Business Law

In Space We Trust: Regulate the Race

October 28, 2018
Business Law, Environmental Law, Ethics, International Law, Social Welfare, Space Law

By: Hannah Payne, MJLST Staffer

In 1999, the UN General Assembly launched “World Space Week,” an annual celebration observed from October 4th (the date of Sputnik’s launch in 1957) to October 10th (the day The Outer Space Treaty entered into force in 1967). This year’s theme was “Space Unites the World.” The UN said the theme “celebrates the role of space in bringing the world closer together.” Unfortunately, the words ring hollow in light of the U.S.’s Space Force plans, as well as the recent escalation of inter-planetary militarization by China, Russia and the EU. Additionally, activities of SpaceX and others raise concerns about privatization, space pollution and the plans of the uber-wealthy to leave the world behind. These forces threaten to marginalize the awe-inspiring exploration of space into a scheme concerned only with war, profit, and advancing inequality. The dominance of such interests calls for a coherent system of global space regulation.

Some have observed that many recent activities violate the 1967 Outer Space Treaty, which declared: “The exploration and use of outer space . . . shall be carried out for the benefit and in the interests of all countries, irrespective of their degree of economic or scientific development, and shall be the province of all mankind.” The treaty also states that space and all celestial bodies are unowned and open to exploration by all. The U.S. and over 100 countries signed and ratified it, and America did not reserve the right to alter its obligations, as it often does in agreements. However, with no real international enforcement mechanism and our ceaseless profit-seeking, countries have—and will continue to—disregard the goals of the 1967 agreement. Last year, Ted Cruz expressed excitement that “the first trillionaire will be made in space.” He proposed amending the treaty to foster commercialization – and correct its erroneous assumption that worthy goals exist besides wealth and power. His motive seems to be formalistic, as was Congress’ in 2015 when it declared in the Commercial Space Launch Competitiveness Act that “the United States does not, by enactment of this Act, assert sovereignty . . . exclusive rights . . . or ownership of, any celestial body[,]” but in the same act granted U.S. citizens the right to own and sell any “space resource.” Though the U.S. track record of treaty violations makes their disregard of the agreement perhaps unsurprising, the serious consequences of space militarization and privatization call for critical advancement in space regulation.

From an environmental law perspective, the language of the 1967 treaty evokes the seldom-used Public Trust Doctrine (PTD). Traced back to the Roman era, the Public Trust Doctrine is described as “requir[ing] government stewardship of the natural resources upon which society . . . depends for continued existence.” The PTD places the government/sovereign as the trustee, obligated to protect the rights of the public/beneficiary in the trust, which is comprised of things like navigable waterways. It has mostly been applied to water rights, and successfully reclaimed property for the “public good” in Illinois and California. However, in 2012 the Supreme Court suggested that the PTD is no stronger than state common law. Even so, the doctrine should be remembered by those who think the privileged cannot, by right, hoard or destroy resources – including those in space. In the 1970s, Joseph Sax argued for the PTD’s use as sweeping environmental common law. Some have since theorized about the extension of the PTD to space. These scholars identify issues such as the lack of a sovereign to act as trustee. That problem would not likely be solved by allowing every country to exert self-interested sovereignty in space. At least no one has been so bold as to outright claim the moon – yet.

The PTD is just one tool that may be useful in designing a peaceful move forward. The Expanse, a near-future science fiction series in which humanity has colonized the solar system, offers a thought-provoking look ahead. Earth and the moon are governed by the UN. Mars is a sovereign as well, and the asteroid belt a colonial structure with fractured governance. Space is highly commercialized and militarized, and personal opportunity is hard to come by – but humanity has avoided self-destruction. Their global governance allows for some cooperation between Earth and Mars in space. Depending on one’s dreams of the future, the situation represents an overpopulated, inefficiently run hellscape – or a less-bad option out of the possibilities that now seem likely. It begs the question – how do we expand while avoiding astronomical inequality and self-destruction?

