BUS 446: POLITICAL AND LEGAL ENVIRONMENT
FOUNDATIONS OF INTERNATIONAL MARKETING
AGENDA
¡ Political Environment
¡ Legal and regulatory Challenges
n
In 2016, Uber (China) merged with Didi Chuxing at $35
billion to overcome regulatory obstacles that have failed
most foreign companies in this market.
https://www.youtube.com/watch?v=Z4QcwsEbKyo
5-4
THE POLITICAL ENVIRONMENT
¡ A political system is the means by which people in
a society make the rules that control and
influence their lives.
¡ Political environment is made up of governmental
institutions, political parties, and organizations that
rulers and people use to wield power.
¡ Each nation’s political culture reflects the
importance of the government and legal system
LEGAL SYSTEMS
Nations are sovereign
Disputes between nations are settled by
• Wars and treaties
• Trade: World Trade Organization (WTO has a Dispute Settlement Body)
• Court: The UN’s World Court (International Court of Justice)
The Peace Palace
LEGAL SYSTEMS
Corporations are not
sovereign
There is no international
system of laws
Disputes may arise…
•
Between two international
companies
•
Between an international company
and a domestic consumer
•
Between a company and sovereign
nation
•
Between an international company
and shareholders
•
…etc.!
IMC = infrastructure, mining, and commodities
© Norton Rose Fulbright
POLITICAL RISK
¡ The possibility of a change in
political environment or
government policy that would
adversely affect a company’s
ability to operate effectively and
profitably
When perceived political risk is high, a country will have
a difficult time attracting foreign direct investment
e.g. Russia, north Korea.
Political forces could dramatically change the business environment
with little advance notice.
POLITICAL RISK
RISK: SEIZURE OF ASSETS
¡ Expropriation–governmental action to dispossess a foreign company or investor
¡ Confiscation occurs when no compensation is provided.
¡ Nationalization–a government takes control of some or all of the enterprises in an
entire industry
¡ Public purpose
¡ Adequate payment.
RISK: SEIZURE OF ASSETS
¡ Creeping expropriation–limits economic activities of
foreign firms
¡ May include:
¡ Limits on repatriation of profits, dividends, or royalties
¡ Increased local content laws
¡ Quotas for hiring local nationals
¡ Limitation on ownership
¡ Price controls
¡ Discriminatory tariff and nontariff barriers
¡ Discriminatory laws on patents and trademarks
¡ …
EACH COUNTRY HAS ITS OWN UNIQUE LEGAL SYSTEM
There are four (4) main bases for legal systems
Bases
Features
Example countries
Common law
• Judges interpret laws and statues and set precedents
• Code law is used only in a few areas
US, UK, India, South Africa
Civil or code law
• Legal system reflects the structural concepts and
principles of the Roman Empire
• All inclusive system of written rules of law
Germany, France, Japan, the
US State of Lousiana
Religious law
Islamic / Shari’ah
Canon law
•
•
•
•
Socialist law
• Most property is owned by the state
• Resources (e.g., land) are redistributable
Based on religious text: Koran–Holy Book
No vice categories (alcohol, gambling)
No interest payments (riba)
Based on sayings and practices of Muhammad: Hadith
Sudan, Libya, Iran, Yemen,
Saudi Arabia, Vatican City
China, Cuba
Many countries have a pluralistic legal system, which is a hybrid of two or more of the four above
US HAS A VERY ACTIVE LEGAL SYSTEM
Many MNCs use US in jurisdiction clause
Jurisdiction (power to decide a case)
over a legal dispute is generally
determined in one of three ways, on
the basis of:
1.
jurisdictional clauses included in
contracts
2.
where a contract was entered into
3.
where the provisions of the
contract were performed
FORMS OF DISPUTE RESOLUTION
Legally
binding?
Conciliation
(aka mediation)
Arbitration
Litigation
Public?
Political
risk?
WHO ENFORCES JUDGMENTS?
Arbitration
• The US belongs to the “New York Convention” (Convention on the Recognition and Enforcement of Foreign Arbitral
Awards)
• Also, the UN has a model law on commercial arbitration (UNCITRAL Model Law on International Commercial
Arbitration)
• Basic idea is that member states agree to enforce arbitral award
Litigation
• There are no conventions or treaty regarding recognition and enforcement of judgments made by foreign courts
• Enforcement of foreign decisions depends on domestic laws
• US courts will decide:
• Did the foreign court have jurisdiction?
• Was the defendant properly notified?
• Was there fraud in the proceedings?
• Was the judgment consistent with the public policy of the foreign country?
DIGITAL PIRACY IS BIG ISSUE IN DEVELOPING COUNTRIES
COUNTERFEIT TRADE IS COST TO BRAND IMAGE AND PROFITS
Counterfeit trade:
• 2.5% of all trade
• $461bn total
Source: OECD
STOPPING COUNTERFEITS
1. Register trademark
immediately
2. Get a good local lawyer
3. Have an online store that
accepts local payment
4. Use QR and RFID schemes
to detect fraud
Chen, Yue, and Zhao
Stopfakes.gov is (usually) a
good resource for
intellectual property rights
resources
COUNTRIES HAVE VERY SPECIFIC MARKETING LAWS
• US bans the sale of human organs
• Surrogacy (commercial and altruistic) is illegal in many countries (e.g., Italy). Some
countries only permit altruistic surrogacy (e.g., New Zealand). Some permit both
(Iran, Russia, US [by state])
• Sweden bans advertising to kids
• In Austria, free gifts or coupons are considered cash discounts and are prohibited
• France similarly regulates sales—companies can have sales only twice a year in
January and August
The General Data
Protection Regulation
(GDPR) & Big Data
The EU General Data Protection Regulation (GDPR) is the
most important change in data privacy regulation in 20 years.
The regulation will fundamentally reshape the way in which data
is handled across every sector, from healthcare to banking and
beyond.
EU VS. US DATA PROTECTION LAW
EU = One comprehensive
Law for all sectors
US = patchwork of different
laws for different sectors
plus 50 state breach laws
US PRIVACY REGULATION
Ban against “unfair or
deceptive acts or practices
in or affecting commerce.”
Section 5(a) of the Federal
Trade Commission Act
(FTC Act)15 USC §45
GDPR KEY TERMS
¡ Personal Data
¡ any information relating to an identified or identifiable
natural person (‘data subject’)
¡ Data Subject
¡ Natural person (resident of EU) with legal rights
¡ Data Controller
¡ “brains”
that control the data
¡ Data Processor
¡ “body” that follows brains’ instructions
¡ Processing
¡ Digitally touch, see, or facilitate transport of data
GDPR GOLDEN RULE
Personal data must
be processed:
1. lawfully,
2. fairly and in a
3. transparent
manner
in relation to the
data subject.
France just fined
Google $57 million
for failing to obtain
user consent before
collecting data for
retargeting
U.S. LAWS APPLY IN HOST COUNTRIES
¡ Leaving the boundaries of a home
country does not exempt a business
from home-country laws.
¡ What is illegal for an American
business at home can also be illegal
by U.S. law in foreign jurisdictions for
the firm, its subsidiaries, and
licensees of U.S. technology.
NEXT CLASS
¡ Global Marketing Research
¡ Chapter 6