What Is Business Law? Exploring the Importance for Companies

Modern businesses must navigate a complex web of laws and regulations. These rules provide a clear and level playing field, promote fair business dealings, and provide a framework to resolve disputes that may arise. Business law also protects consumers, the environment, employees, and shareholders from harmful or unfair practices.¹

Companies that fail to comply with relevant laws can face steep penalties and damage their reputation. For example, engine manufacturer Cummins was required to pay a $1.675 billion civil penalty after it violated the Clean Air Act by illegally installing emissions control software.² Similarly, the aircraft manufacturer Boeing will face sanctions after leaking confidential information about a federal safety investigation of its planes.³

If you’re interested in a legal career, it's essential to familiarize yourself with business law and its importance. This article explores common types of business law, applications, and notable cases.

What Is Business Law? 

Business law is a broad term that “encompasses the rules and regulations dictating how to form and operate a business.”⁴ Many legal areas fall under the umbrella of business law, including:⁴

• Antitrust laws 
• Business succession planning 
• Contracts 
• Employment laws 
• Environmental protection 
• International business law
• Mergers and acquisitions 
• Securities 

The history of business law in the United States stretches back to the early 1800s, and before, as the basic common law concepts came over from England. Here are a few key milestones:⁵

• 1819: Massachusetts established the first set of business laws in America
• 1930s: A series of lawsuits led to the creation of the Fair Credit Reporting Act, the Federal Trade Commission Act, and other consumer protection laws
• 1952: The Uniform Commercial Code to govern commercial transactions across all states was published

Today, many colleges and universities teach the principles of business law. Curricula vary by institution but often cover constitutional law, contracts, property, tax regulation, and torts.

Types of Business Law 

Legal professionals can specialize in many types of business law:⁶

• Corporate law focuses on the legal aspects of forming, structuring, and operating a business 
• Contract law revolves around the creation and enforcement of cross-border and domestic agreements between businesses and individuals 
• Employment and labor law defines the rights and responsibilities of employers and employees in work environments 
• Intellectual property law governs the use of creative ideas and products 
• Antitrust law encourages fair competition and prohibits the formation of monopolies 
• International business law refers to policies and regulations that regulate trade across national borders 
• Tax law focuses on reducing tax liabilities and compliance with tax laws 
• Consumer protection law protects customers from deceptive sales practices and dangerous products 

Importance of Business Law

Business law offers several benefits for companies and their stakeholders, the public, and society at large.

First, it promotes ethical conduct. Company leaders and employees must use these legal guidelines to inform decision-making and navigate complex issues. For example, the Occupational Safety and Health Act (OSHA) requires companies to provide safe work environments for employees. Similarly, Equal Opportunity in Employment laws mandate that companies have non-discriminatory hiring practices.⁶

Legal frameworks also help businesses operate smoothly. For instance, say two friends decide to launch a company together. They can create a co-founder agreement that defines their rights and splits their equity in the business. This legal document prevents conflict if their relationship deteriorates or the company dissolves. Additionally, robust contracts and intellectual property protections help companies avoid costly legal challenges.⁷

Finally, business laws protect the environment by regulating carbon emissions, development, waste disposal, and other practices. For example, the Clean Water Act prevents companies from releasing pollutants into navigable waters without a permit.⁸ Similarly, the Toxic Substances Control Act regulates manufacturers to report and test certain chemicals that may pose a danger to the environment.⁹

Why Is There a Need for Business Law? 

Business law creates a structured and orderly environment in which companies can operate. These regulations encourage businesses to follow ethical practices and compete fairly.

Many businesses create corporate compliance programs to follow all applicable laws and regulations. These programs establish clear guidelines for ethical behavior and practices. They help employees understand their legal obligations and provide avenues to discuss their concerns. These programs also reduce the risk of non-compliance, which can lead to legal and social sanctions.¹⁰

Additionally, business law provides guidelines for resolving conflicts between organizations, clients, and other business entities. Companies have many legal avenues for handling disputes, including:⁶

• Negotiation: Two parties can work together to make mutually beneficial decisions 
• Mediation: An impartial third party can help disputing parties settle conflicts outside the courts to avoid expensive litigation 
• Arbitration: A neutral arbiter hears both parties’ arguments and decides how to resolve the dispute 
• Litigation: The parties can resolve their conflict in the federal or state court system 

Business Law in Practice

While the federal government implements many regulations, several notable court cases have also shaped the law for business.

Monopoly and Antitrust Case Examples

One significant early case was Standard Oil Co. of New Jersey v. United States. At the turn of the 20th century, the petroleum company controlled approximately 90% to 95% of all oil produced in America. Standard Oil used many tactics to dominate the market, including buying out competitors and selling oil below cost. In 1911, the Supreme Court declared the company an illegal monopoly and dissolved it into smaller companies. This court case established the “rule of reason,” which means that companies can dominate markets as long as they don’t threaten the public interest.¹¹

Overall, businesses must operate in a manner that significantly benefits both the market and public interest to avoid being penalized for monopolistic practices. Professionals should navigate competitive strategies cautiously, ensuring their practices foster a healthy market environment. This often involves compliance with antitrust laws and maintaining ethical standards. The 2001 United States v. Microsoft Corp. antitrust lawsuit underscores these points. In this case, the U.S. brought a complaint against Microsoft for bundling its web-browsing software with its operating system software, creating an unlawful tying arrangement. This bundling practice was found to violate antitrust law.¹²

IP Case Example 

In a 2011 high-profile patent infringement lawsuit between two technology giants, Apple Inc. v. Samsung Electronics Co., the critical role of intellectual property (IP) rights in protecting innovations and competitive advantage was brought front and center. Apple argued that Samsung’s smartphones infringed on Apple’s patents for design elements in the iPhone and utility patents for specific functional elements. The jury sided with Apple, and although there were numerous retrials, Apple was awarded nearly $300 million in damages.¹³

There are a number of takeaways from the outcome of this case. Companies should invest more in research and development (R&D) and secure their innovations through patents. A heightened awareness of the importance of due diligence in IP is also critical to avoid infringement.

Additional Business Law Example 

Another landmark case is Citizens United v. Federal Election Commission. In 2010, the Supreme Court ruled that political spending by corporations is a form of protected free speech under the First Amendment. This case increased corporate involvement in elections by allowing businesses to spend money endorsing political candidates.¹⁴ Professionals, particularly in corporate or public relations roles, professionals should be cognizant of the legal grounds and ethical implications of their company’s political contributions and endorsements.

Master Business Law with the University of Pittsburgh’s Online Law Programs 

Deepen your understanding of business law with Pitt Law’s Online Master of Studies in Law. This flexible program will help you develop a solid foundation in U.S. law and legal procedure. Our asynchronous classes cover a broad range of topics, including the American legal system, legislation and regulation, and torts. You'll expand your knowledge and develop job-ready skills as you learn from experienced legal professors.

Personalize your learning experience by pursuing a specialization or standalone graduate certificate in one of these areas:

• Corporate Compliance
• Health Care Compliance
• Human Resources Law
• International Business Law
• Sports, Entertainment, and Arts Law

If you’re ready to advance your legal career, explore our application requirements. Schedule an appointment with an admissions outreach advisor to learn more, or complete your application today.