California’s 2024 ballot not only elected our nation’s next president, 53 members of Congress, 100 state legislators and thousands of local officials–it also featured a statewide test of the state’s latest salvo in its battle against corporate-backed ballot measures: changing the ballot itself.

California lawmakers have pursued several reforms in response to a number of corporate-backed ballot measures that have undermined, stalled and even blocked progressive legislation. Their latest effort is changing the design of ballots to include more information about who is supporting and opposing ballot measures. Early results of the Legislature’s reforms appear to be mixed.

This modification continues California’s long and storied history of direct democracy. California voters amended the state constitution in 1911 to create the referendum and initiative in the state, processes that allow voters to overturn laws and directly place proposed legislation on the ballot respectively. Since then, Californians have collected signatures for over 1,600 statewide ballot measures and qualified over 300 initiatives.

The California ballot referendum and initiative processes were originally envisioned as a way for everyday Californians to check an unresponsive legislature potentially beholden to the railroad and corporate interests that dominated state politics at the time. Corporations, however, have increasingly leveraged these processes to stall or even block bills aimed at regulating industry. Corporations have paid firms to gather signatures to qualify ballot measures, made significant contributions to ballot measures’ campaign committees and even paid for campaign advertisements and mailers in support of ballot measures. The Network previously discussed Proposition 22, one of the most expensive ballot measures in California history that exempted app-based gig companies like Uber and Lyft from AB 5 and allowed them to continue classifying their drivers as independent contractors.

Even corporate-backed ballot measures that are ultimately unsuccessful can impact companies’ bottom line. In 2021 and 2022, for example, tobacco companies sponsored–and ultimately qualified–Proposition 31, a referendum seeking to overturn SB 793, a 2020 state law banning certain flavored tobacco products. California voters, however, decisively affirmed the state law when the referendum appeared before voters in the 2022 General Election. Nevertheless, the companies’ $20 million investment to qualify Proposition 31 successfully delayed the implementation of SB 793 until after the general election, allowing their flavored tobacco products to remain on store shelves for an additional two years. Similarly, California oil companies successfully delayed the implementation of a 2022 state law banning new oil wells near residential areas for two years by qualifying a referendum. The companies later withdrew the measure just before the Secretary of State finalized the 2024 General Election ballot, and the law has since taken effect as the companies challenge it in court.

California legislators have increasingly taken aim at corporate-backed ballot measures, targeting multiple stages of the initiative process. The most visible change to California voters is on their ballots.

AB 1416 adjusted the layout on the ballot for each statewide proposition to include 15-word lists of businesses, non-profits and individuals supporting and opposing each measure. AB 1416 proponents believe printing a list of supporters and opponents on the ballot will increase transparency about who is supporting ballot measures, and provide voters with that information “right on the ballot itself.” Proponents argue the information will help voters make informed choices about whether to support a measure, similar to how listing candidates’ party affiliation and occupation designations on the ballot help voters decide which candidates to support.

AB 1416 also extends the requirement for printing lists of supporters and opponents on the ballot to local ballot measures but permits counties, which administer local elections, to opt out. Some Bay Area counties, including Marin, Sonoma, Napa and Contra Costa, have opted out of AB 1416’s local ballot measure requirements for at least the 2024 election cycle.

It remains to be seen, however, if political actors will try to leverage this new, state-mandated space on the ballot to influence voters. Journalists have documented how candidates have long used their occupation-designation space on the ballot to try to influence voters. The California Senate Election and Constitutional Amendments Committee’s analysis of AB 1416 identified the “potential for chicanery,” noting that while there are protections against listing sham organizations on the ballot, political actors could still “game” AB 1416’s rules to confuse voters.

AB 1416 represents only part of the Legislature’s efforts to crack down on corporate-backed ballot measures. SB 1360 took aim at paid-signature gathering practices commonly used by corporations to qualify ballot measures, requiring that a ballot measure committee’s top three funders be listed on each page of petitions used to gather signatures to qualify the measure and modifying the campaign finance disclosure requirements for campaign ads. AB 421, which took effect last year, attempted to build on AB 1416 by further clarifying language on the ballot for referenda to ask voters to “overturn” or “keep” state law; earlier versions of the bill also targeted the signature gathering process by requiring ballot measure signature-gatherers to disclose if they are being paid for gathering signatures and strengthen penalties for signature-gatherers who violate state disclosure requirements.

It’s unclear whether California’s latest reforms have increased voter information or changed how voters respond to potentially misleading corporate-backed ballot measures as the legislature intended. In last year’s election, California voters narrowly approved Proposition 34, a measure heavily funded by the California Apartment Association and other real estate interest groups. The measure enacted new restrictions opponents claim are aimed effectively at a single healthcare provider, the AIDS Healthcare Foundation, requiring them to spend 98 percent of revenue from a federal drug discount program on direct patient care. The AIDS Healthcare Foundation, which derives most of its revenue from the federal drug discount program, has spent over $150 million to sponsor multiple statewide ballot measures to allow local governments to expand rent control. Despite the state’s new reforms, the real-estate industry-backed Proposition 34 received voter approval to prohibit the state’s leading rent control advocate from using its primary source of revenue for political activity.

The California legislature has reconvened for its 2025-2026 legislative session. Time will tell what additional reforms to the state’s ballot measure process, if any, will emerge from this session and affect the way businesses engage with direct democracy in California.

The American Bar Association (ABA) recently highlighted the many ways that artificial intelligence (AI) can benefit law firms. From streamlining processes to automating tasks, AI is transforming the legal industry at a rapid pace. Currently, there are estimates suggesting that AI could automate up to 44% of legal work, which is helping drive this change. However, this increased reliance on AI comes with significant risks, including a sharp rise in cyberattacks targeting law firms—particularly Big Law firms, increasingly costing them millions in class action suits. While AI is often talked about, firms’ use of third-party technology providers also plays a significant role in these cyberattacks.

In the first five months of 2024, 21 law firms have already filed data breach reports with the attorney general’s office. In comparison, only 28 such reports were filed throughout all of 2023. As AI becomes more integrated into Big Law firms—slowly but steadily—its dual use is emerging. While AI tools are improving efficiency and reducing costs, they are also being leveraged by cybercriminals to carry out more sophisticated attacks. This trend will likely accelerate in the coming years, with both the number and scope of cyberattacks on law firms expected to rise.

