Need for Government Regulation in Business
Government regulations are important for commercial businesses because they ensure best practices at every level. They ensure risk management and make it possible for businesses to have more opportunities for long term businesses. The reason for government regulations is that through compliance the public interest is maintained and preserved. Government regulations are meant for ensuring safety of the general public and at the same time to ensure the success and growth of businesses. When government compliance is ignored there is market failure due to the following reasons:
- Insufficient Information for the public: When government compliance is ignored best practices are neglected. As a consequence the public does not get accurate and substantial information. Making good choices is an important best practice in business and when the public has limited information about the business this becomes a problem. This is why there are government regulations about proper labeling and providing information for customers. There must be compliance with these regulations to ensure best practices in small business.
- Injustice to Customers: When the company begins to keep fixed prices in order to stay out of competition, it is unfair to the customers. This means there is monopoly in the business. In order to ensure best practices and justice for customers the Federal Government has made fixing prices illegal. Through compliance with regulations, the government also ensures that companies also control negative effects on the customers. For example, products which may lead to long term negative effects are controlled through best practices and compliance with government regulations.
- 3. Failure to comply with State and Firm Regulations: State and firm regulations regulate best practices in three important areas. These are:
- Entries into the business
- Controlling Competition
- Mitigating fraud
- Unjust Compensation: The local, state and federal government is allowed to take private properties of citizens for constructions of essential amenities. However, just compensation of the citizen for the property is an important best practice. Compliance with this regulation is very important.
- Unaffordability Increases: When businesses fail to ensure the best practice of compliance with government regulations on prices, the products become unaffordable for the public. Food stuff for example should have prices which the general public can afford. The government sets prices after evaluating the demand and supply of various businesses. Therefore compliance with regulations on prices is a very important best practice for success in business.
Compliance with business behavior and regulations is an important best practice for all kinds of businesses.