Taking behavioralism seriously: some evidence of market manipulation

Over the last ten to fifteen years, economists and legal scholars have become increasingly interested in and sensitive to behavioralist insights. In a companion article, Jon Hanson and Douglas Kysar argued that those scholars have nevertheless given short shrift to what is, at least for policymaking purposes, perhaps the most important lesson of the behavioralist research: individuals' perceptions and preferences are highly manipulable. According to Hanson and Kysar, one theoretical implication of that insight for products liability law is that manufacturers and marketers will manipulate the risk perceptions of consumers. Indeed, to survive in a competitive market, manufacturers and marketers must do so. In this Article, Hanson and Kysar present empirical evidence of market manipulation--a previously unrecognized source of market failure. The Article begins by surveying the extensive qualitative and quantitative marketing research and consumer behavioral studies that discern and influence consumer perceptions. It then provides evidence of market manipulation by reviewing common practices in everyday market settings, such as gas stations and supermarkets, and by examining familiar marketing approaches, such as environmentally oriented and fear-based advertising. Although consumers may be well-aware of those practices and approaches, they appear to be generally unaware of the extent to which those tactics are manipulative. The Article then focuses on the industry that has most depended upon market manipulation: the cigarette industry. Through decades of sophisticated marketing and public relations efforts, cigarette manufacturers have heightened consumer demand and lowered consumer risk perceptions. Because consumers are aware that smoking may pose significant health risks, the tobacco industry's success in manipulating risk perceptions constitutes especially strong evidence of the power of market manipulation. The Article concludes by arguing that the evidence of market manipulation may justify moving to a regime of enterprise liability. Indeed, according to Hanson and Kysar, the evidence of market manipulation confirms the intuitions of the first generation of product liability scholars, who worried about manufacturers' power to manipulate and called for just such a regime.     

Exclusive contracts with private information in successive differentiated oligopolies

The purpose of this article is to analyze the incentives of manufacturers to deal exclusively with retailers in bilaterally duopolistic industries with brand differentiation by manufacturers. In contrast with the previous literature, exclusive contracts are shown to generate higher profits for manufacturers and retailers selling highly differentiated products, who thus have an incentive to insist on exclusive contracting. However, if the products are close substitutes no exclusivity will emerge in equilibrium. Furthermore, we show that exclusive contracts decrease both consumer and social welfare.     

An empirical testing of leverage effects via the common distribution network

The paper aims to empirically test the significance of leverage effects via the common distribution network in the conglomerate mergers between beer and soju manufacturers of Korea in the time period of 1994–2003. In this paper, a beer (or soju) manufacturer's ability to push the sales of soju (or beer) products via the common regional liquor distribution network is measured by the beer (or soju) firm's market share in the region. If the leverage effect is significant, we expect consumer choices to be significantly affected by the merged firm's ability to push. For a consistent estimation of the leverage effect on consumer demands, this paper adapts a logistic demand function for Yellow Pages in Rysman [Rysman, M. (2004). Competition between networks: A study of the market for yellow pages. Review of Economic Studies, 71, 483–512], controlling other demand-side variables such as prices, consumer loyalty, quality and the introduction of new products. The hypothesis test results indicate that the leverage effects via the common distribution network were not significant at the significance level of 0.1. This conclusion is robust to different specifications of leverage effects and the number of potential drinking.     

The underworld of gold

This paper dissects the global business of gold, from the ground, through the refining and marketing process and on into the hands of the final consumer, while examining the main forms of criminal activity associated with each stage. In one fundamental respect the black market for gold is quite different from that for other contraband goods. With opiates, for example, although there are occasional interrelations, it is reasonable to differentiate between legal and illegal sectors. The legal one uses raw material from designated producing areas, transforming it into a pharmaceutical product to supply a controlled medical demand. The illegal one uses illicitly obtained raw materials to make recreational drugs in order to service a demand that in most countries is defined as criminal by its very nature. By contrast, with gold, legally and illegally produced raw materials flow through the same channels to the same set of legitimate firms for refining and casting; and the product of these respectable refineries then is redivided into separate streams serving the overt and the covert portions of the market. Even then the cross-links do not stop. Legally sold gold can be diverted into illicit uses, while illegally obtained gold can end up in the hands of otherwise legitimate manufacturers or consumers. *** DIRECT SUPPORT *** AW502007 00002     

A Framework for Integrating External Information into New Product Development: Lessons from the Medical Technology Industry

Only the best manufacturers will remain competitive in today's challenging environment. Any manager involved with developing new products knows the excitement, complexity, and risk of this unpredictable undertaking. Based upon findings from four world class manufacturers of medical imaging technology in Japan and the United States, this article presents a new organizing framework for integrating external information into the NPD process. The findings are particularly timely in an era when manufacturers are vulnerable to intense global competition. The article concludes with several implications for managers involved in the new product development process.     