Perhaps it is nearly impossible, but Earth needs real, global regulation of outer space. A weak U.N. cannot do it; private companies and wealthy countries should not be given free reign to try. Last month, the U.N. held the First United Nations Conference on Space Law and Policy.  It’s good to see the international community ramping up these discussions. Hopefully, the PTD’s underlying philosophy of equitable preservation will be central to the conversation. Done right, the exploration of space could be the most inspiring, community-building, and even profitable experience for humanity. If approached thoughtfully, inclusively, carefully –  we could have much more than just a Space Force.

“Juuling”: Gen Z’s Alleged Addiction May Mean Major Legal Problems for E-Cigarette Companies

October 6, 2018
Agriculture, Business Law, Ethics, Food and Drug Law, Health, Product Liability, Public Health, Regulatory

By: Jack Kall, Minnesota Journal of Law, Science & Technology Vol. 20 Staffer

With every new week comes new headlines regarding Gen Z and their latest craze. After years of Millennials being cast as the generation responsible for everything wrong in the world, (Business Insider’s list of 19 things Millennials are killing, including everything from homeownership, banks, football, and oil to beer, napkins, cereal, and bars of soap; NPR describing how Millennials are killing Applebee’s; Forbes claiming Millennials might kill home-cooked meals and kitchens) it seems the media has found a new culprit, Gen Z! Gen Z’s supposed addiction to e-cigarettes, specifically to the JUUL brand, is common among the headlines.

Depending on how you define the generation, Gen Z includes anyone born in the years starting with 1995–2000 and ending between 2014–25. Pew Research has yet to name or define the end date of Gen Z, but it defines the “Post-Millennial generation” as those born 1997 and later.

No matter how you define Gen Z, it includes high school students, many of whom are under the legal tobacco consumption age of 18. High schoolers have been a major reason for both the rise of e-cig popularity and for giving JUUL Labs major market share in the e-cig industry. Browse through social media pages popular within the Gen Z community and you’ll inevitably see numerous posts about “Juuling.” However, Gen Z isn’t alone in its supposed obsession with e-cigs, as Leonardo DiCaprio (a member of Gen X) has long been known to appreciate vaping (e.g., 1, 2, 3).

JUUL Labs, which launched in 2015, has been repeatedly investigated for targeting minors through its advertising and sued for targeting teens with false claims of product safety. In 2017, Consumer Reports found that teens who vape are seven times more likely to turn to regular cigarettes. Additionally, the CDC has declared e-cig use among young people a public health concern.

As further research is published, JUUL should expect be the main target of continued legal action. One current case, a nationwide class action with ten named plaintiffs aged above 13, alleges in part that JUUL’s decision to market through social media was aimed at soliciting those under the legal smoking age. Another case, filed on behalf of a high school sophomore, alleges that JUUL is commonplace among his school, including use “on the school bus, in the bathrooms, outside of school and even in class.”

JUUL Labs will hope to continue to have success while under major legal scrutiny for its marketing practices. JUUL, importantly, hopes it can continue to show growth following its impressive financial valuation (most recently raising $1.2 billion in a financing round that valued the company at over $15 billion).

Judicial Interpretation of Emojis and Emoticons

March 2, 2018
Business Law, New Technology, Social Media

Kirk Johnson, MJLST Staffer

 

In 2016, the original 176 emojis created by Shigetaka Kurita were enshrined in New York’s Museum of Modern Art as just that: art. Today, a smartphone contains approximately 2,000 icons that many use as a communication tool. New communicative tools present new problems for users and the courts alike; when the recipient of a message including an icon interprets the icon differently than the sender, how should a court view that icon? How does it affect the actus reus or mens rea of a crime? While a court has a myriad of tools that they use to decipher the meaning of new communicative tools, the lack of a universal understanding of these icons has created interesting social and legal consequences.

The first of many problems with the use of an emoji is that there is general disagreement on what the actual icon means. Take this emoji for example: 🙏. In a recent interview by the Wall Street Journal, people aged 10-87 were asked what this symbol meant. Responses varied from hands clapping to praying. The actual title of the emoji is “Person with Folded Hands.”

Secondly, the icons can change over time. Consider the update of the Apple iOS from 9 to 10; many complained that this emoji, 💁, lost its “sass.” It is unclear whether the emoji was intended to have “sass” to begin with, especially since the title of the icon is “Information Desk Person.”

