410 Quiz ch 15 & 16

Commission payments

required not only at end of transaction but also whenever a transaction is made between principal and a party the agent previously obtained

Differences with U.S. Courts:

follows civil law (more active role of judges), gives advisory opinions, no dissenting opinions

caveat emptor

("let the buyer beware") which stays away from too much government regulation and believes the market will take care of itself

The Common Agricultural Policy (CAP):

- "transparency, quality and safety and a farm sector in tune with the environment and animal welfare; a sustainable farm and food sector for the future." - First implemented in 1962, has been divisive within EU, accounts for largest portion of EU budget (around 30%), concern over who it benefits - large producers vs. small farmers, leading to an unhealthy diet, environmentally unfriendly practices... - Ongoing negotiations to address concerns

OECD 2018 Data

- 615 individuals and 203 entities have received criminal sanctions for foreign bribery between the time the Convention entered into force in 1999 and the end of 2018. - 86 individuals and 108 entities have received sanctions for foreign bribery through administrative or civil proceedings. - 53 individuals and 96 entities have been convicted or criminally sanctioned for related offences (false accounting or money laundering). - 70 individuals and 165 entities have received sanctions for related offences (false accounting or money laundering) through administrative or civil proceedings. - 528 investigations are ongoing in 28 cases. - Criminal proceedings (against 157 individuals and 5 entities) for foreign bribery are ongoing in 12 cases - Administrative or civil proceedings (against 6 entities) for foreign bribery are ongoing in 2 Cases.

Content-Specific Regulations

- Ads can be unlawful even if non-deceptive - Advertising aimed at children is closely regulated in many countries - Language Laws - many countries require that all advertising be in a certain language which can complicate cross-border advertising in places like the EU - France says every word must be in French, even if French business people typically use another word ex. Cash flow = marge brute d'autofinancement

Advertising Restrictions on "Sin" Products: Tobacco and Alcohol

- Advertising Restrictions on "Sin" Products (alcohol, tobacco etc..) vary greatly, some countries like Saudi Arabia ban alcohol ads altogether - Other restrictions on Advertising in sensitive industries - EU prohibits advertising of prescription drugs *always get legal advice before running an ad campaign

Free Movement of People

- All EU residents have complete freedom to travel, work, study, and live in another member state. - Even extends to close family members who are not citizens of an EU member

Brexit

- Article 50 of the Treaty of Lisbon provides process to leave EU - UK Officially left January 31st 2020 - 52/48 vote; has until December 31st to negotiate terms - Concerns regarding burdensome regulations, loss of sovereignty, relaxed immigration...

The Foreign Corrupt Practices ActBest Practices for U.S. Business Person

- Avoid making direct payments to government officials; simplest course is to avoid doing business where extortion or bribery is the norm - Foreign agents should be carefully selected and even more carefully paid; avoid "premium" transactions - Make appropriate inquiry where government officials have "discretion" in a transaction

Organization for Economic Cooperation and Development (OECD) Anti-Bribery Convention

- Criminalization: Prohibits the bribery of foreign officials. - Enforcement: Includes an obligation to prosecute companies suspected of bribing public officials abroad. - Cooperation: Encourages enhanced collaboration between the law enforcement agencies of signatory countries. - Tax Deductions: Bans the tax deductibility of bribes to foreign public officials. - Whistleblowing: Recommends the establishment of effective whistleblowing mechanisms. - Monitoring: The OECD carries out rigorous peer-review examinations monitoring the level of implementation of the OECD Convention and OECD recommendations.

Use the DUMB test

- Demonstrable - can you show your product and its attributes via photos, videos etc... - Unique - are there other local alternatives or would your product be filling an unmet need? - Meaningful - is the product one that the country you're considering wants? Are there cultural or religious factors to consider. (China and cold cereal) - Believable - are you able to make credible claims and connections?

Free Movement of Capital

- Efforts to integrate free flow of capital include the European Central Bank and the "Euro" - Became fully effective in 2002; today 19 of the 27 countries use the Euro - Eliminates conversion fees, integrates markets....

