Fair Trade Laws Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Fair Trade Laws, written in plain English, along with examples of how it is used.

What is Fair Trade Laws?

History and Meaning of Fair Trade Laws

Fair trade laws refer to regulations stipulated by the government on the pricing of goods based on the manufacturer’s price. These laws are meant to ensure fair competition amongst businesses by preventing large companies from forcing retail businesses to purchase their products at high prices, thus reducing prices for consumers. It is important that businesses stay afloat, and these laws aim to help small businesses or new entrants to industries get their footing, prices set by manufacturers can sometimes be too high for these businesses, which can lead to bankruptcy. By applying fair trade laws, the government sets limitations on the prices manufacturers can set. These laws help ensure the survival of small and relatively new businesses by making sure they have access to affordable products that can attract customers.

The concept of fair trade dates back to the 1940s when it was first introduced in the United States. The idea was to give consumers a market for importing goods from developing countries for fair prices. The fair trade laws we are familiar with today, however, emerged between the 1960s and 1980s when they were commonly used to control the sales of products in the framework of agricultural trade.

Examples of Fair Trade Laws

• In the United Kingdom, The Groceries Code Adjudicator enforces codes of fair dealing in the grocery supply chain. This ensures that large and powerful goods suppliers do not harm small business owners.

• In the United States, there are Anti-Price Discrimination laws in place to prevent large companies from setting different prices for different customers. This ensures that small companies or new entrants pay the same price established businesses pay, mitigating discrimination that large companies may cause.

• In Ghana, cocoa farmers can benefit from fair trade laws in that they are guaranteed a fair price for their crop. this is made possible through the Ghana Cocoa Board, which gives farmers access to a market for their products at an agreed price that isn't subject to exploitation.

Legal Terms Similar to Fair Trade Laws

• Anti-Price Discrimination laws: These regulations prohibit manufacturers, distributors, or retailers from treating customers differently or setting unjustified discriminatory prices for similar goods.

• Anti-Racketeering Laws: These are laws that combat organized crime by investigating and prosecuting individuals or groups engaging in extortion, embezzlement, bribery, or other forms of illegal business practices.

• Foreign Corrupt Practices Act: This act prevents individuals and companies from bribing foreign officials to obtain or retain business deals, which could have an impact on fair trade.

• Consumer Protection Laws: These laws aim to protect consumers from fraudulent, deceptive, or unfair business practices by businesses.