Finally, actual icons vary from device to device. In some instances, when an Apple iPhone user sends a message to an Android phone user, the icon that appears on the recipient’s screen is completely different than what the sender intended. When Apple moved from iOS 9 to iOS 10, they significantly altered their pistol emoji. While an Android user would see something akin to this 🔫, an iPhone user sees a water pistol. Sometimes, an equivalent icon is not present on the recipient’s device and the only thing that appears on their screen is a black box.

Text messages and emails are extremely common pieces of evidence in a wide variety of cases, from sexual harassment litigation to contract disputes. Recently, the Ohio Court of Appeals was called upon to determine whether the text message “come over” with a “winky-face emoji” was adequate evidence to prove infidelity. State v. Shepherd, 81 N.E.3d 1011, 1020 (Ohio Ct. App. 2017). A Michigan sexual harassment attorney’s client was convinced that an emoji that looked like a horse followed by an icon resembling a muffin meant “stud muffin,” which the client interpreted as an unwelcome advance from a coworker. Luckily, messages consisting entirely of icons rarely determine the outcome of a case on their own; in the sexual harassment arena, a single advance from an emoji message would not be sufficient to make a case.

However, the implications are much more dangerous in the world of contracts. According to the Restatement (Second) of Contracts § 20 (1981),

(1) There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and

(a) neither party knows or has reason to know the meaning attached by the other; or

(b) each party knows or each party has reason to know the meaning attached by the other.

(2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if

(a) that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or

(b) that party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.

 

Adhering to this standard with emojis would produce varied and unexpected results. For example, if Adam sent Bob a message “I’ll give you $5 to mow my lawn 😉,” would Bob be free to accept the offer? Would the answer be different if Adam used the 😘 emoji instead of the 😉 emoji? What if Bob received a black box instead of any emoji at all? Conversely, if Adam sent Bob the message without an emoji and Bob replied to Adam “Sure 😉,” should Adam be able to rely upon Bob’s message as acceptance? In 2014, the Michigan Court of Appeals ruled that the emoticon “:P” denoted sarcasm and that the text prior to the message should be interpreted with sarcasm. Does this extend to the emoji 😜😝, and 😛, titled “Face with Stuck-Out Tongue And Winking Eye,” “Face With Stuck-Out Tongue And Tightly-Closed Eyes,” and “Face With Stuck-Out Tongue” respectively?

In a recent case in Israel, a judge ruled that the message “✌👯💃🍾🐿☄” constituted acceptance of a rental contract. While the United States does have differing standards for the laws of contracts, it seems that a judge could find that to be acceptance under the Restatement of Contracts (Second) § 20(2). Eric Goldman at the Santa Clara University School of Law hypothesizes that an emoji dictionary might help alleviate this issue. While a new Black’s Emoji Law Dictionary may seem unnecessary to many, without some sort of action it will be the courts deciding what the meaning of an emoji truly is. In a day where courts rule that a jury is entitled to actually see the emoji rather than have a description read to them, we can’t ignore the reality that action is necessary.

Acquisitions of Our Lives

November 22, 2017
Antitrust, Business Law

Zachary Currie, MJLST Staffer

 

Growing up, my mother was an avid consumer of soap operas, which aired during the daily drought of day-time television. I never watched any soap opera closely, but I occasionally stopped in the living room while one was on and caught a glimpse of the whirling melodrama—after all, the characters were beautiful, handsome, and belonged to a realm of luxury far removed from my paltry existence. The story was always the same; it was always about banal, dynastic feuding, resulting in predictable and outrageous tragedies. But never once did I think that the content of a soap opera was accurate, not in the sense of being based on a true story, but in the sense of being as realistic as a story written by Ernest Hemingway about fishing for marlin in the Gulf Stream. My perception of the quality of soap opera writing changed when I was introduced to the melodramatic world of telecommunication corporations, their acquisitions, and anti-trust law, through its latest garish episode: AT&T’s bid for Time Warner.

