Week 1 Flashcards
Scandals
Dieselgate
Volkswagen Emissions Scandal
What: The Chief Exec. quite after they confirmed that 11 million cars were created to chear on environmental tests. They emitted toxic fumes 40x more than permitted.
Solution: VW settles by paying out 193 million euros for the cheat and 6.5 billion euros in compensation and reparations.
Scandals
Theranos Scandal
What: Elizabeth Holmes was the CEO of her company Theranos which tested blood for hundresds of health issues simultaneously. It was once valued at 9 billion USD, but it was later exposed to be fraudulent.
Solution: Her and her partner were charged with 12 counts of fraud with a total loss of 121 million usd. She was required to pay 800 million usd restitution.
Scandals
Collapse of FTX
What: Sam-Bankman-Fried founded a cryptocurrency business called FTX in 2019 which rapidly became one of the most popular crypto exchanges. At some point, they realised that 6 Billion euros went missing. Coincidentally, the next Thursday, the filed for banktrupcy.
Solution:U.S. securities and exchange commission (SEC) charged Samuel Bankman-Fried with defrauding investors in crypto asset trading platofrm FTX on Dec. 13th 2022 for 1.8B USD. He was found guily on all 7 counts of defrauding his customers.
What is Market Regulation?
Narrow sense: The government actively controls how people or businesses act in the market by making, monitoring, and enforcing rules—sometimes leading to bigger issues for society.
Broad sense: Includes all ways society influences how people behave, whether done on purpose or not, and whether it’s the government or other groups
Three core functions of market regulation
- Setting standards: creating clear rules to decide what is considered good or bad for the market. This helps people figure out which situations are better or worse for the system.
- Monitoring and collecting information: Govt./other groups keep an eye on what is happening in the market to gather important data on how things are changing.
- Changing behaviour: Regulations can be used to push or nudge businesses or people to act differently, making the system better overall (C. Hood et al. 2001)
How does market regulation relate to law?
Basic role: law acts as a tool for regulating the market. It helps shape how people and businesses behave by setting rules and creating a system where transactions can happen fairly and safely.
It plays a key role in limiting how market regulations work. In other words, it sets rules on what can or cannot be done in regulating the market. Laws restrict or guide market regulation to make sure it’s down in a fair and legal way.
Relationship between public and private law
Public
* Public authorities
* Public interests
* Socially just distribution of goods in a society (e.g. taxes)
* Public enforcement –> this is done by public authorities through public law measures, ex ante complliance and deterrence.
Private
* Private parties
* Private interests
* Interpresonal justice –> Balance between the parties’ interests through their respective rights and remedies (e.g. damages)
* Private enforcement usually by aggrieved private parties through a priavte law mean, ex post compensation,
Horizontal/Vertical Relationship - Private/Public law
public law: focuses on vertical relationship between private parties and public authorities. It has the necessary powers and instruments to act in favour of the public interest
* can be seen in consitutional and administrative law
private law: creates a horizontal legal framework, allowing private parties to shape their legal relationship as self-determining agents that seek to ensure the balance between the interests of the parties.
* Can be seen in contract/tort law
Relationship between constitutional and administrative law
climate activists block main road into the hague.
applicable case
climate activitist blocked the main road into the hague in defiance of many attempts to prevent their demonstration. This sparked conversation on the right to demonstrate in the Netherlands.
relationship between constitutional and administrative law
constitutional vs. administrative law
constitutional
* sets a general framework for the relationship between public authorities and citizens
* Example: fundamental rights
* Understanding: covid-19 (every citizen has the right to health)
administrative law
* provides more specific rules for the relationship between public authorities and citizens.
* example: rules for notifying or getting approval for public gatherings and how to challenge government decisions on them.
* understanding: covid-19 –> who should be vaccinated first? by whom? and where?
relationship between constitutional and administrative law
most influential systems of administrative law
french approach:
admin. law is a body of rules that organise the govt. and its public authorities.
german approach:
a body of rules that protect the citizens against actions by a public authority.
american approach:
a body law concerned with the establishment and operation of regulatory agencies. This encompasses all statutes, regulations, and judicial decisions that govern them.
why is there a need to regulate?
public interest theories of regulation
regulation emerges to pursue collective goals, with the aim of promoting the general welfare of the community. These are called public interest theories
There are two types of public interest theory:
1. Economic
2. Political
public interest theory
economic version
market regulation should pursue the public interest in an efficient allocation of resources (economic efficiency) –> resources would be put to their most valuable uses
regulation is a response to the imperfections in the market.
* correcting market failures increases the community’s general welfare and so is in the public interest
* these regulations are justifiied because they are able to do what the market cannot.
catgeories of market failures
1. monopolies and anit-competitve practices
2. public good
3. information deficits creating behavioural biases
public interest theory
political version
- collective welfare should not be narrowly defined in terms of an “efficent resource use”.
- pursuing other public interests beside economic efficiency can also justify regulation e.g. social justice, paternalism.
hard vs. soft paternalism
* hard: law enforces individuals to avoid certain risks, so they’re deprived of choice.
* soft: the law ( without coercion ), nudges individuals towards what is generally considered to be a acceptable. The freedom of choice is preserved.
why does regulation emerge?
- maximises the private interests of certain individuals or groups
- regulation may or may not promote the public interests, if it does it is coincidental
- emphasis on regulatory failure and regulatory capture.
regulatory failure vs regulatory capture
regulatory failure:
* poor performance when discharging the core taks of regulation
* collective costs of regulation outweigh it’s benefits.
Government rules don’t work as they should either because they are too weak, strict, or poorly enforced. This can lead to problems like unsafe products, environmental damage, or financial crashes.
regulatory capture
* way in which regulatory failure can occur
* happens when officials within regulatory institutions who are charged with promoting collective welfare develop such close relationships with the regulated entities that the start to promote the private interests of these entities rather than the public interests.
basically, when the people or companies being regulated, influence the regulatory to make rules that benefit them instead of the public.
–> failure is when regulation doesn’t work properly, regulationis when it works, but for the wrong people.
the law’s role in theories of regulation
private interest theories
* law was instrumental and used as a regulatory instrument
* law is likely to be a means to end the underimining of collective welfare
public interest theories
* acts as a tool to regulate the market by shaping how people and businesses behave by setting rules and boundaries.
* sets rules on what can and cannot be done.
critique of private interest theories of regulation
- insufficient distinction from public interest theories bc private interest theories assume the concept of regulatory capture
- enormous weight attached to the legislator’s electoral goals
applicable case for regulation
regulating airbnb
airbnb needs to be regulated because social behaviour in the marketplace may give rise to collective concerns
what interests are involved in regualting airbnb?
* Public interests: public safety, affordable housing, liveability of neighbourhoods
* Private interests: profits for the platform and lessors; safety and privacy of tenants.
solution:
* 2014-2019; Airbnb negotiated with municipalities where favourable arrangements were made.
* 2020< ; Public interest arguments have prevailed; towards stricter regulation (e.g. authorisation schemes for lessors.
