Legal Environment in Practice (AQA A Level Business): Revision Note

Consumer protection

• Consumer protection law sets out legal rights for customers and legal obligations for businesses

  • It covers areas such as product quality, fair trading, accurate information and the right to refunds, repairs or replacements

• In the UK, the main rules come from the Consumer Rights Act 2015

  • This requires goods to be of satisfactory quality, fit for purpose and as described

• Separate rules ban misleading or aggressive selling practices

Benefits of consumer protection for business

• It builds customer trust and loyalty

  • Customers are more likely to buy from, and return to, a business they feel confident will treat them fairly

• It creates a level playing field

  • This stops dishonest competitors gaining an unfair advantage by misleading customers or cutting corners

• It gives businesses a clear legal benchmark to follow

  • This reduces the risk of costly disputes or reputational damage from getting it wrong

• Some businesses use it as a competitive advantage

  • For example, offering returns policies that go beyond the legal minimum to stand out from rivals

Drawbacks of consumer protection for business

• It increases compliance costs

  • This includes handling refunds and returns, checking marketing claims are accurate, and training staff properly

• It increases legal risk

  • Even unintentional breaches can lead to fines, legal action or damaging publicity

• It restricts certain sales practices

  • For example, rules against pressure-selling or unclear pricing limit how aggressively a business can market a product

Example

Since May 2025, new rules under the Digital Markets, Competition and Consumers Act 2024 have required businesses selling online, such as event ticket sites and hotel booking platforms, to show the full price a customer will pay upfront, including any fees, rather than adding them at checkout.

Impact on functional areas

Employee protection

• Employee protection law sets out the legal rights employees have at work, and the responsibilities businesses have towards their staff

  • It covers areas such as pay, working hours, health and safety and protection from unfair treatment

• The Equality Act 2010 specifically makes it illegal to discriminate against an employee or job applicant because of a 'protected characteristic'

  • Protected characteristics include age, disability, sex, race, religion or sexual orientation

• The Act requires employers to make reasonable adjustments for disabled employees

Benefits of employee protection for business

• It improves staff morale, motivation and retention

  • Employees who feel fairly treated and protected are more likely to stay and perform well

Example

Timpson, the UK shoe repair and key-cutting chain, employs around 10% of its staff from people with a criminal record and reports a 75% retention rate among them, far higher than the industry average.

• It reduces the risk of costly tribunal claims

  • Following the law properly reduces the risk of expensive legal action or compensation payouts

• It supports a more diverse workforce

  • The Equality Act protections help ensure a wider range of people can access and stay in employment, bringing a broader range of skills and perspectives

• It helps attract talent

  • Job seekers increasingly favour employers with a strong reputation for fair treatment

Drawbacks of employee protection for business

• It increases costs

  • This includes sick pay, holiday pay, minimum wage compliance, and reasonable adjustments for disabled staff

Example

JD Wetherspoon's chairman said the 2025 rise in National Living Wage and employer National Insurance would cost the company an extra £60 million a year, equivalent to around £1,500 per outlet, per week

• It can reduce flexibility

  • For example, it can be harder and slower to dismiss staff without following a proper legal process

Example

In 2024, the UK Supreme Court ruled against Tesco after it tried to dismiss and re-hire warehouse staff on worse terms, to take away a pay agreement it had promised them years earlier

• It increases administrative burden

  • Businesses must keep detailed records and follow correct procedures for grievances, discipline and redundancy

• It carries real legal risk if a business gets it wrong

  • Employment tribunal claims can be lengthy, costly and damaging to reputation, even when unintentional

Impact on functional areas

Competition policy

• Competition policy refers to laws and regulations designed to promote fair competition between businesses and prevent anti-competitive practices

  • Examples include price-fixing, cartels or one business abusing a dominant market position

• In the UK, competition policy is enforced mainly by the Competition and Markets Authority (CMA)

  • This body can investigate mergers, block deals or fine businesses found to be acting anti-competitively