 

The latest episode of this soap opera involves players as glamorous, foolish, rich, and powerful as any soap opera cast. A takeover of Time Warner by AT&T would create America’s sixth largest firm by pre-tax profits; the Department of Justice has expressed its disapproval of the star-crossed lovers’ plans to elope. Some important socialites in ermine fur have hinted, with winks, that DoJ is motivated by the Donald’s hatred for CNN, a channel owned by Time Warner. Others belonging to the grapevine scoff at the match, deriding it as unsophisticated and gauche; after all, the marriage will cost over a $100 billion, return on capital is egregiously low, and attempting to increase returns by forcing Time Warner content on AT&T consumers would irritate the ever-watchful and puritanical anti-trust regulators.

So, the plot thickens: is the corporate tryst motivated by an intent to commit some dirty illegality? Well, the DoJ was suspicious and nosy enough to file a suit seeking to block the acquisition. The suit claims that after the acquisition, AT&T would be situated to force rivals to pay hundreds of millions of dollars more per year for Time Warner content, and the new formidable couple would dampen technological innovation. But is the DoJ being disingenuous? Perhaps it is motivated more by priggishness, or, maybe, political vengeance, than a concern to foster competition. Remember, this acquisition is vertical integration rather than horizontal integration; there can be good, healthy reasons for vertical integration. One way in which vertical integration can be efficient is through gaining economies of scale, when average total cost decreases with increasing output; surplus from gaining economies of scale may outweigh social costs caused by imperfect competition. Another advantage of vertical integration is the correction of market governance failures: integration allows firms to internalize the costs that arise from strategic and opportunistic behavior. Has the DoJ seriously considered all the consequences of acquisition? One anonymous attorney general claimed that the DoJ has not been forthcoming with any economic analysis helpful to decide whether to sue. Stay tuned to see the end of this Great American Corporate Love Story. Other juicy details include AT&T’s use of one of Trump’s former lawyers and Trump’s tweets about CNN (including an edited wrestling video showing Trump punching a man whose head is replaced by the CNN logo) for litigation.

Why Equity-Based Crowdfunding Is Not Flourishing? — A Comparison Between the US and the UK

April 12, 2017
Business Law, Internet, Regulatory, Securities Law

Tianxiang Zhou, MJLST Editor

While donation-based crowdfunding (giving money to enterprises or organizations they want to support) is flourishing on online platforms in the US, the equity-based crowdfunding (funding startup enterprises or organizations in return for equity) under the JOBS Act is still staggering as the requirements are proving impractical for most entrepreneurs.

Donation-based crowdfunding is dominating the major crowdfunding websites like Indiegogo, Kickstarter, etc. In March, 2017, Facebook announced that it will introduce a crowdfunding feature that will help users back causes such as education, medical needs, pet medical, crisis relief, personal emergencies and funerals. However, this new crowdfunding feature from Facebook has nothing to do with equity-based crowdfunding; it is only used for donation-based crowdfunding. As for the platforms specialized in crowdfunding,  equity-based crowdfunding projects are difficult to find. If you visit Kickstarter or Indiegogo, most of the crowdfunding projects that appear on the webpages are donation-based crowdfunding project. As of April 2, 2017, there are only four active crowdfunding opportunities appearing on the Indiegogo website that are available for investors. The website stated that “more than 200 (equity-based) projects funded in the past.” (The writer cannot find an equity-based crowdfunding opportunity on Kickstarter or a section to search equity-based crowdfunding opportunities.)

The reason why equity-based crowdfunding is not flourishing is easily apparent. As one article points out, the statutory requirements for Crowdfunding under the JOBS Act “effectively weigh it down to the point of making the crowdfunding exemption utterly useless.” The problems associated with obtaining funding for small businesses that the JOBS Act aims to resolve are still there with crowdfunding: for example, the crowdfunding must be done through a registered broker-dealer and the issuer have to file various disclosure statement including financial statement and annual reports. For smaller businesses, the costs to prepare such reports could be heavily burdensome for the business at their early stage.

Compared to crowdfunding requirements in the US, the UK rules are much easier for issuers to comply with. Financial Conduct Authority (FCA) introduced a set of regulations for the peer-to-peer sector in 2014. Before this, the P2P sector did not fall under any regulatory regime. After 2014, the UK government requires platforms to be licensed or to have regulated activities managed by authorized parties. If an investor is deemed a “non-sophisticated” investor constraints are placed on how much they are permitted to invest, in that they must not invest more than 10% of their net investable assets in investments sold via what are called investment-based crowdfunding platforms. Though the rules require communication of the offers and the language and clarity of description used to describe these offers and the awareness of the risk associated with them, much fewer disclosure obligations are required for the issuers such as the filing requirements of annual reports and financial statement.