Why have a foreign representative?

- Expand your geographic scope - Provide guidance on local preferences, customs and laws - Improve brand loyalty - help with defective products/returns

Disadvantages to further expansion:

- German Chancellor's comments about what does it mean to be European as expansion continues to spread - May be drain on resources - mostly poorer, less economically stable countries wanting to join now

Supersession of Agreement with Representative

- Governments can interfere to protect local interests - while U.S. Courts will generally enforce contract terms other governments may not if feel they need to protect workers - An arrangement that continues beyond the stated term is an evergreen contract - in EU after a 3-year relationship can only terminate contract with 3 months notice - While in U.S. most employment contracts are "at will" other countries may require "just cause" as determined by a local court to terminate - sometimes non-performance or violation of the contract terms may not be considered "just cause"

Advantages to further expansion:

- Greater security for European continent - Minimizes likelihood of armed conflict - Promotes democracy, rule of law, and human rights - Gives members greater access to new markets

Truth in Advertising

- In most countries today false advertising is prohibited but to what degree varies. - Puffing - or vague exaggeration - is tolerated in some countries like the U.S. "we make the best blankets in the world" - fact vs. opinion - Other countries such as Germany and Japan are less tolerant and require exactness (Japan barred Pepsi's ad campaign that it was "the choice of the next generation" which was allowed without question in the U.S. )

International Treatment of Corruption

- International Refusal to Enforce Contracts Induced by Bribery - Clean Hands Doctrine - World Bank will cancel funding for any projects if proof of corruption or bribery

The Foreign Corrupt Practices Act

- Passed in 1977, a violation of the FCPA consists of five "elements." That is, a person or organization is guilty of violating the law if the government can prove the existence of: 1) a payment, offer, authorization, or promise to pay money or anything of value 2) to a foreign government official (including a party official or manager of a state-owned concern), or to any other person, knowing that the payment or promise will be passed on to a foreign official 3) with a corrupt motive 4) for the purpose of (a) influencing any act or decision of that person, (b) inducing such person to do or omit any action in violation of his lawful duty, (c) securing an improper advantage, or (d) inducing such person to use his influence to affect an official act or decision 5) in order to assist in obtaining or retaining business for or with, or directing any business to, any person.

Free Movement of Goods

- Prohibits customs duties and taxes on imports and exports; also quantitative restrictions or other non-tariff barriers and sets a common external tariff. - There are limited exceptions for goods that pose risks to consumers or harm the public health or environment

Exception:

- Routine governmental acts are exempt but must be non-discretionary (grease payments) such as gratuity payments to customs or governmental officials - If concerned can seek guidance from DOJ but must submit all documentation (which can be discoverable via FOIA) and can take up to 30 days to get an opinion.

The Foreign Corrupt Practices Act (cont'd)

- Territorial Jurisdiction over Non-U.S. Persons - FCPA applies to non-U.S. persons who commit a violation "while in the territory of the U.S." - DOJ and SEC interpret this broadly (if uses a U.S. address that's enough) - Foreign Enforcement Actions have been increasing via OECD members (37 member countries)

European Union History

- Treaty of Rome (1957) creates European Community - Single European Act (1987) set 1992 deadline of achieving single market - Maastricht Treaty (1993) created European Union and set path for monetary union - Treaty of Lisbon (2009) significantly restructured the European Union

Free Movement of Services

- Treaty of Rome prohibits restrictions on services from a national in one state to a national in another - Services account for about 70% of all activity in EU - Services are defined as any economic activity performed for compensation not covered under goods, capital or persons. Includes commercial activities, craftspeople and professionals.

Foreign Representatives

- create an Agency relationship: one party (agent) performs a variety of functions on behalf or on direction of another (principal); raises issues regarding liability - Can be direct agents (employees) or - Independent contractors: perform general tasks but retain substantial discretion and independence (less liability)

Mandatory provisions:

- economic conditions alarm - commission payments - commission override

Entering Foreign Markets

- is it a good idea? - Does your product have market potential? - Best way to go about it? - Potential Risks...

