Advanced Business Law (BPP433/85)
2007 Winter Quarter
Instructor: David Oliveiri
Advanced Business Law BPP 433
Learning Objectives
“The Law” Affects Business -- Rules, Rulemaking and
Enforcement Processes
As “Environment” for Business, Law Provides Constraints,
Risks, Opportunities
LAW
Advanced Business Law BPP 433
BUSINESS
Law and Opportunities? -The Credit Card Industry
in 1980
State “Usury” Laws – Ceilings on Interest Rates
1980 Citibank Situation -- “Squeezed” by New York State
Usury Law and Double-Digit Inflation Rates -- “Lending
money at 12% and paying 20%..."
1978 US Supreme Court Decision (Marquette National
Bank v. First of Omaha Service Corp.) – “National banks
only have to obey the interest-rate caps of the state they are
chartered in, not that of the state where a bank's customer
lives.”
South Dakota Legislature Eliminated Usury Ceiling –
Revenue Measure
Advanced Business Law BPP 433
Law and the Credit Card
Industry: Opportunity
Realized
Advanced Business Law BPP 433
Syllabus Review
Time: Tuesdays 5:50-8:50PM
Instructor: David Oliveiri – Phone: (585) 275-5144 CS3-206
E-Mail: david.oliveiri@simon.rochester.edu
Assistant: Kathleen DeFazio (Phone: x5-5526; Office: CS-3-202B)
Course Objectives:
– To develop familiarity with selected laws, regulations, legal principles,
and legal processes that have an impact on …assembling factors of
production, conducting business
– To understand and appreciate the constraints, risks, and opportunities
that the legal environment provides to entrepreneurs.
Evaluation of Performance:
Midterm (2/6)
33 1/3%
Final
33 1/3%
Participation
33 1/3%
100%
Advanced Business Law BPP 433
Syllabus Review
Learning Approach:
– Lectures + Hypotheticals/Commercial Fact Patterns
– Weekly Self-Tests
– Team-Based Discussion Questions (Weeks 7-10)
Exams:
– Midterm and Final Exam – 2 Hours – Short Answer
Text: Smith & Roberson’s Business Law, Mann & Roberts
(Thomson/Southwestern, 13th Ed. 2006)
Outline
Advanced Business Law BPP 433
Before Focusing on
Business Law
Understand Scope of “Law”
Understand Economic Rationale for a Legal
Environment
Understand Financial and Competitive Impacts of
a Legal Environment
Then, We Can Apply These Understandings to
Business
Advanced Business Law BPP 433
Advanced Business Law BPP 433
Law = Government
Regulation
Regulation by Government, not Regulation of
Government
“regulation, n. 1. the act or process of controlling
by rule or restriction <the federal regulation of
the airline industry>…” Source: Black’s Law
Dictionary, 7th Ed. (1999, West)
Quiz
Advanced Business Law BPP 433
Quiz:
Law/Regulation or Not?
“…transportation of intoxicating liquors within,
the importation thereof into, or the exportation
thereof from the United States and all territory
subject to the jurisdiction thereof for beverage
purposes is hereby prohibited.”
Advanced Business Law BPP 433
Quiz:
Law/Regulation or Not?
Source: US Constitution, Amendment XVIII (1919)
Advanced Business Law BPP 433
Quiz:
Law/Regulation or Not?
Federal Clayton Act forbids acquisitions that “lessen
competition, or … tend to create a monopoly.”
Subsequent Amendments/Regulations Spell Out
Requirements of Pre-Merger Notice to FTC and DOJ;
“Waiting Period” Pending Review
FTC Threshold: Voting Securities + Assets >$200 million,
now $226 million by recent FTC bulletin.
Advanced Business Law BPP 433
Quiz:
Law/Regulation or Not?
Source: Federal Trade Commission Revised
Jurisdictional Thresholds for Section 7A of
the Clayton Act
Advanced Business Law BPP 433
Quiz:
Law/Regulation or Not?
“Where a minor is in the employment of a person
other than his parent or guardian, payment to such
minor of his wages is valid, unless such parent or
guardian notify the employer in writing, within 30
days after the commencement of such service , that
such wages are claimed by such parent or guardian,
but whenever such notice is given at any time
payments to the minor shall not be valid for services
rendered.”
Advanced Business Law BPP 433
Quiz:
Law/Regulation or Not?
Source: NY General Obligations Law Ş 3-109
Advanced Business Law BPP 433
Quiz:
Law/Regulation or Not?
“Professor-of-the-first-part agrees to pay
Professor-of-the-second-part the sum of
$50,000.00 for delivery on January 24, 2007 of
one (1) Advanced Business Law class of 180
minutes duration to Professor-of-the-first-part’s
BPP433 class.”
Advanced Business Law BPP 433
Quiz:
Law/Regulation or Not?
Source: Contract Between _____& David Oliveiri
Advanced Business Law BPP 433
What is Government
Regulation?
Constitutions, Statutes, Admin Agency Regulations,
Court Decisions, …Contracts
Lots of Them – Municipal, County, State, Federal,
International
Some are Highly Specific -- [Hart-Scott-Rodino
Thresholds]
Some are “Less Specific” -- [Sherman Act
prohibitions against “contracts, combinations, and
conspiracies that restrain trade…”]
Advanced Business Law BPP 433
What Does
Law/Regulation Do?
Workplace Safety—Unregulated
No Car
No Care
“Employee”
Care
-100,0
“Employer”
Care
-100,-10
•No Collusion
-110,0
-20,-10
•Cost of Care=10
•Cost of Injury=100
•Probability of
accident given 2party Care = 10%
Advanced Business Law BPP 433
What Does
Law/Regulation Do?
