New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

The Legal Environment of Business 9th ed. Notes.

by: Tiffany Notetaker

The Legal Environment of Business 9th ed. Notes. MGMT 246 - 03

Marketplace > California State University - Fullerton > Business, management > MGMT 246 - 03 > The Legal Environment of Business 9th ed Notes
Tiffany Notetaker
Cal State Fullerton
GPA 3.62
Business and Its Legal Environment
Charles Smith

Almost Ready


These notes were just uploaded, and will be ready to view shortly.

Purchase these notes here, or revisit this page.

Either way, we'll remind you when they're ready :)

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

Chapter 6, 24, 25, 26, and 27 Textbook Notes.
Business and Its Legal Environment
Charles Smith
business management
75 ?




Popular in Business and Its Legal Environment

Popular in Business, management

This 25 page Bundle was uploaded by Tiffany Notetaker on Monday September 28, 2015. The Bundle belongs to MGMT 246 - 03 at California State University - Fullerton taught by Charles Smith in Summer 2015. Since its upload, it has received 75 views. For similar materials see Business and Its Legal Environment in Business, management at California State University - Fullerton.

Similar to MGMT 246 - 03 at Cal State Fullerton

Popular in Business, management


Reviews for The Legal Environment of Business 9th ed. Notes.


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 09/28/15
Chapter 6 Administrative Agencies 1 The Practical Signi cance of Administrative Law A Administrative laws are created by administrative agencies rather than legislatures The agency creates the detailed rules and regulations necessary to carry out the statute B Administrative agencies exist at all levels of government A state agency is commonly created as a parallel to a federal agency Federal agency regulations take precedence over con icting state regulations C Administrative agencies at various levels of government work together and share the responsibility of creating and enforcing particular regulations Although an agency can have calculated overall benefits of its regulations that often exceed their costs the burden on business is substantial Business therefore has a strong incentive to try to in uence the regulatory environment through lobbying 2 Agency Creation and Powers A Congress creates federal administrative agencies by passing enabling legislation which specifies the name purposes functions and powers of the agency being created An agency s enabling statute defines its legal authority An agency cannot regulate beyond the powers granted by the statute B Congress created the Federal Trade Commission FTC by enacting the Federal Trade Commission Act of 1914 which prohibits unfair methods of competition and deceptive trade practices It also describes the procedures that the FTC must follow to charge persons or organizations with violations of the act and it provides for judicial review of agency orders C There are two basic types of administrative agencies executive agencies and independent regulatory agencies Federal executive agencies include the cabinet departments of the executive branch which assist the president in carrying out executive functions and the subagencies within the cabinet departments Independent regulatory agencies are outside the federal executive departments and is usually run by a commission or board made up of several members D Agencies powers include functions associated with the legislature rulemaking the executive branch enforcement and the courts adjudication Administrative agencies can make legislative rules substantive rules that are as legally binding as laws that Congress passes They can also issue interpretive rules which declare policy and do not affect legal rights or obligations a The delegation doctrine holds that Article I grants Congress the authority to delegate some of its power by establishing administrative agencies to create rules for implementing those laws Administrative agencies which constitute the bureaucracy are sometimes referred to as the fourth branch of the US government b The executive branch of government exercises control over agencies both through the president s power to appoint federal officers and through the president s veto power The president may veto enabling Chapter 6 Administrative Agencies legislation passed by Congress or congressional attempts to modify an existing agency s authority 0 Congress exercises authority over agency powers through legislation Congress gives power to an agency through enabling legislation and can take power away or even abolish an agency altogether through subsequent legislation Legislative authority is required to fund an agency and enabling legislation usually sets certain time and monetary limits on the funding of particular programs 1 The judicial branch exercises control over agency powers through the courts review of agency actions The Administrative Procedure Act provides for judicial review of most agency decisions 3 The Administrative Procedure Act A Sometimes Congress specifies certain procedural requirements in an agency s enabling legislation In the absence of any directives from Congress concerning a particular agency procedure the Administrative Procedure Act APA applies B The APA provides that courts should hold unlawful and set aside agency actions found to be arbitrary capricious an abuse of discretion or otherwise not in accordance with law Parties can then challenge regulations as contrary to law or as so irrational that they are arbitrary and capricious C Today the major function of an administrative agency is rulemaking the formulation of new regulations or rules The APA defines a rule as an agency statement of general or particular applicability and future effect designed to implement interpret or prescribe law and policy Noticeand comment rulemaking involves three basic steps notice of the proposed rulemaking a comment period and the final rule a When a federal agency decides to create a new rule the agency publishes a notice of the proposed rulemaking proceedings in the Federal Register a daily publication of the executive branch that prints government orders rules and regulations b The purpose of the comment period is to give interested parties the opportunity to express their views on the proposed rule in an effort to in uence agency policy 0 The final rule must contain a concise general statement of basis and purpose that describes the reasoning behind the rule as it is published in the Federal Register Final rules have binding legal effect unless the courts later overturn them and for this reason are considered legislative rules 1 If an agency failed to follow proper rulemaking procedures the final rule may not be binding D Agencies have increasingly been using more informal methods of policymaking such as issuing interpretive rules and guidance documents Interpretive rules simply declare policy and do not affect legal rights or Chapter 6 Administrative Agencies obligations Informal agency actions are exempt from the APA s requirements because they do not establish legal rights 4 Judicial Deference to Agency Decisions A When asked to review agency decisions courts historically granted deference significant weight to the agency s judgment often citing the agency s great expertise in the subject area of the regulation At issue in the Chevron case was whether the courts should defer to an agency s interpretation of a statute giving it authority to act The Supreme Court held that the courts should defer to an agency s interpretation of law as well as fact The Court found that the agency s interpretation of the statute was reasonable and upheld the bubble policy Under the holding of the Chevron case when the meaning of a particular statute s language is unclear and an agency interprets it the court must follow the agency s interpretation as long as it is reasonable 5 Enforcement and Adjudication A Although