Business Law, Public Responsibility, and Ethics Commons^™

The Rule Of Reason, Herbert J. Hovenkamp

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Antitrust’s rule of reason was born out of a thirty-year (1897-1927) division among Supreme Court Justices about the proper way to assess multi-firm restraints on competition. By the late 1920s the basic contours of the rule for restraints among competitors was roughly established. Antitrust policy toward vertical restraints remained much more unstable, however, largely because their effects were so poorly understood.

This article provides a litigation field guide for antitrust claims under the rule of reason – or more precisely, for situations when application of the rule of reason is likely. At the time pleadings are drafted and even up …

Progressive Antitrust, Herbert J. Hovenkamp

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Several American political candidates and administrations have both run and served under the “progressive” banner for more than a century, right through the 2016 election season. For the most part these have pursued interventionist antitrust policies, reflecting a belief that markets are fragile and in need of repair, that certain interest groups require greater protection, or in some cases that antitrust policy is an extended arm of regulation. This paper argues that most of this progressive antitrust policy was misconceived, including that reflected in the 2016 antitrust plank of the Democratic Party. The progressive state is best served by a …

Appraising Merger Efficiencies, Herbert J. Hovenkamp

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Mergers of business firms violate the antitrust laws when they threaten to lessen competition, which generally refers to a price increase resulting from a reduction in output. However, a merger that threatens competition may also enable the post-merger firm to reduce its costs or improve its product. Attitudes toward mergers are heavily driven by assumptions about efficiency gains. If mergers of competitors never produced efficiency gains but simply reduced the number of competitors, a strong presumption against them would be warranted. We tolerate most mergers because of a background, highly generalized belief that most or at least many produce cost …

Antitrust Balancing, Herbert J. Hovenkamp

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Antitrust litigation often confronts situations where effects point in both directions. Judges sometimes describe the process of evaluating these factors as “balancing.” In its e-Books decision the Second Circuit believed that the need to balance is what justifies application of the rule of reason. In Microsoft the D.C. Circuit stated that “courts routinely apply a…balancing approach” under which “the plaintiff must demonstrate that the anticompetitive harm…outweighs the procompetitive benefit.” But then it decided the case without balancing anything.

The term “balancing” is a very poor label for what courts actually do in these cases. Balancing requires that two offsetting effects …

Raj Rajaratnam: Cheater (Revised), Alicia Baker

Richard T. Schellhase Essay Prize in Ethics

No abstract provided.

The New Global Financial Regulatory Order: Can Macroprudential Regulation Prevent Another Global Financial Disaster?, Behzad Gohari, Karen E. Woody

Scholarly Articles

This Article posits that the success of macroprudential regulation will depend on four factors. First, the economic philosophy of the central banker in charge of the domestic institution with jurisdiction over macroprudential regulation will prove crucial in the implementation of adopted regulation. If, like Chairman Greenspan, the banker is averse to the exercise of the Central Bank's regulatory oversight authority, then no amount or volume of policy or regulation will prevent or mitigate systemic risks and the accompanying shocks. Second, a sufficiently deep level of international cooperation is required to mitigate regulatory arbitrage, without being so broad that the ensuing …

U.S. Vs. European Broadband Deployment: What Do The Data Say?, Christopher S. Yoo

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As the Internet becomes more important to the everyday lives of people around the world, commentators have tried to identify the best policies increasing the deployment and adoption of high-speed broadband technologies. Some claim that the European model of service-based competition, induced by telephone-style regulation, has outperformed the facilities-based competition underlying the US approach to promoting broadband deployment. The mapping studies conducted by the US and the EU for 2011 and 2012 reveal that the US led the EU in many broadband metrics.

• High-Speed Access: A far greater percentage of US households had access to Next Generation Access (NGA) …

Government Governance And The Need To Reconcile Government Regulation With Board Fiduciary Duties, Lisa Fairfax

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Corporate governance scandals inevitably raise concerns about the extent to which corporate directors failed in their responsibility to monitor the corporation and its managers, especially in terms of the latter's’ misdeeds. Corporate governance reforms strive to shore up directors' roles by seeking to ensure that boards have sufficient incentives to engage in effective oversight and to hold the boards more accountable. The current financial crisis has ushered in an era of significant government reform of the financial system and involvement in corporate governance matters. Such involvement has increased board of directors' responsibilities but has not reconciled those responsibilities with board …

Federalism, Variation, And State Regulation Of Franchise Termination, Jonathan Klick, Bruce Kobayashi, Larry Ribstein

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This article discusses and expands on our recent work examining the effects of franchise-termination laws. In a prior article, we examined empirically the effect of franchise-termination laws on the level of franchise activity. Our analysis improved upon the prior literature in two major ways. First, our work exploited two new sources of panel data to provide new empirical evidence on the effect of franchise termination laws. Second, our analysis examined variation in states’ restrictions on the ability of franchisors and franchisees to contract around a particular state’s regulation. We found that the effects of termination laws on the overall level …

