Law Commons^™

The Market Cannot Be Your Mother, Meghan Boone

Michigan Law Review

A Review of The Free-Market Family: How the Market Crushed the American Dream (and How It Can Be Restored). by Maxine Eichner.

Libor Phaseout: Litigation Is Coming, John Michael Neubert

Michigan Business & Entrepreneurial Law Review

This paper will explore the different steps market participants should take to make sure they are prepared when LIBOR is phased out in December 2021. Part I will focus on the actions market participants should do before going into negotiations that can increase their potential to reach a consensual agreement. Part II will explore what financial firms should be prepared for during the negotiation process and what claims may arise when no agreement is reached. The decision for how to handle any LIBOR-linked financial instrument in their portfolio should be left to the discretion of market participants themselves. This paper …

Equity Market Structure Regulation: Time To Start Over, Paul G. Mahoney

Michigan Business & Entrepreneurial Law Review

Over the past half-century, the U.S. Securities and Exchange Commission (SEC)’s regulations have become key determinants of the way in which stocks trade and the fees that exchanges charge for their services. The current equity market structure rules are contained primarily in the SEC’s Regulation NMS. The theory behind Regulation NMS is that a system of dispersed markets operating pursuant to SEC-mandated information and order routing links will provide the benefits of consolidation and competition simultaneously.

This article argues that Regulation NMS has failed in that quest. It has produced fragmented markets and created questionable incentives for market participants, possibly …

Fascism And Monopoly, Daniel A. Crane

Michigan Law Review

The recent revival of political interest in antitrust has resurfaced a longstanding debate about the role of industrial concentration and monopoly in enabling Hitler’s rise to power and the Third Reich’s wars of aggression. Proponents of stronger antitrust enforcement argue that monopolies and cartels brought the Nazis to power and warn that rising concentration in the American economy could similarly threaten democracy. Skeptics demur, observing that German big business largely opposed Hitler during the crucial years of his ascent. Drawing on business histories and archival material from the U.S. Office of Military Government’s Decartelization Branch, this Article assesses the historical …

Uncovering Wholesale Electricity Market Principles, Michael Panfil, Rama Zakaria

Michigan Journal of Environmental & Administrative Law

This paper examines, enunciates, and makes explicit a set of market principles historically relied upon by the Federal Energy Regulatory Commission (FERC) to regulate wholesale electricity markets as required under the Federal Power Act (FPA). These identified competitive market principles are supported by policy and legal foundations that run through a myriad of FERC orders and court decisions. This paper seeks to make that history and those implicit market principles explicit by distilling and organizing Commission Orders and court decisions. It concludes that five market principles, each with multiple subprinciples, can be identified as elemental to how FERC understands and …

Property, Unbundled Water Entitlements, And Anticommons Tragedies: A Cautionary Tale From Australia, Paul Babie, Paul Leadbeter, Kyriaco Nikias

Michigan Journal of Environmental & Administrative Law

As water becomes an increasingly scarce resource, a lack of clarity in relation to its use can produce both conflict among and inefficient use by users. In order to encourage markets in water and to ensure the viability and functionality of those markets, governments in many jurisdictions have moved away from commons property as a means of water allocation, and towards systems of private property in water. In doing so, one policy and legal option is “unbundling”, which seeks carefully to define both the entitlement to water and its separation into constituent parts. Advocates claim that unbundling makes water rights …

Global Standards For Securities Holding Infrastructures: A Soft Law/Fintech Model For Reform, Charles W. Mooney Jr.

Michigan Journal of International Law

This Article outlines a “soft-law-to-hard-law” approach for the development and implementation of reforms to systems for the holding of publicly traded securities. It proposes the development of global standards for securities holding systems (“Global Standards”), to be led by the International Organization of Securities Commissions (the “IOSCO”). This approach contemplates that States would be encouraged and expected to implement the Global Standards by adopting “hard law” reforms through statutory and regulatory adjustments to their securities holding systems as well as modifications of the architecture of their securities holding systems. The successes of past IOSCO initiatives inspire this Article’s proposal, as …

A Crossroads, Not An Island: A Response To Hanoch Dagan, Zoë Hitzig, E. Glen Weyl

Michigan Law Review Online

Hanoch Dagan critiques Radical Markets for insufficient attention to the value of autonomy. While most of his concrete disagreements result from miscommunications, he appears sympathetic to a theory of autonomy that is more widespread, and deserves response. Human agency is fundamentally social, and individuality is primarily constituted by the unique set of social connections and identities one adopts. In this sense, flourishing individuals are crossroads of different communities, not self-sufficient islands. Beyond any welfarist benefits, a fundamental value of Radical Markets is that they aim to instantiate the social nature of identity and empower agency through diverse community.

