensure that the company guarantees their welfare. Stringent laws govern the way the company is supposed to report their financial reports for the stockholders to understand the way the company has performed. Among the laws that regulate these requirements is that, the company should publish salaries that their managers are paid. These laws ensure that they regulate the public interest towards the companies. Such laws have affected the environment of the business especially that are scrumptious as Arthur Andersen and Environ that were faced by injunctions after cooking their audit.
As the time demands, there has been enacting of law to ensure that business actions have complied completely with emerging issues in the pursuit of accommodating new changes. Due to company’s technological way of doctoring their results, new regulations in US were put in place to ensure that they completely disclose their financial results. In 2002, the congress party passed Sarbanes-Oxley Act that provided that the CEO has to personally vouch accounting numbers failure to which they would serve a jail term (Melvin, 2010).
These accounting numbers are supposed to be reported to Wall Street without any falsification. Some of the companies have found themselves in a loggerhead with the law and had made them pay millions of shillings as fine due to breaking the public interest laws. This has affected the environment that they work in; as they have to adjust to ensure that, they comply with these laws.
Laws that affect business occupation
There are several laws that have been put in place to ensure that the businesses act ethically in their place of business execution. Laws that affect their occupation, occupation qualification, business diversity as well as laws that promote health and safety of the employees have been put in place.
Laws regulating business occupation
Most of the federal government across the globe has put in place the level of skills , qualification, and experience required too ensure that one is able to be hired to execute a certain duty. Each professional globally requires a certain level of qualification (Melvin, 2010). This is to ensure that the people who are hired are able to serve them public interest. These requirements have been extended to the private company to ensure that the services that are offered by these companies are up to the standard. These companies must ensure that they comply with these rules to ensure quality services are offered as regulation demands.
Laws governing diversity
This law ensure that a level playing ground ahs been put in place for all the company. It ensures that there are standardized hiring, promoting and retention of the people in the company according to the qualification of the people. It also ensures that it postulate the way the lay off employees should be done without affecting them. It gives the procedures that should be done to ensure that the process is due and can be understood. Failure to compliance to this law where the company tends to be discriminatory to its employees, it can be highly fined.
Health and safety promoting laws
There are various laws that govern the company on the way they should protect the health and safety of their people at work. In United State, Department of Labor occupational Safety and Health Organization are agencies that responsible for the enacting of these laws. The companies invest heavily to ensure that they comply with this law. They offer their employees medical covers as well as safety equipment to ensure that they are safe.
The Legal Environment of Business ensures that all the business across the globe is regulated thus working in a regulated environment. The number of laws that are put in place to ensure that the business act as required affect the way the business execute their duties. Due to the consequences that are attached therein, the business is forced to comply with these laws or otherwise they will close their business. Otherwise, these regulations have very well made the environment to be conducive for new business to come up as competition is ensured. This makes the public to receive quality and cost effective goods and services that have no or less effect to the environment.