The Chevron doctrine was established in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. (1984), during a period of widespread agency budget-cutting. While Chevron was initially celebrated as a win for the deregulatory state, it has since evolved into a cornerstone legal test in the world of administrative law. Loper Bright Enterprises v. Raimondo (Loper Bright) and Relentless, Inc. v. Department of Commerce (Relentless), two cases on the Supreme Court’s docket this year, seem poised to overturn the regulatory power that Chevron provided for government agencies.

The case of Chevron specifically reviewed the regulatory regime established by the Clean Air Act (CAA). The Environmental Protection Agency (EPA) had long defined the term “stationary source” within the CAA to include each individual source of pollution within a plant or a factory. In 1984, however, the EPA redefined it: “stationary sources” started to encompass entire plants and factories, rather than the machinery within them. The Natural Resources Defense Council challenged this, arguing that it defeated the purpose of the CAA by allowing corporations to easily dodge regulatory review. In a unanimous 6-0 decision, however, the Supreme Court ruled against the Council, establishing the principle of Chevron deference. As long as the meaning of the statutory text was ambiguous – and as long as the agency’s interpretation of that ambiguity was relatively reasonable – federal courts had to defer to agency interpretation.

The modern Supreme Court has maintained a general antipathy towards Chevron’s principles – while, so far, refusing to explicitly overrule the case. For example, American Hospital Association v. Becerra (2022) and Becerra v. Empire Health Foundation (2022) both involve challenges to the Department of Health and Human Services (HHS)’s interpretations of the Medicare act. In American Hospital Association, rather than addressing how the HHS interpreted its power to “calculate and adjust” drug prices under the Medicare Act, the Court claimed instead that HHS had failed to properly survey the “average price” of drugs before it made its modifications. In Empire Health Foundation, the Court held that the definition of Medicare “eligibility” merely had to be read consistently throughout the entire statute. Neither applied Chevron principles, even though both could have been resolved by asserting the power of the HHS to promulgate its reasonable interpretation of healthcare statutes. Niz-Chavez v. Garland (2021) and West Virginia v. Environmental Protection Agency (2022) involved agency interpretations of a 1966 immigration reform act and the CAA, respectively – and yet the Court failed to mention the Chevron doctrine in either.

Loper Bright and Relentless pose a more direct challenge to Chevron deference. Both address the Magnuson-Stevens Act, which obligates the National Marine Fisheries Service (NMFS) to “implement a comprehensive fishery management program.” Part of this program is a system of federal observers that are randomly assigned to different fishing vessels. NMFS holds that private businesses, such as Loper Bright and Relentless, should pay for the costs of these observers. With the help of a public-interest law firm, Cause of Action, Loper Bright challenged the payment requirement. In both cases, the lower courts ruled against the challenges, citing directly to Chevron. Both Loper Bright and Relentless then requested certiorari, asking the Supreme Court to overrule Chevron entirely.

Ironically, the Loper Bright case seems to mirror the same circumstances that drove the initial Chevron ruling. Chevron, at the time, went to court because it would benefit directly from court deference to agency interpretation. While Loper Bright and Relentless are small, local fisheries, they are backed by larger industry interests that are going to court now hoping to benefit from strict judicial review of agency action. Cause of Action’s attorneys have been traced back to Americans for Prosperity, a libertarian policy advocacy group explicitly backed by Koch Industries. Koch, an oil-industry business magnate, has supported deregulation in dozens of different industries. Given that the many factories and plants his subsidiaries own would benefit significantly from overturning Chevron in favor of a softened regulatory regime, it comes as little surprise that Koch would be found with pecuniary interests in Loper Bright and Relentless as well.

Oral arguments were heard on January 17^th for both cases, with a joint decision expected this summer. If Chevron is overturned, the future of agency regulation is in peril. Rather than allowing agencies to update their regulations based on real-world conditions, any amendments would have to be passed through Congress to avoid potential judicial review. This would significantly slow down regulation: while agencies pass more than 3,000 rules per year, the polarized House and Senate take much longer to enact – let alone edit – any bills whatsoever, particularly with enough specificity to avoid potential ambiguity. Agencies also rely heavily on the expansive interpretation of decades-old statutes, adjusting their language and definitions to better pursue the overall statutory goals that Congress has provided them. With the threat of litigation looming on the horizon, how vulnerable are these interpretations going to become?