Big Law firms are especially vulnerable to cyber threats due to the sensitive nature of the data they handle. These firms often possess highly confidential information, including patents, intellectual property, and personal or corporate secrets related to major companies and high-profile deals. Even industry giants like Kirkland & Ellis, Proskauer Rose, and Allen & Overy have been targeted by data breaches and ransomware attacks, highlighting that no firm is immune from these attacks. Surveys on cybersecurity breaches show that around 50 percent of firms surveyed either experience security breaches or not knowing whether they have. There is a clear correlation between firm size and “not knowing” of breaches with smaller firms with 2–9 employees reporting rates of around 5%, while larger firms with 500 or more employees experience breach rates of up to 60%. The survey also indicated a significant increase in client requests for security requirements and guidelines of larger firms.

The rise of remote work has further exacerbated cybersecurity risks for law firms. With many legal professionals now working from home, often on unsecured networks, the potential for cyber incidents has significantly increased. Public Wi-Fi networks, which are frequently used by remote workers, are particularly vulnerable to hacking and pose a serious concern for law firms trying to protect client data. Remote work also makes it more difficult to enforce cybersecurity policies and monitor compliance. Without a controlled office environment, employees may not follow best practices for securing their devices or data, making firms more susceptible to attacks. Two of the most common attacks on firms consist of: (1) phishing (malicious emails or messages designed to trick employees into providing sensitive information or granting access to secure systems) and (2) ransomware (a type of malware that encrypts a firm’s data, with cybercriminals demanding a ransom for its release). There are also other forms of attacks, which include exploitation of vulnerabilities in third-party software used by firms.

Given the increasing reliance on AI and the growing risks posed by remote work, it is crucial for law firm leaders to prioritize cybersecurity. Implementing comprehensive security protocols, training employees to recognize phishing attempts, and investing in AI-driven cybersecurity solutions will be essential to mitigating these risks. Firms must also ensure that remote work policies account for secure network usage and compliance with cybersecurity standards.

As AI continues to reshape the legal industry, the threat landscape will only become more complex. Law firms—especially Big Law—must act now to protect their sensitive data, maintain client trust, and prevent the major class actions lawsuits that have been increasing due to these attacks.

In recent years, technology giants like Apple, Google, and Amazon have heavily relied on foreign talent to fill crucial roles in their companies. This dependence is largely facilitated by employment visas for foreign workers, such as the H-1B and L-1 visas. As of 2019, immigrants made up almost one-fourth, or 23.1 percent, of all STEM workers in the entire country.  Amazon hired the most new H-1B workers out of any employer in 2021 and 6,400 new H-1B workers in 2022 and hired the most new H-1B workers out of any employer in 2021. Google and Meta (formerly Facebook) have contributed to this demand, collectively hiring over 3,100 new H-1B workers in 2022. Meta has even declared itself an “H-1B dependent” firm in government filings because more than 15% of Meta’s total U.S. workforce consists of H-1B workers. This reliance on international talent demonstrates the necessity of immigration for innovation and competitiveness, but also introduces significant legal and ethical challenges that companies must navigate carefully.

A flurry of high-profile lawsuits in recent years illustrate the delicate balance Big Tech companies must strike between leveraging international expertise and adhering to stringent immigration laws. One notable case is Apple’s settlement with the U.S. Department of Justice (DOJ) over discriminatory recruitment practices related to PERM (Permanent Labor Certification) positions. The PERM process requires employers to demonstrate that no qualified U.S. workers are available for a job before sponsoring a foreign worker for permanent residency. This involves conducting a labor market test, obtaining a prevailing wage determination, and documenting genuine recruitment efforts. Recent enforcement actions serve as evidence of how Big Tech companies have struggled or failed to comply with these requirements. For instance, in 2023, Apple settled with the U.S. Department of Justice (DOJ) for $25 million over allegations that its PERM recruitment practices disadvantaged U.S. citizens by not posting jobs on its external website, requiring paper applications, and disregarding electronic applications.

Similarly, in 2021, Facebook (now Meta) settled with the DOJ for $14.25 million over allegations that it unfairly favored temporary visa workers for PERM positions over U.S. workers. These cases highlight how Big Tech’s corporate immigration practices can run afoul of U.S. labor laws, particularly those designed to protect domestic workers from unfair competition. Furthermore, these practices led to fewer applications from U.S. workers, violating 8 U.S.C. § 1324b, which prohibits discrimination based on citizenship or national origin.

To fully grasp the legal challenges surrounding Big Tech’s corporate immigration practices, it’s essential to understand key statutes like 8 U.S.C. § 1324b, which address unfair immigration-related employment practices. This statute prohibits employers from discriminating against individuals based on their national origin or citizenship status during hiring or recruitment processes. Additionally, 8 U.S.C. § 1153 outlines the allocation of immigrant visas through employment-based preferences. The PERM process falls under this statute’s framework, requiring employers to test the labor market before sponsoring foreign workers for green cards. Failure to comply with these legal requirements can result in significant penalties, as seen in both the Apple and Facebook cases.

During 2022 and early 2023, major tech firms hired over 34,000 new H-1B workers while laying off at least 85,000 employees. For instance, together, Google and Meta laid off 33,000 employees, almost 11 times the number of new H-1B workers they hired in 2022. This discrepancy raises questions about whether these visas are genuinely being used to fill gaps in skilled labor, or if companies are using them as a cost-cutting measure by hiring cheaper foreign labor instead of domestic workers.

In addition to laying off foreign workers, some tech companies have slowed down or frozen their PERM processes due to fears of lawsuits like those faced by Apple and Facebook.  After Apple’s legal troubles with PERM-related discrimination claims, many companies have become wary of continuing with this process, since they are unable to meet the labor certification requirements. These requirements mandate employers to demonstrate that they cannot find qualified U.S. workers for the position and that hiring a foreign worker will not adversely affect wages or working conditions of similarly employed U.S. workers. Employers must conduct a labor market test, obtain a prevailing wage determination, and provide detailed documentation proving they have made genuine efforts to recruit American workers before sponsoring a foreign employee for permanent residency.