rulemaking is the most prominent agency activity enforcement of B the rules is also critical An agency itself often enforces its own rules After final rules are issued agencies conduct investigations to monitor compliance with those rules or with the requirements of the enabling statute The Occupational Safety and Health Administration OSHA requires companies to report any workrelated deaths a Many agencies gather information through onsite inspections Administrative inspections and tests cover a wide range of activities including safety inspections of underground coalmines safety tests of commercial equipment and automobiles and environmental monitoring of factory emissions b There are two basic types of subpoenas ad testificandum and duces tecum The subpoena ad testificandum is a writ or order compelling a witness to appear at an agency hearing The subpoena duces tecum compels an individual or organization to hand over books papers records or documents to the agency To determine whether an agency is abusing its discretion in its pursuit of information as part of an investigation a court may consider the purpose of the investigation the relevance of the information being sought the specificity of the demand for testimony or documents and the burden of the demand on the party from whom the information is sought 0 Agency investigations often involve onsite inspections Usually companies do not resist such inspections although in some circumstances they do 1 An agency typically must obtain a search warrant that directs law enforcement officials to search a specific place for a specific item and present it to the agency However agencies can conduct warrantless searches in several situations Chapter 6 Administrative Agencies C After an investigation reveals a suspected violation an agency may begin to take administrative actions against an individual or organization Most administrative actions are resolved through negotiated settlements at their initial stages without formal adjudication the process of resolving a dispute by presenting evidence and arguments before a neutral decision maker a Depending on the agency negotiations may involve a simple conversation or a series of informal conferences Whatever form the negotiations take their purpose is to rectify the problem to the agency s satisfaction and eliminate the need for additional proceedings b If a settlement cannot be reached the agency may issue a formal complaint against the suspected violator Agency adjudication may involve a triallike arbitration procedure before an administrative law judge ALJ c An ALJ presides over the hearing and has the power to administer oaths take testimony rule of questions of evidence and make determinations of fact The APA requires that the ALJ be separate from an agency s investigative and prosecutorial staff and prohibits ex parte private communications between the AL and any party to an agency proceeding 1 Hearing procedures vary widely from agency to agency Administrative agencies generally exercise substantial discretion over the type of procedure that will be used Frequently disputes are resolved through informal adjudication proceedings A formal adjudicatory hearing resembles a trial in many respects e Following a hearing the ALJ renders an initial order or decision on the case Either party can appeal the decision to the board or commission that governs the agency If no party appeals the case the ALJ s decision becomes the final order of the agency 6 Public Accountability A As a result of growing public concern over the powers exercised by administrative agencies Congress passed several laws to make agencies more accountable through public scrutiny B The Freedom of Information Act FOIA requires the federal government to disclose certain records to any person or entity on written request even if no reason is given for the request The FOIA exempts certain types of records such as those pertaining to national security and those containing information that is confidential or personal C Congress passed the Government in the Sunshine Act open meeting law in 1976 which requires that every portion of every meeting of an agency be open to public observation It also requires the establishment of procedures to ensure that the public is provided with adequate advance notice of scheduled meetings and agendas Chapter 6 Administrative Agencies D Concerns over the effects of regulation on the efficiency of businesses particularly smaller ones led Congress to pass the Regulatory Flexibility Act in 1980 E The Small Business Regulatory Enforcement Fairness Act SBREFA allows Congress to review new federal regulations for at least 60 days before they take effect as to give opponents of the rules time to present their arguments to Congress It also authorizes the courts to enforce the Regulatory Flexibility Act Chapter 24 Consumer Protection 1 Deceptive Advertising A The Federal Trade Commission Act created the Federal Trade Commission FTC to carry out the broadly state goal of preventing unfair and deceptive trade practices including deceptive advertising B Generally deceptive advertising occurs if a reasonable consumer would be misled by the advertising claim Vague generalities and obvious exaggerations are permissible these claims are known as puffery a Advertising that appears to be based on factual evidence but in fact is not reasonably supported by some evidence will be deemed deceptive b Some advertisements contain halftruths meaning that the presented information is true but incomplete and therefore leads consumers to a false conclusion C One of the most important rules that the FTC issued was the guides Against Bait Advertising which seeks to prevent baitandswitch advertising advertising a very low price for a particular item that will likely be unavailable to the consumer who will then be encouraged to purchase a more expensive item D Deceptive advertising occurs in the online environment as well as of ine The FTC actively monitors online advertising and has identified hundreds of websites that have made false or deceptive claims for products ranging from medical treatments for various diseases to exercise equipment and weightless aids The FTC has issued guidelines to help online businesses comply with existing laws prohibiting deceptive advertising all ads must be truthful and not misleading the claims made in an ad must be substantiated and ads cannot be unfair a Guidelines also call for clear and conspicuous disclosure of any qualifying or limiting information To satisfy the clear and conspicuous requirement the disclosure should be placed as close as possible to the claim being qualified or be included within the claim itself b Many states have passed consumer protection laws that regulate deceptive online advertising E The FTC receives complaints from many sources including competitors of alleged Violators consumers trade associations Better Business Bureaus and government organizations and officials a If the FTC concludes that a given advertisement is unfair or deceptive it drafts a formal complaint which is sent to the alleged offender The company may agree to settle the complaint without further proceedings or conduct a hearing in which the company can present its defense b If the FTC succeeds in providing that an advertisement is unfair or deceptive it issues a ceaseanddesist order requiring the company to stop the challenged advertising In some circumstances it may also impose a sanction known as counteradvertising which requires the Chapter 24 Consumer Protection company to advertise anew to inform the public about earlier misinformation The FTC sometimes institutes a multiple product order which requires a firm to stop false advertising for all of its products not just the product involved in the original action 0 When a company s deceptive ad leads to wrongful payments by consumers the FTC may seek other remedies including restitution F The Telephone Consumer Protection Act TCPA prohibits