Posts Tagged ‘small business’

Bad ideas in our time: emergency merger moratorium

I’m quoted in Jack Arnholz’s report for ABC News on some of the problems with a very bad new scheme from Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez for a ban on corporate mergers . Excerpt:

“A bill like this would harm the economy in general. It would in particular threaten workers, consumers, investors and those affected by the coronavirus,” Walter Olson, a senior fellow at the Cato Institute, told ABC News.

“In crisis conditions especially, mergers are a way for companies with a relevant strength, such as a strong balance sheet or superior distribution channels, to combine with others that may be weaker yet have vital assets such as promising research, a loyal consumer base, or a superior product line. If mergers are blocked, some weaker, yet valuable companies, will flounder, discontinue research, furlough workers or even enter bankruptcy,” he added.

Despite its prominent sponsors, the proposal is unlikely to pass a Republican-controlled Senate and White House. Olson said that the possibility the bill becomes law is unlikely.

“This bill is an exercise in political symbolism, not the way an advanced democratic country should approach antitrust policy. It’s the equivalent of a Trump tweet — it lets off steam, everyone can take sides, and it allows momentary domination of a not especially meaningful conversation until everyone moves on to the next,” Olson said.

Mergers are also a main means by which successful tech startups hit the mainstream and win wide distribution for their products; absent the prospect of being able to exit this way, fewer funders and principals will be interested in going the startup route.

Filed under: antitrust, corporate governance, Elizabeth Warren, small business

Small business could use some advance funding. Too bad gift cards are a legal mess.

Gift cards make a nice way to support your favorite business during the pandemic shutdown. They also make a compliance trap that can mire that same business in years of expensive hassle. My new piece at Reason explores the many legal exposures, from ADA lawsuits over lack of Braille translation to class actions over fine print and even exposure to money-laundering liability.

One durable problem, in some states at least, is state unclaimed-property law. Thinking of tossing a gift card into a drawer and never using it, as a kind of tip to an enterprise that’s brought you happiness over the years? Depending on what state you live in, you might actually be tipping your state tax authorities, and laying only future legal hassle on the merchant you wanted to help. I’ve covered state unclaimed-property law both here and at Cato. (More on its intersection with gift cards: Michael Waters, The Atlantic last fall.)

Delaware’s ambitious claims over unclaimed property have resulted in pitched courtroom battles for years, only a portion of which has been over gift cards specifically. Last year a jury awarded the state more than $7 million in a triple-damage unused gift card proceeding against just one national retailer, Overstock.com.

The Blue Hen State had to rewrite its unclaimed property law after a 2016 ruling by a federal court found its existing law a violation of due process and concluded that Delaware authorities had “engaged in a game of ‘gotcha’ that shocks the conscience.” The replacement law, which explicitly lays out a claim to gift cards rather than relying on older and more uncertain language, doesn’t have a long track record yet.

Filed under: COVID-19 virus, Delaware, property law, small business, taxes, WO writings

From TSA to small business lending, emergency regs often make the next emergency worse

My new piece at the Washington Examiner examines how government responses to the last crisis impede response to the next one. The post-9/11 TSA checkpoint system, for example, “is now the one point in air travel where a virus-fearing traveler is least able to avoid prolonged physical or face-to-face contact with a stranger, as well as the… commingling of high-touch personal items on communal trays.” With the COVID-19 crisis, the old rules requiring banks to report “suspicious” transactions are causing all sorts of problems as ordinary customers radically change their banking habits. Worse, “Know Your Customer” regs rationalized on anti-terrorism grounds have become a bottleneck to processing thousands of applications for short-term funds from small businesses not previously known to the bank. Verifying KYC information on a small business, even if it’s got access to all its files, can take a month. Who’s supposed to wait that long amid today’s crisis? (more from colleague Diego Zuluaga on the rules’ failings)

I conclude: of the many good reasons for deregulation, one “is that it bolsters resilience when systems [like banks] are asked to cope with complex new perils.”

Filed under: banks, COVID-19 virus, disasters, regulation and its reform, small business, WO writings

Gig/freelancer economy roundup

In an emergency that has made trucking, logistics, and home delivery uniquely important, fractured the schedules of countless parents and caregivers, and sent the services sector reeling, it would be nice if California and other states were not making war on the work arrangements needed for the situation. That’s why California’s AB5 fiasco (earlier here, here) along with similar moves in New Jersey and elsewhere, come at the worst time.

