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Chapter 6: Protecting Supplier Interests through English Company Law
Christopher Ruane Company law and supplier protection Imagine a scenario in which S supplies a product or service to P. This transaction will possess many contractual characteristics, whether or not any legal contract in fact exists. Let us assume for simplicity that efficient market theory holds true. If both S and P contract voluntarily, we may characterise their transaction as efficient. To regulate the transaction, it must be contended that the transaction contains imperfections, despite its efficiency. This contention may employ the policy argument that mere efficiency is an inadequate normative benchmark for such transactions (Cheffins, 1997: 142–57). Alternatively, it may involve a more specific critique of the bargain struck. Perhaps, for example, threatened transaction costs led to gaps in the terms of the transaction, which only a regulator using a hypothetical bargaining model could fill efficiently (ibid.: 264–307). One response would be self-regulation. For example, a supplier who achieves efficient pricing through low-wage production may voluntarily agree to a code of practice regulating his employment practices. The relational nature of much business transacting may in itself allow for a degree of supplier protection. An alternative is legal regulation. As a response to the incomplete contracting identified above, this could apply on either side of the transaction. Suppliers and purchasers may each suffer from contractual gaps. Thus, purchaser protection may provide a valid justification for regulation. The scope of the present chapter, however, is limited to supplier protection. Law may be able to remedy such incompleteness of the...
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