How and when can we control Big Business?

Callum Swanston

There are a plethora of large businesses and monopolies in both the Global and UK markets. They can often be corrupt and exploit a number of people for their personal gain. For the good of the consumer, the supplier or the economy, should they be restricted or controlled. Can they be restricted or controlled?

One way in which these dominating companies are able to gain further profit is by exploiting their own company base. This is especially effective when referring to the energy market; because energy is a necessity, and therefore a price insensitive market. Due to the price insensitivity of the service that energy companies such as E.on provide, they are able to exploit the customer not only with misleading information about their service, but also with high and unreasonable prices. For example, E.on removed the ‘stay warm’ allowances. The previous criteria for these allowances were as follows:

  • at least one member in the house is over 60 years of age,
  • there are less than 4 residents in the house,
  • the property must have no more than 3 bedrooms,
  • you pay monthly by direct debit
  • you take both gas and electricity from E.on StayWarm.

Given that the StayWarm service was by far not the cheapest option for energy, the exploitation of those customers with lower incomes should be stopped. Despite this, the UK energy regulator, Ofgem, is unable to directly influence the decisions of any energy companies, only to make suggestions. The only other option that could be used nationwide is to force the shutdown of the corrupt energy companies, theoretically leaving those with good intentions. Unfortunately, if any energy company was closed down due to corrupt behaviour, then the national and perhaps even global supply may decrease, thus further increasing prices.

Although being unable to efficiently control a number of businesses, such as E.on, there are a number of other ways for large companies to be regulated. Increasing corporation tax, a tax on the profits of a business, will lead to companies giving a larger percentage of larger profits to the government. This encourages these businesses to keep profits to a minimum, therefore paying less tax, and having more after-tax profits. In this way, an increase in taxation on profits acts as an incentive to prevent the dishonest trading of corrupt businesses such as E.on.

Another solution to the problem of controlling businesses in a capitalist economy is encouraging competition. Through the use of governmental grants, tax breaks as well as subsidies, new businesses are encouraged to start up in the hope of making greater profits in the particular market, because of the aid provided for these new companies. If this does work, and the influenced market becomes more competitive, then in theory, the larger businesses should decrease prices in an attempt to increase demand and therefore sales for their product or service. This solution may not work in the case of the energy market, because energy is price insensitive, so small alterations in price have minimal effects on demand. This would make it unlikely, especially for the larger companies, to reduce costs because of greater competition.

Allowing, or even encouraging pressure groups to form is another possible way of regulating larger businesses. Pressure groups, such as ‘Tescopoly’  for the supermarket giant Tesco, make the general public, as well as the companies themselves, aware of the issues that are being created, and the effects of those on the company’s consumers. Although these may not be able to solve the problems themselves, pressure groups may act as catalysts; forcing the businesses to change their ways. There is no guaranteed way of changing company policies, and pressure groups may well be ignored.

To conclude, not all large businesses have negative impacts, although a number of them can harm consumers, employees, suppliers and even the economy as a whole. There are a number of methods used to attempt to control or regulate these corrupt businesses, thus creating and sustaining fair markets. Not all big businesses can be controlled however, such as the example of E.on, whom it is difficult to regulate sufficiently.

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