Do regulations constrain or protect?

This article is intended to open up the issues of how regulations have different outcomes depending on who you are and how they impact you.

We already know that in the world of business relationships and contracts that we need a certain level of local and international laws to ensure that business is conducted fairly and to some degree openly.

There is an argument however that what works to the benefit of some will often have adverse impacts on others.

If this means that unethical behaviour is prevented, then that is a good principle, but if it restricts trade or legitimate opportunities, then that is a concern.

For example, under The European Union procurement rules the requirement to run competitive bidding processes is enshrined as is the requirement for transparent processes in terms of information about the requirement; processes of evaluating bids; and in ensuring all potential bidders have exactly the same level of updated information.

This is to ensure that there is no opportunity to operate corruptly or to favour your local bidder. Rather, all interested parties should be treated equally.

However there has always been a tension between the people responsible for buying the goods or services for the public sector and a political argument about local benefits from the spending.

The way to accommodate these is to specify in advance that the contract for say a school building project must also deliver some local benefits in hiring local labour or training of young people for example.

As long as all bidders are including these issues in their tender documents and the selection process meets the free and fair rules, then all parties should be satisfied and even the losing bidders can check that all was done fairly.

In this way the rules can be seen to enable good practice and controlled spending processes. So perhaps this is an example of rules constraining and protecting a wide range of interests, but is this always the case?

Intellectual property can be argued as very important to the long term benefit of the holder of the patent, trademark or design right and this constrains others from pretending to have the capability and trading on the ideas others have created (often at great cost in time and resource). However regulations can sometimes have a very political flavour to them when seen from one direction.

You maybe interested to read Tim’s blog post ‘When Regulation becomes Political’ about the actions of the Chinese government to force foreign banks to give up IP which most will not even own.

Protection against counterfeit products taking market share away from the inventor is one aspect of IP regulations but others might see this as an imposition from one country’s legal protection of their local companies, while restricting competition from the companies in the other country who can emulate the invention.

This is especially the case in luxury goods where the price to be paid to buy the brand is many times higher than the cost to produce. Some regard this as less serious and only denting the ‘excessive’ profits of the brand owner.

However if the ‘copycat’ does not have the inherent quality or safety standards of the brand company then this is potentially dangerous to life and wellbeing of those buying the counterfeits and this happens in car and aero engine parts as well as in food and drink and pharmaceuticals.

The pharmaceutical companies have a relatively low success rate for their innovative drugs and can use up half of their patent protected time just getting all the approvals needed to prove efficacy and safety of their drugs and so they would argue they need this level of protecting against copying so that they can earn enough to pay for the wastes incurred developing the drugs which did not succeed.

This however is very difficult to accept if you come from a poor country where the clinical need is extreme but the funds to pay the imported prices are not available. How are the UN Development goals being shared in this case?

There is perhaps no definitive answer to this question but that is the challenge, to see what the scale and scope of these issues are and therefore what individuals need to be careful of in their application of the existing rules and regulations and perhaps in informing the need to challenge some of them.

Having read this article, what are your thoughts?

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This article is from the free online course:

Contract Management: Building Relationships in Business

University of Southampton