Instead, some companies have turned to alternative immigration pathways like the National Interest Waiver (NIW), which allows companies to avoid direct involvement in potentially risky sponsorship processes and bypass the labor certification requirements, while still accessing global talent. This shift towards NIW is evidenced by the dramatic increase in STEM-related NIW receipts, which surged from 6,500 cases in 2018 to 20,950 cases in 2023, representing a 222.3% increase.

Critics argue that part of the reason Big Tech relies so heavily on foreign workers is due to shortcomings in the U.S. educational system. There is a shortage of STEM graduates from American universities who can meet the demands of these high-tech roles. In contrast, countries like China produce large numbers of highly educated professionals who are disciplined and hardworking, qualities that tech giants value highly. Without access to global talent through programs like H-1B and L-1 visas, many fear that American tech companies would struggle to maintain their competitive edge in research and development. However, public skepticism about immigration have been out in full force, using this as a talking point for deeply misguided commentary and analysis that roughly translates to “immigrants are taking all our jobs.” However, EPI has mentioned several reasons for why this misguided commentary is false. One reason  is that the unemployment rate for U.S.-born workers averaged 3.6% in 2023, the lowest rate on record. Suggesting that foreign talent complements rather than competes with domestic workers by filling roles in high-demand fields like STEM.

As we look toward future changes in immigration policy under Donald Trump’s administration, it’s important to consider how past policies might inform what’s ahead. Trump has historically favored stricter immigration controls, which could further complicate visa processes for both employers and employees in tech. If immigration policies become more restrictive again, it could exacerbate existing challenges for foreign workers trying to navigate layoffs while on temporary visas.

In conclusion, while international talent is indispensable for innovation and competitiveness in Big Tech, current corporate immigration practices present significant legal and ethical challenges, both for companies and their employees. Therefore, companies must find a balanced approach that protects the interests of international talent while adhering to U.S. labor laws designed to safeguard domestic employment opportunities.

After years of inertia, the Department of Justice (DOJ) is taking an aggressive stance towards Big Tech, signaling a resurgence of antitrust enforcement with the potential to reshape the world as we know it. Regulators in the United States and the European Union are addressing Big Tech’s dominance, long perceived as a well-kept secret. This article focuses on the antitrust lawsuit against Google’s ad-tech practices, highlighting the debate between structure and conduct in antitrust.

The DOJ’s efforts began with a landmark ruling in August 2024, finding Google guilty of maintaining an illegal monopoly in the web search market, by, among others, paying to be the default search engine on major devices. The DOJ’s action marked a shift from years of permissive policies toward vertical mergers (conduct-based approach), signaling a focus on addressing anti-competitive effects proactively rather than reacting to them after they occur (structure-based view). As a result, Google’s breakup is now looming over the company and the tech industry in general, more likely as a matter of how, than when. Moreover, the EU is pursuing its own case on Google’s ad-tech monopoly, with growing calls for a “once-in-a-generation” opportunity to order Google’s break-up.

On September 9, the DOJ targeted Google’s monopolization of the ad-tech market contrary to Sections 1 and 2 of the Sherman Act. At the heart of this case is the critical role of ads in online ecosystems: publishers sell ad space to generate revenue, while advertisers buy it to reach consumers. Transactions between advertisers and publishers rely on ad exchange mechanisms (i.e. an auctioneer), which match publishers and advertisers through automated, high-speed auctions. The advertiser with the highest bid usually wins, and their winning ad is displayed on the publisher’s website.

Why is this a problem? The DOJ alleges that Google has monopolized the ad-tech market by controlling advertisers, publishers and the ad exchange itself – the central node where these transactions occur. This control has effectively “locked-in” both advertisers and publishers, stifling competition.

Publishers elect to engage in direct sales (one-on-one negotiations) or indirect sales (through a publisher ad server) with advertisers. For indirect sales, publishers can choose only one publisher ad server, as switching between many is extremely costly. On the other side of the transaction, most small advertisers are represented by Google through Google Ads (an ad network), which possesses a large set of unique data. Publishers and advertisers can only be matched through an ad exchange, which earns a revenue share only on winning bids. Even though advertisers pay publishers, the ad tech (the ad network and the ad exchange) retains a portion of the sum. Large publishers with the resources to multi-home (i.e. use multiple ad exchanges to secure favorable transactions) drive competition by forcing ad exchanges to compete both for selection by publishers and against one another to provide the most favorable transactions and best matches.

Google’s market dominance stems largely from its 2006 acquisition of DoubleClick, which gave it control of both the dominant publisher ad server (DFP) and ad exchange (AdX). Essentially, by assuming all the roles – buyer (Google Ads), seller (DFP) and auctioneer (AdX) – the control remains in Google’s own hands. In 2011, Google also acquired AdMeld, a yield management firm enabling publishers to multi-home across ad exchanges, and used it to enforce exclusivity with DFP and eliminate competition.

Practically, publishers are now compelled to single-home with one publisher ad server. DFP is the only viable means to have access to Google Ad’s demand, which is almost exclusively on Google’s ad exchange. Therefore, a potential competitor to Google’s publisher ad server (DFP) would need to enter both the publisher ad server and the ad exchange market at scale to compete. Finally, the practice of dynamic allocation enables publishers to multi-home. However, Google’s actions, including the implementation of Unified Pricing Rules, interfere with dynamic allocation by preventing publishers from freely distributing their inventory to multiple exchanges. Specifically, Unified Pricing Rules force publishers to offer the same pricing terms across all ad exchanges, making it difficult for them to benefit from using multiple ad exchanges.

These vertical acquisitions (among others), have allowed Google to implement anti-competitive measures, including restricting demand to AdX, offering AdX advantages, and manipulating bids to favor its platform. The DOJ claims that these actions have led to a series of anti-competitive effects, including (1) higher prices and margins for Google by channeling transactions through its ad-tech; (2) reduced competition due to scale and diminished multi-homing; (3) limited choice and control for publishers and advertisers; (4) information asymmetry; and (5) stifled innovation.