Digital Market Perfection, Rory Van Loo

Michigan Law Review

Google’s, Apple’s, and other companies’ automated assistants are increasingly serving as personal shoppers. These digital intermediaries will save us time by purchasing grocery items, transferring bank accounts, and subscribing to cable. The literature has only begun to hint at the paradigm shift needed to navigate the legal risks and rewards of this coming era of automated commerce. This Article begins to fill that gap by surveying legal battles related to contract exit, data access, and deception that will determine the extent to which automated assistants are able to help consumers to search and switch, potentially bringing tremendous societal benefits. Whereas …

Why Markets? Welfare, Autonomy, And The Just Society, Hanoch Dagan

Michigan Law Review

Review of Eric A. Posner's Radical Markets: Uprooting Capitalism and Democracy for a Just Society.

Assessing The Evolution Of Cryptocurrency: Demand Factors, Latent Value, And Regulatory Developments, Ryan Clements

Michigan Business & Entrepreneurial Law Review

The purpose of this Comment is to analyze the roots of this fervor— including that which drove Bitcoin’s initial demand surge—and investigate whether cryptocurrency can survive a market bubble that experienced a significant correction in 2018.

Integrating Micro And Macro Policy Levers In Response To Financial Crises, Daniel A. Crane, Markus Kitzmuller, Graciela Miralles

Michigan Business & Entrepreneurial Law Review

The 2008–09 Global Financial Crisis originated from a poor incentive structure in the asset market derived from subprime mortgages. The ultimate bursting and unwinding of an asset bubble (here highly overvalued real estate prices woven into a complex multilayer network of securitization, so called collateralized debt obligations or CDOs) put enormous stress on the financial system, spreading through the global network economy and ultimately resulting in the worst economic crisis since the Great Depression. Economists today agree that the severe economic fallout can be largely attributed to the poor systemic performance of international financial markets. Global macroeconomic imbalances, as well …

Exclusion In Digital Markets, Konstantinos Stylianou

Michigan Telecommunications & Technology Law Review

This article recasts the existing analytical framework on exclusion to account for the technology-intensive nature of digital markets. It discusses:

a) technological ways that affect the competitive intensity in digital markets
b) empirical data on the durability of competitive advantage in digital markets, and
c) the nature of exclusion as a monopolization tactic from a technological point of view

The technology element is important because as a matter of order it is technological capabilities and limitations that define what the transactional overlay can be, not the other way around. Economists start from the pre-assumption that “in the beginning there [are] …

Remembering Financial Crises: The Risk Implications Of The Rise Of Institutional Investors In Project Finance, David J. Park

Michigan Law Review

Barely a decade ago, a cascading sequence of market failures threatened to topple the global financial system. Public responses to the recent Financial Crisis were immediate and drastic to resuscitate the global economy while attempting to make the markets safer. Many financial services sectors have since recovered to pre-crisis levels. One such industry is project finance, which comprises various financing arrangements often used to fund long-term infrastructure or industrial projects. Curiously, significant post-crisis banking regulations and other global credit enhancement initiatives are pushing banks out of project finance and giving rise to institutional investors. This Comment argues that animated institutional …

Break From Tradition: Questioning The Primacy Of Self-Regulation In American Securities Law, John I. Sanders

Michigan Business & Entrepreneurial Law Review

This Comment outlines the circular path of American securities law—one that begins and ends with the primacy of self-regulation. Part I of this paper describes American securities law between 1792 and 1911 (the “Buttonwood Era”). In this era, a group of New York stock brokers utilized private contract law to create securities regulation for their private club, thereby establishing a tradition of self-regulation. Part II describes a short period of history in which individual states attempted to regulate the se-curities market through state statutes, the so-called “Blue Sky Laws.” Part III details the creation of the federal securities law regime …

Finance And Growth: The Legal And Regulatory Implications Of The Role Of The Public Equity Market In The United States, Ezra Wasserman Mitchell

Michigan Business & Entrepreneurial Law Review

The important study of the relationship between finance and economic growth has exploded over the past two decades. One of the most significant open questions is the role of the public equity market in stimulating growth and the channels it follows if it does. This paper examines that question from an economic, legal, and historical perspective, especially with regard to its regulatory and corporate governance implications. The US market is my focus.

