Introduction into US business law VIII FS 2017

Transcription

1 Introduction into US business law VIII FS 2017

2 Repetition last time: torts > Torts > Civil wrong > Relevance (incl. Excessive damages reforms?) > Intentional > Negligence > To proof: > Duty to care, breach of duty, causation, damage 19. Mai

3 Strict liability > Liability without fault for activities that create exceptional dangerous risks to society > Prima facie case > Absolute duty to make safe > Creation of undue risk of harm > Breach > Causation > Damages

4 Strict liability > cases > Animals > Liable for reasonably foreseeable damage > Ultra hazardous activity > Activity not commonly engaged in which involves risk of serious harm and cannot be performed with complete safety > Storing of explosives in populated area > building a water reservoir on own property that can flod neibghouring coal mine

5 Product liability > The majority of product liability laws are determined at the state level and vary widely from state to state. > Each type of product liability claim requires different elements to be proven to present a successful claim. > Section 2 of the Restatement (Third) of Torts: Products Liability distinguishes between three major types of product liability claims: > manufacturing defect, > design defect, > a failure to warn (also known as marketing defects). 19. Mai

6 Product liability > Negligence > Legal duty > Breach (lack of reasonable care) > Causation > Damages > Defenses (contributory negligence, assumption of risk) > Strict liability > Liability of commercial supplier > Consumer expectations/warnings/reasonable standard 19. Mai

7 Escola v. Coca-Cola Bottling Co (1944) > Important product liability case > Escola was waitress, putting aside glass bottle of Coke when that bottle spontaneously exploded in her hand > One of Coke s delivery drivers confirmed that bottles had exploded > Court: bottle was in some manner defective > Although no negligence proofed strict liability

8 Escola today > Today Escola is widely recognized as a landmark case in American law > Even if there is no negligence, however, public policy demands that responsibility be fixed wherever it will most effectively reduce the hazards to life and health inherent in defective products that reach the market. It is evident that the manufacturer can anticipate some hazards and guard against the recurrence of others, as the public cannot. Those who suffer injury from defective products are unprepared to meet its consequences. The cost of an injury and the loss of time or health may be an overwhelming misfortune to the person injured, and a needless one, for the risk of injury can be insured by the manufacturer and distributed among the public as a cost of doing business. It is to the public interest to discourage the marketing of products having defects that are a menace to the public. > In the 40 years after Greenman, the highest courts of nearly all U.S. states and territories followed California's example in imposing strict liability on manufacturers, distributors, and retailers for defective products. 19. Mai

9 Relevance of torts law > Today is touching nearly all aspects of life in USA > Remedy for business against unfair competitiors > To protect employees from emotional distress > To regulate environment (air pollution, etc.) > Surviving family members in case of wrongful death to recover pecuniary loss

10 Tort reform > Damages often very high > Limitation of damages > President Clinton vetoed (cap. of ) > States (currently in effect) > Antitrust damages have come under special scrutiny > Punitive damages?

11 >

12 Antitrust law

13 History > In the USA first competition law (antitrust) 1890 > Why? > Freedom and equality > After civil war dominant firms > Trusts (Standard Oil Rockefeller) > Influence on politics > Democratic control of powerfull but private enterprises > No monopolies > Protection of middle class

14 Federal legislation > Federal legislation (commerce clause) > Interstate trade > 2 tests > Flow of commerce test > Affecting interstate commerce test > State antitrust regulations exist too > little sherman > of little importance

15 US Antitrust laws as an export product > USA 1890 > EU/D 1952 > CH 1962 > Russia 1990 > China Mai

16 Extraterritorial application > Foreign Trade Antitrust Improvements Act (1982) > Extraterritorial application > Affecting competition in the US > Considerable > Reasonable > US foreign trade or US markets > Antitrust Enforcement Guidelines for International Operations (1995)

17 Goals of US antitrust law > Limiting political influence > Prevention of monopolies > Promotion of competition by forbiding certain forms of restrictions > Protection of small business and middle class people > Protection of competition, not competitors

18 US antitrust legislation - overview > Sherman Act 1890 > Cartels > Monopoly (abuse of dominant position) > Clayton Act (1914) > Merger Control > Private law suits > Federal Trade Commission Act (1914) > Second enforcement authority > Unfair competition

19 Sherman Act (1) > 1890 > magna charta of free enterprise > Restraint of trade (Sec. 1) = cartels > Monopolies (Sec. 2) > Only if through unfair practices > Monoplois per se not illegal > Broad wording courts > Rule of reason > Only reasonable restraint

20 Sherman Act Section 1 Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court

21 Sherman Act Section 1 > Section 1 has 3 elements > An agreement > Which unreasonably restrains competition > And which affects interstate commerce

22 Sherman Act Section 2 Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.

23 Sherman Act Section 2 > Section 2 has 2 elements: > The possession of monopoly power in the relevant market and > The willful acqusition or maintenance of that power as distinguished from growth or development as a consequence of a superior product.