Toward A Unified Theory Of Access To Local Telephone Systems, Daniel F. Spulber, Christopher S. Yoo

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One of the most distinctive developments in telecommunications policy over the past few decades has been the increasingly broad array of access requirements regulatory authorities have imposed on local telephone providers. In so doing, policymakers did not fully consider whether the justifications for regulating telecommunications remained valid. They also allowed each access regime to be governed by its own pricing methodology and set access prices in a way that treated each network component as if it existed in isolation. The result was a regulatory regime that was internally inconsistent, vulnerable to regulatory arbitrage, and unable to capture the interactions among …

Unilateral Refusals To Deal, Vertical Integration, And The Essential Facility Doctrine, Herbert J. Hovenkamp

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Where it applies, the essential facility doctrine requires a monopolist to share its "essential facility." Since the only qualifying exclusionary practice is the refusal to share the facility itself, the doctrine comes about as close as antitrust ever does to condemning "no fault" monopolization. There is no independent justification for an essential facility doctrine separate and apart from general Section 2 doctrine governing the vertically integrated monopolist's refusal to deal. In its Trinko decision the Supreme Court placed that doctrine about where it should be. The Court did not categorically reject all unilateral refusal to deal claims, but it placed …

Patent Deception In Standard Setting: The Case For Antitrust Policy, Herbert J. Hovenkamp

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Many patent applications are rejected upon initial submission, but they are almost never rejected with absolute finality. Further, subsequent to filing its original application a patent applicant might wish to write an application with broader or somewhat different claims, or perhaps add claims that were not made in the original application. Or it may wish to rewrite claims that had been rejected in the original application. A patent "continuation" is an application for additional claims made on a patent that was previously applied for.

Under generally accepted patent practices in the United States, when a subsequent continuation or divisional application …

The Legal Periphery Of Dominant Firm Conduct, Herbert J. Hovenkamp

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This essay explores two different but related problems and how U.S. antitrust law and EU competition law approach them. The first is the offense of attempt to monopolize, which concerns the acts that a firm that is not yet dominant might undertake in order to become dominant. The second is the offense of monopoly or dominant firm leveraging, which occurs when a firm uses its dominant position in one market to cause some kind of harm in a different market where it also does business.

The language of EU and U.S. provisions concerning dominant firms provokes one to think that …

Fiduciary Duties And The Analyst Scandals, Jill E. Fisch

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No abstract provided.

Does Analyst Independence Sell Investors Short?, Jill E. Fisch

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Regulators responded to the analyst scandals of the late 1990s by imposing extensive new rules on the research industry. These rules include a requirement forcing financial firms to separate investment banking operations from research. Regulators argued, with questionable empirical support, that the reforms were necessary to eliminate analyst conflicts of interest and ensure the integrity of sell-side research.

By eliminating investment banking revenues as a source for funding research, the reforms have had substantial effects. Research coverage of small issuers has been dramatically reduced—the vast majority of small capitalization firms now have no coverage at all. The market for research …

Criminalization Of Corporate Law: The Impact On Shareholders And Other Constituents, Jill E. Fisch

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No abstract provided.

Regulatory Responses To Investor Irrationality: The Case Of The Research Analyst, Jill E. Fisch

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An extensive body of behavioral economics literature suggests that investors do not behave with perfect rationality. Instead, investors are subject to a variety of biases that may cause them to react inappropriately to information. The policy challenge posed by this observation is to identify the appropriate response to investor irrationality. In particular, should regulators attempt to protect investors from bad investment decisions that may be the result of irrational behavior?

This Article considers the appropriate regulatory response to investor irrationality within the concrete context of the research analyst. Many commentators have argued that analyst conflicts of interest led to biased …

Institutional Competition To Regulate Corporations: A Comment On Macey, Jill E. Fisch

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No abstract provided.

Do Institutions Matter? The Impact Of The Lead Plaintiff Provision Of The Private Securities Litigation Reform Act, Stephen Choi, Jill E. Fisch, A. C. Pritchard

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When Congress enacted the Private Securities Litigation Reform Act in 1995 (“PSLRA”), the Act’s “lead plaintiff” provision was the centerpiece of its efforts to increase investor control over securities fraud class actions. The lead plaintiff provision alters the balance of power between investors and class counsel by creating a presumption that the investor with the largest financial stake in the case will serve as lead plaintiff. The lead plaintiff then chooses class counsel and, at least in theory, negotiates the terms of counsel’s compensation.