Very broad and comprehensive policy driven by Environmental Action Program enacted in 2014. Three objectives:

1. Protection, conservation and enhancement of natural capital 2. Creation of a resource-efficient green and competitive low-carbon economy 3. Safeguarding of EU populations from health risks associated with environmental degradation. - Consumer Protection - Safety standards, fair business practices, misleading advertising on most products, drugs, and appliances - Energy and the Environment

What is the difference between a dependent vs. an independent agent?

CA uses the A,B,C test from Dynamex Operations, Inc. (Cal. 2018): - A = Is the worker free from the control and direction of the hiring entity regarding performance of the work? (under contract and in fact) - B = Does the worker perform work that is outside of the hiring entity's normal business - C = Is the worker customarily engaged in an independently established trade, occupation or business of the same nature of work

labor laws

Dependent agents are employees and all labor laws apply

Commission of the European Communities v. Italian Republic (2006)

Facts: Although Italy gave reduced rates to all EU citizens to national monuments, museums and other tourist attractions, local Italian governments provided reduced admission rates only to Italian nationals and people living in Italy to visit "public monuments" not to all EU members. The Commission challenged this practice. Issue: Were the local governments violating the EU's non-discrimination principle with its pricing scheme? Holding: Yes Reasoning: Italy, and its local governments, may not maintain two different pricing schemes for Italian nationals and citizens and other EU members as this practice was discriminatory.

Carlill v. Carbolic Smoke Ball Co.(Queen's Bench 1893)

Facts: Defendant made and sold a medical preparation called the Carbolic Smoke Ball. It placed an ad in a magazine claiming it would pay a 100 pound reward to anyone who contracted the flu, a cold etc... after using the product as directed for 2 weeks. A woman sued claiming she'd followed the instructions and caught the flu. Issue: Was the advertisement a definite and operative offer that plaintiff had accepted? Holding: Yes Reasoning: The ad was not a mere "puff" but a clear and definite offer that the plaintiff had accepted through her performance.

U.S. v. Joel Esquenazi, Carlos Rodriguez (U.S. 2014)

Facts: Defendants co-owned Terra, a Florida Co., which purchased phone time from foreign vendors and resold the time to U.S. customers. Teleco was one of Terra's main vendors. Teleco had close ties to the Haitian government. Terra fell behind on its bills and met with a Teleco official who agreed to shave minutes off Terra's bills in return for 50% of savings. New Teleco official takes over and sets up "side payments" by which he receives $60,000 in return for reducing bills. DOJ brings charges. Terra argued FCPA didn't apply because Teleco was a private company. Issue: Was Teleco an instrumentality of the Haitian Government? Holding: Yes Reasoning: The Haitian government effectively controlled Teleco thus it was an instrumentality. The government appointed board of directors and president, national bank owned 97%; it had a total monopoly on telecommunications in Haiti and it was providing functions the government usually treats as its own.

World Duty Free Company Limited v. The Republic of Kenya (2006)

Facts: House of Perfume entered into contract to construct, maintain and operate duty free shops at two airports in Kenya. WDF claims breach of contract and sues, Kenya claims contract procured via bribe and unenforceable. Issue: Was the contract procured by paying a bribe to the then President of Kenya and therefore unenforceable as a matter of public policy? Holding: Yes Reasoning: Bribery or influence peddling is considered criminal conduct in most countries and it was in Kenya when contract was entered into. Thus, as a matter of public policy the claimant cannot enforce any of its claims.

Blanco and Fabretti v. Agenzia Della Entrate re dual tax treatment (2014)

Facts: In Italy, gambling winnings were exempt from taxation, however, gambling winnings from casinos located outside of Italy were taxed. Italy said it was needed to prevent money laundering, compulsive gambling and the flow of capital into the country with an unknown origin. Issue: Was Italy's dual tax treatment of gambling winnings justified? Holding: No Reasoning: Italy's dual tax treatment infringed on the EU's free movement of services because it discriminated against winnings earned outside of Italy and was not justified by Italy's public policy concerns.