telephone solicitation using an automatic telephone dialing system or a prerecorded voice It makes it illegal to transmit ads via fax without first obtaining the recipient s permission a The Federal Communications Commission FCC enforces the TCPA The FCC imposes substantial fines on companies that violate the junk fax provisions of the act b The Telemarketing and Consumer Fraud and Abuse Prevention Act directed the FTC to establish rules governing telemarketing and to bring actions against fraudulent telemarketers The FTC s Telemarketing Sales Rule TSR requires a telemarketer to identify the seller s name describe the product being sold and disclose all material facts related to the sale It makes it illegal for telemarketers to misrepresent information or facts about their goods or services 2 Labeling and Packaging Laws A A number of federal and state laws deal specifically with the information given on labels and packages In general labels must be accurate and they must use words that are easily understood by the ordinary consumer B The Energy Policy and Conservation Act of 1975 requires automakers to attach an information label to every new car The label must include the EPA s fuel economy estimate for the vehicle C The Fair Packaging and Labeling Act requires that food product labels identify the product the net quantity of the contents the manufacturer and the packager or distributor a Food products must bear labels detailing the nutritional content including the number of calories and the amounts of various nutrients that the food contains The Nutrition Labeling and Education Act requires standard nutrition facts to be listen on food labels and regulates the use of such terms as fresh and low fat The US Food and Drug Administration FDA and the US Department of Agriculture USDA are the primary agencies that issue regulations on food labeling b The healthcare reforms enacted by Congress in 2010 included provisions aimed at combating obesity in the US the hope is that consumers armed with information will consider the number of calories when they make their food choices The federal law on menu labeling supersedes all state and local laws already in existence 3 Sales Chapter 24 Consumer Protection A A number of statutes protect consumers by requiring the disclosure of certain terms in sales transactions and providing rules governing unsolicited merchandise and home or doortodoor sales mailorder sales and referral sales Many states and the FTC have coolingoff laws that permit the buyers of goods sold door to door to cancel their contracts within three business days B The FTC Mail or Telephone Order Merchandise Rule amended by FTC Mail Order Rule which provides specific protections for consumers who purchase goods over phone through the mail by fax or via the Internet The Postal Reorganization Act provides that consumers who receive unsolicited merchandise sent by US mail can keep it throw it away or dispose of it in any manner that she or he sees fit C The FTC and other federal agencies have brought numerous enforcement actions against those who perpetrate online fraud Nonetheless protecting consumers from fraudulent and deceptive sales practices conducted via the Internet has proved to be a challenging task 4 Protection of Health and Safety A Labeling and packaging laws promote consumer health and safety but there is a significant distinction between regulating the information dispensed about a product and regulating the actual content of the product B The most important federal legislation regulating food and drugs is the Federal Food Drug and Cosmetic Act which protect consumers against adulterated and misbranded foods and drugs a The FDCA establishes food standards specifies safe levels of potentially hazardous food additives and provides classifications of foods and food advertising i In recent years many people in the US have contracted food poisoning from eating foods that were contaminated ii In 2011 Congress enacted the Food Safety Modernization Act FSMA to provide greater government control over the US food safety system The act requires any person who manufacturers processes packs distributes receives holds or imports food products to pay a fee and register with the US Department of Health and Human Services b The FDA also has the responsibility of ensuring that drugs are safe and effective before they are marketed to the public C In 1972 the Consumer Product Safety Act created the first comprehensive scheme of regulation over matters of consumer safety This act also established the Consumer Product Safety Commission CPSC which has far reaching authority over consumer safety a The Consumer Product Safety Act authorizes the CPSC to set safety standards for consumer products ban the manufacture and sale of any product that the commission believes poses an unreasonable risk to consumers remove form the market any products it believes to be imminently hazardous require manufacturers to report on any Chapter 24 Consumer Protection products already sold or intended for sale if the products have proved to be hazardous and administer other productsafety legislation b The Consumer Product Safety Act requires the distributors of consumer products to notify the CPSC immediately if they receive information that a product contains a defect which creates a substantial risk to the public or an unreasonable risk of serious injury or deat D In 2010 the healthcare reforms enacted by Congress went into effect and gave Americans new rights and benefits with regard to health care by 2014 these laws prohibited a certain insurance company practices such as denying coverage for preexisting conditions a The reforms expanded access to health care by enabling more children to obtain healthinsurance coverage Medicare recipients now receive a 50 percent discount on namebrand drugs and the gap in Medicare s prescription drug coverage will be eliminated by 2020 b In an attempt to control the rising costs of health insurance the law places restrictions on insurance companies States can require insurance companies to justify their premium increases to be eligible to participate in the new healthinsurance exchanges 5 Credit Protection A Credit protection is one of the more important aspects of consumer protection legislation The Consumer Financial Protection Bureau CFPB is the agency dedicated to overseeing the practices of banks mortgage lenders and credit card companies B A key statute regulating the credit and creditcard industries is the Truthin Lending Act TILA the name commonly given to Title I of the Consumer Credit Protection Act as amended It is basically a disclosure law administered by the Federal Reserve Board and requires sellers and lenders to disclose credit terms or loans so that individuals can shop around for the best financing arrangements a The disclosure requirements are contained in Regulation Z issued by the Federal Reserve Board of Governors Under the provisions of the TILA all the terms of a credit instrument must be clearly and conspicuously disclosed It also provides for contract rescission cancellation if a creditor fails to follow the exact procedures required by the act b Congress enacted the Equal Credit Opportunity Act ECOA as an amendment to the TILA The ECOA prohibits the denial of credit solely on the basis of race religion national origin color gender marital status or age 0 The TILA also contains provisions regarding credit cards If a consumer receives an unsolicited credit card in the mail that is later stolen the company that issued the card cannot charge the consumer for any unauthorized charges Chapter 24 Consumer Protection d Amendments to the TILA s creditcard rules that became effective in 2010 added many more protections C The Fair Credit Reporting Act FCRA protects consumers against inaccurate credit reporting and requires that lenders and other creditors report correct relevant and uptodate information a Any time a consumer is denied credit or