BSAD 132

Four periods of regulatory change

1. Turn of century (Sherman Act, Food and Drug Act) and end Robber Barons 2. Progressive era (social security begins) in response to great depression 3. Social regulation (environmental regulation) product liabilities and equal opportunity laws. 60's 4. Deregulation of business (airlines, interstate commerce, trucking deregulated). Reagan era.

Trade Secrets

A formula, practice, process, design, instrument, pattern, or compilation of information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers

Strategic CSR

By taking a strategic approach, companies can determine what activities they have the resources to devote to being socially responsible and can choose that which will strengthen their competitive advantage. By planning out CSR as part of a company's over all plan, organizations can ensure that profits and increasing shareholder value don't overshadow the need to behave ethically to their stakeholders.

Corporate Social Responsibility

CSR policy functions as a built-in, self-regulating mechanism whereby business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. The goal is embrace responsibility for, an encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere.

Managerial Capitalism

Capitalistic enterprises administered by managerial executives rather than by owners.

Entitlements - and their protection by property or liability rule

D: A guarantee of access to benefits based on established rights or by legislation

Structural and Behavioral (Chicago) Schools

D: A neoclassical school of thought within the academic community of economists, with a strong focus around the faculty of The University of Chicago, some of whom have constructed and popularized its principles I: A change of approach, to put the burden of proof for positive effects on a government that was intervening in the market, by analyzing the costs of action.

Treble Damages

D: A term that indicates that a statute permits a court to triple the amount of the actual/compensatory damages to be awarded to a prevailing plaintiff, generally in order to punish the losing party for willful conduct. I: Form of punitive damages, unique to antitrust laws.

Social Efficiency

D: Aggregate macro cost and benefit to society. Social efficiency increases as benefits exceed cost. Ex: spending money to eliminate harm to the point that next expenditure reduces more harm than cost to do it. I: It defines the economically ideal structure of government regulation

Robinson Patman Acts

D: Amendment to Clayton Act that prohibits anticompetitive practices by producers, specifically price discrimination. I: Prohibits sales that discriminate in price on the sale of goods to equally-situated distributors when the effect of such sales is to reduce competition.

Capture and rent seeking by firms in relationship with government

D: Capture is when people within regulatory agency begin to see from point of view of regulated industry. D: Rent seeking is when a business goes out and seeks regulation (times when regulation may increase profits) I: Many business profited before deregulation.

Market Failures

D: Circumstances where free market system does not function appropriately because of inherent nature of free market system Forms include public goods, externalities I: Because market system does not regulate these aspects, it is a justification for government to step in.

Punitive damages

D: Damages intended to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit. Often awarded where compensatory damages are deemed an inadequate remedy. I: Court may impose them to prevent under-compensation of plaintiffs, to allow redress for undetectable torts and taking some strain away from the criminal justice system.

FTC

D: Established the Federal Trade Commission (FTC), a bipartisan body of five members appointed by the President of the United States for seven-year terms. I: Authorized to issue Cease and Desist orders to large corporations to curb unfair trade practices.

Monopoly

D: Exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. I: Reason for establishment of Antitrust laws

Property rights (role free market economy; basis for entitlement to attain socially efficient outcome

D: Laws created by governments in regards to how individuals can control, benefit from and transfer property. Many justice systems must now contend with property that solely exists in a digital or virtual setting. I: Economic theory contends that government enforcement of strong property rights is a determinant regarding the level of economic success seen in the area.

Social and economic policies of Antitrust laws

D: Objectives of antitrust: To require competition (prohibit monopoly) and prevent companies from becoming too powerful (political objection to big business). I: Objectives are foundation for which Antitrust law is build, purpose is to ensure that benefits of free market system are enjoyed by society (technical efficiency and resource allocation)

Natural Monopoly

D: Occur when there is one producer that has achieved it through competition. I: Socially inefficient, producer will charge above equilibrium price. Total surplus is less.

Cross Subsidization

D: Practice of charging higher prices to one group of consumers in order to subsidize lower prices for another group I: Gives ability to redistribute income for political reasons. Contributed to demise of telephone industry because it distorted economics for industry.

Sherman Act

D: Requires the United States Federal government to investigate and pursue trusts, companies, and organizations suspected of violating the Act I: First Federal statute to limit cartels and monopolies, and today still forms the basis for most antitrust litigation by the United States federal government

Clayton Act

D: Specified particular prohibited conduct, the three-level enforcement scheme, the exemptions, and the remedial measures. I: Enacted in the United States to add further substance to the U.S. antitrust law regime by seeking to prevent anticompetitive practices in their incipiency.