Corporate social responsibility as new challenge for the IT industry

Corporate social responsibility (CSR) has become a relevant topic for enterprises offering products and services on a global scale. International organizations provide for guidelines and private associations publish codes of conduct requiring businesses to integrate social, environmental and ethical aspects, human rights as well as consumer concerns into their operations. Not at least the EU is promoting CSR through an Agenda for Action 2011–14. The implementation of CSR is a multidimensional ethical process and gains particular importance for the IT industry which by its nature is global. Therefore, IT enterprises are invited to conduct a CSR assessment, to develop a CSR strategy and to implement CSR commitments. These tasks are to be done by introducing specific CSR processes and compliance measures for risk assessment and risk mitigation.     

Records and reports regulations for radiation emitting electronic products--FDA. Final rule

The Food and Drug Administration (FDA) is amending its regulations regarding the requirements for recordkeeping and reporting of adverse experiences and other information relating to radiation emitting electronic products. This rule reduces recordkeeping and reporting requirements for some products, requires only abbreviated reporting for other products, and clarifies certain requirements. The timing and content of certain reports will be revised to enhance the usefulness of the information. These amendments will improve protection of the public health while reducing regulatory burdens on manufacturers, dealers, and distributors of radiation emitting electronic products.     

Cultivating Evidence-Based Pathways for Cannabis Product Development: Implications for Consumer Protection†

Disparities between federal and state cannabis regulation, coupled with protracted federal enforcement, have facilitated the proliferation of a multi–billion dollar cannabis industry that generally evades compliance with federal consumer protection laws. The Federal Food, Drug and Cosmetic Act (FDCA) established regulatory pathways for the lawful development of products such as food, drugs, and dietary supplements. The FDCA uses a science-based approach to protect consumers from harmful products, but early inconsistencies between state and federal cannabis regulation prevented and/or discouraged the cannabis industry from complying with FDCA requirements. Cannabis products are promoted as safe and attributed with providing effective therapeutic treatment for numerous medical conditions, yet the claims often lack the rigorous evidence-based support typically expected by regulators and the medical community. The Food and Drug Administration (FDA) has announced its expectation that cannabidiol (CBD) products comply with the FDCA and follow a science-based approach to product development. The FDA is addressing violations involving unsubstantiated CBD health claims and is working to clarify the future regulatory pathway for CBD products. Meanwhile, the state-approved cannabis market continues to operate, selling numerous products that have circumvented the FDCA consumer protections. This article examines the need for strengthening consumer protections in the cannabis market. We use evidence-based medicine as a model to address the importance of science-based product development and to contextualize a science-based comparison of regulatory pathways for cannabis drugs, food, and dietary supplements.     

Conditions for Guilt-Free Consumption in a Transnational Criminal Market

It has been widely opined in discussions around a number of transnational criminal markets that where a global economic supply and demand relationship exists, demand reduction by way of consumer education and ‘awareness-raising’ may be an effective intervention in reducing illicit trade. It seems an obvious and sensible suggestion on the face of it, but just how amenable are consumers to being educated away from purchasing illicitly obtained and trafficked goods, and what are the barriers that stand in the way of that process of demand reduction through awareness-raising? This paper approaches these questions by asking what are the conditions for guilt-free consumption in the international trade in illicit cultural objects. The paper identifies seven such conditions, and concludes that in this global market we are witnessing the playing out of a common social story in which a powerful group of market capitalists and end-consumers employs a range of sociologically developed linguistic and performative strategies to obfuscate or legitimise their exploitation of a group of less powerful victims. If that is the context for the so-called debate about illicit antiquities, crime-reduction strategies involving consumer education seem considerably more difficult to achieve than has been widely recognised in policy discussions on transnational crime.     