insurance on the basis of her or his credit report the consumer must be notified of that fact Under the FCRA consumers may request the source of any information used by the credit agency as well as the identity of anyone who has received an agency s report A creditreporting agency that fails to comply with the act is liable for actual damages plus additional damages and attorney s fees The USSC held that an insurance company s failure to notify new customers that they were paying higher insurance rates as a result of their credit scores was a willful violation of the FCRA D Congress passed the Fair and Accurate Credit Transactions FACT Act in an effort to combat identity theft It established a national fraud alert system and requires major credit reporting agencies to provide consumers with free copies of their own credit reports every 12 months E The Fair Debt Collection Practices Act FDCPA attempts to curb perceived abuses by collection agencies It applies only to specialized debtcollection agencies and attorneys who regularly attempt to collect debts on behalf of someone else usually for a percentage of the amount owed a Under the FDCPA a collection agency may not contact the debtor at the debtor s place of employment if the debtor s employee objects contact the debtor at inconvenient or unusual types or at any time contact third parties other than the debtor s parents spouse or financial adviser about payment of a debt unless a court authorizes such action harass or intimidated the debtor or make false or misleading statements or communicate with the debtor at any time after receiving notice that the debtor is refusing to pay the debt The FDCPA also requires a collection agency to include a validation notice whenever it initially contacts a debtor for payment of a debt or within five days of that initial contact Debt collectors who violate the act are exempt form liability if they can show that the violation was not intentional and result from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error Chapter 25 Environmental Law 1 Common Law Actions A Common law remedies against environmental pollution originated centuries ago in England Today injured individuals continue to rely on the common law to obtain damages and injunctions against business polluters B Under the common law doctrine of nuisance persons may be held liable if they use their property in a manner that unreasonably interferes with others rights to use or enjoy their own property C Lawsuits for personal injuries caused by exposure to a toxic substance such as asbestos radiation or hazardous waste has given rise to a growing body of tort law known as toxic torts In a strict liability action the injured party does not have to prove that business failed to exercise reasonable care 2 Federal State and Local Regulations A All levels of government in the US regulate some aspect of the environment B Many states have enacted laws to protect the environment City county and other local governments also regulate some aspects of the environment State and local regulatory agencies also play a significant role in implementing federal environmental legislation Typically the federal government relies on state and local governments to enforce federal environmental statutes and regulations such as those regulating air quality C Congress has passed a number of statutes to control the impact of human activities on the environment Most of these statutes are designed to address pollution in the air water or land a The primary federal agency regulating environmental law is the Environmental Protection Agency EPA which was created in 1970 to coordinate federal environmental responsibilities All federal agencies must take environmental factors into consideration when making significant decisions b The National Environmental Policy Act of 1969 requires that an environmental impact statement EIS be prepared for every major federal action that significantly affects the quality of the environment The EIS must analyze the impact on the environment that the action will have any adverse effects on the environment and alternative actions that might be taken and any irreversible effects the action might generate 3 Air Pollution A The Clean Air Act provides the basis for issuing regulations to control multistate air pollution It covers both mobile sources and stationary sources of pollution B Regulations governing air pollution from automobiles and other mobile sources specify pollution standards and establish time schedules for meeting the standards a In 2010 the Obama administration ordered the EPA to develop national standards regulating fuel economy and emissions for medium and heavyduty trucks starting with 2014 models Chapter 25 Environmental Law b A growing concern among many scientists and others around the world is that greenhouse gases such as carbon dioxide are contributing to global warming and climate change It was not until 2009 that the EPA began to regulate carbon dioxide emissions from motor vehicles C The Clean Air Act also authorizes the EPA to establish airquality standards for stationary sources but recognizes that the primary responsibility for implementing these standards rests with state and local governments The EPA sets primary and secondary levels of ambient standards and the states formulate plans to achieve those standards a The Clean Air Act requires the EPA to list all hazardous air pollutants HAPs on a prioritized schedule Nearly 200 substances have been classified as hazardous b The Clean Air Act requires major new sources to use pollutioncontrol equipment that represents the maximum achievable control technology MACT to reduce emissions The EPA issues guidelines as to what equipment meets this standard D To penalize those who find it more costeffective to violate the Clean Air Act than to comply with it the EPA is authorized to impose a penalty equal to the violator s economic benefits form noncompliance Those who knowingly violate the act may be subject to criminal penalties 4 Water Pollution A Federal regulations governing water pollution can be traced back to the Rivers and Harbors Appropriations Act of 1899 which prohibited ships and manufacturers from discharging or depositing refuse in navigable waterways without a permit In 1948 Congress passed the Federal Water Pollution Control Act FWPCA but its regulatory system and enforcement powers proved to be inadequate B The FWPCA also known as the Clean Water Act CWA established certain goals make waters safe for swimming protect fish and wildlife and eliminate the discharge of pollutants into the water a The CWA established a permit system called the National Pollutant Discharge Elimination System NPDES for regulating discharges from point sources of pollution which include industrial municipal and agricultural facilities Under this system any point source emitting pollutants into water must have a permit b Regulations generally specify that the best available control technology BACT be installed Essentially the guidelines issued by the EPA require the most effective pollutioncontrol equipment available c The CWA prohibits the filling or dredging of wetlands unless a permit is obtained from the Army Corps of Engineers Wetlands are thought to be vital to the ecosystem because they filter streams and rivers and provide habitat for wildlife Chapter 25 Environmental Law d Discharging emissions into navigable waters without a permit or in violation of pollution limits under a permit violates the CWA Violators are subject to a variety of civil and criminal penalties The Safe Drinking Water Act requires the EPA to set maximum levels for pollutants in public water systems Public water systems operators must come as close as possible to meeting the EPA s standards by using the best available technology that is economically and technologically feasible The Ocean Dumping Act regulates the transportation and dumping of material pollutants into ocean waters It