As a result, the crowdfunding market in the UK is characterized as “less by exchanges that resemble charity, gift giving, and retail, and more by those of financial market exchange” compared with the US. On the UK-based crowdfunding website Crowdcude, there are 14 opening opportunities for investors as of April 2, 17, and there were 494 projects funded. In comparison, the US-based crowdfunding giant Indiegogo’s statement that “more than 200 projects funded in the past” is not very impressive considering the difference between the sizes of the UK’s economy and the US’ economy.

While entrepreneurs in the US are facing many obstacles in funding through equity-based crowdfunding, the UK crowdfunding websites are now providing more equity-based opportunities to the investors, and sometimes even more effective than government-lead programs. The Crowd Data Center publicized a report stating that seed crowdfunding in the UK is more effective in delivering 40% more funding in 2016 than the UK government funded Startup Loans scheme.

As for the concern that the equity-based fraud funding involves too much risk for “unsophisticated investors,” articles pointed out that in countries like UK and Australia where lightly regulated equity crowdfunding platforms welcomed all investors, there is “hardly any instances of fraud.” While the equity-crowdfunding JOBS Act has not failed to prove its efficiency, state laws are devising more options for the issuers with restrictions of SEC Rule 147. (see more from 1000 Days Late & $1 Million Short: The Rise and Rise of Intrastate Equity Crowdfunding). At the same time, the FCA stated that it will also revisit the rules on crowdfunding. It would be interesting to see how the crowdfunding rules will evolve in the future.

The Rise and Fall of a Scholarly Crowdfunding Article

March 10, 2017
Business Law, Economics, Regulatory

Tim Joyce, Editor-in-Chief, MJLST Vol. 18

Print publication of science and tech articles is a weird thing. On the one hand, a savvy articles selection team will prioritize articles on the most pressing and innovative advancements in the field. On the other, though—and precisely because these articles are so current—a draft piece can be partially outdated even before the publisher’s pressing start rolling. So it is that a little piece on investment crowdfunding, conceived in September 2015, meticulously researched throughout the 2015–16 academic year, and selected in April 2016, for publication in January 2017, can transform from forward-looking thinkpiece to historically-dated comparison piece.

My recent article with MJLST, 1000 Days Late & $1 Million Short: The Rise and Rise of Intrastate Equity Crowdfunding, compares the newly-activated federal Regulation Crowdfunding to Minnesota’s intrastate investment crowdfunding model MNvest. When the piece was originally conceived both of these laws were not yet active; in fact, it was not yet clear that the SEC would ever release final rules for what would become Regulation Crowdfunding. When the issue was ultimately sent to the printers, each of the laws had been active for at least 6 months. Like I said, weird.

This post is intended to update the curious reader on current happenings with investment crowdfunding on both a federal and a state level.

On the federal level, Regulation Crowdfunding rules have been final since October 2015 and active since May 2016. Nearly 200 offerings later, analysts and scholars are already starting to crunch the numbers. [Full disclosure: I am one of those academics. Our paper (co-author Zach Robins of Winthrop & Weinstine) will be presented at the Mitchell-Hamline Law Review Symposium next month, if you’re interested.] Similar to rewards-based crowdfunding models like Indiegogo and Kickstarter, there appear to be some things a crowdfunding issuer can do to increase the likelihood of success of their offering. Here are some examples.

First, a clear business plan is essential to attracting investors. After all, the “crowd” is made of lots of folks without sophisticated investing experience; so you have to find a creative way to hook them without violating securities disclosure restrictions. This isn’t always as easy said than done, and some portal operators have already gotten in serious trouble for violating their obligations to ensure offering accuracy.

