Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
CHAPTER 16
REGULATION OF THE INTERNATIONAL MARKETPLACE
CASES IN THIS CHAPTER
Electra-Amambay S.R.L. v. Compañía Antártica Paulista Ind. Brasileira de Bebidas E Conexos
Carlill v. Carbolic Smoke Ball Co.
Quebec (Procureur general) v. Enterprises W.F.H. Itée
Foreign Corrupt Practices Act Review Opinion Procedure Release 12-02
Securities and Exchange Commission v. Siemens Aktiengesellschaft
World Duty Free Company Limited v.The Republic of Kenya
TEACHING SUMMARY
Having found success within their borders, many businesses often look to introduce their
products and services to markets outside those borders. Doing so, however, requires more than
a good product. It requires adapting any product to the unique culture of that market, a
connection and mechanism to bring the product into the local market, such as through a sales
representative or products distributor, raising the foreign consciousness regarding the product
through advertising, and being aware of how business is done in that market. At any of these
critical junctures, a business may run afoul of not only local custom, but also host country and
home country law. For instance, advertising and consumer protection laws differ around the
globe as do customs regarding bribes. An important law pertaining to bribery of foreign officials
is the U.S. Foreign Corrupt Practices Act (and its revisions) as well as its international
counterpart, the OECD Convention on Combating Bribery.
Additional Background: Introducing Products to Overseas Markets. Among the most
important questions facing a company considering taking a product overseas is whether the
product possesses global potential. Although a successful and established brand may seem
promising, even well-established brands face difficulty entering overseas markets. One senior
consultant has suggested that the company should ask whether the product is D.U.M.B., i.e.,
demonstrable, unique, meaningful, and believable.
First, the company must be able to demonstrate the promise of the product or service, such as
showing a cut-away photo of the promised cushioning in an athletic shoe. Second, there are
often local alternatives to a new, foreign product, and consumers might be loyal to their local
brands. Therefore, a company must build uniqueness into products that are recognized by local
consumers. This somewhat insulates the new product from direct competition and can re-direct
customer loyalty. For example, Coca-Cola is a successful global brand but tastes different in
different regions (containing more or less carbonation and syrup). Thus, it is unique from market
to market. Uniqueness can also help to respond to cultural nuances.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Chapter 16: Regulation of the International Marketplace
Third, the product must be meaningful in that marketplace. For example, although Americans
may desire low-fat and diet foods, other countries associate low-fat foods or “diet”-labeled drinks
with obesity, rather than slimness. Other cultures that already enjoy low-fat diets find such labels
meaningless. Finally, the promise of the product must be believable. Any claims must be
credible and, if overstated, will be very damaging for products not yet established in the
marketplace.
One example of a D.U.M.B. product is the BMW. The BMW makes demonstrable claims
regarding performance and engineering excellence; the German and American products differ
somewhat, but maintain this promise of quality; the essence of the BMW is meaningful to
American as well as German consumers; and its claims are believable, as the BMW performs
as it promises to. See H. Parker Smith, “Is Your Product D.U.M.B. Enough To Take Overseas?”
14 World Trade, 30 (Feb. 2001).
CASE QUESTIONS AND ANSWERS
Electra-Amambay S.R.L. v. Compañía Antártica Paulista Ind. Brasileira de Bebidas E
Conexos
1. What is the “special character” of Law 194/93 and how is its purpose achieved?
2. How does the court justify not implicating the social order of Paraguay?
2. What are alternative methods for Paraguay to achieve the results it seeks under this
law?
Answer: This question calls for student opinion and additional research.
Carlill v. Carbolic Smoke Ball Co.
1. Give at least three examples of where advertising or the subsequent acts that led to this
suit suffered from vagueness problems.
2. What other factors could have influenced the court’s determination that there was a
promise and not mere puffery?
Chapter 16: Regulation of the International Marketplace
Quebec (Procureur general) v. Enterprises W.F.H. Itée
1. Do you think geography is a valid reason to favor one language over another?
2. Is it appropriate to favor one language over another provided people who do not speak
that language are given the opportunity to conduct normal life functions in a different
language?
3. If French is so important and powerful to millions of people, why does it need legal
protection?
Foreign Corrupt Practices Act Review Opinion Procedure Release 12-02
1. How important are the following two representations made by the Requestors to the
DOJ’s decision?
(a) The Requesters will not give any money directly to the foreign officials, but will pay
expenses directly to the providers.