prohibits the ocean dumping of any radiological chemical and biological warfare agents and highlevel radioactive waste It also established a permit program The Oil Pollution act provides that any oil facility oil shipper vessel owner or vessel operator that discharges oil into navigable waters or onto an adjoining shore may be liable for clean up costs as well as damages Toxic Chemicals A B Today control of toxic chemicals used in agriculture and in industry has become increasingly important The Federal Insecticide Fungicide and Rodenticide Act FIFRA of 1947 regulates pesticides and herbicides Pesticides and herbicides must be registered before they can be sold certified and used only for approved applications and used in limited quantities when applied to food crops a The EPA can cancel or suspend registration of substances that are identified as harmful and inspect factories where the chemicals are made b It is a violation of FIFRA to sell a pesticide or herbicide that is either unregistered or has had its registration canceled or suspended It is also a violation to sell a pesticide or herbicide with a false or misleading label or to destroy or deface any labeling required under the act The Toxic Substances Control Act regulates chemicals and chemical compounds that are known to be toxic and controls the introduction of new chemical compounds by requiring investigation of any possible harmful effects from these substances Hazardous Wastes A Some industrial agricultural and household wastes pose more serious threats than others If not properly disposed of these toxic chemicals may present a substantial danger to human health and the environment If released into the environment they may contaminate public drinking water resources The Resource Conservation and Recovery Act RCRA was passed in response to growing concern about the effects of hazardous waste materials on the environment The RCRA required the EPA to establish regulations to determine which forms of solid waste should be considered hazardous and to establish regulations to monitor and control hazardous waste disposal In 1980 Congress passed the Comprehensive Environmental Response Compensation and Liability Act CERCLA commonly known as Superfund Chapter 25 Environmental Law with the basic purpose of regulating the clean up of disposal sites in which hazardous waste is leaking into the environment a Superfund provides that when a release or a threatened release of hazardous chemicals from a site occurs certain people may be held liable for cleaning up the site such as the person who generated the wastes disposed of at the site the person who transported the waste to the site the person who owned or operated the site at the time of the disposal or the current owner or operator A person falling within one of these categories is referred to as a potentially responsible party PRP i Superfund imposes strict liability on PRPs and that liability cannot be avoided through transfer of ownership Therefore selling a site where hazardous wastes were disposed of does not relieve the seller of liability and the buyer also becomes liable for the clean up ii Liability under Superfund is usually joint and several a PRP who generated only a fraction of the hazardous waste disposed of at a site may nevertheless be liable for all of the clean up costs b One way for a business to minimize its potential liability under Superfund is to conduct environmental compliance audits of its own operations regularly The EPA encourages companies to conduct self audits and promptly detect disclose and correct wrongdoing c There are a few defenses to liability under CERCLA the most important being the innocent landowner defense Under this defense an innocent property owner may be able to avoid liability by showing that he or she had no contractual or employment relationship with the person who released the hazardous substances on the land Chapter 26 Real Property and Land Use Control 1 The Nature of Real Property A B Real property realty consists of land and everything permanently attached to it including structures and other fixtures Real property is immovable Land includes the soil on the surface of the earth and the natural products or artificial structures that are attached to it Land also includes all the waters contained on or under its surface and much but not all of the airspace above it The owner of real property has relatively exclusive rights to both the airspace above the land and the soil and minerals underneath it Any limitations on either airspace rights or subsurface rights called encumbrances normally must be indicated on the document that transfers title at the time of purchase a Disputes concerning airspace rights may involve the right of commercial and private planes to y over property and the right of individuals and governments to seed clouds and produce artificial rain b The owner of the surface may sell subsurface rights to another person A subsurface owner has a right called a profit to go onto the surface of the land to find and remove minerals Plant life both natural and cultivated is also considered to be real property When a parcel of land is sold and the land has growing crops on it the sale includes the crops unless otherwise specified in the sales contract When crops are sold by themselves however they are considered to be personal property or goods Ownership and Other Interests in Real Property A Ownership of property is an abstract concept that cannot exist independently of the legal system No one can actually possess or hold a piece of land the air above the earth below and all the water contained on it One who possesses the entire bundle of rights is said to hold the property in fee simple which is the most complete form of ownership In a fee simple absolute the owner has the greatest aggregation of rights privileges and power possible The owner can give the property away or dispose of the property by deed or by will If there is no will it passes on to the owner s legal heirs on her or his death A life estate is an estate that lasts for the life of some specified individual A conveyance or transfer of real property to A for his life creates a life estate The life tenant has the right to use the land in a manner that would adversely affect its value Persons who share ownership rights simultaneously in a particular property are said to have concurrent ownership There are two principal types of concurrent ownership tenancy in common and joint tenancy a The term tenancy in common refers to a form of coownership in which each of two or more persons who owns an undivided interest in the property Chapter 26 Real Property and Land Use Control b In a joint tenancy each of two or more persons owns an undivided interest in the property but a deceased joint tenant s interest passes to the surviving joint tenant or tenants i The right of a surviving joint tenant to inherit a deceased joint tenant s ownership interest referred to as a right of survivor ship distinguishes a joint tenancy from a tenancy in common ii Although a joint tenant can transfer his or her rights by sale or gift to another without the consent of the other joint tenants doing so terminates the joint tenancy c A less common form of shared ownership of real property by husband and wife is a tenancy by the entirety It differs in that neither spouse may separately transfer his or her interest during his or her lifetime unless the other spouse consents d A limited number of states allow property to be owned by a married couple as community property If property is held as community property each spouse technically owns an undivided onehalf interest in the property E A leasehold estate is created when a real property owner or lessor landlord agrees to convey the right to possess and use the property to a lessee tenant for a certain period of time a A fixedterm tenancy also called a tenancy for years is created by an express contract stating that the property is leased