In contrast to most studies, I follow both economic history and the actual flow of funds in addition to empirics and theory to conclude that the public equity …

The Business Of Law: Evolution Of The Legal Services Market, Tyler J. Replogle

Michigan Business & Entrepreneurial Law Review

The legal services market is changing. This change has been driven by various factors through the years: expansion of in-house legal departments, globalization (through mergers and outsourcing), technological advances, and the rise of alternative legal service providers. This paper explores these factors in isolation—i.e., discussing each factor separately and distinctly from other factors. Then, this paper seeks to understand these factors together, as products of a legal services market that is evolving from the growth stage into the mature stage.

Part I summarizes the early history of law firms, including the rise of the Cravath System through the Golden Era …

The Global Architecture Of Financial Regulatory Taxes, Carlo Garbarino, Giulio Allevato

Michigan Journal of International Law

This Article endeavors to broaden the analysis of available policy tools to address the problems created by financial crises and discusses how, in addition to direct regulation, certain tax measures having a regulatory nature may operate to address the so-called “negative externalities” often associated with those crises. There is a negative externality when an economic agent making a decision does not pay the full cost of the decision’s consequences. In such cases, the cost to society as a whole is greater than the cost borne by the individuals creating the economic impact. In practice, negative externalities result in market inefficiencies …

Medicine As A Public Calling, Nicholas Bagley

Michigan Law Review

The debate over how to tame private medical spending tends to pit advocates of government-provided insurance—a single-payer scheme—against those who would prefer to harness market forces to hold down costs. When it is mentioned at all, the possibility of regulating the medical industry as a public utility is brusquely dismissed as anathema to the American regulatory tradition. This dismissiveness, however, rests on a failure to appreciate just how deeply the public utility model shaped health law in the twentieth century— and how it continues to shape health law today. Closer economic regulation of the medical industry may or may not …

Regulating Electricity-Market Manipulation: A Proposal For A New Regulatory Regime To Proscribe All Forms Of Manipulation, Matthew Evans

Michigan Law Review

Congress broadly authorized the Federal Energy Regulatory Commission (“FERC”) to protect consumers of electricity from all forms of manipulation in the electricity markets, but the regulations that FERC passed are not nearly so expansive. As written, FERC’s Anti-Manipulation Rule covers only instances of manipulation involving fraud. This narrow scope is problematic, however, because electricity markets can also be manipulated by nonfraudulent activity. Thus, in order to reach all forms of manipulation, FERC is forced to interpret and apply its Anti-Manipulation Rule in ways that strain the plain language and accepted understanding of the rule and therefore constitute an improper extension …

Reinventing Copyright And Patent, Abraham Bell, Gideon Parchomovsky

Michigan Law Review

Intellectual property systems all over the world are modeled on a one-size-fitsall principle. However important or unimportant, inventions and original works receive the same scope of protection, for the same period of time, backed by the same variety of legal remedies. Essentially, all intellectual property is equal under the law. This equality comes at a heavy price, however. The equality principle gives all creators access to the same remedies, even when those remedies create perverse litigation incentives. Moreover, society overpays for innovation through more monopoly losses than are strictly necessary to incentivize production. In this Article, we propose a solution …

Pay-For-Delay Settlements In The Wake Of Actavis, Michael L. Fialkoff

Michigan Telecommunications & Technology Law Review

“Pay-for-delay” settlements, also known as reverse payments, arise when a generic manufacturer pursues FDA approval of a generic version of a brand-name drug. If a patent protects the brand-name drug, the generic manufacturer has the option of contesting the validity of the patent or arguing that its product does not infringe the patent covering the brand-name drug. If the generic manufacturer prevails on either of these claims, the FDA will approve its generic version for sale. Approval of a generic version of a brand-name drug reduces the profitability of the brand-name drug by forcing the brand-name manufacturer to price its …

Ridding The Law Of Outdated Statutory Exemptions To Antitrust Law: A Proposal For Reform, Anne Mcginnis

University of Michigan Journal of Law Reform

Antitrust law is designed to be an overarching check against anticompetitive conduct that harms the free market system. Almost as soon as the first antitrust laws were enacted in the United States, however, industry groups began lobbying Congress for exemptions from these laws. Most of the statutory exemptions created over the last one hundred years remain in place, despite widespread changes in economic theory, market structures, and overall antitrust law. Today, some exemptions are merely irrelevant, while others actively harm society by transferring wealth to private individuals and hampering beneficial competition. This Note proposes a fourpart legislative solution to rid …

