Government Intervention: Legislation
When it comes to legislation, the government has a numerous amount of ways that it can intervene and alter the way in how Firms operate, what they sell etc.. From creating laws that introduce price limitations to limiting how much power a particular firm has, the government has a lot of power when in regard to legislation.
When considering government intervention via legislation with Woolworths, introducing a law that limits the market power that Woolworths has can have many interesting affects, both in the short and long term.
For example, if the Australian government were to introduce a law that stated that a firm was only allowed to control up to 40% of the supermarket industry, there would be huge ramification for Woolworths, as they would be unable to increase their size in regard to profit, and if they were originally over the 40% limit, they would have to sell off some of their shops and producers that they own etc. to make sure they are under the new limit.
The introduction of a law regarding the removal of a liquor licence, or the removal of any licence for that matter, would also have huge implications for Woolworths due to the number of retail chains that they already own. If they were to lose any licence, a decrease in profit would most likely ensue, and in the long run Woolworths would have to start regaining its profit loss in some other area of retail. Finally, the introduction of a price floor or ceiling would cause multiple issues as discussed before under the topic of price ceilings and floors, leading to a positive result for the government.
When considering government intervention via legislation with Woolworths, introducing a law that limits the market power that Woolworths has can have many interesting affects, both in the short and long term.
For example, if the Australian government were to introduce a law that stated that a firm was only allowed to control up to 40% of the supermarket industry, there would be huge ramification for Woolworths, as they would be unable to increase their size in regard to profit, and if they were originally over the 40% limit, they would have to sell off some of their shops and producers that they own etc. to make sure they are under the new limit.
The introduction of a law regarding the removal of a liquor licence, or the removal of any licence for that matter, would also have huge implications for Woolworths due to the number of retail chains that they already own. If they were to lose any licence, a decrease in profit would most likely ensue, and in the long run Woolworths would have to start regaining its profit loss in some other area of retail. Finally, the introduction of a price floor or ceiling would cause multiple issues as discussed before under the topic of price ceilings and floors, leading to a positive result for the government.