for a specified period of time such as a month a year or a period of years b With a periodic tenancy the lease does not specify how long it is to last but does specify that rent is to be paid at certain intervals The type of tenancy is automatically renewed for another rental period unless properly terminated c With a tenancy at will either party can terminate the tenancy without notice This type of tenancy can arise if a landlord rents property to a tenant for as long as both agree or allows a person to live on the premises without paying rent d The mere possession of land without right is called tenancy at sufferance A tenancy at sufferance is not a true tenancy because it is created when a tenant wrongfully retains possession of property F Nonpossessory interests do not include any rights to possess the property and include easements profits and licenses They are basically interests in real property owned by others An easement is the right of a person to make limited use of another person s real property without taking anything from the property In contrast a profit is the right to go onto land owned by another and take away some party of the land itself or some product of the land a An easement or profit appurtenant arises when the owner of one piece of land has a right to go onto an adjacent piece of land owned by another Chapter 26 Real Property and Land Use Control b In an easement or profit in gross the right to use or take things from another s land is given to one who does not own an adjacent tract of land They are intended to benefit a particular person or business not a particular piece of land and cannot be transferred c Most easements and profits are created by an express grant in a contract deed or will allowing parties to include terms defining the extent and length of time of use An easement may arise by implication when circumstances surrounding the division of a parcel of property imply its creation An easement arises by prescription when one person exercises an easement such as rightofway on another person s land without the landowner s consent d An easement or profit can be terminated or extinguished in several ways The simplest way is to deed it back to the owner of the land that is burdened by it Mere nonuse will not extinguish an easement or profit however unless the nonuse is accompanied by an overt act showing the intent to abandon e In the context of real property a license is the revocable right of a person to come onto another person s land It is a personal privilege that arises from the consent of the owner of the land and can be revoked by the owner 3 Transfer of Ownership A Ownership interests in real property are frequently transferred by sale and the terms of the transfer are specified in a real estate sales contract Real property ownership can also be transferred by gift by will or inheritance by possession or by eminent domain B A sale of real estate involves a transfer of ownership often with specific warranties Usually after substantial negotiation the parties enter into a detailed contract setting forth their agreement a The contract usually fixes a date for performance or closing that frequently is four to twelve weeks after the contract is signed Deposits toward the purchase price normally are held in a special account called an escrow account until all for the conditions of sale have been met b The question of title to a particular parcel of property is especially important to the buyer A grantor seller is obligated to transfer marketable title or good title to the grantee buyer Marketable title means that the grantor s ownership is free form encumbrances and free of defects The most common way of ensuring title is through title insurance which insures the buyer against loss from defects in title to property c Most states imply a warranty the implied warranty of habitability in the sale of new homes The seller is warranting that the house is in reasonable working order and is of reasonably sound construction Chapter 26 Real Property and Land Use Control d In most jurisdictions courts impose on sellers a duty to disclose any known defect that materially affects the value of the property and that the buyer could not reasonably discover C Possession and title to land are passed from person to person by means of a deed the instrument used to transfer real property Deeds must meet certain requirements but does not have to be supported by legally sufficient consideration To be valid a deed must include the names of the grantor and the grantee words evidencing the intent to convey a legally sufficient description of the land the grantor s signature and delivery of the deed a A warranty deed makes the greatest number of warranties and thus provides the most extensive protection against defects of a title Warranty deeds include a number of covenants promises that the grantor makes to the grantee which includes a covenant that the grantor has the title to and the power to convey the property Generally the warranty deed makes the grantor liable for all defects of title by the grantor and previous titleholders b A special warranty deed limited warranty deed warrants that the grantor does not warrant that there were no defects of title when the property was held by previous owners c A quitclaim deed conveys to the grantee whatever interest the grantor had It can and often does serve as a release of the grantor s interest in a particular parcel of property d With a grant deed the grantor simply states I grant the property to you or I convey or bargain and sell the property to you By statute grant deeds carry with them an implied warranty that the grantor owns the property and has not previously transferred it to someone else or encumbered it except as set out in the deed D Every state has a recording statute which allows deeds to be recorded in the public record Recording a deed gives notice to the public that a certain person is now the owner of a particular parcel of real estate E A person who wrongfully possesses the real property of another may eventually acquire title to it through adverse possession Adverse possession is a means of obtaining title to land without deliver of a deed and without the consent of or payment to the true owner a For property to be held adversely four elements must be satisfied possession must be actual and exclusive the possession must be open visible and notorious not secret or clandestine possession must continuous and peaceable for the required period of time and possession must be hostile and adverse b There are a number of public policy reasons for the adverse possession doctrine which include society s interest in resolving to property in question and in assuring that real property remains in the stream of commerce 4 Limitation on the Rights of Property Owners Chapter 26 Real Property and Land Use Control A No ownership rights in real property can ever really be absolute that is an owner of real property cannot always do whatever she or he wishes on or with the property Holding the property is also conditional on the payment of property taxes The rights of every property owner are subject to certain conditions and limitations B Eminent domain is sometimes referred to as the condemnation power of government to take land for public use and gives the government the right to acquire possession of real property in the manner directed by the US Constitution and the laws of the state whenever the public interest requires it a Property may be taken only for public use not for private benefit When the government uses its power of eminent domain to acquire land owned by a private party a taking occurs where the government must pay just compensation to the owner b In 2005 the USSC ruled that the power of eminent domain may be used to further economic development Since that decision a majority of state legislatures have passed laws limiting the power of state governments to use eminent domain particularly for urban