Chapter 4 The Multinational Enterprise

 

Chapter 4

The Multinational Enterprise

i.              Definitions

1.      Treble damages

Treble damages is a term in some statutes that permits a court to triple the amount of the actual/compensatory damages to be awarded to a prevailing plaintiff, generally in order to punish the losing party for willful conduct.

 

2.      Long arm statute

A law defining the conduct of a foreign person within a state that will subject that person to the jurisdiction of the state.

 

3.      United States effects test

A jurisdictional test that subjects foreign businesses to U.S. anti-trust laws if their activities were intended to affect U.S. commerce and the effect was other than minimal.

 

4.      Blocking statute

Blocking statute Law enacted in some states to obstruct the extraterritorial application of U.S. antitrust laws by limiting a plaintiff’s right to obtain evidence or to enforce a judgment, and that allows a defendant to bring suit locally to recover punitive damages paid in the United States.

 

5.      Anti-Suit Injunctions

In addition to foreign legislators’ attempts to curtail the extraterritorial application of American anti-trust legislation, foreign courts have sometimes been willing to hand down injunctions forbidding one of their nationals from initiating an antitrust suit in the United States against another of their nationals.

 

6.      pierce the company veil

An expression indicating that the legal fiction that a company is a separate legal entity will be set aside and the shareholders of the company will be held liable for its conduct as if they were partners in a partnership.

 

ii.              True or False

1. Neither the principal nor the agent is truly a multinational enterprise, however, because neither operates outside its home state.     Answer: True

2. The representative offices, agencies, and branches create separate entities in the host country.

 Answer: False

3. As a general rule, home states regulate the parent companies and host state regulate the subordinates.  Answer: True

4. The effects test and the jurisdiction rule of reason test neither can be found in the statutory provisions of the antitrust laws. 

 Answer: True

5. To the disappointment of foreign nations, blocking statutes remained largely ineffective.    

Answer: True

6. The FCPA’s antibribery provisions apply to so-called routine governmental actions.

Answer: False

7. The focus of host state regulation, however, is not on making the local parent company responsible for the conduct of a foreign subsidiary, but on making the foreign parent responsible for the conduct of the local subsidiary.  Answer: True

 

8. A joint venture is a subsidiary company that in turn owns other subsidiaries.

Answer: False

9. One of the reasons why multinational firms set up holding companies is to establish. a consolidated management team for a group of subsidiaries.

Answer: True

10. With respect to Article 82 of the European Community Treaty (which forbids businesses with a dominant position in their market place from taking improper advantage of their position to the detriment of consumers), a “dominant firm” is one having the power to behave independently without taking into account, to any substantial extent, competitors, purchasers, or suppliers.

Answer: True

iii.              Multiple Choice

1.  Which of the following subordinate business structures do not do business on their own and operate only as a foreign contact point where interested parties can obtain information about the parent firm?

a)        Agent.

b)        Branch.

c)        Representative office.

d)        Subsidiary.

Answer: c

2.    Which of the following international organizations have promulgated rules of ethical behavior for multinational enterprises that have binding legal effect?

a)        International Chamber of Commerce.

b)        International Labor Organization.

c)        Organization for Economic Cooperation and Development.

d)        None of the above.

Answer: d

3.  Section 1 of the United States Sherman Antitrust Act of 1890 (that prohibits contracts, agreements, and conspiracies which restrain) applies only to:

a)        conduct between two or more parties.

b)        contracts, combinations, and conspiracies that unreasonably restrain trade.

c)        firms capable of dominating (or monopolizing) their trade or industry.

d)        Both a. and b. above.

Answer: d

4.  Which of the following is a per se violation of Section 1 of the United States Sherman Antitrust Act of 1890 (that prohibits contracts, agreements, and conspiracies which restrain)?

a)        Horizontal market division (where competitors agree not to sell in each other’s territories).

b)        Horizontal price fixing (where competitors at the same level expressly or impliedly agree to charge the same price for competing products).

c)        Vertical price fixing (where a seller at one level sells goods to a buyer at a different level on the condition that the latter will not resell below an agreed-upon price).

d)        Joint refusals to deal (i.e., group boycotts).

e)        All of the above.

Answer: e

5.  To show a violation of Section 2 of the United States Sherman Antitrust Act of 1890 (which forbids monopolies and attempts to monopolize commerce or trade either between the states of the US or in international commerce affecting the US), the following must be proven:

a)        a firm intended to monopolize the marketplace.

b)        two or more firms conspired to exclude competitors from the market.

c)        two or more firms conspired to monopolize a trade or industry.

d)        Either b. or c. above.

Answer: a

6.  Which of the following does the United States Clayton Act of 1914 define as being unfair business competition?

a)        Exclusive dealing agreements.

b)        Interlocking directorates.

c)        Mergers which result in a monopoly.

d)        Tying clauses.

e)        All of the above.