David Doniger, one of the original lawyers in the Chevron case, called the Loper Bright litigation an obvious way to “cloth[e] nakedly private interests in highfalutin constitutional arguments”: the separation of powers, the limits of statutory interpretation, and the question of who Congress has delegated this interpretation to. Without Chevron – and facing the realities of a conservative Supreme Court and a host of conservative federal judges hand-picked by Donald Trump –these “private interests” might end up benefiting from the same constitutional arguments used to limit them in the 1980s.

In the age of digital technology, Section 230 of the Communications Decency Act has become a crucial law, molding how online interaction and content moderation unfold. Initially designed to promote innovation and free expression online, Section 230 has come under increasing scrutiny, especially regarding its effects on competition.

At its core, Section 230 provides online platforms with immunity from liability for content posted by users. The provision shields platforms from legal repercussions for hosting user-generated content, granting them considerable leeway in content moderation without fear of facing lawsuits for defamation or other legal claims different from copyright infringement. This immunity has been instrumental in enabling the growth of social media giants like Facebook, Twitter, and YouTube, which serve as conduits for diverse voices and ideas.

Critics argue that the broad immunity granted by Section 230 has inadvertently stifled competition and innovation. The provision has empowered dominant platforms to consolidate their market share without facing the same legal risks and liabilities as traditional publishers. As a result, smaller competitors struggle to enter the market and challenge the incumbents, leading to a less diverse and dynamic digital ecosystem. However, removing this provision would unfairly disadvantage smaller companies endeavoring to thrive in the digital marketplace.  It would deter innovation and hinder their ability to compete on an equal footing with larger entities, as they did in the past.

One of the primary concerns regarding competition stems from the dominance of a few technology giants in key sectors of the digital economy. Companies like Google and Facebook exert significant control over online advertising and capture a substantial portion of digital advertising revenue. Their dominance not only limits competition but also raises antitrust concerns, as they leverage their vast user bases and troves of data to maintain market dominance. Furthermore, the immunity provided by Section 230 has led to a lack of accountability among tech platforms regarding their content moderation practices. argue that the broad immunity shield allows platforms to selectively enforce their policies, stifling competition by suppressing dissenting voices or favoring content that aligns with their own interests. This lack of transparency and accountability erodes user trust and undermines the principles of free expression and open discourse that Section 230 was intended to uphold.

In response to these concerns, calls for reforming Section 230 have grown louder in recent years. Policymakers and legal scholars advocate for a more nuanced approach that preserves the core principles of Section 230 while addressing its unintended consequences on competition and accountability. Some proposals include narrowing the scope of immunity for platforms that engage in certain types of content moderation or imposing additional obligations on dominant platforms to ensure fair competition and transparency.

Nevertheless, navigating the complexities of Section 230 reform poses significant challenges. Any attempt to amend the legislation must strike a delicate balance between promoting competition, protecting free expression, and preserving the innovative spirit of the Internet. Moreover, regulatory intervention risks unintended consequences and could stifle innovation or inadvertently favor incumbents over emerging competitors.

One potential avenue for addressing competition concerns within the framework of Section 230 is through targeted enforcement of existing antitrust laws. Regulators could scrutinize the market power of dominant platforms and take action to promote competition and level the playing field for smaller players. Additionally, encouraging interoperability and data portability could empower users to switch between platforms more easily, fostering competition and innovation.

Another approach involves promoting self-regulatory mechanisms and industry standards for content moderation and platform governance. By encouraging platforms to adopt transparent and consistent moderation policies, policymakers can enhance accountability and promote a more competitive landscape. Collaborative efforts between industry stakeholders, civil society organizations, and policymakers can help establish best practices that balance the interests of users, platforms, and society at large.

In conclusion, addressing Section 230 concerns regarding competition requires a multifaceted approach that considers legal, economic, and societal factors. While the legislation has undoubtedly shaped the digital landscape in profound ways, it is imperative to reassess its impact in light of new technological and market dynamics. By engaging in thoughtful dialogue and exploring innovative solutions, stakeholders can navigate the challenges posed by Section 230 and foster a more vibrant and competitive digital ecosystem for the benefit of all.

March 7 is the first day for Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft—the first six gatekeepers designated by the European Commission for their platform services—to fully comply with the EU’s Digital Markets Act (DMA). Since May 2023, the DMA has been aiming to ensure fair and open markets in the digital sector. It requires gatekeepers to (1) allow third parties to inter-operate with the gatekeeper’s own services, (2) grant business users access to the data they generate while using the gatekeeper’s platform, (3) provide tools and information necessary for advertisers and publishers to carry out their own independent verification, and (4) permit business users to promote their offers and conclude contracts outside the gatekeeper’s platform. If a gatekeeper fails to comply, they will face initial fines of up to 10% of the company’s total worldwide turnover. The fines increase to 20% for repeated infringement.