The pending judgment reflects a broader policy shift under the Biden administration towards neo-Brandeisian antitrust, prioritizing prevention of monopolies over post-hoc regulation. In particular, Google has been engaging in post-merger anti-competitive behavior, which was facilitated through its pre-merger actions. This raises critical questions: why were the mergers that led Google to dominate the ad-tech market allowed in the first place? And what different standards would disallow them today?

This can be explained by understanding the underlying context. The mergers and acquisitions that Google engaged in occurred during a time when the neo-liberal view prevailed in antitrust policy, which favored ex-post intervention (conduct-based approach) over ex-ante regulation (structure-based approach). This led to a lenient stance, permitting horizontal acquisitions and more limited vertical ones. Conduct-based approaches generally focus on what companies do rather than their size or market share, being concerned about the breaking up of companies because of alleged harms on innovation and efficiency. Structure-based advocates argue that conduct remedies are reactive and insufficient to address entrenched dominance. They believe that structural issues (such as market concentration, barriers to entry, mergers & acquisitions) inherently lead to anti-competitive practices and harm long-term competition.

The main question therefore turns to whether we should intervene before potential monopolies form or catch them later. Are we more concerned with under or over-enforcement of antitrust rules? False negatives or false positives? In that regard, ex-post remedies are much more painful, given that a break-up of Google is going to affect all market actors in a much more significant way, including users. Taking action upfront while taking into account the constant need for innovation – despite the risk of being overly inclusive – could alleviate the need for continuous and usually failed monitoring of Google’s conduct and prevent its current alleged monopoly position. The DOJ should be getting at promoting competition before monopolistic power takes root.

I’d like to thank Professor Talha Syed for the last point in the legal analysis of this article, as well as his overall help and support. I’d also like to thank Zara Tayebjee for her enthusiasm, support, and help.

High-profile scandals have plagued the cryptocurrency industry. Recently, these cases have drawn attention to financial institutions’ ethical and legal responsibilities in the digital finance sector. In March 2024, the U.S. District Court for the Southern District of California heard a case in the cryptocurrency industry, Bhatia v. Silvergate Bank. The court addressed the extension of third-party liability for banks in the crypto sector, and set a distinct precedent for how courts might handle the liability of financial institutions and, more importantly, a new standard for fiduciary duties.

FTX, once a leading cryptocurrency exchange, and Alameda Research, its affiliated trading firm, were both founded by Sam Bankman-Fried. Their 2022 collapse, driven by alleged fraud and mismanagement, resulted in billions of dollars in losses and became one of the most significant scandals in cryptocurrency history. Following their bankruptcy, plaintiffs sued Silvergate Bank (the “Bank”), despite not being direct customers of the Bank, contending that Bank administrators allowed the improper transfer of funds to accounts controlled by Alameda without their consent as customers of FTX. The plaintiffs argued that despite multiple red flags, the Bank turned a blind eye to these irregularities, enabling the loss of billions in customer deposits. Specifically, the plaintiffs pointed to unusually large and frequent transactions between FTX and Alameda, the rapid movement of customer funds without adequate explanation, and the commingling of customer deposits with Alameda’s operational funds. These irregularities suggested potential misuse of funds, which, if addressed, might have prevented the misappropriation and subsequent financial collapse of FTX. The plaintiffs’ argument was that by ignoring these warning signs, the Bank enabled the loss of billions in customer deposits.

Traditionally, under California law, banks do not have a duty of care to non-customers. For instance, in Casey v. U.S. Bank National Association, the court held that banks generally don’t have a legal obligation to investigate or intervene in the transactions of their account holders when those transactions involve third parties who are not direct customers of the bank. In that case, the court reasoned that imposing such obligations could burden banks with extensive oversight responsibilities, potentially hindering their operational efficiency.

However, in this case, the court applied factors from Biakanja v. Irving to assess whether a duty of care should exist without a direct contractual relationship. These factors assessed the foreseeability of harm, the intent of the transaction, and the connection between the bank’s actions and the plaintiffs’ injury. The Bhatia court concluded that the nature of the Bank’s involvement with FTX and Alameda created circumstances where the foreseeability and direct connection of harm justified a broader scope of responsibility. This shift significantly broadens the scope of responsibility for financial institutions and implies that banks cannot process transactions without considering the consequences for non-customers. Therefore, this decision could establish a new standard of due diligence for cryptocurrency clients, ensuring that banks take proactive measures to monitor and mitigate risks associated with high-volume and high-velocity crypto transactions.

This case questions the corporate governance practices of financial institutions involved in cryptocurrency and exemplifies the evolving nature of fiduciary duties. The court found that FTX’s Terms of Service suggested a fiduciary relationship between FTX and its customers because FTX promised to segregate customer assets and protect them from misuse. It found that the Bank had facilitated the transactions that diverted these funds, thus contributing to FTX’s breach of fiduciary duty. This increased liability incentivizes banks to require stricter covenants and terms and conditions with their crypto clients to ensure proper safeguards. This decision could have significant implications for corporate governance in the crypto industry, which operates with less regulatory oversight than financial institutions. But, if fiduciary duties can be established by contracts or public representations, as asserted in the case, crypto platforms could face heightened liability, prompting them to adopt more rigorous compliance and governance standards.

Moreover, Bhatia v. Silvergate Bank comes at a time when the collapse of high-profile scandals put the cryptocurrency industry under increased scrutiny. If banks can be held accountable for their role in facilitating financial transactions within the cryptocurrency sector, many may distance themselves from the cryptocurrency sector. This distancing could reduce banking services available to crypto companies, making them difficult to operate.

A fringe implication of Bhatia is the potential new crypto industry regulations. After this case, companies with minimal oversight from regulators and financial partners could face greater scrutiny. Financial institutions could be required to enhance their monitoring systems and to report suspicious transactions more frequently. These regulations would raise business costs, potentially slowing the growth of crypto-focused banks and platforms because of increased operational expenses and regulatory burdens. Additionally, these regulations would provide greater protection for investors and customers.