Private Copyright Reform, Kristelia A. García

Michigan Telecommunications & Technology Law Review

The government is not the only player in copyright reform, and perhaps not even the most important. Left to free market negotiation, risk averse licensors and licensees are contracting around the statutory license for certain types of copyright-protected content, and achieving greater efficiency via private ordering. This emerging phenomenon, herein termed “private copyright reform,” presents both adverse selection and distributive justice concerns: first, circumvention of the statutory license goes against legislative intent by allowing for the reduction, and even elimination, of statutorily mandated royalties owed to non-parties. In addition, when presented without full term disclosure, privately determined royalty rates can …

A Capital Market, Corporate Law Approach To Creditor Conduct, Mark J. Roe, Frederico Cenzi Venezze

Michigan Law Review

The problem of creditor conduct in a distressed firm—-for which policymakers ought to have the distressed firm’s economically sensible repositioning as a central goal—-has vexed courts for decades. Because courts have not come to coherent, stable doctrine to regulate creditor behavior and because they do not focus on building doctrinal structures that would facilitate the sensible repositioning of the distressed firm, social costs arise and those costs may be substantial. One can easily see why developing a good rule here has been hard to achieve: A rule that facilitates creditor intervention in the debtor’s operations beyond the creditor’s ordinary collection …

The Future Of Securities Class Actions Against Foreign Companies: China And Comity Concerns, Dana M. Muir, Junhai Liu, Haiyan Xu

University of Michigan Journal of Law Reform

In Morrison v. National Australia Bank Ltd., the U.S. Supreme Court limited the application of U.S. securities fraud law in transnational situations. The Supreme Court noted that its decision was influenced by international comity considerations. In this Article, we evaluate the availability of class actions in China in cases involving alleged securities fraud. Because we find that the availability of those actions is too limited to fully protect U.S. shareholders, we argue that U.S. investors should be permitted to bring securities fraud class actions against non-U.S. companies whose securities are traded on a U.S. exchange regardless of where those investors …

A Dual Track Approach To Challenging Chinese Censorship In The Wto: The (Future) Case Of Google And Facebook, Anonymous

Michigan Journal of International Law

As economic and trade policies continue to affect more facets of society, the World Trade Organization’s (WTO) impact on government policy and citizens’ lives has grown. Since its creation on January 1, 1995, the WTO has fostered trade liberalization negotiations and served as a forum where member countries can discuss economic concerns with one another. The WTO is perhaps best known for its dispute settlement mechanism. When countries cannot reach a mutual resolution to a conflict governed by a trade agreement, they can initiate formal legal proceedings against one another by asking for a panel to be appointed. The panel …

Model-Based Pricing In Hurricane Insurance: A Case Study For Judicial Reform Of The Mccarran-Freguson Act, Benjamin Holland Able

University of Michigan Journal of Law Reform

The McCarran-Ferguson Act (MFA) exempts various aspects of state insurance operations from federal antitrust enforcement. This exemption is a source of longstanding controversy, due in part to its potentially harmful effect on consumers in product pricing. In hurricane insurance, there is a burgeoning debate concerning insurers' use of predictive computer models rather than shared loss data to set premiums for the industry. By using these models in hurricane-prone states, insurers have increased the price of hurricane insurance dramatically. Where these new prediction methods are used, MFA exemption may facilitate supracompetitive pricing in ways its architects could not have foreseen. This …

Market Power In Power Markets: The Filed-Rate Doctrine And Competition In Electricity, Sandeep Vaheesan

University of Michigan Journal of Law Reform

State and federal initiatives have opened the American electric power industry to competition over the past four decades. Although the process has not occurred uniformly across the country, wholesale electricity markets exist everywhere today. Independent power producers can construct generation facilities and sell their output to utilities and industrial customers through bilateral contracts. In many regions, centralized power markets now facilitate the sale of billions of dollars in electricity annually through auctions. Although market forces have replaced direct price regulation in electricity, antitrust enforcement has not expanded its role commensurately. A lack of competition has been a serious problem in …

Private Equity & Private Suits: Using 10b-5 Antifraud Suits To Discipline A Transforming Industry, Kenneth J. Black

Michigan Business & Entrepreneurial Law Review

This note demonstrates why private equity will no longer be able to avoid private investor suits as it has (mostly) done in the past and explores the industry’s response to a growing number of investor suits. Notably, the industry has already begun to shift its strategy from regulatory avoidance to regulatory capture, at least in part to avoid investor suits. Given these changes, this note proposes that the best way to maintain discipline in the transforming private equity market is to protect the ability of investors to bring private suits.