Legislation Regulating Business

Even the most liberal advocates of free-market economies agree that the system works best with at least some regulation. Well-conceived regulation can encourage competition and ensure fair markets for goods and services. Thus, governments develop public policy to guide commerce—sets of laws and regulations that limit business for the good of society as a whole. Almost every marketing activity is subject to a wide range of laws and regulations.

Increasing Legislation. Legislation affecting business around the world has increased steadily over the years. The United States has many laws covering issues such as competition, fair trade practices, environmental protection, product safety, truth in advertising, consumer privacy, packaging and labeling, pricing, and other important areas (see # Table 3.1). The European Commission has been active in establishing a new framework of laws covering competitive behavior, product standards, product liability, and commercial transactions for the nations of the European Union.

Understanding the public policy implications of a particular marketing activity is not a simple matter. For example, in the United States, there are many laws created at the national, state, and local levels, and these regulations often overlap. Aspirins sold in city of Dallas, Texas, are governed both by federal labeling laws and by Texas state advertising laws. Moreover, regulations are constantly changing—what was allowed last year may now be prohibited, and what was prohibited may now be allowed. Marketers must work hard to keep up with changes in regulations and their interpretations.

Business legislation has been enacted for a number of reasons. The first is to protect companies from each other. Although business executives may praise competition, they sometimes try to neutralize it when it threatens them. So laws are passed to define and prevent unfair competition. In the United States, such laws are enforced by the Federal Trade Commission and the Antitrust Division of the Attorney General's office.

The second purpose of government regulation is to protect consumers from unfair business practices. Some firms, if left alone, would make shoddy products, invade consumer privacy, tell lies in their advertising, and deceive consumers through their packaging and pricing. Unfair business practices have been defined and are enforced by various agencies.

The third purpose of government regulation is to protect the interests of society against unrestrained business behavior. Profitable business activity does not always create a better quality of life. Regulation arises to ensure that firms take responsibility for the social costs of their production or products.

Changing Government Agency Enforcement. International marketers will encounter dozens, or even hundreds, of agencies set up to enforce trade policies and regulations. In the United States, Congress has established federal regulatory agencies, such as the Federal Trade Commission, the Food and Drug Administration, the Federal Communications Commission, the Federal Energy Regulatory Commission, the Federal Aviation Administration, the Consumer Product Safety Commission, and the Environmental Protection Agency. Because such government agencies have some discretion in enforcing the laws, they can have a major impact on a company's marketing performance.

New laws and their enforcement will continue to increase. Both domestic and foreign companies must watch these developments when planning their products and marketing programs. Marketers need to know about the major laws protecting competition, consumers, and society. They need to understand these laws at local, national, and international levels.

s,n Author I Even the most liberal Comment | advocates of the freemarket system agree that the system works best with at least some regulation. But beyond regulation, most companies want to be socially responsible. Check the Web site of almost any company and you'll find long lists of good deeds and environmentally responsible actions. For example, try the Nike Responsibility page (www.nikebiz.com/responsibility/) or Johnson & Johnson's Community page (www.jnj.com/community/index. htm). We'll focus directly on marketing and social responsibility in Chapter 20.

Political environment

Laws, government agencies, and pressure groups that influence and limit various organizations and individuals in a given society.

Major U.S. Legislation Affecting Marketing

Legislation ffurpose

Sherman Antitrust Act (1890)

Federal Food and Drug Act (1906)

Clayton Act (1914)

Federal Trade Commission Act (1914) Robinson-Patman Act (1936)

Wheeler-Lea Act (1938)

Lanham Trademark Act (1946) National Traffic and Safety Act (1958) Fair Packaging and Labeling Act (1966)

Child Protection Act (1966)

Federal Cigarette Labeling and Advertising Act (1967)

National Environmental Policy Act (1969)

Consumer Product Safety Act (1972) Magnuson-Moss Warranty Act (1975)

Children's Television Act (1990)

Nutrition Labeling and Education Act (1990)

Telephone Consumer Protection Act (1991)

Americans with Disabilities Act (1991)

Children's Online Privacy Protection Act (2000)

Do-Not-Call Implementation Act (2003)

Prohibits monopolies and activities (price fixing, predatory pricing) that restrain trade or competition in interstate commerce.

Forbids the manufacture or sale of adulterated or fraudulently labeled foods and drugs. Created the Food and Drug Administration.

Supplements the Sherman Act by prohibiting certain types of price discrimination, exclusive dealing, and tying clauses (which require a dealer to take additional products in a seller's line).

Establishes a commission to monitor and remedy unfair trade methods.

Amends Clayton Act to define price discrimination as unlawful. Empowers FTC to establish limits on quantity discounts, forbid some brokerage allowances, and prohibit promotional allowances except when made available on proportionately equal terms.

Makes deceptive, misleading, and unfair practices illegal regardless of injury to competition. Places advertising of food and drugs under FTC jurisdiction.

Protects and regulates distinctive brand names and trademarks.

Provides for the creation of compulsory safety standards for automobiles and tires.

Provides for the regulation of packaging and labeling of consumer goods. Requires that manufacturers state what the package contains, who made it, and how much it contains.

Bans sale of hazardous toys and articles. Sets standards for child resistant packaging.

Requires that cigarette packages contain the following statement: "Warning: The Surgeon General Has Determined That Cigarette Smoking Is Dangerous to Your Health."

Establishes a national policy on the environment. The 1970 Reorganization Plan established the Environmental Protection Agency.

Establishes the Consumer Product Safety Commission and authorizes it to set safety standards for consumer products as well as exact penalties for failure to uphold those standards.

Authorizes the FTC to determine rules and regulations for consumer warranties and provides consumer access to redress, such as the class action suit.

Limits number of commercials aired during children's programs.

Requires that food product labels provide detailed nutritional information.

Establishes procedures to avoid unwanted telephone solicitations. Limits marketers' use of automatic telephone dialing systems and artificial or prerecorded voices.

Makes discrimination against people with disabilities illegal in public accommodations, transportation, and telecommunications.

Prohibits Web sites or online services operators from collecting personal information from children without obtaining consent from a parent and allowing parents to review information collected from their children.

Authorized the FTC to collect fees from sellers and telemarketers for the implementation and enforcement of a National Do-Not-Call Registry.

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