The Bhatia case presents a critical lens into the responsibilities of financial institutions in the digital evolution. As technology evolves and the cryptocurrency industry continues to grow, regulators will have to re-examine how fiduciary duties should apply to banks facilitating crypto transactions. As the court broadens the scope of third-party liability and explores the application of fiduciary duties to financial institutions, it sets a precedent that could reshape the relationship between banks and crypto platforms. While economic efficiency remains an important key of the industry, Bhatia shows the need for fairness, stronger corporate governance, and enhanced safeguards in digital finance. Looking ahead, the crypto industry may face increased regulatory scrutiny and corporate reforms aimed at upholding fiduciary duties and preventing future collapses like FTX.

On December 29, 2023, the “Company Law of the People’s Republic of China (Revised in 2023)” (“New Company Law”) was passed by the Standing Committee of the Fourteenth National People’s Congress, formally coming into effect on July 1, 2024. The New Company Law represents the first major overhaul of the Company Law in the last two decades. The Company Law of the People’s Republic of China (PRC), initially established in 1993, has undergone six revisions. Throughout its creation and refinement, it has drawn extensively on rules from the western legal system, with regulations about self-dealing transactions being a prime example.

A. Self-dealing Regulations in China

Before this revision, China’s Company Law distinguished between direct self-dealing and indirect “affiliate transactions”. Article 148 prohibited directors and officers from directly trading with the company without approval from shareholders. Article 21 prohibits directors and officers from exploiting their control over affiliated entities to harm the company’s interests.

A significant transformation in the New Company Law is the elimination of the distinction above. The law now encompasses both under the umbrella term “self-dealing transactions,” which includes both direct and indirect dealings by directors and officers with the company. Additionally, the new law explicitly stipulates that the relatives of directors and officers are also subject to the rules.

Article 182 and 185 provides new sets of procedural requirements that govern all self-dealing transactions. Directors and officers, who intend to engage in self-dealing transactions either directly or through controlled entities, must report to the board or the shareholders. The transaction must be voted on by the board or during a shareholders’ meeting, where directors with a conflict of interest must avoid voting. Only after the resolution is passed can the transaction be considered compliant with the law.

B. Self-dealing Regulations in the United States

In the United States (U.S.), self-dealing or “conflicting interest transactions” often fall under the duty of loyalty. This duty, owed by directors and officers, restricts them from transactions that conflict with the company’s interests. The Model Business Corporation Act (MBCA) and Delaware General Corporation Law (DGCL) address this issue in similar ways.

MBCA states that conflicting interest transactions occur when a director or “related persons” – family members or other individuals with close relationships to the director – engage in company transactions that they have a significant financial interest in. MBCA specifies that when there’s a potential conflict of interest, directors have to disclose this information and abstain from voting at board meetings where such transactions should be decided.

Slightly different from the MBCA, which provides a compliance standard for making self-dealing transactions work, DGCL offers dispute-resolution-based guidelines for validating transactions. It creates a safe harbor for self-dealing transactions from automatic invalidity, as long as they have been approved by informed, disinterested directors or shareholders. Furthermore, if no prior approval is obtained, judicial review for fairness can justify the transaction.

The courts assess fairness based on several factors, including whether the corporation received full value in the commodities purchased; whether the transaction was at the market price, or below; whether there was a detriment to the corporation as a result of the transaction.

C. Comparison Between Rules in China and the United States

Comparing the rules of these two different jurisdictions, we can see that the New Company Law of the PRC has largely adopted the rules from the MBCA and DGCL, while there are also some differences between them.

1. Definition of Self-dealing Transaction

   With the New Company Law of the PRC unifying the definition of self-dealing, both Chinese and U.S. rules define self-dealing transactions as those involving directors and officers trading with the company, either directly or indirectly through persons or entities over which they have control or significant influence.

2. Approval Requirement

   Both Chinese and U.S. rules require the self-dealing transactions to be voted by informed and disinterested directors or shareholders. In this context, the New Company Law has largely incorporated the U.S. approval requirements for self-dealing transactions, thereby addressing the previous ambiguity in terms of procedural stipulations.

3. Fairness Standard

   DGCL validates self-dealing transactions lacking the approval procedure if the transaction meets the fairness standard. The New Company Law of the PRC does not explicitly provide for such an exception, but similar fairness principles have been incorporated in judicial practice.

   In the “Provisions of the Supreme Court on Application of the Company Law of PRC (V),” the Chinese Supreme Court underscored that mere procedural approval is insufficient as a defense in self-dealing cases. It has also emphasized in the (2019) Civil Final No. 496 case the importance of reviewing the substantive content of the transaction, including whether the contractual terms and performance conform to normal business principles and whether the price is reasonable.

4. Application of Business Judgment Rule

   The Delaware Court maintains that once a transaction is approved by an informed and disinterested board, the business judgment rule (BJR) should be invoked. Under this rule, the court refrains from interfering with the board’s decision unless there is evidence of gross negligence or a clear act of mismanagement, such as gift or waste. This contrasts with the Chinese Supreme Court’s opinion: here, a self-dealing transaction, even if it satisfies approval requirements, is non-compliant if it deviates from the principles of fairness.

   The reason for this difference is that boards in China are composed of shareholders or shadow directors (directors who can only follow the shareholders’ instructions), while boards of American companies are expected to either be independent or make decisions based on their fiduciary duties to the company. The shareholders sitting on Chinese company boards are usually not professional managers and may find it difficult to form professional business judgments. As a result, it is common for controlling shareholders to control the board of directors. Applying the BJR to their decisions without the extra protection of the fairness standard would lead to a huge increase in unfair, self-dealing transactions.

In conclusion, the New Company Law has drawn extensively from U.S. regulations to refine its rules on self-dealing transactions, thereby enhancing the self-dealing governance. This reform provides a stronger legal foundation for protecting the interests of companies, thus promoting corporate governance practices that align with international standards.

The biotechnology industry is highly competitive and dominated by a few major pharmaceutical companies, making it difficult for smaller companies to succeed. Biotechnology companies frequently face substantial challenges that may lead to dissolution or necessitate the sale of intellectual property to bring products to market.

