Introduction
This paper discusses the effectiveness of alcohol marketing regulation, and how it can protect the consumer from fake products. This topic draws inspiration from recent events. A twenty one year old student, almost went blind due to the consumption of fake vodka.
The vodka consumed was sold to him at a club. This essay seeks to establish how such cases, can be prevented through regulations. To accomplish this, product quality control regulations and marketing regulations must be discussed.
The cause of the event is market failure, caused by poor dissemination of information. The popular way of disseminating information to the market is through marketing (Collins et al 2004).
Discussion
The other instance during which the government may engage regulation, is when the goods produced to cater for the lower income earning market segment, are of questionable quality. The quality of health care, for example, should not differ depending on one’s financial capability.
The foodstuffs and any consumable products, must be of satisfactory quality to prevent the outbreak of diseases and epidemics among the citizens. In this case, the government has the duty to ensure that its citizens get quality products by setting benchmarks on the quality of products sold in the market place. These regulations affect the market forces by placing restrictions on the price (Estevao 2005).
Generally, the quality of goods and services is directly related to the price. An increase in the quality of a product or service, increases the cost of production. The producer then passes the incremental costs to the consumer, in order to make a profit.
Consequently, the quality of a product increases commensurate to the price set on the product. There are specific authorities in each country, in charge of setting the quality standards for the products at the market place, as well as ensuring that the restrictions set by the government are obeyed.
The institution has the mandate to inspect places of work, and production factories, carry out surveys of goods in the market, test and approve the products in the market, and to persecute those found to be in breach of the set regulations (U.S Preventive Services Task Force 2005; Gunther 1980).
On a macro-economic level, restrictions affect production of goods and services by existing producing companies. The regulations go deeper to affect the rate of growth in productivity, by affecting the motivation for innovation, consequently interfering with the rate at which new goods and services replace the old (Kaplan 1980).
The market failure due to poor dissemination of information, is clearly evident in the case study. A young student went out to have fun in a club. At the age of twenty one, the student is beyond the legal age limit for alcohol consumers. This means that, this was not the first time drinking, and the student had a favorite brand of vodka. Therefore, there are the following assumptions drawn up from this case:
- The bar tender may not have been aware that the vodka was fake.
- The bar tender and student were not aware that there were fake vodka products in the market.
- The quality control authority was aware but did not disseminate the information.
- The quality control authority was not aware and did not conduct their regular inspections.
According to the story, the fake vodka was in a Smirnoff bottle, and earlier that day, the quality inspector checked the inventory on the counter and found that it was all genuine. The unsuspecting student purchased the vodka and took a third of it. She remained in bed for a period of two days.
The quality regulator cannot say that he had no news of the counterfeit vodka. The story further explains that Sarah’s case was not the first that the hospital casualty section had treated.
These events cast doubt on the accountability of the quality control regulator and calls for the development of a marketing regulator. The case was well investigated and the bar tender was charged a fine (Jarvis 1992; Howells & Weatherill 2005).
Based on the above assumptions, one cannot ignore the importance of having a strong and active regulator. The regulating body must have five qualities for it to work well. The first is that it must have the backing from a legislative authority.
This means that the regulator should have support from organizations that have legislative authority. The authority is formed through an act of parliament. In this case, the vodka incident ought to unify the people so that they develop the marketing regulator and the quality regulator, through an act of parliament.
However, if these regulators exist, they ought to have an audit done, in order to establish whether they are performing their legislative mandate. In this case, it is likely that the regulator failed to fulfill its legislative mandate. It is thus not in a position to request for public support.
The regulator has statutes that limit their powers to exercise judgment and produce solutions The accountability of the regulators must be proficient. However, the regulators are under the act of parliament, and in most cases, they have been found unaccountable.
This is because the regulator is accountable to the parliamentarians, who are the same people who control it. If indeed there was a regulator well aware of the fake vodka, it is possible that they hid the information intentionally, so as to protect the interests of a member of the democratic institutions that control it.
The value of accountability is remarkably clear (Wasik 1995). The due process receives public merit, when it is transparent, fair, open to all, and easily accessible. In the development of a marketing regulator, the public must ensure that the due process followed has the traits above (Wolfe & Laurie 2004).