Second, and perhaps a bit counterintuitive, the most successful Regulation Crowdfunding issuers actually have slightly higher minimum investments than you would expect. There is no dollar floor to the investment under the rules of Reg CF, but a small minimum opens the door to a potentially unwieldy cap table. In addition, a high minimum investment decreases the number of available spots for investors in the targeted offering amount; there is a very real “exclusivity” effect. To illustrate: it takes 10,000 investors at $10/per to get to $100,000 offering, but you could raise the same $100,000 with only 100 investors at $1,000/per. Issuers get to choose which investors they take on in oversubscription situations, and it can’t hurt to create a little buzz as investors “compete” for limited spots in the offering.

Finally, communicating the business plan using a strong video is a must—industry analysts report that campaigns using any video at raised significantly more money that those without (on the order of 11:1 times more money!). If that video is of good enough quality, according to those same analysts, your offering does even better. Of course, video quality only matters if your network is sufficiently large to reach enough potential investors. For issuers hoping to raise $50,000, that generally means connecting with more than 3,000 people.

There are plenty more nuggets of wisdom to glean from the first 8 months of federal investment crowdfunding offerings, and this post only scratches the surface. For more, see our forthcoming paper in Mitchell-Hamline Law Review’s symposium issue later this year.

As for MNvest, unfortunately, while the law has been technically available for Minnesota crowdfunders since June 2016, it took until the end of the year for the Department of Commerce to approve any portals. So only a handful of issuers and portals are currently active in the space. True to form, for federal crowdfunding offerings at least, craft breweries are making a strong showing (read: in Minnesota, 4 of the first 4 MNvest issuers are breweries!). Hopefully we’ll see more of them as the vehicle becomes more well-known.

One thing that should further aid MNvest issuers is that the SEC recently released final rules that will make it easier and safer for intrastate issuers to use the internet to advertise. Before the rules update, issuers were bound by advertising and solicitation restrictions drafted in the 1970s (that is, before the interwebs). As crowdfunding, almost by definition, requires the use of the internet to reach a crowd, these updates should streamline and loosen up the fundraising process. The new final rules create a new exemption (Rule 147A); state legislatures that based their intrastate laws on old Rule 147 will need to update their laws accordingly first.

Investment crowdfunding laws of the intrastate and federal varieties hold promise for many issuers. And, while there is not yet a perfect model or a one-size-fits-all strategy for fundraising, it is clear that investors and issuers alike are excited by the promise this investment vehicle holds.

Who knows—perhaps in another 18 months the way we crowdfund will have experienced as much change again, to make this piece as quickly “historical” as my earlier article!

Court’s Remain Unclear About Bitcoin’s Status

January 25, 2017
Business Law, Economics, New Technology

Paul Gaus, MJLST Staffer

Bitcoin touts itself as an “innovative payment network and a new kind of money.” Also known as “cryptocurrency,” Bitcoin was hatched out of a paper posted online by a mysterious gentleman named Satoshi Nakamoto (he has never been identified). The Bitcoin economy is quite complex, but it is generally based on the principle that Bitcoins are released into networks at a steady pace determined by algorithms.

Although once shrouded in ambiguity, Bitcoins threatened to upend (or “disrupt” in Silicon Valley speak) the payment industry. At their core, Bitcoins are just unique strings of information that users mine and typically store on their desktops. The list of companies that accept Bitcoins is growing and includes cable companies, professional sports teams, and even a fringe American political party. According to its proponents, Bitcoins offer lower transaction costs and increased privacy without inflation that affects fiat currency.

Technologies like Bitcoins do not come without interesting legal implications. One of the oft-cited downsides of Bitcoins is that they can facilitate criminal enterprises. In such cases, courts must address what status Bitcoins have in the current economy. The Southern District of New York recently held that Bitcoins were unequivocally a form of currency for purposes of criminal prosecution. In United States v. Murgio et al., Judge Alison Nathan determined Bitcoins are money because “Bitcoins can be accepted as payment for goods and services or bought directly from an exchange with a bank account . . . and are used as a medium of exchange and a means of payment.” By contrast, the IRS classifies virtual currency as property.
Bitcoins are uncertain, volatile, and complex, but they continue to be accepted as currency and show no signs of fading away. Going forward, the judiciary will need to streamline its treatment of Bitcoins.

