Government’s Role In Domestic Business

Business Essentials

Chapter Objectives

After completing this chapter, students will be able to: Name four ways in which government

regulates business. Name aspects of the government’s role in

society and items the national government provides.

Explain how a government can stimulate or restrict economic activities.

How Government is Funded

Collect taxes to help run the nation, state, county, city, or town. Property taxes, Income taxes, Sales taxes,

Vehicle taxes, Capital Gains taxes, etc. Taxes don’t always cover the expenses.

Most U.S. Citizens pay the equivalent of 4 months worth of income in taxes each year. Essentially means you’re working 4 months for free.

How Government Regulates Business

One of the most important roles of the government is to foster economic success (help businesses make money). However, it also tries to aid in the quality of

life of its citizens.

Governments must help ensure its people are not abused by businesses To fulfill these duties, local, state, and federal

governments pass laws to promote and regulate business

Difference Between Interstate and Intrastate Commerce

Federal Government oversees Interstate Commerce which is business that takes place between states

State Government oversees Intrastate Commerce which is business that takes place within a state

Government Protecting Business

Laws govern the working of the economy. These laws regulate the production process and protect competition, business agreements, and creative properties.

Companies that break the law can be fined, sued, or forced to close. People who don’t follow the rules also face

penalties

Government Protecting Competition The U.S. Government passes antitrust laws to

promote domestic competition. Antitrust laws allow the federal government to break

up monopolies, regulate them, or take control of them.

A Monopoly occurs when one company controls an industry or is the only one to offer a product or service. Companies can form a monopoly by establishing a

Trust – meaning a group of companies that band together to form a monopoly and cut out competition

Who Enforces Antitrust Laws?

The Federal Trade Commission (FTC) enforces antitrust laws.

Lets look at the other side of the coin – obviously this video is a parody but it does cause one to think.

Partner Activity

Using www.google.com, key the search words “violated antitrust laws.” Look through the returned search links

and summarize an antitrust case in the bottom section of your notes.

Be prepared to present your findings to the class.

15 minutes

Government Protecting Business Agreements

One of the most basic ways government protects business is by enforcing Contracts. A Contract is a legally enforceable agreement

between two or more parties. It can be written, verbal, or even formed over a handshake.

When one party fails to live up to the terms of the contract a Breach of Contract has occurred. It is always easier to prove a breach of contract has

occurred when there is a written agreement.

Government Protecting Creative Properties

Laws also protect the right to own creative properties.

Creative properties, items such as inventions and art, can be protected with a copyright, a patent, or a trademark.

Creative Properties

A Copyright gives artists the legal right to own their creations. I.E. If you own a copyright to a song,

others who want to use your song and/or lyrics must get your permission beforehand.

Copyrights usually last until 70 years after the owner’s death.

Creative Properties A Patent is a legal grant for the sole right to

own an invention. No one can copy a patented product or process

without permission for 20 years after the inventor filed his/her application with the US Patent and Trademark Office

A Trademark is a name, a symbol, or a characteristic that identifies a product. Trademarks are protected from being copied if

they’re registered appropriately with the government.

Only the owner of the trademark can legally use it (i.e. )

Partner Activity

Using www.google.com, research a case involving copyright, patent, and/or trademark infringements (violations). Look through the returned search links

and summarize an court case on a separate sheet of notebook paper.

Be prepared to present your findings to the class.

15 minutes

Regulating The Production Process

The government also enacts laws that regulate the amount of waste that factories can discharge into the environment.

Worker protection laws impose safety requirements and work procedures and regulate minimum wage.

The Food and Drug Administration (FDA) regulates the manufacture and sale of drugs in the US. When things go bad…

Discussion Questions

Why does our government want businesses to succeed?

How is competition a form of consumer protection?

Does Microsoft have a monopoly?

Government’s Role in Society

The Government provides: Key goods and services to the public Incentives to businesses and people Jobs and distribution of income for

Americans

Providing Goods and Services

The Government is the largest provider of services in the country. The government provides services to the

public as a whole for the good of the society (i.e. National Defense).

Public goods and services are items provided by gov’t and paid for by taxes. The cost of providing public goods and

services are high. Taxes and other forms of revenue can’t always

cover expenses. Must find money somewhere!

Privatization of Public Goods or Services

Privatization occurs when a business offers a public good or service. In most cases, the gov’t receives money

from the company giving them the legal “rights” to provide the good or service (remember Chicago’s Skyway).

Sometimes, this can lead to problems due to the “profit motive” of businesses.

Privatizing Road Video - 4 min

Other Government Roles

Transfer Payments Unemployment, Social Security, and

Veteran’s Benefits are all transfer payment by the government to improve quality of life and ensure people have money when they need it most.

This has its pitfalls as many individuals abuse this system. This strains the economy and handcuffs those dependent on the transfer payments.

Welfare Fraud Case 1 Video

Welfare Fraud Case 2 Video

Other Government Roles

Employment The gov’t is the largest employer in the

U.S. (roughly 3 million employed). Teachers, firefighters, mayors, congress, etc.

are all public workers.

Consuming Goods and Services Largest consumer of goods and services. The gov’t must buy goods and services

just as other business must do.

Other Government Roles…Supporting Businesses

Small Business Administration (SBA) Agency that encourages development of

small businesses. Offers loans, training, and other resources to small businesses.

Subsidies Money (grants) given to producers or

consumers to encourage certain economical behaviors. Helps businesses be more competitive internationally and is usually given to industries considered to benefit the public (agriculture).