Regulators require expert advice and knowledge before passing a verdict. A balanced decision based on sound knowledge of the situations, will aid in evaluating the best course of action. The case at hand, requires research into the contents of the drink and the possible effects of consuming the fake vodka.
The regulator also requires marketing experts, who develop the best methods of informing the public about the difference between the original vodka and the fake vodka.
The quality regulator could require services of expert investigators, who will track down the manufacturers of this counterfeit vodka and other products in the market. The regulator must use the fewest resources possible to achieve the best results.
The efficiency of the regulator to perform, is directly related to factors such as the legislative mandate and accountability (Schiantarelli 2005). There is a variety of regulations to choose from, and the first one is self-regulation.
This happens when individuals or organizations, which have a common interest, come together to form a body, which is charged with a mandate to control the members. This is witnessed among professional bodies and sports associations. An outstanding example is FIFA.
Self-regulation overcomes various challenges encountered in governmental regulation. The regulator enjoys more autonomy and has clear accountability about how it works. The regulator does not hold any immunity to consequences, resulting from not performing its legislative mandate.
Self-regulators have a vast pool of experts in their area of relevance. This does well in the performance of its mandate. The participating bodies may agree that each, shall provide experts to work in the regulator, hence securing professionalism. The effect of all the afore mentioned positive aspects of self-regulators, is better than that of the government regulator.
In the case at hand, the club owners and bar owners can team up with the alcohol distributors, to form a self-regulator. The purpose of the regulator will involve the regulation of alcohol quality in the clubs and bars. The regulator will be accountable to the participating parties, since it’s there to protect their interests.
The organization has a pool of experts to select regulators. This makes the body exceptionally competent and efficient in performing its duty. The efficiency of the regulator will obviously depend on various factors. The main one is the legislative mandate. The proper mandate gives the regulator power to perform its duties.
The aggrieved parties in the case study have another option. They may choose to form enforced self-regulation or Meta regulation. Enforced regulation, involves the subcontracting of the regulator duties to organizations that already have a regulator. The subcontracted duties include making the rules, punishment and correction of those in breach, and keeping watch on compliance.
This type of arrangement would do well for the community. The members of the society can join to form a regulator. The main purpose of this regulator is to regularly check on the quality of the consumer products in the market.
The duties that the regulator can subcontract include punishing those in breach and research and testing services. This form of regulation by the community is instrumental in preventing the occurrence of adverse incidents. Even though the community regulator is established, the government regulator, despite the shortcomings, is still helpful to its citizens.
To achieve the best possible results from regulators, organizations must concoct a delicate mix of the institutions and the tools used in regulation.
The organizations should identify their tools and then organize them in order of importance or urgency for use. This is called sequencing of instruments. The extraction of the instruments for application ranges from the least effective to the most effective depending on the difficulty of a situation.
Complex forms of regulators come up from time to time. There are no rules that prevent the combination of several regulators to create an effect called a network. In fact, the regulatory body for the bars and clubs association, can combine with the community regulator.
The two bodies have similar interests and can consequently easily merge into a network. The benefit of this form of the union is evident in the efficiency with which regulation is done. The organizations together, cover a wide range of issues, particularly, market controls and the quality control, for ensuring accountability to the organizations that formed it.
In some cases, the self-regulators join hands with the government regulators (Previts 2007; Sherman 2008). The regulators have various qualities. Good market regulation has the following criteria:
- Backing and support from a legislative body.
- Good accountability framework.
- Open, fair and accessible procedures of operation.
- Experts and professional regulators.
- Importance and purpose for the regulation.
The above criteria, are paramount in setting the benchmarks for a relevant and functional regulator. The regulator must have a means of measuring the quality of regulation, and producing regulatory improvement strategies, bodies and tools (Barrett & Herbert 1994).
Conclusion
The forces of demand and supply, play a vital role in shaping the operations of the market place. The demand for a commodity, determines the eventual production, facilitating pricing choice by the market, and ultimately, passing a strong verdict on the longevity of the products’ demand in the market.