Benefits of competition policy for business

• It stops dominant businesses abusing market power

  • This protects smaller competitors from unfairly being squeezed out of the market

Example

In 2017, the EU fined Google €2.42 billion for abusing its dominant position as a search engine by placing its own shopping comparison service above rival services, instead of the cheapest or most relevant option

• It helps maintain consumer choice and reasonable prices

  • This supports a healthier market that new or smaller businesses can enter and compete within

• It can create opportunities for other businesses

  • For example, rivals may gain market share if a merger is blocked or a dominant firm's practices are restricted

Example

In 2022, the CMA forced Meta to sell Giphy, the GIF-sharing platform it had already bought, after ruling the deal would let Meta restrict rival social media platforms' access to Giphy's GIFs and reduce competition in UK display advertising

• It encourages ongoing innovation and efficiency

  • Businesses can't rely on anti-competitive shortcuts to protect their position, so must keep improving to succeed

Drawbacks of competition policy for business

• It can block or delay mergers and acquisitions

  • This can prevent a business from expanding or achieving economies of scale as planned

Example

In 2019, the European Commission blocked a planned €17 billion merger between Siemens and Alstom, which would have created a 'European champion' in the rail industry.

It considered it would leave too few suppliers of high-speed trains and signalling systems, likely raising prices for the trains and safety systems used by passengers.

• Investigations can be lengthy and costly

  • This creates uncertainty for a business while a decision is pending

• Fines for breaching competition law can be very large

  • This directly reduces profit and can damage reputation

Example

In 2016, the EU fined five major truck manufacturers, including Daimler and DAF, a combined €2.93 billion for operating a secret price-fixing cartel for 14 years, the largest cartel fine in EU history at the time.

• Compliance can require specialist legal advice

  • This is a significant, ongoing cost, particularly for large or complex businesses

Impact on functional areas

Environmental protection

• Environmental protection law sets legal limits and requirements on businesses to reduce environmental harm

  • It covers areas such as emissions, waste, pollution and resource use

• Environmental protection increasingly includes legally binding national targets

  • E.g. The UK's commitment under the Climate Change Act to reach net zero greenhouse gas emissions by 2050

Benefits of environmental protection law for business

• It levels the playing field

  • This stops competitors gaining an unfair cost advantage by cutting corners on environmental standards

• It can encourage innovation

  • Businesses investing in cleaner technology or processes to comply can sometimes turn this into new products or services to sell

Example

Since 2024, the UK has legally required a rising percentage of new cars sold to be zero-emission, starting at 22% and reaching 80% by 2030

This has encouraged car manufacturers to speed up development of new electric models or face fines of up to £15,000 per non-compliant car sold

• It builds trust with increasingly environmentally conscious customers and investors

  • This can increase sales and improve access to finance

• It can help businesses access new funding or contracts

  • Some grants, contracts or investments are specifically tied to meeting environmental standards

Example

Since 2021, UK government departments have required suppliers bidding for contracts worth over £5 million a year to submit a Carbon Reduction Plan

Businesses with strong environmental practices find it easier to win major public sector work

Drawbacks of environmental protection law for business

• It increases compliance costs

  • This includes new equipment, monitoring and reporting requirements

• It can slow down operations or expansion

  • For example, where environmental permits or assessments are required before a project can proceed

Example

HS2 had to build a one-kilometre-long protective tunnel, nicknamed the 'bat tunnel' to stop trains disturbing a rare, legally protected bat species in a Buckinghamshire woodland.

This added an estimated £100 million or more to the project's cost and timeline.

• Penalties for non-compliance can be severe

  • This can mean large fines alongside serious reputational damage

Example

In 2021, Southern Water was fined a record £90 million after admitting to nearly 7,000 illegal sewage discharges into the sea over several years

This was the largest environmental prosecution in the Environment Agency's history

• Smaller businesses can struggle proportionally more

  • They often have fewer resources to meet the same standards as larger, better-resourced competitors

Impact on functional areas