Horizontal Practices

D: Strategy used by a business or corporation that seeks to sell a type of product in numerous markets. Occurs when a firm is being taken over by, or merged with, another firm which is in the same industry and in the same stage of production as the merged firm I: Allows for economies of scale, scope, and stocks.

Strict Liability for product injuries

D: Strict Liability claims focus on the product itself. Under strict liability, the manufacturer is liable if the product is defective, even if the manufacturer was not negligent in making that product defective. Product liability is an area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause. I: Requires the plaintiff to prove that the defendant's conduct fell below the relevant standard of care. However, if an entire industry tacitly settles on a somewhat careless standard of conduct, then the plaintiff may not be able to recover even though he or she is severely injured, because although the defendant's conduct caused his or her injuries, such conduct was not negligent in the legal sense.

Least-Cost avoider

D: The actor who can act to prevent a loss at the lowest cost. I: Significant in the Coase theorem for achieving social efficiency

Per Se and Rule of Reason Reviews

D: Two ways that institutions evaluate if someone is guilty I: As interpretation and implementation of antitrust laws have evolved, the categories that business practices falls into have changed. More have moved into Rule of Reason. oPer Se • D: violation that requires no further inquiry into the practice's actual effect on the market or the intentions of those individuals who engaged in the practice. oRule of Reason • D: guilty depending on a) if you intended to have anticompetitive effect or b) is legitimate business venture.

Vertical Practices

D: Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need. It is contrasted with horizontal integration. I: Andrew Carnegie introduced the idea of the existence and use of vertical integration. This led other businesspeople to use the system to promote better financial growth and efficiency in their companies and businesses.

Assumption of risk

D: a defense in the law of torts, which bars a plaintiff from recovery against a negligent tortfeasor if the defendant can demonstrate that the plaintiff voluntarily and knowingly assumed the risks at issue inherent to the dangerous activity in which he was participating at the time of his injury. Occurs when the plaintiff has either expressly or impliedly relieved the defendant of the duty to mitigate or relieve the risk causing the injury from which the cause of action arises I: Operates as a complete bar to liability on the theory that upon assumption of the risk, there is no longer a duty of care running from the defendant to the plaintiff; without a duty owed by the defendant, there can be no negligence on his part.

Herfindahl-Hirschman Index

D: a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them. Sum of the squares of the market shares of the 50 largest firms (or summed over all the firms if there are fewer than 50) within the industry, where the market shares are expressed as fractions I: Widely applied in competition law, antitrust and also technology management

Deadweight Loss

D: loss of economic efficiency that can occur when equilibrium for a good or service is not Pareto optimal. Causes include monopoly pricing (in the case of artificial scarcity), externalities, taxes or subsidies , and binding price ceilings or floors. I: Can be beneficial when there is a negative externality, in which case it can be considered a deadweight gain, as it would help those that the negative externality was hurting

Trademark

Distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or services from those of other entities.

Punitive Damages

Not awarded in order to compensate the plaintiff, but in order to reform or deter the defendant and similar persons from pursuing a course of action such as that which damaged the plaintiff. Punitive damages are awarded only in special cases where conduct was egregiously invidious and are over and above the amount of compensatory damages, such as in the event of malice or intent.

Compensatory Damages

Paid to compensate the claimant for loss, injury, or harm suffered as a result of another's breach of duty.

Patent

a set of exclusive rights granted by a state (national government) to an inventor or their assignee for a limited period of time in exchange for a public disclosure of an invention.

Copyright

a set of exclusive rights granted by the law of a jurisdiction to the author or creator of an original work, including the right to copy, distribute and adapt the work.

Damages

an award of money to be paid to a person as compensation for loss or injury

Substantive Process

commonly used in two ways: first to identify a particular line of case law, and second to signify a particular attitude toward judicial review under the Due Process Clause. involves liberty-based due process challenges which seek certain outcomes instead of merely contesting procedures and their effects; in such cases, the Supreme Court recognizes a constitutionally-based "liberty" which then renders laws seeking to limit said "liberty" either unenforceable or limited in scope.

Externalities

o D: A cost or benefit, not transmitted through prices, incurred by a party who did not agree to the action causing the cost or benefit. o I: The existence of externalities results in outcomes that are not socially optimal. Those who suffer from external costs do so involuntarily, while those who enjoy external benefits do so at no cost.

