Business law is the field of law that governs how businesses are organized and the rules regarding commercial transactions. It is also the field of law that looks at how laws and regulations impact capital markets, corporate governance, bankruptcy and restructuring, deal-making, taxation, and labor and employee relations.
Commercial law has its roots in both common law as well as from state and federal government statutes (statutory law). In the United States, state laws make up the bulk of commercial law. However, in many important areas, federal laws are applicable. For example, businesses must adhere to federal securities regulation, environmental regulation, food and drug regulation, national and international intellectual property laws, anti-trust law and labor law.
Common law governs all commercial law that lies outside of government statute. For example, contract law is governed by common law, but sales contracts specifically are regulated by the Uniform Commercial Code, which has been generally adopted by all 50 states, the District of Columbia, and the U.S. territories.
When the government implements a new statute, these new laws trump existing common law. For example, following increased concerns over corporate fraud and the 2008 financial crisis, there have been a number of new government regulations that impact commercial law. These developments include:
(1) Sarbanes Oxley Act (SOX): This 2002 act implemented large changes to the requirements for reporting publically traded corporations as well as the penalties for fraudulent financial activity. Significant attention has been paid to section 404 of the SOX, which requires management to certify the effectiveness of their company's internal controls.
(2) Dodd-Frank Wall Street Reform and Consumer Protection Act: This 2010 law implemented significant changes to the regulation of the financial industry in the United States, following in the footsteps of the Glass-Steagall Act (a reform act that followed the Wall Street crash of 1929).
(3) Digital Millennium Copyright Act (DMCA): This 1998 law looks to bring US copyright law in line with law set out by the World Intellectual Property Organization (WIPO) Treaties.
(4) The Patient Protection and Affordable Care Act (2010): Often called Obamacare, the Affordable Care Act creates a transparent exchange for insurance plans and provides a number of mechanisms for employers to help comply with the new law, which aims to increase health insurance coverage.
(5) Foreign Corrupt Practices Act: This 1977 law introduced changes to accounting transparency in relation to the Securities and Exchange Act of 1934, as well as introduced rules regarding the bribery of foreign officials.
These laws look to protect investors, consumers and the American public in the face of an increasingly complex business environment, asymmetrical information, moral hazard and agency costs. However, by adding a new layer of complexity, many critique these laws as increasing compliance costs and hurting business.
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