International Legal Environment

There are wide variations between countries n the policies and regulations regarding the conduct of the business. For example, certain trade practices or promotional methods/strategies allowed in some countries may be regarded as unfair by the laws of some other countries. In many countries there is a lot of restriction n the use of the media. Radio and Television, in particular are under State monopoly or under strict state control in a number of countries. The advent of cable TV however, is creating problems for regulation.

In most countries, apart from those laws that control investment and related matters, there are a number of laws that regulate the conduct of the business. These laws cover such matters as standards of product, packaging, promotion, ethics, ecological factors etc.

Business policies and regulations have much to do with the political system and the characteristics of the political parties and politicians.

In many countries with a view to protecting consumer interests, regulations have become stronger. Regulations to protect the purity of the environment and preserve the ecological balance have assumed great importance in many countries.

Some governments specify certain standards for the products (including packaging) to be marketed in the country: some even prohibit the marketing of certain products. In most nations promotional activities are subject to various types of controls. Several European countries restrain the use of children in commercial advertisement. In a number of countries, including India, the advertisement of alcoholic liquor is prohibited. Advertisements, including packaging of cigarettes must carry the statutory warning that “cigarette smoking is injurious to health”. Similarly, baby foods must not be promoted as a substitute for breast feedings. In countries like Germany, product comparison advertisements and the use of superlatives like best or excellent in advertisements is not allowed. In the United States, the Federal Trade Commission is empowered to require a company to provide sufficient evidence to substantiate the claim concerning the quality, performance or comparative prices of its products.

There area host of statutory controls on business in India. Although the controls have been substantially brought down as a result of the liberalization, a number of controls still prevail.

Many countries today have laws to regulate competition in the public interest. Elimination of unfair competition and dilution of monopoly power are the important objectives of these regulations.

Certain changes in government policies such as the industrial policy, fiscal policy, tariff policy etc. may have profound impact on business. Some policy developments create opportunities as well as threats. In other words, a development which brightens the prospects of some enterprises may pose a threat to some others. For example, the industrial policy liberalizations in India have opened up new opportunities and threats. They have provided a lot of opportunities to a large number of enterprises to diversify and to make product mix better. But they have also given rise to serious threat to many existing products by way of increased competition; many seller’s markets have given way to buyer’s markets. Even products which were seldom advertised have come to be promoted very heavily. This battle for the market has provided a splendid opportunity for the advertising industry.

The legal systems that exist in different countries across the world may be classified into three categories, viz, common law, civil law or code law, and theocratic law.

The basis for common law is tradition, past practices, and legal precedents set by the courts through interpretations of statutes, legal legislation, and past rulings.

Code law, on the other hand, is based on an all-inclusive system of written rules (codes) of law. Under code law, the legal system is generally divided into three separate codes: commercial, civil, and criminal. The civil law system, also called a codified legal system, is based on a detailed set of laws that make up a code. Rules for conducting business transactions are a part of the code.

The theocratic law system is based on religious precepts. The best example of this system is Islamic law, which is found in Muslim countries. Islamic law, or Shair’a, is based in the following sources: The Koran, the sacred text; the Sunnah or decisions and sayings of the Prophet Mohammad; the writings of Islamic scholars, who derive rules by analogy from the principles established in the Koran ad the Sunnah; and the consensus of Muslim countries’ legal communities.

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