“Lisa Yakomin, president of the Association of Bi-State Motor Carriers… said the California bill is expected to cost tens of thousands of truckers their jobs.” [Dana Rubinstein, Katherine Landergan and Anna Gronewold, Politico; Deborah Lockridge, TruckingInfo; California independent trucker coalition] Operating in New Jersey trucking under an independent contractor model “is becoming incredibly risky,” as the state assumes power to shut down alleged violators by issuing stop work orders [David Kim and Salvador Simao, Ford Harrison]
Jugglers unite: “My full-time job is being a mother, my second is cleaning houses. New Jersey please keep it that way.” [Antonette McKay, Star-Ledger]
Musicians on the ropes as venues shut down. Wouldn’t it be nice if they could look forward to returning to an existent gig industry? [Fight for Freelancers NJ, Brian Ralston et al., Kim Kavin, Daily Kos (“The state could argue that by hiring you to play your French horn two nights a week, the theater violated prong A of the ABC test”), Michael Tanner (Lake Tahoe Music Festival), Ravi Rajan, Orange County Register]
What hope for legal challenges to AB5? [Stephen Melnick, WLF]
Audio/video: Reason video with John Osterhoudt on the California mistake; “State regulators and the gig economy” [Federalist Society teleforum with Alexander MacDonald]
Getting services distributed to dispersed at-home locations is going to create a host of new communication challenges, but good luck with that: “The California legislature designed AB5 in a manner that completely disregards how professional translators and interpreters work.” [Philip Shawe, Crain’s New York]

P.S. Related Cato post now up. Truckers especially have many more problems than this right this moment responding to the COVID-19 pandemic outbreak, read about some of them here (and help if you can!) They have begun getting direly needed removals of regulations. But don’t let this one slip off the list.

Filed under: California, COVID-19 virus, disasters, music and musicians, New Jersey, small business, wage and hour suits

“Make room for lemonade stands”

A new bill in the Maryland General Assembly would prohibit counties and cities from banning children’s lemonade stands when set up occasionally on private property. I submitted these perhaps somewhat tongue-in-cheek comments advising lawmakers to stop them young:

“Today’s breaker of low-level regulations is tomorrow’s breaker of more serious regulations. The ten year old who dabbles in lemonade selling today could become tomorrow’s bringer of a church potluck casserole prepared in a home kitchen rather than an inspected commercial facility. A few years later, accustomed to the ways of regulation-breaking, that same miscreant might use that same home kitchen to bake a dozen pies, plus one for good luck, to bring to a homeless shelter for Thanksgiving.

“The time to stop it is when it starts — on the June day when the first pitcher of lemonade is mixed and hawked to passersby for 50 cents, plus a tip if you get lucky. Stop them young, or they will get used to serving others and along the way learning to act and think for themselves.

“Does this all sound a little crazy and upside down? Well, it is. We should make it easier, not harder, for kids to be enterprising, well organized, and friendly, all lessons of the lemonade stand.”

More here [cross-posted from Cato at Liberty]

Filed under: Maryland, small business, WO writings

Gig/freelancer economy roundup

More on the chaotic, destructive effects of California’s AB5 (earlier here, here, etc.):

“Non-equity theaters, music venues and jazz clubs, dance companies, small cultural festivals of all types face very real threats” [Brendan Rawson, Cal Matters] Translators and interpreters hard hit by law [Dan Plante, KUSI]
Women-owned businesses “reeling” [Elaine Pofeldt, Forbes] Disabled workers “hugely impacted” [Markos Moulitsas, Daily Kos]
California Assemblyman Kevin Kiley (R-Granite Bay) has asked members of the public for their stories about how AB5 has affected them. You can see the results here;
“Ready, Fire, Aim: How State Regulators Are Threatening the Gig Economy and Millions of Workers and Consumers” [U.S. Chamber Employment Policy Division]
“The New York Times is hiring a contractor to write about California real estate, but because of AB5 they will not be hiring anyone in California.” [Emma Gallegos on Twitter]
Not an isolated outrage: union allies nearly got such a bill passed in New Jersey in recent weeks [Alida Kass, Star-Ledger; Jen Singer, Philadelphia Inquirer] New York’s Gov. Andrew Cuomo has now signaled support for something similar [Evie Fordham, Fox Business] And backers want to take the idea national through a bill called the PRO Act, or HR2474/S1306, in the U.S. Congress [Kim Kavin, Daily Kos; Markos Moulitsas, Daily Kos]

Filed under: art and artists, California, New Jersey, New York, small business, wage and hour suits

Now, a push for more disclosure of who owns businesses

Cato event featuring David R. Burton, Richard Hay, Karen Kerrigan, & Diego Zuluaga:

Policymakers on both sides of the aisle have proposed new regimes for small-business beneficial ownership reporting. The aim of such legislation is to eliminate opportunities for money laundering and financial crime. However, the proposals before Congress would place heavy new compliance costs on millions of America’s small businesses while continuing to provide opportunities for bad actors to engage in illicit financial activities. Beneficial ownership reporting would add to an already onerous anti-money-laundering/know-your-customer (AML/ KYC) regulatory burden, cited by community banks as the single most costly financial regulation. Furthermore, international experience with beneficial ownership reporting requirements suggests that it will be difficult to make such requirements work in the United States.