Workplace Safety--Regulated
No Care
No Care
“Employee”
Care
“Employer”
Care
-100,0
-100,-10
-10,-100
-20,-10
Results: 1. Shifts Costs
2. Influences Future Behavior
3. Barrier to Entry?
Advanced Business Law BPP 433
How Law/Regulation
Affects Business
Business Environment
Technology
Computers
Telecommunications
Production Methods
Markets
Competitors
Customers
Suppliers
Regulation/
Law
Business Strategy
Which Markets?
How to Compete
Organizational Architecture
Decision-rights assignment
Reward System
Performance-evaluation
Source: Brickley, Smith,
Zimmerman, Managerial
Economics and Organizational
Architecture (Irwin/McGraw-Hill)
Advanced Business Law BPP 433
Incentives and actions
Firm value
How Law/Regulation Affects
Business – Another View
Owners
Employees
Creditors/Suppliers
Land
Labor
Venture
Capital
Ent. Talent
Advanced Business Law BPP 433
Customers
Competitors
The “Public”
How Law/Regulation Affects
Entrepreneurs – Another View
Land (Zoning, EPA,…)
Labor (NLRB, Contract, At Will, ..)
Owners (SEC, Bus. Orgs., …)
Employees (EEOC, …)
Creditors/Suppliers (UCC,
BK, ..)
Venture (Bus. Orgs., …)
Capital (UCC, Contract…)
Customers (UCC, Prod. Liab.,
…)
Ent. Talent (Contracts, …)
Advanced Business Law BPP 433
Competitors (Antitrust, IP, …)
The “Public” (EPA, SOX, …)
Why Law/Regulation?
Defines/Enforces Property Rights
[©David J. Oliveiri]
Redresses Market Failures [SOX]
Redistributes Wealth
[Football Helmet Industry]
Advanced Business Law BPP 433
Law Influences
Business Thinking
Piecemeal Introduction of Laws/Regulation to a Market –
Relationships with Customers, Competitors
Internet Commerce and Standards – Internet Sales Law,
“Electronic Signature” Laws, BUT Browsewrap Contracts,
Use of Electronic Agents, IP Protection Online, and….
Yahoo vs. LICRA, UEJF
Advanced Business Law BPP 433
Law Influences
Business Thinking
Sudden Introduction of Laws/Regulation to a
Market – Relationships with Customers
PATRIOT Act (10/26/01) and Cost Structure of
Lenders – Detailed Department of Treasury Regs.
for Banks, Lenders:
Identity Verification Procedures
Recordkeeping
Comparison with Government Watch Lists
Advanced Business Law BPP 433
Law Influences
Business Thinking
Introduction of Law/Regulation BENEFITS
SOME/TAXES OTHERS – Relationships
with Competitors
Sonny Bono Copyright
1998 – Extended
Hire” Protection from
Advanced Business Law BPP 433
Extension Act of
“Works-for75 to 95 Years!
Law Influences
Business Thinking
Change in Enforcement Patterns for Existing
Laws/Regulation – Relationships with
Customers
Multi-million-dollar verdict in Texas over Merck’s
Vioxx painkiller finds neglect by Merck and sets
new precedent over usage threshold (4/22/06 WSJ)
– one month vs. 18 months
Advanced Business Law BPP 433
Law Influences
Business Thinking
Change in Enforcement Patterns for
Existing Laws/Regulation – Relationships
with Competitors, Customers
Microsoft in Europe (4/25/06 NYT) – “Microsoft began
it’s weeklong appeal of the European Commission’s 2004
antitrust decision against it on Monday with an attack on
the regulator’s arguments for ruling against the bundling of
Media Player in Windows…If the court upholds the
commissioner’s ruling, it will have a powerful legal weapon
to use in challenges of future moves to bundle products.”
Advanced Business Law BPP 433
Law Influences
Business Thinking
Mixed Signals – UNCERTAINTY –
Relationships with Public, Customers
FDA Dismisses Medical Benefit From Marijuana, Gardiner
Harris, NYT 4/21/06: “The [FDA] declared Thursday that ‘no
sound medical studies’ supported the medicinal use of
marijuana…and that [marijuana] is not an approved medical
treatment…[The FDA said that] any enforcement on its finding
would need to be by DEA, since this falls outside of FDA’s
regulatory authority… In addition, eleven states have legalized
medicinal use of marijuana, but the [DEA has] opposed these
laws… A Supreme Court decision last year allowed the federal
government to arrest anyone using marijuana, even for medicinal
purposes and even in states that have legalized it’s use.”
Advanced Business Law BPP 433
Law Influences
Business Thinking
Mixed Signals – UNCERTAINTY –
Relationships with Competitors
A Battle Erupts Over The Right To Marilyn Monroe,
Nathan Koppel, Wall Street Journal 4/10/06: “The
central issue in four Monroe-related lawsuits, now
pending in Indiana, New York and California is
seemingly simple: At the time of her death was the
actress a Californian or a New Yorker? The answer is
worth millions.” – PostMortem Publicity Rights vs.
Photographers’ Copyrights
Advanced Business Law BPP 433
Dealing With Lawyers
Multiple Roles
– Advocate
– Advisor
– Facilitator
– Risk Manager
Inhouse Counsel v. Outside Counsel
– Inhouse: Cost Center vs. Profit Center
– Outside: Hourly Billing vs. Value Billing
Attorney-Client Privilege
Advanced Business Law BPP 433
Bottom Lines/Q&A
Legal Regulation Scenarios:
– Evaluating a Business Opportunity
– Starting Up
– Operating (+New Product, New Market, …)
– Exiting
–…
EVAPPROACH = NPVBENEFITS – NPVCOSTS
f (Cash Flows, Timing, Probabilities)
Advanced Business Law BPP 433