Electra-Amambay S.R.L. v. Compania Anartica Paulista Ind. (Paraguay S. Ct. 2001)

Facts: Paraguayan law requires that if a representative of a foreign company is terminated for other than "just cause" an extraordinarily large payment must be made to the representative. Compania Anartica, a Brazilian company, terminated a representative and argued that the law requiring just cause amounted to unconstitutional discrimination based on national origin. Issue: Is the law unconstitutional? Holding: No Reasoning: The law is necessary to place the local representatives on an equal footing with the foreign companies who generally lay down all the laws of the relationship. It's not "exaggerated protectionism" but instead provides legal security and equality between two unequal parties.

Commission of the European Communities v. Portuguese Republic (2008)

Facts: Portugal restricted all tinted automobile windows which it acknowledged was a restriction on the free flow of goods butclaimed it was justified to promote road and public safety. The Commission challenged this restriction as in conflict with EU policies and excessive and disproportionate regarding stated goals. Issue: Was Portugal's ban on tinted automobile windows justified by its health and safety concerns? Holding: No Reasoning: Portugal failed to show that its ban was necessary to combat crime and promote road safety and there might be some films which would achieve same goals so absolute ban was excessive and disproportionate to stated goals.

Québec (Procureur général) c. Entreprises W.F.H. ltée (2000)

Facts: Québec had a law that all public signs and commercial advertising must be in French, signs could be in French and another language as long as French was markedly predominant. Challenged as being void under the Canadian Charter of Rights and Freedoms. Issue: Was the law discriminatory and thus invalid? Holding: No Reasoning: The law is not discriminatory, Québec is in a unique linquistic situation, a population of 6 million French speakers surrounded on all sides by 300 million English speakers, thus there is a rational connection between the law and Québec's goal to maintain French literacy within its borders.

Securities Exchange Commission v. Siemens Aktiengesellchaft ( SEC 2008)

Facts: Siemens, a German Co., was found to have made corrupt payments to third parties throughout the world-4,283 payments totaling $1.4 billion to obtain business; 1,185 payments totaling $391 million related to bribery, embezzlement etc... It had slush funds, cash desks, off-book systems etc.... Jurisdiction in U.S. because it is listed on NYSE and does business in U.S. Result: Siemens agreed to implement internal changes andcontrol systems, pay over $2B in fines to USDOJ/SEC and German Office of the Prosecutor General and also to be overseen for 4 years by a FCPA monitor.

Torresi v. Consiglio dell' Ordine degli Avvocati di Macareta (ECJ 2014)

Facts: Two Italian nationals obtained law degrees in Italy and Spain, then registered as attorneys in Spain. They then applied to become attorneys in Italy. Italy did not process their applications, believed they were attempting to circumvent Italian requirements to become an attorney. Issue: Could Italy refuse to process applications on the grounds that the applicants were attempting to abuse the system by becoming lawyers in another member state and then returning home to practice law? Holding: No Reasoning: An EU directive allows this practice under its goal of Free Movement of People and thus no abuse can be present by traveling to different states to study or obtain licenses.

consequences of the Foreign Corrupt Practices Act

Individuals can be criminally charged and imprisoned or fined up to $500,000; Corporations up to $2 million per violation or 2x the amount by which they profited

Case Problem

Jordan Motors opens a car dealership in Frankfurt, Germany selling American cars. In its advertising campaign, Jordan states that for the next 2 weeks only, it will beat the price on any comparable German car by 1,000 euros. Hartman Autos thus slices the prices of its cars to cost. Andrea comes to Jordan's Motors with a written estimate for Hartman's bottom of the line German car and demands that Jordan sell her 20 of its bottom of the line vehicles at 1000 euros below the estimate. Jordan, faced with a substantial loss, refuses. If Andrea sues will she be successful? Would it matter if she sued in German or U.S.court? - yes - German

