Discuss some of the Laws Affecting the Operation of Markets

This is the area which regulates the trading relationships between organisations and their customers and suppliers, and the way in which competition may be conducted.

(a) Contracts
In order to function in the wider economy, organisations have to make agreements with each other: for example, to ensure the supply of raw materials or the delivery of finished goods on time. Such agreements are covered by the law of contract, which is part of common law. The law of contract developed from the rules of merchants dealing with each other in the Middle Ages, but also applies to agreements between organisations and individuals and between private individuals.
The parties agree on certain points and these become the terms of the contract. The
more important of these terms are known as conditions, the less important are referred to as warranties.
A breach of contract is deemed to have taken place if one party fails to comply with the terms. The most serious breach is of conditions, which entitles the injured party to rescind the contract and bring an action for damages. A breach of warranty only entitles the injured party to bring an action for damages.
The law of contract enables organisations and individuals to enter into agreements with reasonable assurance that others will behave in such a way as to honour their side of the bargain.
(b) Consumer Protection
The relations between organisations and consumers were rooted in common law, which enable consumers injured by faulty goods or the negligence of suppliers to obtain damages in compensation. There have been a large number of statutes passed in the last thirty or so years to extend that protection, including the following:
Sales: the Sale of Goods Act 1979, as amended by the Sale and Supply of Goods Act 1994, governs
contracts of sale. The Act requires goods to be of satisfactory quality and fit for the purpose. So, if you order two dozen pens and they don't write, you can ask for a refund because the goods aren't of satisfactory quality, i.e. they don't do what you would reasonably expect them to do.
Quality: the quality of goods or services supplied to consumers is also regulated by the Consumer Safety Act 1978. This Act provides that unsafe goods can be prohibited from sale to the public (such as flammable nightdresses and dangerous toys).
Credit: the Consumer Credit Act 1974 regulates small credit arrangements.
Those who carry on the business of granting consumers credit must be licensed to do so. An important aspect of this legislation is its control over the way that credit is advertised. Advertisements must be accurate and show the true rate of interest being charged for the credit offered. The Act set up the Office and Director General of Fair Trading to enforce the regulations.
(c) Competition
The Restrictive Trade Practices Act 1956 protects consumers from exploitation through monopoly
arrangements between firms, or the cornering of a market by a firm, or from other restrictive practices which limit proper competition. Thus consumers are protected even from the largest, most powerful organisations.
The EU also affects legislation in this area; the original Treaty of Rome forbids restrictive trade policies and monopolies which would be against the public interest. The EU is particularly alert to the dangers of unfair pricing, restrictions on production, distribution and technological development. To some extent, however, there is a countervailing influence in the need of some European industries to be organised into large units which can compete with those of the USA or Japan.

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Titany answered the question on November 9, 2021 at 05:15