Abstract

English-architecture company law describes the distinct and diverse group of company or corporate law used in more than 60 jurisdictions worldwide. English-architecture company law provides a robust platform for innovation and development due to its permissive structure, opportunity for choice of law in an entity’s internal governance, and scalability permitting variation for small and large entities. It is the dominant form among International Financial Centers (IFCs), many of which have legal systems with a British connection. This body of law responds to competition and maintains dynamism by engaging its practice community through “learning by doing” and “frictioneering.” An architecture approach permits a broader review of developments in company law that more closely captures the reality of global law practice. The IFC experience of climbing the value chain from tax arbitrage to provide solutions for entities or structures left out in the corporate law of larger jurisdictions provides a useful global governance model to maintain normative, jurisprudential, and regulatory coherence even as it responds to more specialized and unanticipated needs. This Article explores what makes English-architecture company law so successful and how IFCs use it to compete in the global law market.

Abstract

The Global Antitrust Institute (“GAI”) provided comments to the U.S. Federal Trade Commission (“FTC”) in response to the FTC’s proposal to make significant amendments to the rules governing premerger notification under the Hart-Scott-Rodino Antitrust Improvements Act. The proposal will, if implemented, substantially increase burdens on all merging parties, regardless of whether the transaction reported poses an anticompetitive risk. In Section I we review the market for corporate control and the benefits it can have for effective firm management, allocative efficiency of economic resources, and consumer welfare. In Section II we explain how, contrary to the FTC’s view, the proposed changes will significantly increase the burden imposed on filing parties. This will impede the market for corporate control and consequently reduce productivity and inhibit innovation in other markets. In Section III we highlight potential conflicts between the proposed rule amendments and the Administrative Procedures Act.

This symposium wonders what exactly is “The FTC’s New Normal”? The short answer: scary.

The current Federal Trade Commission (FTC) leadership is clear that old U.S. Supreme Court opinions, rather than more recent jurisprudence, are their lodestones for antitrust analysis. This is dramatically illustrated by the draft merger guidelines recently proposed by the FTC and U.S. Justice Department’s (DOJ) Antitrust Division; as Geoff Manne has noted, of the 48 antitrust decisions cited, only 10 are from this century, and on a weighted-average basis, the cases cited are almost a half-century old!

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The UK has long prided itself as an attractive destination for investors and a hub for innovation. This is no small part due to the country’s sensible and proportionate, evidence-based approach to regulation, which focuses on correcting market failures. But a new bill currently in Parliament risks undermining Britain’s status as a regulatory role model, as well as Rishi Sunak’s ambition to turn the UK into a “science and technology superpower.” The Digital Competition and Consumers Bill (DMCC) takes its inspiration from the EU’s Digital Markets Act. The DMCC would give the Competition and Market Authority’s (CMA) expansive new powers to prohibit or compel conduct in digital markets, with potentially far-reaching implications for consumers, investment, innovation, and the country’s overall competitiveness.

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Abstract

We take advantage of the Brazilian mandatory corporate governance (CG) reporting system to build an overall Brazil Corporate Governance Index (BCGI) and subindices (CGIs), and track changes in firms’ scores over the 10-year period from 2010-2019. We show that overall CG level improved significantly between 2010 and 2019, with most of the improvement over the first part of this period. The improvement has two sources: an increase in the proportion of high-standard listings (Novo Mercado and Level 2, NML2) versus low-standard listings (Level 1 and regular, L1R), and within-firm improvement in CG practices. In the first half of the sample period, both NML2 and L1R firms improved CG practices considerably. Overall improvement in the second half of the sample period reflects an increasing proportion of NML2 firms, plus gradual improvement in L1R CG levels; with nearly constant NML2 levels. Improvements were stronger for Board Procedure and Disclosure. Firms in both listings improved their CG. Overall improvement was stronger in NML2 than in L2R, but was concentrated in the period from 2010-2015.

In its latest State of Tax Justice (SOTJ 2023) report, Tax Justice Network (TJN) claims that over the next decade the world will “lose” $4.7 trillion in taxes unless governments agree to sign a global agreement on taxes under the auspices of the United Nations.

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Abstract

We study the evolution of corporate governance (CG) practices in Brazil over 2010-2019, using a country-specific Brazil Corporate Governance Index (BCGI) validated in prior work. We study separately firms in high-governance and low-governance legal regimes, in a single country. CG improved considerably in Brazil over 2010-2015, with much smaller changes over 2015-2019. Positive CG changes are much more common than negative changes. Some firms made only minimal changes, despite low initial CG levels. We also study which firm financial factors predict both CG levels and changes in levels. None of the firm financial variables we study consistently predicts CG levels. However, for CG changes, a measure of equity financing need predicts CG improvements in the first half of the sample period, but only for firms in the lower governance regime, not for firms in the higher regime. This is the first article to find evidence for firm financial characteristics predicting CG changes, consistent with theoretical predictions, including stronger effects for firms in the lower governance regime.

School’s back in session and the Telecom Hootenanny is heating up. We’ve got a hot-off-the-presses issue brief on the ACP, more BEAD agonistes, and the latest on spectrum auctions.