Policy Proposals for High Frequency Trading

April 21, 2016
Business Law, Competition, Economics, Securities Law

Steven Graziano, MJLST Staffer

In his article, The Law and Ethics of High Frequency Trading, which was published in the Minnesota Journal of Law, Science, and Technology Issue 17, Volume 1, Steven McNamara examines the ethics of high frequency trading. High frequency trading is the use of high-speed algorithms to take advantage of minor inefficiencies in trading technologies, and in doing so gain large market returns. McNamara looks into ethical, economic, and legal aspects of high frequency trading. In the course of his discussion McNamara determines that: high frequency trading is a term that actually describes an assortment of different practices; the amount of dollars involved in high frequency trading is declining, but is still a concern for certain types of investors and regulators; a proper analysis of high frequency trading requires use of expectation-based, deontological moral theory; and that modern technology may call into question the use of the Regulation National Market System regime. McNamara concludes that even though high frequency trading may lower costs to most investors, many practices associated with high frequency trading support the position that high frequency trading is not fair.

Securities and Exchange Commission Chair Mary Jo White has recently commented on the legality, and potential ways to approach, high frequency trading. White, while testifying before the Senate Appropriations Subcommittee on Financial Services and General Government, informed the Congressional Committee that “You don’t paint with the broad brush all high-frequency traders — they have very different strategies.” This sentiment mirrors McNamara’s assertion that the term high-frequency trading actually involves various practices. However, White is seemingly defending some practices, while McNamara has a more negative view.

Differing still from these two views are the results of a study done by United Kingdom’s Financial Conduct Authority. That study concluded with the conclusion that high-frequency trade technologies are not rapidly predicting marketable orders and then trading those orders. However, the study examined practices in Europe, which has less market participants and a slower moving market than the United States.

In conclusion, Steven McNamara offers a very insightful, encompassing look at high frequency trading. His analysis resonates through both White’s testimony, and in the results of the study from the Financial Conduct Authority. Although all three perspectives seemingly stand for somewhat different propositions, what is clear from all three sources is that the practice of high-frequency trading is extremely complex and requires in-depth analysis before making any conclusive policy decisions.

Long-Term Success of Autonomous Vehicles Depends on Its First-Generation Market Share

January 25, 2016
Autonomous Vehicles, Business Law, Competition

Vinita Banthia, MJLST Articles Editor

In its latest technology anticipations, society eagerly awaits a functional autonomous car. However, despite the current hype, whether or not these cars will be ultimately successful remains a question. While autonomous cars promise to deliver improved safety standards, lower environmental impacts, and greater efficiency, their market success will depend on how practical the first generation of autonomous vehicles are, and how fast they are adopted by a significantly large portion of the population. Because their usability and practicality depends inherently on how many people are using them, it will be important for companies to time their first release for when they are sufficiently developed and can infiltrate the market quickly. Dorothy J. Glancy provides a detailed account of the legal questions surrounding autonomous cars in Autonomous and Automated and Connected Cars Oh My! First Generation Autonomous Cars in the Legal Ecosystem. This blog post responds to Glancy’s article and suggests additional safety and regulation concerns that Glancy’s article does not explicitly discuss. Finally, this post proposes certain characteristics which must be true of the first generation of autonomous vehicles if autonomous vehicles are to catch-on.

Glancy thoroughly covers the expected benefits of autonomous cars. Autonomous cars will allow persons who are not otherwise able to drive, such as visually impaired people, and the elderly, to get around conveniently. All riders will be able to save time by doing other activities such as reading or browsing the internet during their commute. And in the long run, autonomous vehicles will allow roads and parking lots to be smaller and more compact because of the cars’ more precise maneuvering abilities. Once enough autonomous vehicles are on the road, they will be able to travel faster than traditional cars and better detect and react to dangers in their surroundings. This will decidedly lead to fewer crashes.