Recommendations

Recommendations and opinions have no binding force

The European Union and the Regulation of Business: The Four Freedoms

Refers to a body of law originating in the Treaty of Rome: - Free Movement of Goods - Free Movement of Services - Free Movement of Capital - Free Movement of People

case problem

Roger, a U.S. citizen who is an executive for a U.S.Company bt is currently stationed in Paris, wishes to build an office for his firm's technicians working in France. Heenters into a contract with Francois, a French construction worker, to complete the project for $100,000. The contract specifies the exact specifications of the office building, that it will be completed within 9 months, and that Francois may seek reimbursement for any unforeseen costs. Is Francois a dependent or an independent agent? - independent

MERCOSUR

South American trade bloc of 4 countries

The European Commission

The executive body that implements decisions of the council. Each member state appoints one member and it is headed by a President appointed by Parliament. Also refers to the 25,000 employees who carry out day to day work - the "bureaucrats."

Regulation of Advertising Abroad

Very country specific: huge differences between France and Saudi Arabia - something to look at for your country presentation - also concern about what is illegal as well as ineffective

EU Council Directive 86/653

aggressively protects local agents

Corruptness requirement:

businessperson must display an evil motive or purpose or a reckless or conscious disregard for consequences *truly innocent mistakes are not illegal

Knowing requirement:

businessperson must prove no knowledge of bribery; there are record keeping requirements under the act as well

To join:

complex procedure, with lots of negotiations, must meet Copenhagen Criteria: free market economy, stable democracy and rule of law, accept all EU legislation, all member countries must approve

The European Council

composed of heads of all EU member states and the president of the European Commission. Responsible for composition of Parliament, Commission, law enforcement, foreign policy and constitutional matters.

Treaty of Rome

identifies four principal means to harmonize laws and create a common legal environment: regulation, directive, decision, and recommendations *EU also has a Supremacy doctrine like U.S. Supremacy Clause - EU law is superior to state laws

ASEAN Free Trade Area (AFTA)

is a trade bloc agreement by the Association of Southeast Asian Nations comprising of 10 members.

African Continental Free Trade Area (AFCFTA)

largest in world with 55 countries participating

The European Parliament

members elected by European citizens, each state has a different number of members based on population, no state has more than 96 or less than 6, serve a 5-year term, legislative powers regarding immigration, law enforcement, judicial cooperation, some aspects of trade and agriculture. Also approves EU's budget and many treaties.

National courts

must follow EU law and decisions

Tax Purposes

once a principal hires a dependent agent it is deemed to have opened an office in that country and will become subject to the host country's tax laws; the dependent agent is also an employee so the principal must meet withholdings, pension requirements etc...

Economic conditions alarm

principal must notify agent if "volume of business" and thus agent's commission will be "significantly decreased"

directive

shall be binding as to the result to be achieved - individual members can determine form and methods to enact

decsion

shall be binding upon those to whom addressed - used in mergers or agricultural matters

regulation

shall have general application - is binding in its entirety and directly applicable to all member states.

Council of Ministers

sits in Brussels, Belgium, the "capital" of the EU, one representative from each member state although each state will have several ministers who specialize in different areas (which one sits on council will depend on issue being decided at each meeting). Its purpose is to coordinate economic policies of member states, approve legislative directives and international agreements.

The Court of Justice

sits in Luxembourg and is the highest authority of EU law. Hears appeals from general court. Each state appoints one judge, most cases heard by 3-5 judge panels but for important cases can sit with 11 judge panels.

Marketing Considerations

something may not be illegal to be ill-advised: the Nestle Infant Formula Case - in 1970s provided free and low-cost baby formula as a marketing technique in poor countries, led to a backlash and boycott, Nestle eventually stopped the practice

The General Court

trial court, one judge from each member state, cases are heard by 3 judge panels - up to 13 judge panels for important cases

liability

vicarious liability for actions of dependent agents - contracts, torts etc...

Commission override

whenever principal makes a sale in the agent's territory, the principal must pay the agent a commission, even if the agent wasn't involved in the sale