Key challenges for these companies include extensive regulations, such as the United States Food and Drug Administration (FDA) requirements. Most companies must obtain FDA approval and undergo extensive trials before commercializing a product, a process that can be extremely lengthy. It typically takes 10-15 years to develop a single new medicine. Additionally, bringing a new product to market is costly, with expenses driven by trials, professional hiring, marketing, and so on. The average cost of developing a drug can reach up to $2.6 billion. Furthermore, given the high failure rate of businesses in this ecosystem, investors tend to be cautious about their investments.

Despite these obstacles, many biotechnology companies pursue acquisitions motivated by both societal impact and financial profit. The following mergers and acquisitions strategies are particularly relevant and common in this industry since they are influenced by and result from the unique challenges of this field.

Continuing the research and development of a drug to eventually commercialize it. Biotechnology companies frequently acquire assets at a reduced cost when a target corporation with late-stage products faces financial difficulties. Acquisitions may also be made with the future intent to sell or license a promising product. This strategy is common in the orphan drug industry, which focuses on treating rare medical conditions, where investments are often purpose-driven. However, big pharmaceutical companies also target this sector for profit. The Orphan Drug Act incentivizes drug development with benefits like tax relief and treatment protection, yet it does not regulate prices. As a result, big companies often acquire orphan drug rights and charge their consumers high prices, capitalizing on the lack of alternatives to life-saving treatments.

An example is seen with Ligand Pharmaceuticals (“Ligand”), which acquired the assets of Novan, Inc. (“Novan”), a company developing skin disorder treatments. In June 2023, after falling below NASDAQ listing requirements, Novan’s board decided to file for bankruptcy following an assessment of the company’s financial challenges and market conditions. In September 2023, the Bankruptcy Court approved Ligand’s $12.2 million bid to acquire Novan’s berdazimer gel and other assets. At the time, the FDA had already reviewed the berdazimer gel for molluscum contagiosum, approving it shortly after the acquisition. Ligand’s acquisition aligns with the strategy of purchasing underpriced, promising drugs from distressed companies to commercialize and generate profits, possibly selling or licensing them later without lengthy trials or high development costs. This helped rebuild Ligand’s reputation and restore shareholder confidence, despite the company’s earlier struggles and legal issues (including regulatory investigations, stock exchange issues, and lawsuits).

Enhancing or developing a new product (based on the same IP as an existing product). This strategy highlights the potential for drug repurposing in biotechnology, where existing drugs or formulas can be adapted for new uses (also seen in the orphan drug sector). Repurposing offers biotechnology companies many benefits addressing the unique challenges they face by providing existing data for clinical trials, reducing development costs, and quicker development time overall. Additionally, a formula or technology may complement or enhance another, and advance research and development. Therefore, biotechnology companies are incentivized to acquire other biotechnology corporations that hold existing intellectual property they think has the potential to be repurposed.

An example is seen with Novartis AG (“Novartis”), which acquired products from GlaxoSmithKline plc (“GSK”). In 2015, Novartis paid $16 billion to acquire GSK’s oncology portfolio, including Arzerra, a drug for chronic lymphocytic leukemia (CLL). Though Arzerra struggled in the CLL market due to extensive competition, Novartis saw its potential as a treatment for multiple sclerosis (MS). This acquisition for repurposing proved successful when in 2020, Novartis secured FDA approval for its use for MS. This example demonstrates how acquiring and repurposing drugs offers biotechnology companies a cost-effective, lower-risk alternative to developing new drugs from scratch.

Expanding the company’s portfolio to strengthen market presence or enter new markets. This strategy is common among large pharmaceutical companies with the resources to invest in emerging markets and trends. By acquiring assets from other sectors, they stay competitive and lead innovation. However, this approach isn’t exclusive to big companies, expanding a portfolio can be profitable for any pharmaceutical company by broadening its product range and strengthening its market presence.

An example is seen with Merck & Co., Inc. (“Merck”), which acquired Sirna Therapeutics, Inc. (“Sirna”), an RNAi (RNA interference) drug development company, for $1.1 billion (almost double Sirna’s stock price). At the time, Merck’s partnership with RNAi leader Alnylam Pharmaceuticals, Inc. (“Alnylam”), had faltered, with Alnylam pausing joint development of their RNAi-based blindness drug. Sirna’s similar drug positioned it as an alternative. This acquisition highlights Merck’s strategy of diversifying its portfolio to maintain its presence in the growing RNAi market after setbacks. Ultimately, in 2014, Merck sold Sirna to Alnylam for only $175M. This sale likely reflects frustration with slow progress, as extended trials often result in sale of assets, to recoup losses. Another reason for the sale could be Merck’s effort to re-strengthen its partnership with Alnylam.

Occasionally, this strategy can lead to antitrust issues, as seen with Amgen, Inc. (“Amgen”) acquisition of Horizon Therapeutics plc (“Horizon”). As Amgen tried to broaden its rare disease portfolio, the Federal Trade Commission raised concerns that it might bundle its products with Horizon’s, using discounts on its existing drugs to limit competition. Eventually, Amgen received the green light after committing to refrain from such practices.

Ultimately, companies pursue acquisitions for various reasons, often achieving multiple purposes through a single transaction. While these methods are not exclusive to the biotechnology industry, they illustrate the unique and evolving ecosystem of this industry, being widely recognized and used within the sector because of the unique challenges that pharmaceutical companies face. The biotechnology sector, along with the regulating entities operating within it, presents significant obstacles for those looking to participate and contribute. However, successful acquisitions can be highly profitable and beneficial to humanity.

2025 has the potential to be one of the most significant years for tax policy in a generation. Donald Trump’s election, Republican control of the House and Senate, and the expiration of the Tax Cuts and Jobs Act (TCJA) will make 2025 a major year for changes to the federal tax code that will likely alter many businesses’ tax liability.

