Chapter 5 The Political, Legal, and Regulatory Environments

Global Marketing, 10e (Green/Keegan)
Chapter 5 The Political, Legal, and Regulatory Environments
1) Which of the following statements does not reflect performance and service provided by Uber
nationally and internationally?
A) Industry observers hailed the company as a prime example of digital technology disrupting an
established industry.
B) Uber's rapid growth was another example that the "sharing economy," also known as
"collaborative consumption," was gaining traction.
C) Uber has encountered resistance as its popularity has grown.
D) In Brussels, a court fines drivers who use Uber service.
E) The European Commission conducted an inquiry and found Uber to be different than taxi
services.
Answer: E
Difficulty: 2: Moderate
Chapter LO: 5.1: Understand the elements of a country's political environment that can impact
global marketing activities.
AACSB: Reflective thinking
2) Any company doing business outside the home country should first carefully study the
________ in the target country.
A) political culture
B) cultural activities
C) intellectual activities
D) social activities
E) sovereignty
Answer: A
Difficulty: 1: Easy
AACSB: Application of knowledge
3) Categories of political risk listed by EIU (Economist Intelligence Unit) include all of the
following except:
A) war.
B) social injustice.
C) politically motivated violence.
D) international disputes.
E) corruption.
Answer: B
Difficulty: 1: Easy
4) Bureaucracy is listed as a political risk category by:
A) BERI.
B) PRS.
C) EIU.
D) WTO.
E) OPIC.
Answer: C
Difficulty: 1: Easy
5) Various types of political risk insurance to U.S. companies is provided by:

A) BERI (Business Environment Risk Intelligence).
B) PRS Group.
C) EIU (Economist Intelligence Unit).
D) WTO (World Trade Organization).
E) OPIC (Overseas Private Investment Corporation).
Answer: E
Difficulty: 1: Easy
6) The high level of political risk currently evident in Russia can be attributed in part to:
A) changing of name of the country.
B) changing the national flag.
C) excessive loans from the International Monetary Fund (IMF).
D) participation in the WTO (World Trade Organization).
E) environment of uncertainty for foreign companies.
Answer: E
7) What do value added taxes (VAT) encourage in countries such as China?

A) They make trademarks and copyrights more valuable.
B) They result in cross-border shopping.
C) They make it harder to bribe officials.
D) They protect companies from antitrust scrutiny.
E) Global companies refrain from offering bribes.
Answer: B
8) In Great Britain, the Wine and Spirit Association estimates that, on average, cars returning
from France are loaded with 80 bottles of wine. This is most likely due to:
A) trademarks and copyrights violation.
B) cross-border smuggling.
C) bribes accepted by officers.
D) antitrust scrutiny.
E) high excise and VAT taxes.
Answer: E
Difficulty: 3: Challenging
9) ________ refers to governmental action to dispossess a foreign company or investor.

Compensation is generally provided, often not in the "prompt, effective, and adequate" manner
provided for by international standards.
A) Nationalization
B) Confiscation
C) Expropriation
D) Internationalization
E) Deportation
Answer: C
10) The governmental action to dispossess a foreign company or investor is known as:
A) compensation.
B) confiscation.
C) expropriation.
D) internationalization.
E) nationalization.
Answer: C
11) The roots of modern international law can be traced to the twentieth-century Peace of
Westphalia.
Answer: FALSE
Difficulty: 1: Easy
12) As the ruble's value fell through most of 2014, European firms began to feel the effects.
Answer: TRUE
Difficulty: 1: Easy
13) Russian consumers have little choice but to "buy local" since farmed salmon has expanded to
keep up with booming demand.
Answer: FALSE
Difficulty: 1: Easy
14) Terms like crony capitalism and kleptocracy refer to rampant corruption and bribery within
capitalism.
Answer: FALSE
Difficulty: 1: Easy
15) A current global phenomenon in both nonmarket and market structures is the trend toward
capitalism.
Answer: FALSE
Difficulty: 1: Easy
16) British Petroleum, British Airways, and Rolls-Royce were privatized under Margaret
Thatcher's administration.
Answer: TRUE
17) In Europe, individual EU countries gave up the right to have their own currencies, ceded the
right to set their own product standards, and have made other sacrifices in exchange for
improved market access.
Answer: TRUE
18) If a foreign company is taken over by a host country government, and some form of
compensation is paid, "confiscation" has occurred.
Answer: FALSE
19) If a foreign company is taken over by the host country government, and some form of
compensation is paid, "expropriation" has occurred.
Answer: TRUE
20) The Brexit issue can be viewed as a mandate by Britons to regain some of what their nation
lost to the "collective sovereignty" of the EU28.
Answer: TRUE
21) India, Pakistan, Malaysia, Korea, and Japan have common-law jurisdictions.
Answer: FALSE
22) What will happen if a European Union's competition commission ruled against a company?
Give examples to illustrate your point.
Answer: In fall 2017, the EU's competition commissioner, announced that Amazon would have
to pay €250 million in back taxes after the European Commission ruled that the online giant's
Luxembourg operations had benefited from illegal state aid over a ten-year period. In 2004,
Amazon had shifted certain intellectual property (IP) into a non-taxable holding company in
Luxembourg that collected IP royalties from operations in Europe and then paid the parent
company. The Brussels-based Commission alleged that the arrangement allowed Amazon to shift
as much as three-fourths of its European profits into the holding company, thereby reducing its
tax bill. Under EU law, individual EU states cannot selectively grant tax benefits to some global
companies but not others. Not surprisingly, Amazon denied any wrongdoing. The previous year,
in 2016, the Commission ruled that Ireland had granted Apple illegal tax advantages, and ordered
the country to recover €13 billion in back taxes. Both Apple and Ireland disagreed with the
Commission's findings; Apple CEO Tim Cook called the investigation and the resulting ruling
"total political crap." After Apple refused to pay, the Commission referred the case to the
European Court of Justice.
23) The International Court of Justice (ICJ) is located in:

