Legal Aspects of International Trade and Enterprise - Procter & Gamble

This report analyzes the legal challenges faced by Procter & Gamble in the international trade and enterprise industry. It examines the impact of legislative regulatory frameworks and treaties on the company's operations and products.

Legal Aspects of International Trade and Enterprise
Procter & Gamble

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Executive Summary
The operations of multinational companies are subject to the application of different
legislative provisions that apply to their operations to make sure that they did not violate
their duties. In this report, the Procter and Gamble Company is selected to understand the
legal challenges faced by the company. The industry of the company is analysed along
with its staff members that manage its operations in Australia and worldwide. The impact
of the legislative regulatory framework on the operations of the company is also analysed
in this report. This report also evaluated how the terms of treaties, conventions and
agreements affect the operations of the company while handling its processes overseas.

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Table of Contents
Introduction............................................................................................................................3
Legislation Regulatory Framework for P&G..........................................................................3
Impact of Treaties, Conventions and Agreements on Products and Services of P&G.........5
References.............................................................................................................................8

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Introduction
The Procter and Gamble Company (P&G) is an American multinational corporation that
was founded in 1837; the company operates in consumer goods industry, and it is
specialised in a wide range of personal care and hygiene and health/consumer health
products (PG, 2019). The products offered by the company include cleaning agents,
beauty care products, personal care products, and personal healthcare products. The
company also offers services to its customers regarding the use of its products. In
Australia, the company has established its operations through its subsidiary Procter &
Gamble Australia Pty Ltd. The headquarters of the company is situated in Cincinnati, Ohio,
US and it offers its products across the globe. The company has hired more than 95,000
employees that are responsible for managing its operations relating to distribution,
manufacturing, producing, packing and marketing its products (Brunsman, 2017). The
number of employees of the company in Australia is limited to 400 workers (Marketing
Mag, 2012).
Legislation Regulatory Framework for P&G
Since P&G is a multinational company, it is bound by a range of regulatory provisions
which are implemented by the government to make sure that the company fulfils its
obligations towards its employees, customers and other stakeholders such as the
environment, government and creditors. In Australia, various legislations are implemented
by the government with an objective to protect the interest of stakeholders of the company
(Hillary, 2017). These provisions include guidelines that are applied to the operations of
multinational as well as domestic companies to make sure that they effectively discharge
their duties. Organisations that engage in any practices that resulted in a violation of these
resources leads to penalties or imprisonment for officials that engaged in those practices.
Thus, P&G and its members are bound by the guidelines issued by the Australian
government to ensure that the company did not negatively affect the interest of its
stakeholders. As per these provisions, guidelines are given for the company to pay tax on
the profits which it generates in Australia. This tax is compulsory to be paid by the
company to make sure that it discharges its tax obligations in the country which is crucial
to avoid legal penalties (Vegh and Vuletin, 2015).
Currently, the taxation laws in Australia are favourable for foreign companies since the
government wanted to support multinational companies in Australia. For example, the rate

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of tax for companies is 30 per cent. As per this rate, P&G is required to pay tax on the
profits from its operations that are situated in Australia. The company is also bound to
make payment for the Goods and Services Tax (GST) in Australia. The rate of this tax is
currently fixed by the government at 10 per cent (Treading Economics, 2019). This rate is
imposed on all the products and services that are offered by the company to its customers.
Along with the taxation obligations, the government has also imposed fair trading policies
in the country. These policies are implemented by the government to make sure that major
corporations did not unfairly treat or eliminate small businesses out of the market. The
economic growth of Australia is supported by small businesses; therefore, the company
has implemented fair trading laws under the Fair Trading Act 1992. As per this act, various
provisions are imposed on P&G to make sure that it fairly trade in Australia without
affecting the level of competition in the country. These guidelines enforce the company to
make sure that it did not engage with other major brands or force small businesses to shut
down their operations (Roodposhti, Abadi and Sedghi, 2012).
It basically prohibits the organisation from gaining a monopoly in the market which could
be detrimental for the economic growth of the country. Along with these guidelines, further
competition law provisions are also recognised by the court in the act titled the
Competition and Consumer Act 2010 (Cth). This is a major act in Australia that is
amended by the government to promote competition in the country while recognising basic
rights of customers (Parker and De Costa, 2015). There are two sections given under this
act each of which deals with different provisions. For example, provisions regarding the
promotion of competition in the country are given under schedule one of this act. As per
this schedule, P&G cannot engage in any practices which are considered as anti-
competitive. Actions can be taken against the company by the Australian Securities and
Investments Commission (ASIC). In the second schedule, the provisions regarding
recognition of consumer rights are given. These provisions are mandatory to be followed
by the company to make sure that it did not violate any consumer rights while conducting
its operations. Under section 18 of this schedule, provisions are given regarding false and
misleading representations made by a company regarding its products or services (Parker
and De Costa, 2015). Thus, P&G could face financial obligations in case it made false or
misleading claims regarding its products or services to its customers.
Along with the competition and consumer protection laws, P&G is also subject to
employment laws in Australia. These laws are implemented by the government with an
objective to protect the interest of employees from unfair practices. Various provisions are