Congress’s stated purpose in enacting the lead plaintiff provision was to encourage institutional investors—pension funds, mutual …

The Role Of Government In Corporate Governance, Cary Coglianese, Elizabeth K. Keating, Michael L. Michael, Thomas J. Healey

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Numerous corporate scandals in the past several years have fueled widespread debate over proposals for government action. The central challenge for government is how to restore corporate integrity and market confidence without overreacting and stifling the dynamism that underlies a strong economy. To examine this challenge, the Center for Business and Government's Regulatory Policy Program organized a conference in May 2004 on The Role of Government in Corporate Governance. The conference brought together government officials, business leaders, and academic researchers to discuss three fundamental public policy issues raised by recent corporate abuses. First, who should regulate corporate management - government …

The New Federal Regulation Of Corporate Governance, Jill E. Fisch

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No abstract provided.

Is There A Role For Lawyers In Preventing Future Enrons?, Jill E. Fisch, Kenneth M. Rosen

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Following the collapse of the Enron Corporation, the ethical obligations of corporate attorneys have received increased scrutiny. The Sarbanes-Oxley Act of 2002, enacted in response to calls for corporate reform, specifically requires the Securities and Exchange Commission to address the lawyer’s role by requiring covered attorneys to “report up” evidence of corporate wrongdoing to key corporate officers, and, in some circumstances, to the board of directors. Failure to “report up” subjects a lawyer to liability under federal law.

This Article argues that the reporting up requirement reflects a second-best approach to corporate governance reform. Rather than focusing on the actors …

The Securities Analyst As Agent: Rethinking The Regulation Of Analysts, Jill E. Fisch, Hillary A. Sale

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Recent press has highlighted shocking examples of bias, self-dealing, and inaccuracy in the behavior of the securities analyst. Critics have attributed the bubble and subsequent crash in the technology sector to analyst hype and posited that undue analyst optimism contributed to scandals such as Enron. After many years of minimal regulator oversight analysts are now the subject of extensive regulatory reform proposals, including a mandate in the Sarbanes-Oxley Act of 2002 requiring that the Securities and Exchange Commission adopt a variety of restrictions on analyst behavior.

Despite the media attention, there have been few attempts to conceptualize carefully the analyst's …

Adequacy Of The 1995 Antitrust Guidelines For The Licensing Of Intellectual Property In Complex High Tech Markets, Clovia Hamilton

Winthrop Faculty and Staff Publications

In 1995, the Department of Justice and the Federal Trade Commission adopted new guidelines for those wishing to license intellectual property rights without violating antitrust laws. Designed to provide clarity, these guidelines instead breed confusion because they misunderstand the nature of intellectual property markets and provide insufficient guidance in the most difficult areas. Section I of this article will discuss the basic provisions of the guidelines, especially their treatment of "innovation markets." It argues that government enforcers should focus primarily on activity that creates entry barriers. Understanding the use and misuse of licensing is the key to analyzing barriers in …

Aggregation, Auctions, And Other Developments In The Selection Of Lead Counsel Under The Pslra, Jill E. Fisch

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No abstract provided.

An Economic Analysis Of Trade Measures To Protect The Global Environment, Howard F. Chang

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In this article, Professor Howard Chang addresses the role of trade restrictions in supporting policies to protect the global environment and proposes a more liberal treatment of these environmental trade measures than that adopted by dispute-settlement panels of the General Agreement on Tariffs and Trade (GATT). The GATT Secretariat has recommended that countries like the United States rely on "carrots" rather than "sticks" in order to induce the participation of other countries in multilateral environmental agreements. Professor Chang defends the use of sticks on the ground that they encourage more restrained exploitation of the environment pending a multilateral agreement. First, …

From Legitimacy To Logic: Reconstructing Proxy Regulation, Jill E. Fisch

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On October 16, 1992, after a comprehensive review of its system of proxy regulation and after two separate amendment proposals that drew more than 1700 letters of comment from the public, the Securities and Exchange Commission (the "Commission" or the "SEC") voted to reform the federal proxy rules. The reforms were "intended to facilitate shareholder communications and to enhance informed proxy voting, and to reduce the cost of compliance with the proxy rules for all persons engaged in a proxy solicitation.' The SEC explained the amendments by stating that the rules were "impeding shareholder communication and participation in the corporate …

As Time Goes By: New Questions About The Statute Of Limitations For Rule 10b-5, Jill E. Fisch

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In this Article. Professor Fisch examines the history and legacy of Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilberston, the controversial 1991 Supreme Court decision that established a federal statute of limitations for private causes of action brought under Rule 10b-5. In Part I Professor Fisch reviews the history of the 10b-5 statute of limitations prior to LampE Part II then analyzes both the issues resolved and questions raised by Lampf. Part III traces the congressional reaction to Lampf that culminated in the addition of section 27A to the Securities Act of 1934. In Part IV, Professor Fisch concludes by …

Corporate Law Through An Antitrust Lens, Edward B. Rock

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No abstract provided.

Start Making Sense: An Analysis And Proposal For Insider Trading Regulation, Jill E. Fisch

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No abstract provided.