On the contrary, several other features may discourage the use of autonomous vehicles. First, because of the mapping systems, the cars will likely be restricted to one geographic region. Second, they might be programmed to save the most number of people during a car crash, even if that means killing the occupant. Therefore, many prospective buyers may not buy a car that is programmed to kill him or her in the event of an inevitable crash. In addition, initial autonomous cars may not be as fast as imagined, depending on whether they can detect faster moving lanes, frequently change lanes, and adapt to changing speed limits. Until there are significant numbers of autonomous cars on roads, they may not be able to drive on longer, crowded roads such as highways, because vehicles will need to interact with each other in order to avoid crashes. Some argue that other car-service provides will suffer as taxis, Ubers, busses, and trails become less relevant. However, this change will be gradual because people will long continue to rely on these services as cheap alternatives to car-ownership.

When these cars are available, in order to promote autonomous cars to enter the market rapidly, manufacturers should make the cars most attractive to potential buyers, instead of making them good for society as a whole. For example, instead of programming the car to injure its own occupants, it should be programmed to protect its occupants. This will encourage sales of autonomous cars, reducing the number of car crashes in the long run.

Glancy also states that the first generation of autonomous vehicles will be governed by the same state laws that apply for conventional vehicles, and will not have additional rules of their own. However, this is unlikely to be true, and specific state and possibly even federal laws will most likely affect autonomous vehicles before they may be driven on public roads and sold to private individuals. Because autonomous cars will co-exist with traditional vehicles, many of these laws will address the interaction between autonomous and conventional cars, such as overtaking, changing lanes, and respecting lane restrictions.

In the end, the success of autonomous cars depends widely on how practical the first fleet is, how many people buy into the idea and how fast, as well as the car’s cost. If they are successful, there will be legal and non-legal benefits and consequences, which will only be fully realized after a few decades of operation of the cars.

Recent Developments in Automated Vehicles Suggest Broad Effects on Urban Life

January 20, 2016
Autonomous Vehicles, Business Law, Competition, Intellectual Property

J. Adam Sorenson, MJLST Staffer

In “Climbing Mount Next: The Effects of Autonomous Vehicles on Society” from Volume 16, Issue 2 of the Minnesota Journal of Law, Science & Technology, David Levinson discusses the then current state of automated vehicles and what effects they will have on society in the near and distant future. Levinson evaluates the effect of driverless cars in numerous ways, including the capacity and vehicles-as-a-service (VaaS). Both of these changes are illuminated slightly by a recent announcement by Tesla Motors, a large player in the autonomous vehicle arena.

This week Tesla announced Summon which allows a user to summon their tesla using their phone. As of now, this technology can only be used to summon your car to the end of your drive way and to put it away for the night. Tesla sees a future where this technology can be used to summon your vehicle from anywhere in the city or even in the country. This future technology, or something very similar to it, would play a pivotal role in providing urban areas with VaaS. VaaS would essentially be a taxi service without drivers, allowing for “cloud commuting” which would require fewer vehicles overall for a given area. Ford has also announced what it calls FordPass, which is designed to be used with human-driven cars, but allows for leasing a car among a group of individuals and sharing the vehicle. This technology could easily be transferred to the world of autonomous vehicles and could be expanded to include entire cities and multiple cars.

Beyond VaaS, these new developments bring us closer to the benefits to capacity Levinson mentions in his article. Levinson mentions the benefits to traffic congestion and bottlenecks which could be alleviated by accurate and safe autonomous vehicles. Driverless vehicles would allow for narrower lanes, higher speed limits, and less space between cars on the highway, but Levinson concedes that these cars still need to “go somewhere, so auto-mobility still requires some capacity on city streets as well as freeways, but ubiquitous adoption of autonomous vehicles would save space on parking, and lane width everywhere.” Tesla is seeking to alleviate some of these issues by allowing a vehicle to be summoned from a further distance, alleviating some parking congestion.

Audi, however, is seeking to tackle the problem in a slightly different fashion. Audi is partnering with Boston suburb Somerville to develop a network including self-parking cars. “UCLA urban planning professor Donald Shoup found 30 percent of the traffic in a downtown area is simply people looking for parking” and eliminating this traffic would allow for much higher capacity in these areas. Similarly, these cars will not have people getting in and out of them, allowing for much more compact parking areas and much higher capacity for parking. Audi and Tesla are just some of the companies working to be at the forefront of automated vehicle technology, but there is no denying that whoever the developments are coming from, the effects and changes David Levinson identified are coming, and they’re here to stay.

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