Earlier on money laundering and know your customer (KYC) regulations.

Filed under: banks, corporate governance, privacy, small business

Trimming back the “regulatory thicket”

For small businesses, regulation vies with taxes as the most complained-of public policy issue. Commonly, however, no one regulation is singled out as causing most of the problem: it’s more the cumulative and interactive hassle of various burdens, especially as a company grows or tries to enter new markets or take on new functions. The Federalist Society has launched a “regulatory thicket” project aimed at shedding light on the problem. Among its products so far: an overview paper by Anastasia Boden et al.; a paper on how the thicket operates in one urban jurisdiction, the District of Columbia [Yesim Sayin Taylor]; a video on how it affects an Oregon couple’s home-based telecommunications services firm; and a teleforum with Brooks Rainwater and Luke Wake.

A related op-ed [Braden Boucek and Luke Wake, Real Clear Policy] notes that reformers often appeal to state legislators, with ideas such as sunset laws and regulatory impact statements for new legislation. But other actors can be involved too:

One especially interesting proposal that has been tried in Arizona with success is giving people a way to challenge regulations in court when they needlessly burden the right to earn a living. That way lawmakers are not the sole party able to bring about reform.

State governors are also in a position to help trim the regulatory thicket in many cases. Governors might follow Canada’s success in controlling the growth of regulation by requiring government agencies to eliminate regulatory impositions for every new mandate. President Trump’s executive order to eliminate two regulations for every new regulation is another instructive example. Likewise, state legislatures might assign the task of reviewing and eliminating regulation to a special commission.

Filed under: Arizona, Oregon, regulation and its reform, small business, Washington D.C.

October 17 roundup

Antitrust legislation once targeted the unstoppable rise of chain stores A&P and Sears, both now bankrupt [my new Cato post, quoting Joe Nocera, Bloomberg (“The next time you hear somebody say that the dominance of Walmart or Amazon or Facebook can never end, think about Sears. It can — and it probably will.”)]
When you wish upon a suit: visitor grabs Disney cast member and screams at her after she asks him to move out of parade route, later pleads no contest to disorderly conduct, now wants $15,000 [Gabrielle Russon, Orlando Sentinel]
Tomorrow (Thurs.) at noon Eastern, watch a Cato panel on “Coercive Plea Bargaining” with Scott Hechinger of Brooklyn Defender Services, Bonnie Hoffman of the NACDL, and Somil Trivedi of the ACLU, moderated by Cato’s Clark Neily. Could you resist taking a plea bargain if faced with a false accusation? [Marc John Randazza, ABA Journal]
“I am a Democrat. But this may be the dumbest thing I have seen…. the Speech or Debate Clause makes about as clear as anything in the Constitution that a court cannot enjoin legislative officials from taking a fundamental legislative action such as a vote.” [Howard Wasserman on suit by Sen. Jeff Merkley (D-Ore.) asking court to, among other things, order delay of Senate vote on Kavanaugh nomination]
An ideological screen for CLE? Following demands from tribal attorneys, Minnesota bar authorities order shelving of continuing legal education class on Indian Child Welfare Act developments taught by attorney Mark Fiddler, who often handles ICWA cases on side adverse to tribes [Timothy Sandefur]
Left-leaning Florida Supreme Court nixes plan to let incumbent Gov. Rick Scott fill vacancies, entrenching its leftward lean for a while at least depending on outcome of governor’s race [Spectrum News 9]

Filed under: antitrust, crime and punishment, Disney, Florida, Indian tribes, judicial nominations, Senate, small business

Europe’s new data-privacy law helps… guess who?

The European Union’s new privacy law, the General Data Protection Regulation, or GDPR, is sometimes defended as a response to the prospect that too much data will concentrate in the hands of the biggest corporate data users. Per the WSJ, however, one of its earliest effects “is drawing advertising money toward Google’s online-ad services and away from competitors that are straining to show they’re complying with the sweeping regulation.” In particular, Google is showing a higher rate of success in gathering individuals’ consents to be marketed to. [Tyler Cowen] With bonus mention of CPSIA: “The Inevitable Lifecycle of Government Regulation Benefiting the Very Companies Whose Actions Triggered It” [Coyote]

Filed under: competition through regulation, CPSIA, Europe, Google, privacy, small business