Consumer protection

Although the legal control of monopolies and restrictive practices now has a fairly long history, the idea that govern­ment should provide organizations for a general oversight of consumers' interests is relatively new. The Fair Trading Act of 1973 made the Director-General of Fair Trading respon­sible for safeguarding the interest of consumers. He propos­es new laws to end unfair trading practices, encourages trade associations to produce codes of practice for member firms to follow when dealing with consumers, and deals with manufacturers and traders who persistently indulge in unfair practice. In this matter he is assisted by a Consumer Protection Advisory Committee (CPAC) whose functions are to investigate undesirable trading practices referred to it by the DO FT and to consider his proposals for dealing with the practices. The types of unfair practice with which the CPAC is concerned are those which:

(a) mislead consumers about the nature, quality, or quantity of goods involved in a transaction;

(b) mislead consumers about their rights and obliga­tions;

(c) subject consumers to undue pressures to buy;

(d) cause the terms or conditions of sale to be so adverse as to be inequitable.

If the CPAC is satisfied that the practice adversely affects consumers and agrees with the DGFT's proposals, the Secretary of State can make an order banning the practice.

The work of the CPAC and the Director-General has resulted in many codes of practice being adopted by various trade associations (e.g. the servicing of electrical appliances, mail order trading, laundry and dry cleaning services, pack­age holidays and footwear retailing). The Office of Fair Trading has also investigated many other practices (e.g. advertising, door-to-door selling and one-day sales) and has obliged many individual companies to give undertakings to modify their business practices. The DGFT also has important responsibilities as a result of the consumer Credit Act of 1974. Under this Act all businesses involved in the granting of credit or the hiring of goods (including hire purchase) to individuals, sole traders or partnerships require a license from the DGFT. An important aim of the legislation is that the consumer should be given sufficient information about the credit being offered and its true cost. A court may be asked to reopen a credit agreement which is deemed to be extortionate and a consumer is also given the right to complete payment of hire purchase or credit agreements early and obtain a rebate of the credit charges.

PART III

GLOSSARY

Accrual Based Accounting. An accounting method whereby income and expenses are entered on the books at the time of contract or agreement rather than at the time of payment or receipt of funds.

Barriers to Entry. Those conditions that make it difficult or impossible for new competitors to enter the market: two barriers to entry are patents and high start-up costs.

Board of Directors. The members of the governing body of an incorporated

company.

Capacity. The amount of goods or work that can be produced by a company

given its level of equipment, labor, and facilities.

Capital. The funds necessary to establish or operate a business.

Cash Based Accounting. An accounting method whereby income and expenses are entered on the books at the time of actual payment or receipt of funds.

Cash Flow. The movement of money into and out of a company; actual income received and actual payments made out.

Collateral. Assets pledged in return for loans.

Conventional Financing: Financing from established lenders, such as banks, rather than from investors: debt financing.

Convertible Debt. Loans made to a company that can be repaid with stock ownership (or a combination of stock and cash), usually at the lender's option.

DBA: "Doing Business As... "A company's trade name rather that the name by which it is legally incorporated: a company may be incorporated under the name XYZ Corporation but do business as "The Dew Drop Inn."

Debt Financing. Raising funds for a business by borrowing, often in the form of bank loans.

Debt Service. Money being paid on a loan; the amount necessary to keep a loan from going into default.

Deferred Compensation. Salary delayed until a future date; often taken by principal employees as a method of reducing expenditures in early years of operation.

Disbursements. Money paid out.

Distributor. Company or individual that arranges for the sale of products from manufacturer to retail outlets; the proverbial "middle man."

Downside Risk. The maximum amount that can be lost in an investment.

Due Diligence. The process undertaken by venture capitalists, investment tinkers or others to thoroughly investigate a company before financing; jittered by law before offering securities for sale.

Equity. Shares of stock in company; ownership interest in a company.

Exit Plan. The strategy for leaving an investment and realizing the profits of such investment.

Funding Rounds. The number of times a company goes to the investment community to seek financing; each funding round is used to reach new stages company development.

Initial Public Offering: IPO. The first time the company's stock is sold to the neral public (other than by a limited offering) through stock market or over-the-counter sales.

Lead Investor. The individual or investment firm taking primal responsibility for the financing of a company; usually brings other investors or venture capital firms into the deal and monitors the investment for all.

Leasehold Improvements: The changes made to a rented store, office, or plant, to suit the tenant and make the location more appropriate for the conduct of the tenant's business.

Letter-of-Intent. A letter or other document by a customer indicating the customer's intention to buy from a company.

Licensing. The granting of permission by one company to another to use its

ducts, trademark, or name in a limited, particular manner.

Limited Partnership. An investment method whereby investors have limited liability and exercise no control over a company or enterprise; the general partner(s) maintain control and liability.

Liquidity. The ability to turn assets into cash quickly and easily; widely traded stocks are usually a liquid asset.

Manufacturing Companies. Businesses which make products from raw or unfinished materials generally to be sold to intermediaries (such as stores and dealers) rather than the end-user.

Market Share. The percentage of the total available customer base captured by a company.

Milestone. A particular business achievement by which a company can be judged.

Net Worth. The total ownership interest in a company, represented by the excess of the total amount of assets minus the total amount of liabilities.

Options. The right to buy stock in a company at a later date, usually at a present price; if the stock rises higher than the original price, an option holder is likely to exercise these options.

Partnership. A legal relationship of two or more individuals to run a company.

Profit Margin. The amount of money earned after the cost of goods (gross profit margin) or all operating expenses (net profit margin) are deducted; usually expressed in percentage terms.

Proprietary Technology or Information. Technology or information belonging to a company; private information not to be disseminated to others.

Receipts. Funds coming in to the company; the actual money paid to the company for its products or services; not necessarily the same as a company's actual revenues.

Sole Proprietorship. Company owned and managed by one person.

Strategic Partnerships. An agreement with another company to undertake business endeavors together or on each-other's behalf; can be for financing, sales, marketing, distribution, or other activities.

Venture Capitalist. Individual or firm who invests money in new enterprises. Working Capital. The cash available to .the company for the ongoing operations of the business.