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Summary

• The Digital Markets, Competition and Consumers Bill (DMCC or ‘the Bill’) endows the UK’s Competition and Markets Authority (CMA) with extensive new powers to tackle alleged anticompetitive practices in digital markets.
• The CMA will be able to both prohibit or require a wide array of conduct at an incipient stage and impose far-reaching remedies with limited accountability or consideration of consumer benefits.
• The DMCC’s powers are defined broadly, meaning the CMA will have significant discretion to direct the development of digital markets; this is unlike the European Union’s Digital Markets Act, which, although still far-reaching, contains more clearly defined thresholds, requirements and prohibitions.
• The CMA will be able to designate any large company satisfying certain criteria and undertaking ‘digital activity’ as having Strategic Market Status (SMS). That could bring hundreds of companies into the scope of the regime, empowering the CMA to exert substantial control over broad swaths of the economy over time.
• The DMCC empowers the CMA to take crucial decisions at every step of the process—g., in designating relevant activities, imposing conduct requirements and pro-competition interventions, investigating breaches, adjudicating wrongdoing and imposing significant fines — without full merits review.
• It will only be possible to challenge the CMA on process grounds under the judicial-review standard, giving it great power.
• The DMCC ignores important tradeoffs inherent to the proposed prohibitions and obligations, such as the privacy and security implications of requiring ‘interoperability’ or the convenience to users of ‘self-preferencing’.
• The ‘final offer mechanism’ backstop enforcement power marks a fundamental incursion on freedom of contract for private businesses, which could find themselves required to accept unfavourable terms in relation to third parties. The CMA will be asked to arbitrate commercial conflicts between large digital firms and their competitors, leading to a significant risk of rent-seeking behaviour by third parties, regulatory capture, and politicised decision-making.
• The regime will undermine investment in the UK digital sector, and associated innovation, because of the risk of cumbersome, unclear and ever-changing rules—along with a lack of accountability. New features could be delayed or not introduced for British users as firms seek to minimise the risk of falling afoul of the new regime and incurring hefty fines and stringent remedies. The UK’s position as a ‘science and technology superpower’ will thus be undermined.

Introduction

The Digital Markets, Competition and Consumers Bill (DMCC), introduced into parliament in April 2023, is the UK government’s response to alleged anticompetitive practices in digital markets.[1] But in its current form, the Bill threatens to do more harm than good.

In this paper we address Part 1 of the Bill, which concerns its provisions on digital markets.[2] In this area, the government’s underlying concern is that network effects, economies of scale and the accumulation of user data have led to the creation of monolithic technology giants that can exercise market power in ways that lead to higher prices and poor outcomes for consumers, and furthermore, that their power is entrenched, in the sense that their market position is very hard for new entrants to challenge. Advocates of the legislation believe that new regulatory powers are necessary to address these competition issues. The particular point that digital companies are heavily entrenched has been questioned elsewhere, for example by Baye and Prince (2020: 1287). They argue that technology markets are highly dynamic and that, while it may be tempting for policymakers to intervene in an attempt to remedy an immediate concern, history suggests that competition often permits new and superior technologies to supplant entrenched ones. This paper, however, is more narrowly focused on the DMCC, the powers it gives to regulators, the lack of procedural protections, and the issues this raises for the UK economy.

Part 1 of the DMCC will:

1. empower the CMA to designate companies as having ‘strategic market status’ (SMS) with respect to designated digital activities;
2. allow the CMA to design bespoke ‘conduct requirements’ for each SMS firm, dictating important aspects of the operation of its service, how customers are treated, and relations with other businesses in relation to designated activities (g., preventing a search engine from prioritizing its services in results);
3. allow the CMA to undertake what are presumed to be pro-competition interventions (g., requiring open data sharing);
4. mandate transparency in relation to mergers;
5. equip the CMA with extensive enforcement powers, including the imposition of large fines and a ‘final offer mechanism,’ as a backstop enforcement tool.

In practice, it endows the CMA, acting through the newly created Digital Markets Unit (DMU), with extensive new powers to categorically prohibit certain types of conduct at an incipient stage and impose far-reaching remedies with limited consideration of countervailing consumer benefits.

The CMA will also be able to take crucial decisions at every step of the process—e.g., in designating relevant activities, imposing conduct requirements and pro-competition interventions, investigating breaches, adjudicating wrongdoing and imposing significant fines—without full merits review. It will only be possible to challenge the decision-making on process grounds under the judicial review standard. In simple terms, courts will not assess whether the CMA was ‘right’, but whether the correct procedures were followed.

In addition, the procedural safeguards contemplated by the Bill may enable overenforcement in ways that hurt consumers. In practical terms, this could mean new products will not be developed in the UK and that new features could be delayed or not introduced for British users, as firms seek to minimise the risk of falling afoul of the new regime and incurring hefty fines and stringent remedies. This could, in turn, deter post-Brexit investment in the British economy and damage job creation in high-tech industries.

Granting extreme executive powers without sufficient oversight marks a departure in British governance from the rule of law in favour of expansive regulatory discretion, which is ill-advised on both principled—i.e., respect for the rule of law as a guiding democratic principle—and practical grounds.

To avoid turning the UK into a ‘tech turn-off’, it is vital that the DMCC be revised to narrow the CMA’s discretion and that meaningful procedural guardrails are incorporated to counterbalance its far-reaching powers. Absent this, the damage caused to the British economy may be hard to reverse.

[1] These issues were outlined in the government’s Digital Competition Expert Panel, also known as the Furman (2019) report, and the consultation on a new pro-competition regime for digital markets (DCMS and BEIS 2022).

[2] Shalchi and Mirza-Davies (2023) describe Part 2, and Conway, Fairbairn, and Pyper (2023) describe Parts 3-6.