As of March 7, all six gatekeepers have released DMA compliance measures. For example, Google implemented updates affecting Google Chrome and the Google Play store that aimed to simplify the third-party app download process. This allows users to use alternative app stores and billing options outside Google Play. Apple modified App Store, Safari, iOS, and Apple Pay to enable third-party applications to interact with the Apple systems. Whereas TikTok (owned by ByteDance) challenged its gatekeeper designation in Europe’s second top court—the Luxembourg-based General Court—it still complied with the DMA requirements as the Court refused to suspend its obligation to comply. Consequently, TikTok released its compliance measures on March 3: it enhanced its “download data” feature for both users and developers and granted additional data access to business accounts.

The DMA is considered a tool to break the dominance of Big Tech in the EU. However, it has faced criticism such as claims that it protects competitors rather than consumers, overregulates, and decreases economic efficiency. In fact, the EU acknowledges that the DMA will increase the time costs for consumers to choose digital services. Conversely, supporters argue that the DMA helps to build a more competitive environment for businesses by regulating the self-preferencing of big tech companies and bringing fairness to the mobile app ecosystem. Additionally, consumers can benefit from a wider range of choices. Regardless of the evaluation, the DMA has opened the closed market created by big tech companies, which have for years leveraged their market dominance to exclude competition by self-preferencing and building closed ecosystems. Under the DMA, tech companies are obligated to open up their ecosystems, facilitate data flow between platforms, and treat search results equally. For small companies, the opportunities outweigh the challenges, while for gatekeepers, DMA compliance will become an essential part of future corporate compliance.

In an increasingly integrated global economy, companies are looking outside their boundaries to capitalize on foreign possibilities. However, with the appeal of new markets comes a complicated network of corporate rules that differ greatly from one country to the next. Navigating the complexities of cross-border corporate operations necessitates a thorough awareness of various regulatory systems. Businesses must deal with a variety of obstacles, ranging from trade rules and tax structures to legal compliance and cultural subtleties, to maintain smooth operations and long-term profitability.

Global expansion brings out legal concerns on several fronts. Businesses must follow host-country labor regulations and seek legal guidance to ensure compliance. International commerce compliance is crucial, including imports, exports, and sanctions. When establishing a business structure overseas, it is essential to consider expenses, capital, and tax effects. Tax concerns include evaluating prospective treaties. Protecting intellectual property requires strategic planning and contractual agreements. Financial transactions must follow foreign currency regulations, with legal guidance assuring secure payments. A well-thought-out exit strategy is vital, taking into account the possible complexity and costs of ending an international company, such as government clearances and employee rights compliance.

One instance is where TFI International, Canada’s largest transportation services provider, is acquiring Hercules Forwarding, a less-than-truckload (LTL) provider, with the aim of strengthening its cross-border transaction. This acquisition grants TFI International access to expanded capacity and enhanced capabilities in both the United States and Canada, including regions along the US-Mexico border. Moreover, it positions TFI International for potential growth in freight movement between Canada and Mexico.

The global economy is based on the free flow of information across borders, which allows firms and consumers globally to access the greatest technology and services. This unrestricted data flow serves a variety of companies, promoting economic progress. Despite these benefits, some governments argue for limits on cross-border data transfers, which limit enterprises’ capacity to operate worldwide. Such restrictions, which are frequently motivated by security or protectionist concerns, impede efficiency, raise prices, and restrict access to foreign markets. With global enterprises working in highly regulated environments, cross-border transactions are getting increasingly complicated as governments attempt to protect consumers and boost commerce while minimizing risk.

Furthermore, on February 28, 2024, the White House issued a substantial Executive Order (EO) to prevent the transmission of sensitive personal data outside of the United States, particularly to “countries of concern.” This measure, motivated by national security concerns, seeks to protect Americans’ data while keeping open global data flows necessary for international business. The EO authorizes regulatory steps to ban some foreign transactions involving large amounts of sensitive personal data or data connected to the United States government, with draft rules to be issued in the following months. Once the regulations are published, stakeholders will have a 45-day window to submit feedback.