Protection of the Rights of Consumers

Economic reform is greatly expanding the market for consumer services. Under contemporary conditions, unfortunately, this is accompanied by such negative phenomena as consumer fraud, the sale of products and medicinal preparations that are adulterated and sometimes dangerous for people's health, and also the ubiquitous rendering of poor-quality services.     

Empowerment of Whom and for What? Financial Literacy Education and the New Regulation of Consumer Financial Services

Financial regulators in many states recently have obtained statutory mandates to enhance consumer financial literacy. This paper investigates the development of policy pursuant to such mandates in the UK and Canada to identify how national regulators represent the role of the literate consumer in the financial market place. It finds that regulators in both countries represent financial education as empowering consumers but that each embeds in its policy an implicit normative ordering of responsible consumer behavior. The paper relates the tension between empowerment and responsibilization aspects of literacy enhancement to policy goals of expanding financial markets and assisting financial regulators to manage consumers' expectations of protection. It raises questions about regulators' use of consumer education to responsibilize consumption of financial products and calls for further research on the international growth of financial literacy education as a regulatory project.     

欧洲联盟电子商务立法评介

欧盟电子商务立法的框架是由一体化立法、成员国立法、综合立法和专项立法共同构建而成的多层次的法律体系 ,其内容涉及网络服务、电子签名、消费者保护、司法管辖、电子货币、税收以及著作权保护等方面。从欧盟电子商务立法实践可归纳出三方面特点 ,即 (1 )就立法意图而言 ,重点在于创建欧洲电子商务统一市场 ;(2 )就欧盟法与成员国立法关系而言 ,强调相互补充、相互制约 ;(3)就立法的重点而言 ,兼顾内部立法、国际条约和行业自律的制定。     

存款合同还是金融衍生交易——汇丰银行“双利存款”案解析

银行个人理财产品的本质是固定收益计划,但大多嵌入了金融衍生工具从而增加了市场风险。国内首例公开报道的银行理财诉讼——汇丰双利存款诉讼显示,在“存款”名义下发生的是“存款合同＋期权合同”的场外金融衍生交易,在银行与客户之间形成了新的收益-风险分配模式。客户承担理财产品市场风险的决策基础是银行的信息披露与风险提示义务。银行如何履行信息披露义务不仅决定了汇丰双利存款诉讼的结局,同时也是银行个人理财纠纷中区分市场风险与法律责任的关键。     

Regulating smart home technology devices under Malaysian legal framework

Notwithstanding the substantial benefits from the deployment of smart technology devices in a home, the prevalent issues of safety and security protection for the users from defective and malfunction of home devices under the law is still inadequate. This paper adopts doctrinal legal research where statutory provisions of products safety and quality standards, laws and guidelines will be analysed. This paper proposes that, in order for Malaysian consumer law to provide protection to the smart home users, the law must be able to clearly address consumer-related issues in a smart home. On the other side, the statutory Housing Sale and Purchase Agreement should be able to address issues related to the smart infrastructure in a home to avoid injustice and denial of right of the smart home buyers to be protected by the law. In addition, the requirement to strengthen rules on duty and responsibility of smart home stakeholders should be addressed to ensure manufacturers and service providers adhere to the products’ safety requirements. This study is beneficial in terms of acquainting housing and consumer regulatory body to take into consideration the needs to review the existing law to avoid discrepancies in facing the emerging of technologies in housing development.     

The Privatization of Public Legal Rights: How Manufacturers Construct the Meaning of Consumer Law

This article demonstrates how the content and meaning of California's consumer protection laws were shaped by automobile manufacturers, the very group these laws were designed to regulate. My analysis draws on and links two literatures that examine the relationship between law and organizations but often overlook one another: political science studies of how businesses influence public legal institutions, and neo-institutional sociology studies of how organizations shape law within their organizational field. By integrating these literatures, I develop an "institutional-political" theory that demonstrates how organizations' construction of law and compliance within an organizational field shapes the meaning of law among legislators and judges. This study examines case law and more than 35 years of California legislative history concerning its consumer warranty laws. Using institutional and political analysis, I show how auto manufacturers, who were initially subject to powerful consumer protection laws, weakened the impact of these laws by creating dispute resolution venues. The legislature and courts subsequently incorporated private dispute resolution venues into statutes and court decisions and made consumer rights and remedies largely contingent on consumers first using manufacturer-sponsored venues. Organizational venue creation resulted in public legal rights being redefined and controlled by private organizations.     