Enacted in 2017, the TCJA marked the most significant change to the U.S. federal tax code since the Tax Reform Act of 1986. The nearly $1.5 trillion legislation amended tax rates and policies for individuals and businesses alike, impacting every corner of the U.S. economy. The TCJA’s changes for individuals (which included cutting marginal tax rates, increasing the standard deduction, and capping the amount of state and local taxes families could deduct) were temporary and will expire on December 31, 2025, absent congressional action. Conversely, the TCJA’s changes for businesses (which included cutting the corporate tax rate and repealing the corporate alternative minimum tax) were made permanent with some exceptions. Observers from across the political spectrum, including the independent, nonpartisan Congressional Research Service, have noted that the law favored higher-income taxpayers because much of the benefit of cutting the corporate tax rate and the larger individual tax cuts went to higher-income individuals.

While businesses celebrated a permanent reduction to the corporate tax rate, several changes to the business-related provisions of the tax code upon the TCJA’s expiration will put businesses in a less-advantageous position absent congressional action:

1. The TCJA permitted businesses to fully and immediately expense the cost of equipment in a provision known as “bonus depreciation,” which allowed businesses to write off the full cost of equipment as a tax deduction in the year it was purchased. Prior to the TCJA, businesses could only expense a portion of the cost of newly purchased equipment. Bonus depreciation began to phase down in 2023 and will completely revert to pre-TCJA treatment in 2027 without congressional action.
2. The TCJA limited the amount of interest that certain businesses could deduct to 30% of the business’s earnings, down from 50% prior to the TCJA. Beginning in 2022, interest deductions were restricted to an even smaller earnings measure, further reducing the amount of interest that businesses may deduct when paying off debt. This smaller earnings measure will stay in effect absent congressional action.
3. Finally, the TCJA required that businesses begin to amortize their research and experimental expenditures beginning in 2022, reducing their value over time. Likewise, this requirement will stay in effect absent congressional action.

Congress has already started to prepare and draft legislation to address the expiration of the TCJA through partisan tax teams in the House and Senate. The House of Representatives passed legislation to extend bonus depreciation to 2026, allow businesses to deduct interest equal to 30% of a business’s earnings using a broader earnings measure until 2026, and delay amortizing research and experimental expenditures until 2026. Still, Donald Trump’s election and Republican control of the House and Senate are the significant factors that will determine the final contours of business tax policy for the next decade.

While tax policy did not play a significant role in the 2024 election, Donald Trump advanced several high-level promises during his campaign that could be a starting point for anticipating his tax agenda as President. These promises include:

1. In September, Trump announced he would further reduce the corporate tax rate from 21% to 15% for companies that make their products in the United States. It isn’t clear how those companies would be identified or defined, an important consideration for businesses looking to take advantage of this potential tax cut given the complex nature of globalized supply chains.
2. Trump also promised to extend the TCJA, which, as described earlier, would allow businesses to immediately expense the cost of equipment, restore a higher limit on interest expense deductions, and allow for a full deduction for research expenditures.

Like the TCJA in 2017, Trump’s proposals for 2025 appear likely to again confer larger benefits on businesses and high-income earners rather than low- and middle-income Americans. With a Republican majority in Congress and Trump returning to the White House, there will be little standing in the way of sweeping tax cuts. Those cuts may not be shared equally, however. While not widely discussed on the presidential campaign trail, Republicans in Congress have advanced legislation that repeals many of the tax incentives for clean energy and clean transportation in the Inflation Reduction Act. Should similar legislation be enacted as part of Congress’ legislation to extend the TCJA, many businesses utilizing these incentives may actually see a tax increase. With trillions of dollars at stake and the potential for major changes to the tax code, businesses must be vigilant about how they might adjust their tax planning strategies to best serve their shareholders with a new administration and Congress.

In February 2024, Capital One announced its intention to acquire Discover Financial Services for $35.3 billion. The merger, if approved, would make Capital One the largest credit card issuer in the United States by balanced owed, and significantly challenge the market dominance of Visa and Mastercard.  However, the deal has raised significant regulatory concerns, particularly around potential anti-competitive effects and market concentration. Critics argue that the merger could reduce competition among credit card issuers, leading to higher fees and fewer choices for consumers. These concerns are expected to be at the forefront of regulatory scrutiny.

Strategic Motivation and Market Impact

Capital One’s motivation for the merger is clear: it aims to strengthen its position in the highly competitive credit card market. Currently, Capital One ranks as the fourth-largest credit card issuer by purchase volume, with $272.6 billion in transactions. Discover, while a notable player, has struggled to gain significant market share against giants like Visa and Mastercard. By acquiring Discover, Capital One would not only surpass JPMorgan Chase to become the largest credit card issuer in the United States by balance owed—holding approximately 19% of outstanding U.S. credit card loans—but also increase its overall market share to around 22%. This would make Capital One a more formidable competitor, both in terms of balances and the number of cards in circulation.

Potential Benefits and Concerns

The merger promises several potential benefits. Capital One could leverage Discover’s payment network to offer more competitive products, such as no-fee checking accounts and cashback debit cards aimed at lower-income consumers. Additionally, this deal could enhance competition among credit card networks by challenging Visa and Mastercard’s dominance.

However, there are significant concerns about the merger’s impact on competition and consumer costs. Critics argue that the merger could lead to higher interest rates and fees for consumers due to reduced competition among credit card issuers. The consolidation would give Capital One a substantial share of the non-prime credit card market, which refers to consumers with credit scores below 660 or those with limited or no credit history, who typically face higher interest rates and fees due to their perceived higher credit risk. This could potentially allow Capital One to raise interchange fees on transactions. Furthermore, the merger could reduce consumer choices. These concerns have led to calls from consumer advocacy groups and lawmakers to block the deal.

Regulatory Scrutiny and Antitrust Concerns

The merger faces intense scrutiny under the 2023 U.S. Merger Guidelines, which have adopted a more aggressive stance on antitrust enforcement. These guidelines suggest that mergers resulting in a market share above 30% are presumptively illegal due to potential anti-competitive effects. Although Capital One’s projected market share post-merger is below this threshold, at approximately 22%, the horizontal nature of the merger—where two companies operating in the same industry and offering similar products combine—raises significant antitrust concerns because it can reduce direct competition, potentially leading to higher prices, reduced innovation, or fewer choices for consumers.