The global financial services sector is becoming increasingly segmented, with distinct regulatory frameworks in the US, EU, and other regions. In the US, regulatory emphasis historically isolated the sector, particularly through laws guiding securities and derivatives businesses to operate primarily within national boundaries. Notably, the Dodd-Frank Act imposes additional restrictions, affecting banks serving US consumers. For instance, entities engaging in securities transactions with US retail investors face stringent compliance requirements without significant exemptions. While non-US broker-dealers in institutional business are exempt from broker-dealer registration, they are often required to participate in US-registered transactions, typically through affiliated entities. Moreover, derivative transactions involving US consumers mandate the involvement of US-registered corporations and specific collateral within the US, reflecting concerns regarding foreign bankruptcy regimes. Furthermore, soliciting deposits from US individuals typically necessitates a physical US presence, underscoring the intricacies of navigating the US regulatory landscape within the context of cross-border commerce.

Successfully navigating the complex environment of cross-border trade within the context of international commercial law emphasizes the critical need of enterprises to develop a thorough and adaptive strategy. Global transactions need a detailed awareness of numerous legal systems, cultural complexities, and regulatory frameworks. To prosper in such an environment, firms must be proactive, not just handling legal difficulties but also predicting and reacting to the ever-changing global economic and political landscapes. Additionally, recognizing and embracing cultural diversity in corporate processes is critical for developing long-term international connections. Addressing the issues created by international trade requires a coordinated strategy including legal professionals and important members of the business sector. To succeed in the global economy, organizations must prioritize constant learning, adaptation, and a commitment to remaining current on the ever-changing landscape of international commercial law.

The development of generative artificial intelligence (AI) has ushered civilization into a new era of technological curiosity and corporate integration. “Generative AI” is a type of AI that allows machinery to create new material rather than solely assess or change current data. Using models trained on massive quantities of data, generative AI may generate material—such as text, images, music, or video—that is sometimes indistinguishable from content created by people themselves. The global excitement around the debut of OpenAI’s ChatGPT has not only captivated the public’s attention but has also fueled the widespread adoption of AI across a variety of businesses. However, as AI technologies become more integrated into business processes, some antitrust concerns increase. Recognizing AI’s revolutionary influence, antitrust enforcers in the U.S., notably at the Federal Trade Commission (FTC) and the Department of Justice’s Antitrust Division, have emphasized the need to address the junction of AI and antitrust laws.

Federal antitrust rules, which are intended to create competitive markets and protect consumers, have expanded to cover the use of AI by businesses. These rules are intended to restrict actions that may reduce competition, including agreements among market participants and single-firm activity. For example, there have been worries about AI-powered pricing algorithms exchanging industry data, which might lead to anticompetitive agreements and artificially increased costs.

Companies as well as individuals that violate antitrust rules face serious repercussions, including civil enforcement proceedings, private civil litigation, and criminal prosecutions. For responsible individuals, sanctions may include civil monetary fines and injunctions, tripled damages, significant solicitor’s costs, and even jail.

The emergence of AI adds significant difficulties to antitrust issues. Today, AI can promote pricing collusion by using price monitoring and matching algorithmic software. Companies, despite wisely adjusting their prices to those of their competitors, are unable to communicate information about future pricing plans, either directly or indirectly, creating a new compliance difficulty for companies using price matching or implementing blockchains to implement smart contracts. Furthermore, AI may enhance the exploitation of market power through discrimination and bias, as well as the foreclosure of competitors, either through mergers, exclusive collaboration agreements, or the use of significant “Big Data“. As individuals write algorithms and decide upon their application, and without diversification and rigorous testing, this algorithm (which may have subtle biases) can then enter the system which can be automated and further perpetuated by AI.

As AI evolves and antitrust enforcement intensifies, companies that use AI should conduct an antitrust risk assessment, exercise caution when disclosing AI use to avoid collusion implications, audit third-party data sources and AI tools for accuracy, update antitrust compliance policies, and incorporate antitrust counsel into AI development and licensing processes.

In summary, the confluence of AI and antitrust rules is a complicated challenge that both regulators and industry must carefully address. As U.S. regulators aggressively confront the issues posed by AI, businesses must negotiate this changing landscape, developing comprehensive compliance controls to prevent antitrust risks connected with the incorporation of AI technology into their operations. In order to mitigate such risks, businesses should focus on examining suppliers of AI services and establishing in-house protocols, tools, and training.

In an era where AI’s potential for collusion, discrimination, and market power abuse becomes increasingly apparent, regulators’ proactive engagement highlights the importance of adjusting legal frameworks to the changing terrain of technological progress. Companies must stay diligent in ensuring that their AI applications comply with antitrust rules while also promoting fair competition and innovation in the marketplace.