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included by the government under the Fair Work Act 2009 that are targeted towards
ensuring that the company did not violate the interest of its employees by exploiting them
(Harpur, French and Bales, 2012). Guidelines are given in this act regarding maximum
working hours which are necessary to be followed by P&G. The company cannot enforce
its employees to work for more than 38 hours in a week. In order to hire employees to
work for more than 38 hours, the company has to include these terms into the employment
contract with the employee which cannot be enforced. The employee who agrees to work
for more than 38 hours has the right to receive additional pay for the work other than the
basic pay (Harpur, French and Bales, 2012). Furthermore, this act also provides guidelines
for the company regarding minimum wage. Hiring an employee for pay below the minimum
wage is considered as illegal based on which legal penalties can be imposed on P&G.
Thus, the company has to comply with these legislative requirements in Australia to avoid
legal consequences.
Impact of Treaties, Conventions and Agreements on Products and
Services of P&G
Since P&G is a multinational company, it did not solely manage its operations in Australia.
There are many other countries in which the company manages its operations; therefore, it
is affected by the treaties formed between the two nations. There is a substantial impact
on the products and services of P&G when it manages its operations in a country which
has a friendly trading relationship with its home country. Furthermore, it also becomes
easier for the company to expand its operations in new markets when another country has
a positive relationship with a country in which P&G already operates (Rajec, 2014). Thus,
treaties, conventions and agreements affect the offerings of P&G by making it easier for
the company to offer its products and services in different countries without increasing
their prices of reducing their quality. This can be understood by evaluation of the treaties
that are constructed between the home country of P&G and Australia. Since P&G is a
major America brand, the positive trading relationship between Australia and the United
States resulted in positive affecting its products and services. The company finds it easier
to export its products to Australia due to the treaty formed between these two countries.
For example, these nations have formed a double tax treaty with each other which benefits
the operations of P&G (Becker, Reimer and Rust, 2015).
The products or services which P&G offers in Australia are taxed by the Australia
government; however, when the company sent such profit back to its home country, then

