What government regulations affect the fashion retail industry and retail clothing stores in particular?

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Unfortunately, the history of the textile or garment industry, which includes the “fashion” sector within that broad category, is not pretty. In fact, the pejorative phrase “sweatshop” has its origins in the dismal working conditions to which employees of the garment industry were routinely subjected—conditions that can often still be...

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Unfortunately, the history of the textile or garment industry, which includes the “fashion” sector within that broad category, is not pretty. In fact, the pejorative phrase “sweatshop” has its origins in the dismal working conditions to which employees of the garment industry were routinely subjected—conditions that can often still be found today in factories in less-developed countries producing goods for the American market. For this reason, government officials, with prodding from organized labor, imposed a series of regulations on the garment industry intended to improve those working conditions. Consequently, regulations that prohibited child labor, required safe working conditions, limited hours, and made overtime pay mandatory were implemented during the early twentieth century. These regulations did succeed in improving working conditions, but increased production costs, which convinced many business owners to relocate their factories to countries with less stringent or even nonexistent regulations.

In addition to regulating the working conditions in the garment industry, government regulations also extend to product labeling. The federal government requires garment manufacturers to label every item of clothing, and the label must list the nation in which it was produced. This “nation of origin” labeling requirement is intended to ensure that the government can track the quantity and value of imports into the United States from specific foreign countries while informing the public where its clothing was produced.

With respect to retail outlets, government regulations pertaining to product labeling also affect such businesses. Human rights and political activists seeking to shed light on a particular retail outlet’s questionable business practices use country of origin labeling to target those businesses that sell products manufactured in countries with poor regulatory systems and records of human rights abuses. Additionally, import tariffs or taxes on imports from certain countries affect retail outlets by increasing costs to consumers who purchase items from targeted countries. Outlets, therefore, might sell fewer items of clothing, which decreases revenue.

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The retail sector is affected by overtime pay laws stipulated by the government. Thus, workers are entitled to compensation when they provide their services past their normal working hours. Without such regulations, some retailers would exploit their workers. Thus, this regulation increases the legal liabilities and expenses of the retailer.

The fashion industry is also subject to government regulations. The industry is restricted from using certain materials in their creations. For instance, use of fur from endangered species is highly prohibited; the creation and sale of clothing from such materials warrants serious fines and jail terms.

The fashion industry is required to comply with labeling rules that ensure the consumer is aware of the maintenance requirements of different garments.

The fashion industry is also required to disclose the materials used in their creations. The labels have to clearly state the type of materials used and the respective percentages of different blends used in creating the garment.

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The government has a lot of sway when it comes to all industries, fashion included. 

First, the government has the ability to control interest rates. If the cost of borrowing goes up, then many businesses will have a harder time and new ones may not have enough capital to start. Fortunately for us, interest rates are at a low point from a historical point of view. This is partially why businesses are doing fairly well. 

Second, the government has the ability to set minimum wages. This could make the hourly wage higher. This may hurt some fashion retail stores, especially the stores that hire younger people at a lower wage. 

Third, state governments can tax clothing. Some states do and some do not. For example, New Jersey does not tax clothing. This helps tremendously, as there is immediately a 6-8 percent discount. In Connecticut, there is a 6.35 percent tax on clothing. The fact is not negligible. 

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Government regulations affect many aspects of fashion retail. First, labor regulation affect how you can fire, hire, pay, and treat employees. Next, the Internal Revenue Service regulates and determines what sorts of taxes you need to pay. Many types of clothing must meet government flammability standards. Children's clothing must comply with child safety regulations. Since retail stores are public spaces, they come under the regulations concerning accessibility of the Americans with Disabilities Act, and must have no barriers to access for either customers or employees. Also, the retail space must comply with fire regulations concerning maximum number of people in a room, exits, fire detection, sprinklers, etc.

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For purpose of this question, we will discuss regulations separate from any general criminal law. Regulation of business usually serves the purposes of protecting the customers (consumers) of that business, protecting the employees of that business, and/or protecting society in general from potential adverse impacts arising from that business’s operation.

To keep it simple, consumer protection regulation requires that (a) products be safe to use, (b) key information about the product is accurately provided to the consumer before they buy, and (c) terms for payment, refund, and defect or problem resolution be considered “fair.” In fashion retailing, the most salient regulations require proper labelling (both in terms of fiber content, care instructions, and place of manufacture; see the link for OTEXA requirements below) and product safety (in terms of the dyes and fibers and their safety for use). This latter point may include flammability standards, especially for apparel marketed for infants and small children. Note also that the place of manufacture information may be used by some consumers to avoid supporting textile industries in foreign countries which engage in practices which those consumers may consider inappropriate or unethical (e.g. child labor). In this latter capacity, the regulation is furthering the aim of protecting the societies in which the apparel is manufactured.

As far as employee protection is concerned, fashion retailing in most US locations is governed by the same laws and regulations covering any retail business. For the most part, these regulations are national in scope, and cover such things as working hours, minimum and overtime pay, and worker safety (OSHA standards).

Finally it is important to note that many of the purposes of regulation are in fact accomplished through the adoption of industry standards and practices. That is, fashion retailing, like most other major industries, works to avoid overt government regulation by “self-regulating” through trade associations and industry SOP. An example of this is industry moves to foster use of sustainable fiber technologies (such as sustainability in cotton agriculture).

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