24 Standard Oil Co. V. New Jersey > 221 US 1 (1911) > First leading case on antitrust law > Over years, Standard Oil had bought up virtually all oil refining companies > Standard Oil used its size to undercut competitors (underprizing) > Standard Oil was found guilty of monopolizing the petroleum industry > Court endorsed rule of reason only unduly restrictions of trade > Division of Standard Oil into several competing firms

25 Sherman Act (6) The purpose of the Sherman Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself (USC, Spectrum)

26 Rule of reason/per se > Rule of reason v. per se violations > Broad wording > Per se = severe restrictions > Easier > Horizonal (vertical) price fixing > Geografic divisons of markets > Predatory pricing (Verdrängung) > Boycott collective refusals to deal > Tying arrangements

27 Northern Pacific Ry v. US (1) > 356 US 1, 4 (1958) > 1864 Government granted NPR land to facilitate railroad constructions > By 1949 NPR had soled most of that land but with preferential routing clauses > Using NPR as long as rates were equal to competing carriers > Most of interstate trade went with NPR > Government filed lawsuite (Sherman Act) > Preferential routing agreements unlawful

28 Northern Pacific Ry v. US (2) > USC in favour of Government > Tying arrangements are per se unreasonable and unlawful whenever seller has sufficient economic power > Here substiantial economic power is given > Prove of unreasonable restrictions > However, some agreements because of their negative effects on competition, are presumed to be unreasonable

29 Chicago Board of Trade v. US > 223 F.2d 348 (1955) > USC applied rule of reason to internal trading rules of commodity market > CBOT is commodity market (sales of grain) > New internal rules that after last call (2 pm) price is set and all board members have to accept > DOJ accused CBOT of price-fixing > Evidence that rule had no unlawful purpose but rather against pre-existing problems and abuses > USC came to conclusion that new rule was ultimately procompetitive hepled to create public market for grain > Justification of restrictions of trade (reasonable)

30 Clayton Act (1) > 1914 > If competition might be substantially resctricted > Exclusive dealing and tying contracts > Merger control (preemptive) > Interlocking directorates (same persons in boards) > Private law suits > Robinson Pattman Act 1936 > Price discrimination > Celler-Kefauver Antimerger Act 1950

31 Clayton Act (2) > Merger Guidelines > First 1968, 1997 > Set of internal rules promulgated by Antitrust Department of DOJ > Rules under which the 2 bodies will challange mergers > To improve predictability of Agency s merger enforcement policy > Market definition focuses solely on demand substitution factors > definitions

32 Clayton Act (3) > General Electrics/Honeywell > Honeywell Furtune 500 company > Consumer goods and engineering services > In 2000 GE announced intention to acquire Honeywell (2.1 billion $) > American authorities cleared merger but it was blocked by EC > GE s dominance of the small jet engine market and Honeywell s portfolio of regional jet engines > Irritation!

33 Federal Trade Commission Act (1) > 1914 > Second enforcement agency > General prohibition for unfair competition

34 Federal Trade Commission Act (2) > Section 5 > Section 5 prohibits entities from enganging in unfair or deceptive acts or practices in interstate commerce > Deceptive = acts that is likely to mislead consumers acting reasonably > Advertisement: if it includes material information that is false or that is likely to mislead consumers > FTC can seek injunctive relief

35 Federal Trade Commission Act (3) > FTC v. Motion Picture Advertising Service Co (344 US 392 (1953) > MPA produces advertising pictures and distributes them in interstate commerce > It had exclusive contracts with 40% of the theaters where it operated > Together with 3 other companies it had exclusive contracts with 75% of all theaters in the US > FTC found that MPA unreasonably restrain competition and tend to monopoly and that it did unfair method of competition (Section 5) > FTC ordered contracts only for one year > USC accepted this order, FTC did not exceed its powers

36 Difficult issues > Relevant market? > Interchangeability > Cross-elasticity of demand

37 Enforcement (1) > 2 federal offices > DOJ > Depending on who is in power > FBI > Immunity programs > Federal Trade Commission

38 Enforcement (2) > Federal courts > Private lawsuits most important > Of central importance > broad wording > treble damages > Class actions misuse? > Per se - Rule of reason > Criminal sanctions!

39 Enforcement (3) > Waves of enforcement > Broad wording > Interpretation by courts > Depending on judges > Strict v. relaxed interpretation > Criminal act

40 Microsoft case > EU > European Commission > Fine Euro 561 million for abuse of dominant position > USA > Mai

41 Next time Trade / WTO