Orphan drugs: the question of products liability

Orphan drugs, essential for the treatment of persons with rare diseases, generally are unprofitable for manufacturers to develop and market. While congressional and administrative efforts to promote the development of orphan drugs have met with modest success, application of products liability doctrine to orphan drug sponsors could subvert those efforts. This Note describes the provisions of the Orphan Drug Act and analyzes products liability law with respect to orphan drug litigation. It argues that the goals of tort law support the imposition of liability for design defect, failure to warn and negligence in testing. Finally, the Note acknowledges that liability costs create disincentives for orphan drug development and suggests mechanisms for reducing manufacturers' liability concerns.     

Singapore's Personal Data Protection legislation: Business perspectives

As global digitalisation of information and interconnecting technologies along with new marketing practices and business processes vastly increase the opportunities for data collection, storage, usage and delivery, there is a corresponding increase in consumer expectations of data privacy. These expectations must be met if business organisations are to promote consumer trust and confidence and maintain their overall competitiveness in a global market. It goes without saying that information is the most valuable business asset and “privacy is good business and information can be the basis of bigger business”. The need to protect data privacy has long been recognised and implemented by major trading nations. Surprisingly, Singapore as a financial centre and nation aspiring to be a trusted data hosting hub has been slow in enacting specific data protection laws. The first piece of legislation that has emerged is a light-touch baseline framework applicable to all organisations except the public sector. This article considers the new legislation from the business perspective and the implications for private sector business organisations facing the challenges of compliance.     

Letter to manufacturers of blood establishment computer software products--FDA. Notice

The Food and Drug Administration (FDA) is publishing a letter sent to known manufacturers of blood establishment computer software products. In the letter, FDA advised these manufacturers that it considers these computer software products to be devices under the Federal Food, Drug, and Cosmetic Act (the act) because these products aid in the prevention of disease by identifying unsuitable donors and preventing the release of unsuitable blood and blood components for transfusion or for further manufacturing use. The letter, accompanied by a registration package and device listing was intended to notify manufacturers of the requirements of the act, to facilitate registration of these manufacturers as medical device manufacturers, and to further ensure the safety of the blood supply.     

The growth of psychopharmacology in the 1990s: evidence-based practice or irrational exuberance

The rapid growth in sales of psychotropic medications during the late 1980s and 1990s, eventually reaching $20 billion/year, reflected the increased use of seritonin reuptake inhibitors for depression and atypical antipsychotics for schizophrenia. Recently, however, some of the therapeutic claims for these medications have been challenged, and under-appreciated risks have turned out to be significant liabilities. Drug manufacturers increasingly dominate clinical trials research and evidence suggests that study designs and data presentations have been slanted to show products in a favorable light while unfavorable data were suppressed. At the same time, during the 1990s, potentially independent voices did not effectively or consistently present countervailing views. The extensive financial ties between the pharmaceutical industry and academic researchers, professional associations, and consumer groups may also have discouraged expression of critical views. Additionally, the narrow legal mandate of the FDA to evaluate the safety and efficacy of new drugs only in comparison to placebo (rather than in comparison to other treatments) probably limited its contribution. In the absence of reliable, impartial research on the risk and benefits of psychotropic medications, both before and after they are brought to market, pharmacy benefits management cannot achieve its goal of maximizing health care benefits per dollar spent. Further institutional support is needed for independent research, either conducted or funded by the federal government.     

An alternative industrial extension model: The experience of the food manufacturing industry

The ability to reach small manufacturers with productivity enhancing technology requires implementation of alternative industrial extension strategies. We describe one such strategy being pursued in the food manufacturing industry. Given the large numbers of small manufacturers and of potential technology suppliers, the challenge is to create an effective approach that takes advantage of the market aggregation capacity of food industry trade associations. Through a food manufacturing coalition, this extension effort will identify common industry needs for technology; assess and adapt existing technology;stimulate vendors to capitalize on the technology; and rely upon market forces to encourage innovative problem solving.