Other Government Roles…Providing Tax Incentives

Gov’t may offer tax incentives to encourage or discourage a business activity. A tax incentive is a temporary

reduction or even elimination of a tax. A tax break is a special tax benefit

given to promote specific economic or social objectives (new house credit).

Tax deductions are given to encourage things like charitable donations.

Michigan Lithium Batteries Tax Incentive Video – 4 Min

Other Government Roles…Providing Tax Incentives

The gov’t may also try to discourage certain behaviors. For example, taxes on cigarettes have

increased dramatically in hopes that people will stop smoking.

Smoking increases health risks which drains our economy of unnecessary resources.

Partner Activity

Using www.google.com, key the search words “offers tax incentives.” Look through the returned search links

and summarize a case on a separate sheet of notebook paper.

Be prepared to present your findings to the class.

15 minutes

Contract Law

Contracts: Nature and Terminology

Promise is a declaration that something will or will not happen in the future.

What is a Contract? Contract is an agreement (based on a

promise) that can be enforced in court.

Elements of a Contract

1. Agreement (Offer and Acceptance). Offer and Acceptance create Genuine Agreement

which is referred to as a “meeting of the minds.”

2. Consideration The exchange of things in value (what is being

exchanged).

3. Contractual Capacity The legal ability to enter into a contract

4. Legality Parties cannot enforce contracts that involve illegal

acts.

In This Case The Delgados agreed to buy and Oaknoll, Inc.,

agreed to sell one lot from among the 200 in a large suburban subdivision. Using their credit card, the Delgados paid $1,000 as a down payment and were given a receipt. The lots shown on the preliminary subdivision plan were of various sizes, shapes, and prices, but no particular lot was specified in the agreement. Because of this, an essential term was missing, and therefore no contract arose.

Characteristics of a Contract

Valid, Void, and Unenforceable Valid – “legally good” and binding contract

exists Void – has no “legal effect” due to an

absence of one or more of the elements of a contract

Unenforceable – court will not uphold contract generally because of some rule of law, such as the statute of limitations.

Characteristics of a Contract

Express or Implied An express contract is stated in words and may be

either oral or written. An implied contract comes about from actions of

the parties.

Breach of Contract

A breach of contract occurs when one party fails to perform the duties set out in the terms of the agreement. Most contracts are usually breached

after the performance date.

What Happens After Breach?

When a contract is breached, the injured party has a choice of remedies.

A remedy is a legal means of enforcing a right or correcting a wrong.

Two remedies we’ll consider:1. Money Damages2. Equitable Remedies

Money Damages

If you suffer a loss as the injured party, you may sue for money damages resulting from the breach.

The money damages should, by law, place you in the position you would have been in if the contract had been carried out. If you seek “punitive” damages, you’re

seeking damages in excess of the loss to punish the defendant for their wrongful act.

Equitable Remedies

Two equitable remedies:

1. Specific Performance: ask the court to order the other party to do specifically what he or she originally agreed to do.

2. Injunction: ask the court to is an order that prevents a party from an act of some sort.

Partner Activity

Using www.google.com, key the search words “breached contract.” Look through the returned search links

and summarize a case on a separate sheet of notebook paper.

Be prepared to present your findings to the class.

15 minutes

Business Law Basics

BRHS Business Education Department

Business Activities and the Legal Environment

Law regulates many different areas of business.

Many different laws may affect a single business transaction.

Two types of Law:1. Tort Law2. Criminal Law

Basis of Tort Law Doing business today involves risks,

both legal and financial.

A tort is a civil injury designed to provide compensation for injury to a legally protected, tangible or intangible, interest.

There are intentional and unintentional (negligence) torts.

Unintentional Tort Law

Injury caused by a person’s carelessness is known as Negligence Person does not intend the consequences

of the act or believes they will occur.

Unintentional Tort Law

Strict Liability Some activities are so dangerous the law

will apply neither the principles of negligence nor the rules of intentional torts to them. This is called Strict Liability and the defendant is guilty regardless of intent or non-intent.

I.E. using explosives, keeping wild animals, storing highly flammable liquids.

Unintentional Tort Law

Strict Liability – Product Liability In recent years, the doctrine of strict liability

has been applied to product liability cases. When people are injured from defects in products that they bought in the marketplace, the firm manufacturing the products is liable for injuries, regardless of fault.

Manufacturers, sellers, and suppliers of goods can all be held responsible.

Environmental Law

BRHS Business Education

Structural Overview of Environmental Law

Targets of Environmental Laws:Who or what gets regulated?

Products Pollutants Industrial Facilities Individuals Land Uses

Federal Environmental Statutes

Clean Air Act To control air pollution by instituting

point source controls and establishing maximum pollutant levels for the ambient air.

Clean Water Act The stated objective of the Clean Water Act

is to restore and maintain the chemical, physical, and biological integrity of the Nation’s waters. Why should you care?

Federal Environmental Statutes Cont…

Resource Conservation and Recovery Act (RCRA) To provide a “cradle to grave” framework for managing

solid and hazardous waste from generation to final disposal.

Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) To provide a mechanism to clean up contaminated

sites and hold potentially responsible parties accountable for clean up costs.

Federal Environmental Statutes Cont…

Federal Insecticide, Fungicide, and Rodenticide Act To protect the public health and

environment against the misuse of pesticides.

Toxic Substance Control Act (TSCA) To regulate toxic chemicals and mixtures

that present an “unreasonable risk of injury to health or the environment.”

Ecuador versus Cheveron/Texaco

Chevron vs Ecuador Video - 40 min