In the course of all these, comes competition between the suppliers, who are producing the same product or a substitute for these products. The competition, affected by market forces of demand and supply, go on to lead to the formation many market structures.
The manner, in which competitors fight for the clients, ranges from a monopolistic market to an oligopoly. In most cases, the market forces balance out, to the favor of the competitors and suppliers. However, the poor people, end up lacking the ability to obtain these products.
The basic needs, such as clean drinking water, food and education, become a preserve of those who have money in society. The country has a solemn duty to protect its members and to ensure that the basic human rights are maintained in accordance to the country’s constitution.
When basic amenities are not affordable to a vast majority in society, the nation is failing to carry out its duty. The leaders, who were selected by the same people who are now suffering, have to intervene.
Similarly, competition amongst individuals in the market in which demand and supply work to set the prices of commodities, can lead to the production of cheaper commodities that can be afforded by the majority of low income earning class of society.
The bone of contention here, is that the product is the quality of the cheap product. Often, when the market is allowed to run normally, moments happen when the demand outstrips the supply. As a result, the price of commodities in question increases commensurately.
The effect of this, is that a big portion of clients, get locked out because they cannot afford to buy this product or service. The products that are often highly demanded by the clients are basic amenities such as food, shelter, clean water, electricity, transport, education, and legal services.
Due to the nature of society, a growing population causes increased demand for these products. In the process, they become increasingly expensive. This often causes a large part of the population to miss these vital goods and services.
At this point, it is crucial for the government to set some rules governing the market dynamics that concern such products. The government can do this in several ways. However, the most effective is when the producers are not coerced into reducing the prices, but when both the government and the producers are in understanding about the need to set regulations, on the prices of the goods they produce.
In many cases, this is by the provision of tax cuts and subsidies to the producers, in a bid to have them reduce prices. Otherwise, the economy suffers from market failure. However, the main reason for many regulations is market failures.
There are various rationales behind the reason for market failure. The first one is the monopolies and natural monopolies. The situation in which only one producer is producing a specific commodity in the market due to the following factors:
- The commodity in the market is unique, causing it to lack a substitute commodity.
- Only one seller is supplying the commodity in the market.
- There exist barriers to prevent new entrants into the industry, and those in it, already have difficulties getting out.
Monopoly causes market failure due to the lack of proper competition. As a result, the public suffer because the industry player can choose to maximize profits at the drop of the hat. The company with monopoly has the ability to control supply and demand forces in the market.
When the company chooses to reduce production and raise the price of commodities, income shifts from the consumer to the producer. The solution to this is creation of competition laws, which balance out and control the market by introducing competitors.
This solution is especially effective, in resolving natural monopoly. The situation in which the production of a commodity is by one main company, due to the cheap cost of production, is referred to as economies of scale.
The establishment of competition law on its own is not enough, and could cause problems in the quality of output. There is thus need to combine this with price and quality control regulations.
The regulators set the price of the commodity around the incremental cost to encourage the monopolizing producer to increase production to a certain predetermined level. In effect this mimics the effect of having another competitor in the market.
The other market failure is windfall profits. This situation allows a producer to encounter minimal costs through discovering a cheap supply of raw material, or a less costly production process. The other market payers do not have the same advantage and in the process, one producer ends up making more profits that all the others.
Regulation takes place when the sudden escalations in profits require to distribution so that the public also benefits through taxation. The third market failure is externalities. This occurs when the price of producing a product does not take into account the effects on the society by producing that commodity. This leads to too much consumption.
These regulations especially seek to regulate pollution caused by large manufacturing companies. The regulations encourage the producers to factor in the cost of cleaning up pollution caused by them, into the selling price of the commodity.
A principle called “polluter pays”. Information inadequacies are market failures cased when the consumers lack crucial information leading to malfunction of markets. The dissemination of information is especially valuable for the production of food products and medicines.
The consumer must remain informed about the side effects of ingesting the product. Companies abscond to do this due to various factors, key being that the cost of researching into the side effects is high.
Other market failures include; continuity and availability of service, anti-competitive behavior and predatory pricing, public goods and moral hazard, unequal bargaining power, scarcity and rationing, rationalization and coordination, and poor market planning.
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