Regulators, including the Federal Trade Commission (FTC) and Department of Justice (DOJ), are likely to scrutinize whether this merger would substantially lessen competition or pose risks to financial stability. The Biden administration has generally been skeptical of large bank mergers, adding another layer of complexity to the approval process.

Addressing Regulatory Concerns

To address regulatory concerns, Capital One has proposed a $265 billion community benefits plan. This initiative includes significant investments in low and middle-income communities and aims to mitigate potential negative impacts on competition by fostering economic opportunities. Specifically, the plan allocates $200 billion for loans to these communities and $44 billion for development work. Additionally, Capital One has committed to empowering customers with greater control over their financial decisions through accessible financial education and tools for managing finances. They have pledged $15 million in grants to credit counseling agencies and expanded programs like “Keep Customers in their Cars” to assist borrowers during financial setbacks. Furthermore, Capital One plans to increase spending with diverse suppliers by 70% and enhance support for small businesses with tools like Cash Flow Insights. These efforts are designed to address some of the potential competitive and consumer impact concerns raised by the merger, demonstrating Capital One’s proactive approach to regulatory compliance and community support.

Antitrust Trends and Comparisons

Recent trends in antitrust enforcement highlight a challenging environment for large mergers. For instance, the DOJ successfully blocked JetBlue’s acquisition of Spirit Airlines due to concerns over reduced competition and higher consumer fares. The proposed $3.8 billion merger would have combined two of the largest low-cost carriers in the United States, potentially reducing budget travel options and increasing prices for consumers reliant on ultra-low-cost airlines. The DOJ argued that eliminating Spirit as an independent competitor would reduce the availability of low-cost fares and increase overall ticket prices, particularly affecting price-sensitive consumers who rely on affordable travel options.

In contrast to JetBlue-Spirit, Capital One’s proposed acquisition of Discover is positioned as potentially increasing competition among payment networks rather than diminishing it. While both mergers involve significant market players aiming for growth through consolidation, Capital One argues that its merger would enhance competition against dominant networks like Visa and Mastercard. However, similar antitrust concerns exist regarding potential market concentration and reduced competition among credit card issuers.

On the other hand, JPMorgan’s acquisition of First Republic was approved due to its strategic importance for improving financial stability during a period of banking turmoil. This acquisition was facilitated by regulatory bodies like the Federal Deposit Insurance Corporation (FDIC) to prevent further disruptions following significant bank failures. JPMorgan acquired substantial assets from First Republic with FDIC assistance, emphasizing financial stability over competitive concerns.

The contrasting outcomes of these mergers highlight how regulatory bodies assess potential impacts on competition and consumer welfare differently across industries. While the Capital One-Discover merger presents opportunities for enhanced competition and consumer benefits, it also faces substantial regulatory hurdles. The outcome will depend heavily on whether regulators perceive the potential benefits as outweighing the risks of increased market concentration. As such, this merger represents a critical test case for the future of antitrust policy in the financial services industry.

Environmental, social, and governance (“ESG”) considerations have influenced corporate choices more and more in the past several years, especially when it comes to cross-border mergers and acquisitions (“M&A”). Companies have been compelled by ESG principles to incorporate sustainability and ethical conduct into their strategies, shaping investment decisionmaking, due diligence, financial valuations. Although ESG has become increasingly popular as a tool for improving long-term value and minimizing risks, it has also come across increasing opposition from a variety of business, political, and economic stakeholders – a phenomenon described as “ESG backlash.” This backlash arises primarily from concerns that complying with ESG standards imposes burdensome expenses and restricts profitability. These concerns are especially prominent in countries like the United States, where opposition to ESG principles is on the rise.

Regulatory authorities across different regions, particularly in the European Union (EU), have placed growing importance on ESG compliance, driving multinational companies to prioritize these standards when expanding into new markets. For instance, the EU’s Corporate Sustainability Reporting Directive and the Sustainable Finance Disclosure Regulation mandate detailed ESG reporting, compelling acquiring companies to thoroughly assess and evaluate the ESG practices of their target companies.

Despite the increasing influence of ESG, it has faced substantial backlash, especially in countries like the United States. In the U.S., the rise of ESG backlash has been driven by political and economic opposition, with critics arguing that ESG principles impose unnecessary costs and regulatory burdens on businesses.

These criticisms are particularly strong in conservative-leaning states. For example, U.S. states such as Texas and Florida have introduced legislation restricting companies from considering non-financial factors when making investment choices. In these environments, companies must balance ESG concerns with broader political and market forces, adjusting their due diligence processes to reflect these shifting sentiments. However, with the introduction of numerous anti-ESG bills in various U.S. states, many of these legislative efforts are facing political and legal challenges, which result in delays, modifications, or failures. Key factors influencing these outcomes include party control in state legislature and economic impacts influencing the outcome.

ESG has become an important factor in cross-border M&A transactions, impacting target company selection, negotiation procedures, and post-merger integration plans. Businesses with strong ESG credentials are commonly seen as less risky by investors such as because they are in line with sustainability objectives, in compliance with regulations, and prioritize long-term financial success.

Due diligence in cross-border M&A transactions has evolved to incorporate ESG-related risks as part of the process. Companies must assess ESG risks associated with their targets and the potential for regulatory or political pushback in regions with strong anti-ESG sentiment.

Moreover, the financial valuation of companies has always been an essential factor in M&A deals, but ESG backlash has led the role of ESG-related risks and opportunities to become more nuanced. Companies seen as ESG-compliant may enjoy a premium in markets where these factors are valued, while those in industries facing backlash may face discounted valuations. This creates tension for companies engaging in cross-border M&A, where differing regulatory landscapes can lead to strategic misalignments between ESG-driven priorities and profitability concerns.

The intersection of ESG and cross-border M&A is still a critical factor in the global business environment. Companies facing increasing criticism over ESG practices must navigate a more intricate landscape where regulatory, political, and economic factors overlap. Multinational corporations face the challenge of maintaining the viability of cross-border deals while also following changing global standards by balancing the advantages of ESG compliance with the consequences of any potential backlash. Understanding this dynamic will be essential to ensure that M&A strategies remain relevant in a landscape where ESG remains significant both as a means of enhancing value and causing contention.