In 2014, the Onion published this headline: “Scientists Politely Remind World That Clean Energy Technology Ready To Go Whenever.” The satirical report sharply criticized how most countries, at the time, were prone to overlooking the clean energy alternatives readily available to them in favor of the established oil, gas, and coal industries that made up such a large proportion of the global economy. By now, it seems like most countries have taken the hint: CO² emissions finally reached somewhat of a plateau in 2022, after steady rises every year for the past few decades. A survey in July showed that, even in the United States, carbon emissions fell by 5% compared to May of last year – this change, admittedly, being partially due to the mild winter in the Northern Hemisphere.

The U.S. has always been one of the slowest countries in the transition towards clean energy while most other countries have placed it as a top priority. In 2021, we still produced 14.9 tons of CO2, per person – as opposed to Germany’s 8.1 tons and the United Kingdom’s 5.2 tons. The U.S. is still the world’s top producer of unrefined oil and natural gas – while we import an average of six million barrels of crude oil a day, mostly from Canada. Oil makes up nearly 8% of the U.S.’s GDP, despite the controversy that surrounds the average American’s grossly disproportionate carbon footprint.

Government regulatory bureaus have not only failed to control the energy monopoly that oil and gas companies seem to have on our economy – they’ve encouraged its growth, often to immense public backlash. For example, the Bureau of Land Management (BLM) opens up nearly 90% of all publicly-owned U.S. land to oil and gas leasing. Recent reforms and regulations on this use serve to “increase returns to the public” rather than phase out oil and energy use, the way that most of the “public” wants. The Biden administration has even given explicit approval to large-scale, long-term oil enterprises like the Willow Project – a massive oil drilling project in Anchorage, Alaska, projected to add 9.2 million metric tons of CO2 to the atmosphere per year.

Organizations like the Center of Biological Diversity criticize these financial incentives as nothing more than stopgap measures, focused on ensuring that the government gets a cut of the profits that can be made from non-renewable energy. Other conservation groups take a more direct approach in confronting the BLM’s environmental harms. Earthjustice, for example, filed a lawsuit to stop the Willow Project entirely. Their case is currently pending appeal in the Ninth Circuit Court of Appeals.

Individual companies, hoping to make themselves more palatable to their environmentally-conscious consumers, have also started to hold themselves accountable for shifting towards greener-energy alternatives, primarily through the adoption of ESG initiatives: goals focused around improving the Environmental, Social, and Governance scores assigned to different corporations. They’re held responsible for transparency in their ESG disclosures both by their profit margins and by regulatory agencies like the Securities and Exchange Commission (SEC) – providing both the internal and external pressures necessary to change the behavior of even the most pollution-heavy companies.

The former holds companies accountable by providing a monetary incentive for corporations to meet their ESG initiatives. Greater transparency in company environmental disclosures is consistently tied to positive financial growth, creating greater trust across all levels of corporate governance and greater trust with the consumers that these corporations market towards. The latter allows the government to intervene directly through the SEC’s Climate and ESG task force. This team charges companies with misrepresentation (or even fraud) if they fail to make a good-faith effort to meet their ESG initiatives or lie in their public ESG disclosures. Multiple initiatives have both been proposed and passed by the SEC that create more transparency in private entities’ climate-related risks. The large fines and injunctions that the SEC has the power to impose further encourage corporations to be upfront with their environmental impacts – while their consumers push them to be more environmentally friendly overall.

It’s telling that even the Organization of Petroleum Exporting Countries (OPEC) is currently expanding its legal team specifically to manage climate change concerns and “energy transition law.” The U.S. often treats OPEC like a rival – having come head-to-head with it many times in the past and currently fighting to try to get the “No Oil Producing and Exporting Cartels” (NOPEC) Act through Congress, the same way they’ve done for the past two decades. As public opinion continues to shift towards clean energy over the oil, gas, and coal industries that dominated the market in the past, it wouldn’t be surprising if the United States started to focus its own legal power on the same fields of law – with pressures coming from both their external rivals and internal company movements towards ESG, overall.

Insider trading is a broad and murky area. However, now, the SEC has complicated matters with the introduction of a new theory — shadow trading. Unlike insider trading, where a person trades in the stocks of a company in which they have MNPI (material non-public information), shadow trading involves trading in an economically linked company with the MNPI of a target company (entirely different company). Coined by Mehta, Reeb and Zhao in their research paper titled “Shadow Trading ”, this concept was first put to test by the SEC in SEC v. Panuwat. The SEC slapped charges on Panuwat stating that he misappropriated material information about his pharmaceutical company, Medivation, to trade in the stocks of their competitor, Incyte Corporation. Since shadow trading was rather a novel concept, the SEC brought claims under the misappropriation theory of insider trading where trading is forbidden on the basis of MNPI obtained by someone who is not a corporate insider (i.e., a corporate outsider) in breach of a duty.

