The Role and Function of Law in Global Business

Assignment Instructions

Purpose of Assignment

Law impacts how business operations perform. With globalization, the law’s impact and corresponding business risks have grown. The student will learn to consider how and when a business risk should be pursued under traditional litigation (lawsuit, answer, and discovery) and where alternative dispute resolution methods are appropriate in both domestic and international disputes.

Assignment Steps

Select a business or industry with which you are familiar and, in a minimum of 700 words, excluding title and reference pages, develop an analysis including the following:

• Identify at least two ways the U.S. legal system affects that business or industry.
• Examine the risks that business or industry encounters when dealing with traditional litigation, (suit, answer, discovery, trial) and what measures business managers can take to reduce exposure to those risks.
• Choose a global/international business dispute from your business or industry, then compare and contrast one form of alternative dispute resolution (ADR) with traditional litigation with regard to that dispute, and recommend which method is preferred and why.

The Role and Function of Law in Global Business – Sample Solution

Introduction

Business is highly guided by laws that control the general or specific operations in different aspects of a business. Each country has unique laws and regulations which guide labor issues, incorporation procedures, and licensing requirements. Legal forces are essential for successful business operations in each industry.

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It is therefore important to keep track of federal and state changes of regulations in the industry of operations to curb legal issues. It is also very important to be conversant with litigation procedures and dispute resolution given by the state and federal laws, as this might impact individual’s business operations. This paper reviews the role of the law in Cosmetic business at local and international level.

Two Ways that the U.S. Legal System Affect Cosmetics Industry

The Cosmetic industry is a sensitive industry, producing products that can easily affect the health of the users. In this regard, the U.S. legal system has established regulation and laws in which companies in this industry must follow at different levels of operations. The industry is guided by the two main acts that include Fair Packing and Labeling Act (FPLA) and Federal Food, Drug, and Cosmetic Act (FD&C Act). The FD & C Act demands that the additives or food colors used to make cosmetics to be inspected by FDA before it is used. Although other ingredients do not require inspection, the manufacturers are required to follow all the safety laws define by this act.

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The FDA has the authority to enact legal measures in case a cosmetic product in the market is found to failure infollowing the required laws. The FPLA also focus on ensuring that the right branding is done to each cosmetic product. The FDA can seek intervention from the department of justice to eliminate a cosmetic product that is misbranded and adulterated from the market. A restraining order can be issues to a company or distributors who are found to be in violation of law to ensure no further distribution of the harmful product. Moreover the government may seizure such companies for the best interest of the public. Beside this the FD&C Act monitors all cosmetic imports to ensure that they comply to the laws governing cosmetics products in the country (FDA.gov, 2013).

Risks that Cosmetics Businesses Encountered While Dealing with Traditional Litigation and the in Traditional Litigation Measures to Business Managers Can Take to Lower Business Exposure to Such Risks

Traditional litigation refers to the process of resolving disputes using court procedures and system. In a traditional litigation, the cosmetic company runs a risk of spending a considerable amount of money to settle a dispute. This can affect the company growth and expansion, especially if the court decides that the company may pay a hefty fine for the damages caused.Traditional litigation also exposes the company to negative publicity. This may be worse in case the company is found to be against the law in its act and the court rules against the company (Shihata,  1996). The situation may even be worse in case the case is related to safety measures and the complaint is one of the client or the FDA. In such situation, the company runs a risk of seizures, or losing a huge number of customers due to broken trust, and the fear of harm. This will definitely affect the face of the company in the market. To reduce these risks, the managers in cosmetic companies must consider obeying all legal regulations employed to govern the industry. More attention should be employed on the product safety and branding to ensure that the competitors do not use the company’s weaknesses to their disadvantages. This will limit the chances of dispute between the company and its customers or between the company and the FDA.

Global Dispute from Cosmetic Business

The most recent cited dispute in cosmetic industry regards trademark issue between Kroma Makeup EU and Boldface Licensing and Branding Inc. over Khroma makeup line owned by Kardashians. The Kroma Makeup EU sued Kardashians and Boldface for infringement of trademark. The Kardashians considered settling the case through arbitration though the request was denied. Arbitration refers to a process where in a clash is submitted, by parties agreement to one or more arbitrators that make an obligatory decision regarding the dispute. By opting for arbitration, the disputing parties chose to have a private procedure for dispute resolution rather than going to court.

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This is a more preferred procedure since it is considerably cheaper and faster compared to traditional litigation. In addition, it lowers the level of negative publicity that can come hand in hand with prolonged legal battle between two prominent cosmetic companies. The settlement is considerably fair where a balance is maintained. This is contrary to court litigation where the losing party carry huge financial burden of compensating the other party and taking care of individual legal cost. Arbitration ensures that the problem is fairly settled in a friendly manner. Arbitration is therefore the most preferred form of disputes settlement in business disputes since it eliminate the high risks that one can suffer by going through a lengthy court battle, negative publicity, and the possibility of paying high compensation to the winning party (Carneiro, et al.,2014).

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