Market for Corporate Control

o D: A description of the role of equity markets in facilitating corporate takeovers first put forward in an article by HG Manne, 'Mergers and the Market for Corporate Control'. The lower the stock price, relative to what it could be with more efficient management, the more attractive the take-over becomes to those who believe that they can manage the company more efficiently. And the potential return from the successful takeover and revitalization of a poorly run company can be enormous. o I: In this way the market for corporate control could magnify the efficacy of corporate governance rules, and facilitate greater accountability of directors to their investors.

Public Goods

o D: A good that is nonrival and non-excludable. Non-rivalry means that consumption of the good by one individual does not reduce availability of the good for consumption by others; and non-excludability that no one can be effectively excluded from using the good. o I: Non-rivalness and non-excludability may cause problems for the production of such goods. Specifically, some economists have argued that they may lead to instances of market failure, where uncoordinated markets driven by parties working in their own self interest are unable to provide these goods in desired quantities. Problems are related to the broader issue of externalities.

Normative Principles

o D: Consideration of ethical or moral concepts. Which norms should business adopt? o I: Foundation for those who say we should engage in CSR behavior

Calabresi and Melamed Principles

o D: Deal with economic efficiencies. In line with Coase. Deal specifically with liability. • 5 principles: people who make informed decisions are more likely to be right than those without any information. • 1st Criteria: If you want a socially efficient decision in regards to product design, person who has best product knowledge is the person who should be liable. • 2nd Criteria: Or whoever is the least-coast avoider (user). o I: Principles that have been adopted to how liability is treated in institutions.

Command and Control Regulation

o D: Often applies uniform emissions limits on polluters, even though each firm has different costs for emissions reductions. Some firms, in this system, can abate inexpensively, while others can only abate at high cost. o I: Total abatement has some expensive and some inexpensive efforts to abate. Environmental economic regulations find the cheapest emission abatement efforts first, then the more expensive methods second

Advocacy Science

o D: Recognizes institutions that administer regulations make decisions in part by technical information. Many agencies recognize scientific information. o I: Agencies listen to technical info, operating in institutions with incredible scientific opinion Science that advocates for your outcome.

Market Incentive Regulation of the environment

o D: The conscious use of rewards and penalties to encourage good performance in the environmental sector. o I: Notoriously more tricky than they might appear to people who set them up. Human beings are both finite and creative; that means that the people offering incentives are often unable to predict all of the ways that people will respond to them. Thus, imperfect knowledge and unintended consequences can often make incentives much more complex than the people offering them originally expected, and can lead either to unexpected windfalls or to disasters produced by unintentionally perverse incentives.

Appropriability of Intellectual Property

o D: The environmental factors that govern an innovator's ability to capture profits generated by an innovation. Term referring to a number of distinct types of creations of the mind for which property rights are recognized—and the corresponding fields of law. Under intellectual property law, owners are granted certain exclusive rights to a variety of intangible assets, such as musical, literary, and artistic works; discoveries and inventions; and words, phrases, symbols, and designs. o I: Mechanism of incentive - 20 years with a patent one has guaranteed monopoly

Coase Theorem

o D: When trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights. In practice, obstacles to bargaining or poorly defined property rights can prevent Coasian bargaining. o I: An important basis for most modern economic analyses of government regulation, especially in the case of externalities.

Friedman vs. Lankova (Business Roundtable) views of CSR

o Should business adopt true CSR? o Friedman • Says no. As a libertarian economist. • Moral touchstones: • utilitarian approach (greatest good for greatest number). Business exists in society perform function of efficient provision of allocation of scarce resources to meet needs of society. CSR compromises effectiveness of this function • Thou shall not steal: money spent on 'good works' belongs to shareholders, not the business. o Lankova • says yes, practical and moral component • Moral: business effects many people, therefore it has duty to manage various impacts on shareholders and come up with responsible overall effect • Practical: Business exists and has privilege to conduct business only because society has allowed them to. Society has expectations on social performance, if business doesn't meet those expectations, it will be punished.

Procedural Process

right to protect the individual so that statutes, regulations, and enforcement actions must ensure that no one is deprived of "life, liberty, or property" without a fair opportunity to affect the judgment or result.

Due Process

the principle that the government must respect all of the legal rights that are owed to a person according to the law. Due process holds the government subservient to the law of the land protecting individual persons from the state. When a government harms a person, without following the exact course of the law, then that is a due process violation, which offends the rule of law.