(b) The amount spent on hotels and meals will not exceed the GSA rate (which is the
maximum per diem allowance that U.S. federal employees are entitled to receive as
reimbursement for expenses incurred while on official trip within the continental United
States).
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Chapter 16: Regulation of the International Marketplace
2. Is this opinion sufficient to safeguard the identities of the parties involved in the
proposed visit?
3. What role do DOJ’s prior Opinion Releases play in this decision?
Securities and Exchange Commission v. Siemens Aktiengesellschaft
1. How did Siemens’ penalties relate to the caps on fines discussed earlier in this chapter?
2. Why was a German company subject to the U.S. FCPA? Do you think FCPA
enforcement is effective if the foreign officials accepting the bribes are not held
accountable?
3. Why did Siemens’ internal efforts to stop corruption not result in more lenient treatment
from the U.S. government?
World Duty Free Company Limited v. The Republic of Kenya
1. How does the tribunal support its conclusion that bribe payments are unacceptable
under international public policy? What role does the Convention on Preventing and
Combating Corruption that is approved by the African Union play in the tribunal’s
reasoning?
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Chapter 16: Regulation of the International Marketplace
2. How important is it that Kenyan and English law also prohibit bribe payments?
3. What does the tribunal mean when it says that the bribe and the 1989 Agreement were
“one overall transaction”?
ANSWERS TO QUESTIONS AND CASE PROBLEMS
1. Answer: Demblans is an independent agent, or, as more often termed in the U.S.,
an independent contractor. Basic agency principles should be considered, such as: is the
2. Answer: This also focuses on the agent/independent agent distinction, and
illustrates that real life does not always fall easily into pre-established categories. The scheduling
3. Answer: This recalls the Carbolic Smoke Ball decision and the punctiliousness of
Chapter 16: Regulation of the International Marketplace
4. Answer: If Borges does not develop a new advertising campaign for a nation
5. Answer: On its face, the situation simply suggests knowledge, business success,
6. Answer: Under the worst case scenario, the rumors might be true, and sex could
7. Answer: A $10,000 payment would itself be financially immaterial to a
MANAGERIAL IMPLICATIONS
Entering a new foreign market is often made easier by hiring a products distributor or a general
consumer goods distributor based in that country. As discussed in this chapter, such a distributor
might be an agent or an independent contractor, and students should assess the benefits of each.
One should note, however, that “incentives” and lavish gifts bespeak of bribes. Companies should
have in place and enforce policies that prohibit or establish controls for such “gifts”. Consequently,
managers should consider the legal and ethical limits to such transactions (under the FCPA and
the OECD Convention), the ramifications of acts of agents or independent contractors doing
business “as usual” but on the firm’s behalf, and any mechanisms that would distance the firm
from any illegalities (including which mechanisms would be ineffective in doing so).
ETHICAL CONSIDERATIONS_____________________________________________________
1. This consideration calls for an opinion.
2. This consideration calls for an opinion. Students may wish to update this story as
developments warrant, including allegations that Saudi Arabia threatened Prime Minister
Blair with making it easier for terrorists to attack London unless the corruption investigation
was closed and efforts to launch an investigation of this transaction by U.S. law
enforcement officials. The closing of the investigation was rejected by High Court in April
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Chapter 16: Regulation of the International Marketplace
2008. In an action brought by the anti-bribery groups Corner House Research and the
Campaign Against Arms Trade, the Court condemned the discontinuation of the
investigation as an “abject surrender” and a threat to the reputation of British justice.
However, the House of Lords reversed the High Court in July 2008. In his opinion, Lord
Bingham stated that the only issue for determination was whether the refusal to
prosecute was a proper exercise of the Serious Fraud Office’s discretion rather than
whether the decision was right or wrong. Lord Bingham concluded that the decision was
“courageous” in its conclusion that saving British lives outweighed the public interest in
pursuing a conviction against BAE. Lord Bingham concluded that a responsible decision-
maker would have reached the same conclusion when confronted with such “an ugly
and obviously unwelcome threat.” As a result, the U.K. Serious Fraud Office did not
reinstitute the investigation. This result was condemned by anti-corruption groups
throughout the United Kingdom who characterized it as a threat to the rule of law, a legal
license for international blackmail, and symptomatic of the government’s reluctance to
combat corruption. For its part, BAE announced it would adopt a new ethics program,
which included a global code of conduct, monitoring procedures, and increased
employee training and stakeholder consultation.
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
