Month: September 2011

Don’t put the regulatory cart before the entrepreneurial horse.
By Ryan Long

Don’t put the regulatory cart before the entrepreneurial horse.

“We cannot regulate our way out of this.” Mr. Charles Schwab makes this great point about the futility of using regulation as the silver bullet for our recession woes in Every Job Requires an Entrepreneur. And yet the WSJ reports in As Federal Crime List Grows, Threshold of Guilt Declines (“Threshold”), that criminal laws are burgeoning at break neck speed and that many teeter on strict liability. This means you can go to jail for violating an obscure law even if you didn’t know about it. Congress needs to regulate less, more clearly when it does, and with the need of a lot more mens rea.

As the Threshold article points out, mens rea is a Latin term that refers to “guilty mind,” which in the law means that you know what you are doing is against the law, like when you rob a bank. But when you kill an obscure fish in the middle of Maine and cook it for dinner, you may have no idea that the fish is on the federal list of endangered species. Unbeknownst to you, your dinner may subject you to criminal penalties and/or jail time.

The problem in discarding the mens rea requirement is that it makes it too easy for the government to make any one of us criminally liable for being an unintentional contributor to the demise of an endangered fish. We live in an increasing regulatory state that is saturated with statutes, regulations, and judicial decisions. The meaning of these sources of law is sometimes ambiguous to even the most well trained lawyers. As a result, entrepreneurs are operating in more uncertain regulatory times, which exacerbates the financial crisis.

That’s why Mr. Schwab’s statement is so apt. It seems many in Washington think that Washington is the answer. It is not. As Mr. Schwab points out, American entrepreneurs are the answer to our problems. To the extent we seek refuge in the labrynth of laws and regulations coming out of Washington, we are putting the regulatory cart before the entrepreneurial horse.

The T-Mobile – AT & T Merger — Why not just require a corporate pre-nup?
By Ryan Long

The T-Mobile – AT & T Merger — Why not just require a corporate pre-nup?

The Department of Justice (“DOJ”) recently sought to block the merger between AT & T and T-Mobile (“merging entities”). Indeed, many states, including New York, are now on board to stop the merger, too, reports the WSJ in States Join Suit Against AT & T.  The fear: the new entity will have too much market power. This, in turn, will enable to the new entity to raise prices, restrict output, and/or reduce the quality of service.  Rather than block the merger, the DOJ should permit it and require the corporate couple to have pre-nuptual agreement, which is something most but not all couples, including Russel Brand and Katy Perry, pictured below, now have.

In their Answer to the DOJ’s complaint, the merging entities claim that their merger will improve the quality of services they provide by, among other things, increasing the bandwidth — or decreasing the “spectrum shortage” — in the marketplace so as to cause less dropped calls. The Answer cites FCC Chairman Genachowski as saying that this “spectrum shortage” is a threat to the economy as more and more burdens are placed on the cellular highway. In short, the merging entities are telling the proverbial Rabbi — or Priest — that is the DOJ: we will be a good corporate couple, good corporate parents, and will foster a family of products that will cause pro-competitive benefits.

Instead of vetoing the marriage, the DOJ should allow it but require the merging entities to sign onto a proverbial corporate pre-nuptual agreement. The agreement would require the merged entity to report on a quarterly basis to the DOJ concerning the pricing and quality of its products compared to others in the marketplace. Such reports are often required by courts who issue injunctions. The agreement should also require the merged entity to achieve certain benchmarks which would determine whether the pro-competitive vows of the merged entities, as more fully set forth in their Answer, have been met. If not, the agreement would provide for the dissolution of the merged company. It seems that this is a better way to handle the merger than to outlaw it due to knee jerk fears which, in the end, may be unfounded.