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the government also imposed taxes on such profit. However, this issue is resolved by the
double tax treaty. Now the profit generated by P&G is only taxed one time in Australia
which positively affects the products and services of the company (Becker, Reimer and
Rust, 2015). The company did not have to increase the prices of its products in Australia
since it did not face challenges relating to the payment of tax which makes it easier for the
company to avoid complex taxation policies. Another relevant treaty that benefits the
products of P&G is the Free Trade Agreement (FTA) that is formed between Australia and
many other countries. These countries include the United States which is the home
country of P&G due to which the company is able to effective export or import its products
without facing legal issues. Australia – United States FTA (AUSFTA) is a key treaty that is
formed between these nations to promote trading practices. Under this agreement,
provisions are implemented to remove tariff, duties and other barriers that made it difficult
for companies to expand their operations in these countries (Kirchner, 2012).
Under this agreement, the Australian government has removed the imposition of high tax
or tariff on the products of American companies due to which P&G’s products are offered
at affordable prices in Australia. Along with the removal of duties, various strict and
complex legal formalities are also removed by the Australian government which also
benefits P&G in offering effective services to its customers without dealing with bylaws or
regulatory standards (Kirchner, 2012). Furthermore, P&G offers some of its products in
New Zealand through its subsidiary distribution company and the treaties formed between
Australia and New Zealand affects the products of the company. For example, both the
countries are parts of ASEAN-Australia-New Zealand FTA under which they have
established a free trade area for companies. P&G is able to export its products to New
Zealand without facing legal complexities and issues through this free trade area which is
covered under the FTA formed between the two countries. It affects the products and
service of P&G by making them available in the market of New Zealand at cheaper costs
(Gantz, 2016). P&G also operates in China and the company exports many products to the
Chinese market for its customers. Thus, the company benefits by the treaty that is formed
between the Australian and Chinese government titled China-Australia FTA (ChAFTA).
Due to this treaty, the company is able to export its products through Australia to China
without facing tariff, duties or charges which it has to otherwise pay during the export.
Since the government of China is strict against foreign companies, P&G is able to
eliminate all the legal complexities and laws due to the FTA formed between the two
countries. This affects the products and services of the company since it did not have to

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increase the rate of its products since tariff and duties are not imposed on them (Ware,
2016). The company is able to sustain its profitability while operating in these major
markets due to the treaties and agreements which these countries have formed with each
other. These have a positive impact on the products and services of the company by
making them easily accessible to its customers without increasing their prices. Due to
these agreements, the company becomes a global brand which is recognised worldwide,
and it has also achieved a high rate of profitability from its operations due to avoidance of
the payment of tariff, duties or charges. Thus, it contributes to the overall growth of the
company as a whole by increasing the customer base for its customers.

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References
Becker, J., Reimer, E. and Rust, A. (2015) Klaus Vogel on Double Taxation Conventions.
Netherlands: Kluwer Law International.
Brunsman, B.J. (2017) P&G's 2017 by the numbers. [Online] Available from:
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[Accessed on 27/04/2019].
Gantz, D.A. (2016) The TPP and RCEP: Mega-Trade Agreements for the Pacific
Rim. Ariz. J. Int'l & Comp. L., 33, p.57.
Harpur, P., French, B. and Bales, R. (2012) Australia's Fair Work Act and the
Transformation of Workplace Disability Discrimination Law. Wis. Int'l LJ, 30, p.190.
Hillary, R. ed. (2017) Small and medium-sized enterprises and the environment: business
imperatives. Abingdon: Routledge.
Kirchner, S. (2012) Foreign direct investment in Australia following the Australia–US free
trade agreement. Australian Economic Review, 45(4), pp.410-421.
Marketing Mag. (2012) P&G to cut 1600 staff after CEO discovers digital media is free.
[Online] Available from: https://www.marketingmag.com.au/news-c/pg-to-lay-off-1600-staff-
after-ceo-discovers-digital-media-is-free/ [Accessed on 27/04/2019].
Parker, C. and De Costa, J. (2015) Misleading the ethical consumer: The regulation of
free-range egg labelling. Melb. UL Rev., 39, p.895.
PG. (2019) Our Brands. [Online] Available from: https://us.pg.com/brands/ [Accessed on
27/04/2019].
Rajec, S.R.W. (2014) Free Trade in Patented Goods: International Exhaustion for
Patents. Berkeley Tech. LJ, 29, p.317.
Roodposhti, G.A., Abadi, J.R.H. and Sedghi, S.M. (2012) Nature of Archly
Competition. International Journal of Academic Research in Business and Social
Sciences, 2(10), p.337.
Trading Economics. (2019) Australia Sales Tax Rate - GST. [Online] Available from:
https://tradingeconomics.com/australia/sales-tax-rate [Accessed on 27/04/2019].

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Vegh, C.A. and Vuletin, G. (2015) How is tax policy conducted over the business
cycle?. American Economic Journal: Economic Policy, 7(3), pp.327-70.
Ware, H. (2016) Abbott's immigration policy: Open for business. Social Alternatives, 35(2),
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