The SEC alleged that Panuwat, upon receiving confidential information from Medivation’s CEO about the imminent acquisition by Pfizer, misappropriated the information by swiftly purchasing out-of-the-money stock options in Incyte Corporation from his work computer. When the merger was made public the share prices of both companies rose and Panuwat reaped illicit profits of $107,066. Panuwat was charged with violating Section 10(b) and Rule 10b–5 of the Securities Exchange Act of 1934. Panuwat hit back by arguing that SEC failed to show that the information was material and unavailable to the public, there was a breach of fiduciary duty and that he possessed scienter (intent). However the Court ruled against him and dismissed his motion for summary judgment.

The Court held that Panuwat had material information regarding the merger and its disclosure would have been viewed by a reasonable investor as material when deciding to trade in those securities. While Panuwat did point out that he did not possess any information about Incyte when he purchased the stock options, SEC said that the market viewed Medivation and Incyte to be complementary to each other. SEC blamed Panuwat for narrowing the meaning of materiality and held that the information would have been material for more than one company. SEC showed evidence from reports and articles that linked Medivation and Incyte, Panuwat’s positive comments about Incyte months before he bought stock options and Panuwat’s awareness of the market reports which influenced his perspective on the biopharmaceutical market. It was also established that Panuwat had MNPI since he had access to confidential information through summary of bids, letters soliciting final bids and internal emails related to the merger.

These allegations were further strengthened when SEC successfully established breach of fiduciary duty. The Court held that Panuwat was bound by Medivation’s insider trading policy that prohibited all employees from using the company’s sensitive and confidential information for profit by trading in securities. Panuwat breached this duty by using MNPI’s of Medivation to trade in Incyte’s securities. Lastly, the Court held that Panuwat possessed intent, when he actually used information about Medivation’s acquisition to purchase stocks in Incyte. Panuwat immediately purchased stocks right after he received an email showing that the merger was to move forward.

However it is to be noted that Judge Orrick was careful to place the liability on Panuwat because of the broad language of Medivation’s insider trading policy that prohibited their employees from trading in any stock or security. It is unclear whether Panuwat would still be liable under the section absent the broad language or explicit prohibition in the policy. Furthermore, this fact pattern could be applied to any scenario where it is found that information from one company can be linked to the stock price of another. This is unreasonable since any corporate insider could be liable for trading in stocks with the information of their own company.

Shadow trading is still a relatively new concept and Panuwat’s case is only at its initial stage. Shadow trading is not an uncommon phenomenon and the SEC has claimed to take up the task of mitigating illegal trading in all forms starting from Panuwat. It is also a caveat to the ones who interpret insider trading laws narrowly, that the courts are willing to accept the broad powers of the SEC. Needless to say if this is accepted in the future it is a threat to the corporate insiders and would have far reaching effects. Therefore it is important to adopt policies to curb insider trading litigation with the Panuwat decision in mind. After all, prevention is better than cure.

This October 8th, 2023, Gavin Newsom, Governor of California, signed into a law the Senate Bill n°54, or SB 54. The law will come into effect in March 1st, 2025, and aims to promote sustainable finance through diversity in venture capital (VC) companies by empowering historically underrepresented communities. Similar to the California Equal Pay Pledge of 2019, it is part of a political commitment to achieve gender and racial equality.

Venture Capital (VC) companies are companies or investment funds that usually invest in early-stage start-ups. Consequently, VCs drive innovation, economic and employment growth. In recent years, we have observed an increase in Socially Responsible Investment (SRI). This investment strategy consists in investors threatening to discard assets from the VC’s equity if it does not comply with corporate social responsibility standards. Hence, impact investing is limited to investors’ resources. These stakeholders cannot act alone towards an impact investing approach and sustainable finance. Regulators must promote sustainable finance throughout the investment chain. The California State Capitol attempts to do so through the SB 54.

The SB 54 provides more scrutiny on the policies conducted by VCs. The law targets “covered entities”, which is a VC company that: “(i) primarily engages in the business of investing in, or providing financing to, startup, early-stage, or emerging growth companies [; or] (ii) manages assets on behalf of third-party investors, including, but not limited to, investments made on behalf of a state or local retirement or pension system.”

Additionally, the VC company must: “(i) [be] headquartered in California [; or] (ii) [have] a significant presence or operational office in California [; or] (iii) [make] venture capital investments in businesses that are located in, or have significant operations in, California [; or] (iv) [solicit] or [receive] investments from a person who is a resident of California.”