Answer: e

7.    Which of the following United States antitrust acts makes price discrimination illegal?

a)        Clayton Act of 1914.

b)        Robinson-Patman Act of 1936.

c)        Sherman Act of 1890.

d)        All of the above.

Answer: b

8.  Which of the following persons or agencies may enforce the United States antitrust acts?

a)        The US Justice Department.

b)        The US Federal Trade Commission.

c)        Private persons.

d)        All of the above.   

Answer: d

9.  In determining if United States antitrust laws are to be applied extraterritorially, a US court must find that the following exists:

a)        Personal jurisdiction.

b)        Subject matter jurisdiction.

c)        Territorial jurisdiction.

d)        Both a. and b. above.

Answer: d                                  

10. Which of the following are used by some countries to counteract the extraterritorial application of United States antitrust and European Community unfair competitions laws?

a)        Blocking statutes.

b)        Diplomatic protests.

c)        Antisuit injunctions.

d)        Both a. and c. above.

Answer: d

11. Which of the following are features of “blocking statutes” (i.e., statutes used by some countries to counteract the extraterritorial application of United States antitrust and European Union unfair competitions laws)?

a)        By virtue of a “clawback” provision, they allow defendants to bring suit in their home country to recover the punitive damages they paid in the US or EC.

b)        They limit the extent to which a US or EU plaintiff can obtain evidence or seek production of commercial documents outside of the US or EC for use in investigations or proceedings in the US or EU.

c)        They make it difficult for a successful plaintiff to enforce a US or EU judgment outside the US or EU.

d)        All of the above.

Answer: d

12. In Japanese product liability cases based on breach of contract,

a)        only the immediate purchaser of a product may sue.

b)        the burden of proof is on the plaintiff to show that the seller was at fault.

c)        the seller can avoid liability by showing the defect that caused the injury was due to some factor beyond the seller’s control.

d)        All of the above.

Answer: d

13. A firm can expressly consent to the jurisdiction of a host state by:

a)        incorporating in the state.

b)        maintaining the firm’s head office in the state.

c)        obtaining a certificate to do business in the state.

d)        All of the above.

Answer: d

14. A court may pierce the veil of a company and hold its shareholders responsible for its liabilities if the company’s shareholders do not treat it as a separate juridical entity.  The theory or name for this ground of piercing the company veil is called:

a)        alter ego.

b)        assumption of liability.

c)        common enterprise liability.

d)        controlled company.

Answer: a

15. In order for a court to pierce the veil of a subsidiary company and hold its parent responsible for its liabilities under the theory that it is a controlled company, which of the following have to be proven?

a)        The assets of parent and the subsidiary were commingled.

b)        The company’s financing and management are so closely connected to its parent that it does not have any independent decision-making authority.

c)        The parent does not observe the legal formalities (such as holding shareholder meetings or maintaining minutes for the subsidiary) that show that the subsidiary is a separate legal entity.

d)        All of the above.

Answer: b

 

iv.              Short answers

1. What are the advantageous and disadvantageous of establishing representative offices, agencies, and branches?

Answer: The advantageous of establishing representative offices, agencies, and branches is that these elements permit the parent to keep up direct control of the unfamiliar activity. The disadvantageous are as per the following:1. the parent needs to accept the entirety of the danger of contributing abroad, 2. an unfamiliar firm (or its representative or its branch) is frequently charged at higher rates than neighborhood firms, and 1. many creating states require nearby support all together for an unfamiliar firm to either contribute or grow its neighborhood venture.

2. Corporations and certain other companies are juridical entities that have legal identities separate from those of their owners. What are important consequences of separate legal identity?

Answer: To begin with, it implies that the risk of the proprietors is restricted to their interest in their organization. Consequently, an organization's proprietors are typically not needed to pay the organization's commitments from their own homes. Second, it implies that rights and advantages gathering to the organization have a place with the organization, not to its proprietors. At the end of the day, just an organization may make a case for its own property. Also, for certain organizations, the proprietors are neither chiefs nor specialists nor agents of the organization; they may not, all alone, settle on choices in the interest of the organization, or carry out the organization to perform legally, or perpetrate wrongdoings, misdeeds, or delicts that would force obligation on the organization.

3. What are the types of the parent company?

Answer:  There are three types of the parent company. The simplest international operating structure is the nonmultinational enterprise, in which a firm organized in one country contracts with an independent foreign firm to carry out sales or purchasing abroad. The more complex is the national multinational enterprise, in which a parent firm established in one country establishes wholly owned branches and subsidiaries in other countries. The most complex is the international multinational enterprise made up of two or more parent firms from different countries that co-own operating businesses in two or more countries.