Regulatory Administrative Institutions MPA- 517 Lecture-5

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Recap

• Five Areas of Government Regulation of Business – Advertising – Employment and Labor – Environmental – Privacy – Safety and Health 2

Advertising

• Laws pertaining to marketing and advertising set in motion by the Federal Trade Commission exist to protect consumers and keep companies honest about their product.

Every business in the country is required to comply with the truth-in-advertising laws and could face lawsuits for violation.

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Environmental

• The carbon footprint of businesses on the environment is regulated by the Environmental Protection Agency (EPA) alongside state agencies.

The EPA enforces environmental laws passed by the federal government through educational resources, frequent inspections and local agency accountability.

• The Environmental Compliance Assistance Guide exists to help businesses--small and large alike- achieve environmental compliance, and serves as an educational resource more than an enforcer.

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Today’s Lecture

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Role of Government Regulation in Business

– Permission – Contract Enforcement – Consumer Protection – Employee Protection – Environmental Protection – Taxation – Investor Protection – Role of Government in Promoting Small Business 5

Description

• Private sector is the country's chief economic force, but it needs government regulation.

• The U.S. government's role in business is as old as the country itself; the Constitution gives the government the power to regulate some commerce.

• Though the government’s role has increased over time, the business community still enjoys considerable freedom. The government exercises its authority several ways.

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Permission

• Most businesses need to register with a state government to operate. Corporations need a charter, and other forms of businesses, such as limited liability companies or partnerships, need other forms of registration.

• The function of this registration is usually to define the financial liability the owners of the company have. It limits their risk to the amount they have invested in that particular organization.

• Registration also allows the government to monitor companies to execute its other functions in the business world.

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Contract Enforcement

• Businesses contract with other businesses. These contracts may be complex, such as mergers, or they may be as simple as a warranty on supplies purchased.

• The government enforces these contracts. Companies bring one another to court just as individuals do.

• An oral agreement can constitute a contract, but usually only a written agreement is provable.

• If one party fails or refuses to meet its obligation under a contract, a company will turn to the legal system for enforcement.

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Consumer Protection

• The government’s role in business includes protecting the consumer or customer.

• When a vendor fails to honor the guarantee, the purchaser has recourse in the law. Likewise, when a product causes harm to an individual, the courts may hold the vendor or manufacturer responsible.

• Labeling is another requirement the government imposes on marketers. Many foods, for example, must display nutritional content on the packaging.

• The govt. has been making advances in consumer rights for decades.

However, the consumer movement still needs considerable development to protect the public.

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Employee Protection

• Many state and federal agencies work to protect the rights of employees. The Occupational Health and Safety Administration, for example, is an agency under the Department of Labor.

• Its mission is to ensure a safe and healthful work environment. The Equal Opportunity Commission protects employees from discrimination.

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Environmental Protection

• When a marketing transaction impacts a third party--others besides the marketer The third party is often the environment.

and purchaser--the effect is called an “externality.” • Thus, it is the government's role to regulate industry and thereby protect the public from environmental much discussion..

externalities.

Whether the government is effective in this role is a matter of 11

Taxation

• Governments at all levels tax businesses, and the resulting revenue is an important part of government budgets.

• Some revenue is taxed at the corporate level, then taxed as personal income when distributed as dividends.

• This is in no way inappropriate, since it balances the tax burden between the company and individual and allows the government to tax more equitably.

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Investor Protection

• Government mandates that companies make financial information public, thereby protecting the rights of facilitating further investment.

investors and • This is generally done through filings with the Securities and Exchange Commission.

Whether federal regulation has adequate is a matter of much debate.

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Role of Government Regulations in Promoting Small Business • Businesses create jobs and pay taxes, making it natural for government to want to help them start and thrive.

• Municipalities, counties, states and the federal government all offer direct and indirect assistance to individual businesses and industries through a variety of monetary grants, paid research, legislation and worker training.

• If you haven’t done so yet, contact your local and state economic development offices to see how they can help you.

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Economic Development

• Governments businesses start, continue to grow and relocate to specific areas.

create specific programs for helping • In some ways, local, county and state governments compete with each other for jobs. They do this by offering start-up incentives and taking steps to create a “business friendly” environment.

• These steps include tax credits, worker training, free land, zoning changes, permitting.

low-interest loans, infrastructure improvements and help with fast-tracking licensing and 15

Loans

• Government agencies provide loan guarantees to small business, encouraging local banks to work with start ups or area business that wish to expand.

• Talk to your banker about state or federal loan programs that offer low interest rates or target women, minorities or businesses in specific industries.

• Contact your state's economic development office to learn if it has loan programs.

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Research and Development

• The federal government provides grants to academic institutions working to develop new technologies that will benefit industry, with the caveat that the institutions share the technologies with industry.

• In some instances, the government will provide grants to private companies making a new product or service that will improve a vital area of an economy, such as transportation, energy, agriculture or communications.

• Some states also fund research and development projects, working with private investors and the federal government to raise funds.

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Infrastructure Improvement & Education and Training

• Business does better when it can move raw materials to factories efficiently and get finished goods to plants and markets quickly.

Governments help improve the infrastructure needed for businesses to thrive that would be too costly for any one business to fund. This includes building and maintaining roads, bridges, rail lines, airports, seaports, energy transmission lines and telecommunications systems.

• To ensure businesses have access to trained workers, governments provide free schooling for primary and secondary students, grants and loans for higher education and worker training programs.

Governments often work with trade schools, community colleges and universities to provide free worker training.

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Summary

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Role of Government in Business

– Permission – Contract Enforcement – Consumer Protection – Employee Protection – Environmental Protection – Taxation – Investor Protection – Role of Government in Promoting Small Business 19

Next Lecture

• • • • Administrative law Why regulations are important?

What is regulatory policy?

Regulatory policy as a lever of state power

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