Besides, the law prescribes duties to the targeted VCs, namely through a yearly survey reporting information related to its “founding team”. This targets owners of initial shares or interests of the company, a stakeholder who had an important role within the business before the issuance of initial shares or who is not a passive investor in the business, the chief executive officer, the president, the chief financial officer, the manager of the business, or any other stakeholder benefitting from the same level of authority.

Simultaneously, the VC must report information related to gender identity, race, ethnicity, disability status, and sexual orientation of the individual falling under the “founding team” criteria. The report shall also mention if that individual is a veteran or a disabled veteran, and if he/she is a resident of California. The person surveyed can decline to provide information, but the use of this right must be notified in the report.

Finally, the VC company must also provide “the number of [VC] investments to businesses primarily founded by diverse founding team members, as a percentage of the total number of venture capital investments the covered entity made.” Eventually, the results must be submitted to the Civil Right Department (CRD), a state agency that publicizes the data in a searchable database. Monetary penalties are prescribed for VCs who breach the provisions. The fine will be reinjected in the Civil Rights Enforcement and the Litigation Fund to enforce the Civil Rights laws.

This law is welcomed because it intervenes on a level distinct from that of the investors. It is an additional tool that must be used simultaneously with the investors’ room of maneuver. Here, the law targets the policies undertaken by the VC companies in their structure and thus, in their investment choices. Through the report and its publication, the law gives incentive for VC companies to include more diversity in their founding team. By doing so, it aims at easing the burden upon investors who favor ethical investments but are slowed down by the lack of capital.

Conversely, the law does not establish specific diversity standards for compliance; instead, it mandates the submission of a report. Consequently, VCs can potentially disclose a founding team composition lacking in diversity without facing direct consequences.

Yet, the law introduces an indirect incentive for increased diversity, as the annual report is made public. Accordingly, a VC company disclosing a lack of diversity in their data may experience a decline in stock prices. This decline could be attributed to investors prioritizing impact investing over mere profit gains. Hence, the responsibility for fostering sustainable finance ultimately rests on the shoulders of investors. In the end, this law must act as a stepping stone for future laws to provide solutions throughout the investment chain. For instance, regulators could set diversity standards for VCs to abide by, or nudge them to invest in a certain percentage of ESG companies.

Generative AI has evolved significantly through the integration of machine learning algorithms, allowing systems to create content, models, and solutions autonomously based on learned patterns and data. Can AI be an inventor? The Federal Circuit said no in its decision Thaler v. Vidal , denying a researcher’s claim of AI as the inventor of two patents. The court rejected the researcher’s interpretation of patent law, but it did not discuss the rights of AI or the nature of the invention. It reasoned that adjudicating on the patents’ inventorship only requires reading the language of the Patent Act, which explicitly requires inventors to be “individuals.” “When a statute unambiguously and directly answers the question before us, our analysis does not stray beyond the plain text,” the Federal Circuit held.

After the Federal Circuit denied treating AI as an inventor on its own, the question remains whether it can be named a co-inventor, and to what extent a human inventor can use AI in the process of invention. In response, in his executive order issued on October 30, 2023, President Biden asked the United States Patent and Trademark Office (USPTO) to draft guidelines on determining who the inventor is when an invention is developed using AI. The executive order instructed the USPTO to provide examples showcasing the various roles AI might play in the process of invention and to elucidate the evaluation process for determining inventorship in each specific role.

The question of AI inventorship gives rise to hard policy and ethical issues. Policy-wise, a disqualification akin to the Federal Circuit’s ruling may deter researchers and inventors from investing resources and time in developing generative AI due to the inability to safeguard resulting inventions. Content creators may encounter a substantial amount of freely available content that has the potential to weaken their position in the market. Ethical implication appears at the same time. Dr. Thaler, the creator of the generative AI system DABUS, claimed that not recognizing AI’s intellectual production by refusing to recognize its status as an inventor speciesism. In fact, the ethical inquiries about the societal status of AI surfaced long before its ascent. Can it be recognized as an independent creator or thinking being? How to better protect investment in generative AI? The USPTO is set to release its guidelines on February 23, 2024, and inventors and legal experts anticipate that they would address these pressing questions.

The United States Court of Appeals for the Fifth Circuit rejected the Securities and Exchange Commission (SEC)’s rule for share repurchase disclosure modernization (“Share Repurchase Disclosure Modernization Rule”) on October 31, 2023, stating that the “[r]esponse to uncertainty about matters of low probability or low magnitude should be markedly different from those of high probability and magnitude.”

