Advanced Business Law BPP 433 85 2007 Winter Quarter

Advanced Business Law (BPP 433/85) 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: 50 PM Instructor: David Oliveiri – Phone: (585) 275 -5144 CS 3 -206 E-Mail: david. oliveiri@simon. rochester. edu Assistant: Kathleen De. Fazio (Phone: x 5 -5526; Office: CS-3 -202 B) 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 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, 13 th 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 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, 7 th 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 7 A 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 BPP 433 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 Care “Employee” Care -100, 0 -110, 0 “Employer” Care -100, -10 -20, -10 • No Collusion • Cost of Care=10 • Cost of Injury=100 • Probability of accident given 2 party Care = 10% Advanced Business Law BPP 433

What Does Law/Regulation Do? Workplace Safety--Regulated No Care “Employee” Care “Employer” Care -100, 0 -100, -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 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/Mc. Graw-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, …) Competitors (Antitrust, IP, …) The “Public” (EPA, SOX, …) Advanced Business Law BPP 433

Why Law/Regulation? Defines/Enforces Property Rights [©David J. Oliveiri] Redresses Market Failures [SOX] Redistributes Wealth

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-for 75 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. ” – Post. Mortem 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