redevelopment projects that benefit private developers C Inverse condemnation occurs when a government simply takes private property from a landowner without paying any compensation thereby forcing the landowner to sue the government for compensation D A private restriction on the use of land is known as a restrictive covenant If the restriction is binding on the party who purchases the property originally and on subsequent purchasers as well it is said to run with the land 5 LandUse Control and Zoning A The rules and regulations that collectively manage the development and use of land are known as zoning laws Today zoning laws enable the government of a municipality a town city or county to control the speed and type of development within its borders by creating different zones and regulating the use of property allowed in each zone B The purpose of zoning laws is to manage the land within a community in a way that encourages sustainable and organized development while controlling growth in a manner that serves the interests of the community a Municipalities generally divide their available land into districts according to the land s present and potential future uses Typically land is classified into certain types of permissible uses residential commercial industrial and conservation districts b Zoning rules extend to much more than the permissible use of land C Zoning restrictions are not absolute The purpose of zoning is to enable the municipality to control development but not to prevent it altogether or limit the government s ability to adapt to changing circumstances or unforeseen needs a When a property owner wants to use his or her land in a manner not permitted by zoning rules she or he can request a variance which Chapter 26 Real Property and Land Use Control allows an exception to the rules and must demonstrate that it is necessary for reasonable development is the least intrusive solution to the problem and will not alter the essential character of the neighborhood i Property owners normally request variances in hardship situations when complying with the zoning rules would be too difficult or costly due to existing property conditions ii In almost all instances before a variance is granted there must be a public hearing with adequate notice to neighbors who may object to the exception After a public hearing a hearing examiner appointed by the municipality determines whether to grant the exception b The zoning board will issue specialuse permits conditionaluse permits if the property owner complies with specific requirements to ensure that the proposed use does not harm the immediate neighborhood c In addition to granting exceptions to zoning regulations municipalities may also wish to encourage certain kinds of development To do so they offer tax incentives often in the form of lower tax rates or tax credits Chapter 27 Antitrust Law 1 The Sherman Antitrust Act A Senator John Sherman claimed that the Sherman Act did not announce new principles of law but applied old and wellrecognized principles of the common law Antitrust laws were direct descendants of common law actions intended to limit restraints of trade agreements between firms that have the effect of reducing competition in the marketplace B Section 1 and 2 of the Sherman Act provide that every contract or conspiracy is hereby declared to be illegal and that every person who shall monopolize shall be deemed guilty of felony C Section 1 requires two or more persons as a person cannot contract combine or conspire alone so the essence of the illegal activity is the act of joining together Section 2 can apply either to one person or to two or more persons because it refers to every person D The Sherman Act applies only to restraints that have a significant impact on interstate commerce It also extends to US national abroad that are engaged in activities that affect US foreign commerce 2 Section 1 of the Sherman Act A The underlying assumption of Section 1 of the Sherman Act is that society s welfare is harmed if rival firms are permitted to join in an agreement that consolidates their market power or otherwise restrains competition B When restraints are so substantially anticompetitive they are deemed per se violations inherently illegal Courts use the rule of reason to analyze anticompetitive agreements that allegedly violate Section 1 a If the rule of reason had not been developed almost any business agreement could be conceivably be held to violate the Sherman Act b When analyzing an alleged Section 1 violation under the rule of reason a court will consider the purpose of the agreement the parties ability to implement the agreement to achieve that purpose the effect or potential effect of the agreement on competition and whether the parties could have relied on less restrictive means to achieve their purpose C A horizontal restraint is any agreement that in some way restrains competition between rival firms competing in the same market e g price fixing group boycotts market divisions and trade associations a Any pricefixing agreement an agreement among competitors to fix prices constitutes a per se violation of Section 1 The price does not need to be explicit as long as it restricts output or artificially fixes price it violates the law i The US government actively pursues companies that it suspects of being involved in pricefixing cartels groups ii Pricefixing accusations are also frequently made against drug manufacturers b A group boycott is an agreement by two or more sellers to refuse to deal with a particular person or firm To prove a violation of Section 1 Chapter 27 Antitrust Law the plaintiff must demonstrate that the boycott or joint refusal to deal was undertaken with the intention of eliminating competition or preventing entry into a given market c It is a per se violation of Section 1 of the Sherman Act for competitors to divide up territories or customers d Businesses in the same general industry or profession frequently organize trade associations to pursue common interests If a court finds that a trade association practice or agreement that restrains trade is nonetheless sufficiently beneficial both to the association and to the public it may deem the restraint reasonable A concentrated industry is one in which either a single firm or a small number of firms control a large percentage of market sales D A vertical restraint of trade results from an agreement between firms at different levels in the manufacturing and distribution process It encompasses the entire chain of production a Manufacturers may institute territorial restrictions or attempt to prohibit wholesalers or retailers from reselling the products to certain classes of buyers such as competing retailers i A firm may have legitimate reasons for imposing such territorial or customer restrictions ii Territorial and customer restrictions were once considered per se violations of Section 1 but the USSC held that they should be judged under the rule of reason b An agreement between a manufacturer and a distributor or retailer in which the manufacturer specifies what the retail prices of its products must be is known as a resale price maintenance agreement The USSC ruled that maximum resale price maintenance agreements should be judged under the rule of reason 3 Section 2 of the Sherman Act A Section 2 condemns every person who shall monopolize or attempt to monopolize Predatory pricing is when one firm predator attempts to drive its competitors from the market by selling its product at prices substantially below the normal costs of production B The USSC defined monopolization as the possession of monopoly power in the relevant market and the willful acquisition or maintenance of the power as distinguished from growth or development as a consequence of a superior product business acumen or historic accident The plaintiff must prove both of the elements were present in order to establish a violation of Section 2 a Monopoly refers to