The SEC proposed a draft of the share purchase disclosure modernization rule, in December 2021 (“Proposed Rules”), to promote transparency, which in turn enhances efficiency, competition, and capital formation. A key factor that leads to information asymmetry among issuers, insiders, and investors, is the timing of the disclosure. In a share repurchase transaction, since the issuers of the securities are repurchasing their own securities, insiders and affiliated purchasers possess significantly more information about the issuers and their prospects. In contrast, investors only become aware of this information a month or so after the end of the quarter when the issuers’ 10-Q filing is released. To assist unsophisticated investors who lacked access to or the understanding of complex trading information, the SEC proposed that the details of the repurchase activities be disclosed daily. It believed that a daily disclosure of an issuer’s repurchase activities would provide investors with more granular information such as the reasons behind the repurchase. This would enable them to better evaluate the market for the issuer’s securities and the actions of the issuer’s insiders. It also sought alignment with global regulations like those of the U.K. and Hong Kong where issuers must report repurchases to the stock exchange before trading begins the next day.

One key concern regarding opportunistic repurchase activities is management’s interest. Repurchasing shares reduces the denominator for earnings per share, allowing an apparent increase in the issuer’s earnings per share. The management can use it to meet or beat its earnings forecast for the quarter or the year. Furthermore, if the management’s compensation is tied to earnings, the management can use repurchases as a tool to maximize its compensation. Through the disclosures, both the SEC and investors may be able to identify trading patterns and any bad-faith practices.

However, the Share Repurchase Disclosure Modernization Rule, which was finally adopted in May 2023, differed from the Proposed Rules. The SEC backed away from its initial position where it proposed that the trades be disclosed daily. In the Final Rules, the SEC mandated that issuers of securities disclose their aggregate repurchase activities on a daily basis, at the end of each quarter instead of the same day as the trade (“Aggregate Disclosure Regime”).

The Chamber of Commerce protested the Aggregate Disclosure Regime. It believed that the Share Repurchase Disclosure Modernization Rule allows the SEC to micromanage and discourage repurchase activities. It argued that while there may be an increase in transparency pursuant to the disclosures, the rule does not explain how increased transparency will promote efficiency, competition, and capital formation. Further, the Chamber of Commerce by way of its comments on the Proposed Rules commented that the SEC should undertake different quantitative studies to justify the need for these heightened disclosures. It suggested various studies that the SEC could undertake to gauge if there is a need for these heightened disclosure requirements like (i) the percentage of issuers’ annual and long-term incentive plans that is tied to earnings per share and how it correlates with buybacks, (ii) the number of issuers using share repurchases to trigger executive bonuses that would not have been earned, (iii) investors’ reaction to more frequent repurchase disclosure in other jurisdictions, or (iv) the movement of stock prices on days that repurchases are disclosed in jurisdictions with daily reporting. The Chamber of Commerce pleaded before the Fifth Circuit that the SEC had acted arbitrarily and capriciously in formulating the proposed rule since it had not responded to the Chamber of Commerce’s comments on the proposed rule’s economic impact and could not “substantiate the rule’s benefits.”

In its order, the Fifth Circuit exercised its powers under the Administrative Procedure Act (“APA”) and ruled in favor of the Chamber of Commerce. The court held that the agency had not “examine[d] the relevant data and articulate[d] a satisfactory explanation for its action including a rational connection between the facts found and the choice made.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983). The Fifth Circuit held that “[i]f opportunistic or improperly motivated buybacks are not genuine problems, then there is no rational basis for investors to experience uncertainty [in the event the disclosure is made at a later date].” After all, motivated buybacks may be a matter of “low magnitude and low probability.” Accordingly, it held that the SEC had failed to “substantiate the rule’s benefits.” The Court ordered the agency to correct the “defects,” including the lack of justification for the heightened disclosure, within 30 days.

The purpose of the Proposed Rule, like that of the disclosure standards of some other jurisdictions, is to assist unsophisticated investors who lack access to or the understanding of complex trading information. Therefore, additional quantitative analysis of the proposed rule’s economic impact—demanded by the Chamber of Commerce—is hardly necessary to form a “rational connection” between the disclosure requirements and its concerns. However, the U.S. has been opposed to a continuous disclosure regime, and the Chamber of Commerce’s pushback on additional disclosures is no surprise.

While it remains to be seen whether the SEC will rectify the “defects” by modifying the heightened disclosure or justifying its position, most issuers will likely need to continue preparing their 10-Q filings in accordance with the Share Repurchase Disclosure Modernization Rule, which still applies to Q3 starting on October 1, 2023.