The Riddle Underlying Refusal-to-Deal Theory

Michael Jacobs[*] and Alan Devlin[**]

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May a dominant firm refuse to share its intellectual property (IP) with its rivals?  This question lies at the heart of a highly divisive, international debate concerning the proper application of the antitrust laws.  In this short Essay, we consider a profound, yet previously unaddressed, incongruity underlying the controversy.  Specifically, why is it that monopolists refuse to share their IP, even at monopoly prices?  To resolve this issue, some have recommended compulsory licensing, which would require monopolists to license their IP in certain circumstances.  This proposal, however, entails an inescapable contradiction, one rooted in the issue of monopolists’ seemingly inexplicable refusal to share their IP.

Risky Business: The Credit Crisis and Failure (Part III)

Olufunmilayo B. Arewa[*]

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I. Consumers, Industry, and Regulatory Costs

Collection and effective analysis of financial market data may help prevent future crises.  The high human costs of market crises, which may significantly affect those least well positioned to bear such costs,[1] make prevention of future crises a high priority.  This is particularly true in light of the pervasive financial market networks that characterize contemporary financial markets.  Further, through their influence on financial variables such as interest rates and currency prices, financial market networks reach deep into the homes and pocketbooks of a significant portion of the world’s population.[2]  The fallout from the subprime mortgage market collapse thus illustrates fundamental ways in which financial market participants and the broader global community are linked.

Risky Business: The Credit Crisis and Failure (Part II)

Olufunmilayo B. Arewa[*]

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I. Regulatory Failures and Regulatory Reform

The credit crisis underscores the need for reform of regulatory and industry approaches to risk.  Reframing risk should entail greater limitations on leverage and more comprehensive internal company risk management, with both external regulatory monitoring and more robust internal efforts.  As a number of post-credit crisis compensation proposals have recommended, companies should also be encouraged to follow best practices with respect to compensation and bonuses based on performance.[1]  Best practices should involve greater consideration of the ways in which compensation rewards take account of risks, particularly for traders whose activities entail significant risk exposure.[2]  Such best practices in compensation might include, for example, creating a clawback or tail for compensation that matches the time horizon of receipt of compensation to the time horizon of trading activities for which an employee is compensated.  Regulated companies in the financial services industry should also be required to disclose their internal risk management strategies in detail, as well as the alignment between compensation and risk, in order to comply with mandatory disclosures in risk disclosure discussions.  All regulated and unregulated firms should also be required to immediately report all material incidents that reflect a failure of risk controls or risk management to a market stability regulator.  External regulation can be used to promote development of internal risk management in the financial industry.  The credit crisis, however, raises serious questions about the effectiveness of existing financial market regulatory approaches.