control of a specific market by a single entity Monopoly power may be proved by direct evidence that the firm used its power to control prices and restrict output To prove monopoly power indirectly the plaintiff must show that the firm has a dominant share of the relevant market and that there are significant barriers for new competitors entering that market Chapter 27 Antitrust Law b Before a court can determine whether a firm has a dominant market share it must define the relevant market The relevant market consists of a relevant product market and a relevant geographic market i The relevant product market includes all products that have identical attributes but are produced by different firms It also includes products that are reasonably interchangeable for the purpose for which they are produced ii Generally the geographic market is that section of the country within which a firm can increase its price a bit without attracting new sellers or without losing many customers to alternative suppliers outside that area c Monopoly power in and of itself does not constitute the offense of monopolization under Section 2 the offense also requires intent to monopolize i A dominant market share may be the result of good business judgment or the development of a superior product In these situations the acquisition of monopoly power is not an antitrust violation ii If a firm possesses market power as a result of carrying out some purposeful act to acquire or maintain that power through anticompetitive means then it is in violation of Section 2 d A single manufacturer acting unilaterally is normally free to deal or not to deal with whomever it wishes However it is in violation of Section 2 if the firm refusing to deal has monopoly power and the refusal is likely to have an anticompetitive effect on a particular market C Section 2 also prohibits attempted monopolization of a market which requires proof of anticompetitive conduct the specific intent to exclude competitors and garner monopoly power and a dangerous probability of success in achieving monopoly power Predatory bidding involves the acquisition and use of monopsony power which is market power on the buy side of a market 4 The Clayton Act A Congress enacted the Clayton Act in 1914 which was aimed at specific anticompetitive or monopolistic practices that the Sherman Act did not cover It dealt with four distinct forms of business behavior which are declared illegal but not criminal It is only illegal if it tends to substantially lessen competition or to create monopoly power B Section 2 of the Clayton Act prohibits price discrimination which occurs when the seller charges different prices to competing buyers for identical goods or services A seller is prohibited from charging one buyer a lower price than it charges that buyer s competitor a To violate Section 2 the seller must be engaged in interstate commerce the goods must be of like grade and quality and the goods must have been sold to two or more purchasers The effect of the price Chapter 27 Antitrust Law discrimination must be to substantially lessen competition tend to create a monopoly or otherwise injure competition There are several statutory defenses to liability for price discrimination If the seller can justify the price reduction by demonstrating that a particular buyer s purchases saved the seller costs in producing and selling the goods or if the seller charged the lower price in a good faith attempt to meet an equally low price of a competitor the seller will not be liable for price discrimination C Section 3 of the Clayton Act prohibits two types of vertical agreements involving exclusionary practices exclusivedealing contracts and tying arrangements a A contract under which a seller forbids a buyer to purchase products from the seller s competitors is called an exclusivedealing contract Today it is clear that to violate antitrust law an exclusivedealing agreement must qualitatively and substantially harm competition To prevail a plaintiff must present affirmative evidence that the performance of the agreement will foreclose competition and harm consumers When a seller conditions the sale of a product on the buyer s agreement to purchase another product produced or distributed by the same seller a tying arrangement results The legality of a tying arrangement depends on several factors D Under Section 7 of the Clayton Act a person or business organization cannot hold stock or assets in more than one business when the effect may be to substantially lessen competition A crucial consideration in most merger cases is market concentration which involves allocating percentage market shares among the various companies in the relevant market a Mergers between firms that compete with each other in the same market are called horizontal mergers If a horizontal merger creates an entity with a significant market share the merger may be considered illegal because it increases market concentration A vertical merger occurs when a company at one stage of production acquires a company at a higher or lower stage of production Whether a vertical merger will be deemed illegal generally depends on several factors such as whether the merger creates a single firm that controls an undue percentage share of the relevant market E Section 8 of the Clayton Act deals with interlocking directorates the practice of having individuals serve as directors on the boards of two or more companies simultaneously No person may be a director of two or more competing corporations at the same time if either of the corporations has a certain amount of capital surplus or undivided profits aggregating more than that certain amount 5 Enforcement and Exemptions Chapter 27 Antitrust Law A The federal agencies that enforce the federal antitrust laws are the US Department of Justice DOJ and the Federal Trade Commission FTC Section 5 of the Federal Trade Commission Act of 1914 condemns all forms of anticompetitive behavior that are not covered under other federal antitrust laws B The D0 or the FTC may ask the courts to impose various remedies including divestiture making a company give up one or more of its operations and dissolution C A private party who has been injured as a result of a violation of the Sherman Act or the Clayton Act can sue for treble damages three times the actual damages suffered and attorneys fees a A party wishing to sue under the Sherman Act must prove that the antitrust violation either caused or was a substantial factor in causing the injury that was suffered and the unlawful actions of the accused party affected business activities of the plaintiff that were protected by the antitrust laws b The USSC has held that to pursue antitrust lawsuits private parties must present some evidence suggesting that an illegal agreement was made D There are many legislative and constitutional limitations on antitrust enforcement Most of the statutory and judicially created exemptions to the antitrust laws apply in such areas as labor insurance and foreign trade 6 US Antitrust Laws in the Global Context A US antitrust laws have a broad application Not only may persons in foreign nations be subject to their provisions but the laws may also be applied to protect foreign consumers and competitors from violations committed by US business firms B Section 1 of the Sherman Act provides for the extraterritorial effect of the US antitrust laws The US is a major proponent of the free competition in the global economy and thus any conspiracy that has substantial effect on the US commerce is within the reason of the Sherman Act


Buy Material

Are you sure you want to buy this material for

75 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Allison Fischer University of Alabama

"I signed up to be an Elite Notetaker with 2 of my sorority sisters this semester. We just posted our notes weekly and were each making over $600 per month. I LOVE StudySoup!"

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.