A) New York.
B) London.
C) Hague.
D) Geneva.
E) Tokyo.
Answer: C
Difficulty: 1: Easy
Chapter LO: 5.2: Define international law and describe the main types of legal systems found in
different parts of the world.
24) What type of international disputes would be taken before the International Court of Justice?
A) disputes between two nations
B) disputes between two companies
C) disputes between a company and a nation
D) disputes between a citizen of one country and a company from a different country
E) disputes between profit and non-profit organizations
Answer: A
Difficulty: 1: Easy
25) What happens if a nation has allowed a case against it to be brought before the ICJ
(International Court of Justice) and then refuses to accept a judgment against it?
A) American Arbitration Association can be sought for justice.
B) UN Conference on International Trade Law can be approached.
C) International Chamber of Commerce will be another source for seeking justice.
D) European Court of Justice can be approached if the country is in the European Union.
E) The plaintiff nation can seek recourse through the United Nations Security Council.
Answer: E
26) The Uniform Commercial Code (UCC) is fully adopted by all U.S. states except:
A) Virginia.
B) North Dakota.
C) Wisconsin.
D) Louisiana.
E) Montana.
Answer: D
Difficulty: 1: Easy
27) The German civil-law tradition prevails in all of the following countries except:
A) Poland.
B) Hungary.
C) Czech Republic.
D) Scandinavia.
E) Germany.
Answer: D
28) Germany has accused the United States of promoting a legal system so complex that it
requires legions of lawyers to interpret it. The U.S. response: German system is outdated.
Answer: TRUE
29) In West Africa, Burkina Faso, the Ivory Coast and Senegal are former French colonies, while
Nigeria, Sierra Leone, and Ghana are former British colonies. Based on this information, which
of the following would be correct?
A) Burkina Faso, the Ivory Coast and Senegal are civil-code countries, while Nigeria, Sierra
Leone, and Ghana are common-law countries.
B) Burkina Faso, the Ivory Coast and Senegal are common-law countries, while Nigeria, Sierra
Leone, and Ghana are civil-code countries.
C) West Africa, the Ivory Coast and Senegal are the only common-law countries.
D) All the West African nations mentioned are likely to be civil-code countries.
E) All the West African nations mentioned are likely to be common-law countries.
Answer: A
30) Islamic law is a comprehensive code based in part on:

A) Anglo-Saxon common law.
B) Roman law and the Napoleonic Code.
C) the Uniform Commercial Code.
D) the Koran.
E) the French Civil Code.
Answer: D
31) Any Western country doing business in Malaysia or the Middle East should have an
understanding of:
A) the French Civil Code.
B) Anglo-Saxon common law.
C) Islamic law.
D) the Uniform Commercial Code.
E) Roman law and the Napoleonic Code.
Answer: C
32) "Sharia" and "haram" are important concepts in civil-code laws, which are commonly
practiced in Middle Eastern countries.
Answer: FALSE
33) The guidelines of Hadith in Islamic law spells out the products and practices that are haram
(forbidden).
Answer: TRUE
34) In Middle Eastern countries, it is common to see that courts handle marriages, divorces,
distribution of family assets, and business practices by the "Sharia" law. What are these tenets
and how do they have an impact on international business?
Answer: The legal system in many Middle Eastern and some Far Eastern countries is identified
with the laws of Islam. These laws are associated with "the one and only one God, the
Almighty." In Islamic law, the Sharia refers to a comprehensive code governing Muslim conduct
in all areas of life, including business. The code is primarily derived from two sources. The first
and foremost source is the Koran or the Holy Book that is a record of the revelations made to the
Prophet Mohammed by Allah (God). The second source is the Hadith which is an interpretation
of Koran based on the sayings and practices of Prophet Muhammad. In particular, the Hadith
spells out the products and practices that are Haram (forbidden) compared to Halal (allowed).
Any non-Muslim doing business in Islamic countries should be aware of the Islamic laws which
have wide implications for commercial activities including advertisement and promotion.
35) Explain, giving examples, as to why "jurisdiction" plays an important role in global
marketing?
Answer: Jurisdiction plays an important role in trade-related disputes. Two examples illustrate
the importance jurisdiction plays in addressing trade-related disputes. One pitted Volkswagen
AG against General Motors. After GM's worldwide head of purchasing, José Ignacio López de
Arriortúa, was hired by Volkswagen in 1992, his former employer accused him of taking trade
secrets. Volkswagen accepted U.S. court jurisdiction in the dispute, although the company's
lawyers requested that the U.S. District Court in Detroit transfer the case to Germany.
Jurisdiction was also an issue in a trade dispute that pitted Eastman Kodak against Fuji Photo
Film. Kodak alleged that the Japanese government had helped Fuji in Japan by blocking the
distribution of Kodak film. The U.S. government turned the case over to the WTO despite the
opinion expressed by many experts that the WTO lacks jurisdiction in complaints over trade and
competition policy.
36) What are the differences between a patent, trademark, and a copyright? What is meant by
counterfeiting?
Answer: A patent is a formal legal document that gives an inventor the exclusive right to make,
use, and sell an invention for a specified period of time. Typically, this invention should be a
new, novel, and/or non-obvious creation. On the other hand, a trademark is defined as a
distinctive mark, motto, device, or emblem that a manufacturer affixes to a particular product or
package to distinguish it from goods produced by other manufacturers. A copyright establishes
ownership of a written, recorded, performed, or filmed creative work.
Counterfeiting is the unauthorized copying and production of a product. An associative

counterfeit, or imitation, uses a product name that differs slightly from a well-known brand but is
close enough that consumers will associate it with the genuine product. The worst form of
counterfeiting is known as piracy, which is the unauthorized publication or reproduction of
copyrighted work. Counterfeiting and piracy are particularly important in industries such as
motion pictures, recorded music, computer software, and textbook publishing. The United States
in particular has a vested interest in intellectual property protection worldwide since it is home to
many companies which have patents, trademarks, and copyrighted materials.
37) When a company invents a product or service, it should have a right to defend its creativity
with intellectual patents. However, there are some countries like Italy and China where piracy
and copyright violations are common. How can a corporation prevent this by having some built-
in measures in products and services?
Answer: Individuals or companies sometimes find ways to exploit loopholes or other unique
opportunities in patent, trademark, and copyrights. A company should take measures to protect
itself from such piracy situations. For many of the technological products, certain codes can be
built into the software program such that it is self-destructive or becomes inaccessible for those
who would like to use piracy. One of the sure safe methods is to make the product or service of
such a quality that it becomes very difficult or expensive for anyone to copy. One such example
can be seen in the formulas of Coke and Pepsi beverages. The product has special features and it
is distributed so cheaply such that there is no money left for the counterfeiters. Similarly,
packages and containers can be made in such a way that it will become expensive or otherwise
technologically impossible to copy. For example, in China, Budweiser cans have fluted edges
that are difficult to manufacture. Thus, there can be some inherent qualities or manufactured
processes which can make it difficult, if not impossible, to duplicate.
38) Nippon Paper Industries was found guilty in a U.S. court of conspiring with other Japanese
companies to raise fax paper prices in the United States under the antitrust laws. What are the
implications of such a law, and how does it affect international business?
Answer: Antitrust laws in the United States and other countries are designed to combat
restrictive business practices and to encourage competition. Agencies such as the U.S. Federal
Trade Commission, Japan's Fair Trade Commission, and the European Commission enforce
antitrust laws. According to some legal experts, the pressures of global competition have resulted
in an increased incidence of price-fixing and collusion among companies. The Sherman Act of
1890 prohibits certain restrictive business practices, including fixing prices, limiting production,
allocating markets, or any other scheme designed to limit or avoid competition. The law applies
to the activities of U.S. companies outside U.S. boundaries, as well as to foreign companies
conducting business in the United States. Nippon Paper Industries was found guilty in a U.S.
court of conspiring with other Japanese companies to raise fax paper prices in the United States.
The Japanese government denounced the U.S. indictment as a violation of international law and
Japan's sovereignty. A U.S. federal judge struck down the indictment, ruling that the Sherman
Act does not apply to foreign conduct. However, a federal appeals court reversed the decision.
39) A formal legal document that gives an inventor the exclusive right to make, use, and sell an
invention for a specified period of time is known as a:
A) patent.
B) copyright.
C) trademark.
D) trade secret.
E) trade dress.
Answer: A
Difficulty: 1: Easy
Chapter LO: 5.3: Understand the most important business issues that can lead to legal problems
for global marketers.
40) Engineers at a company in a developing country study an American computer chip design,
copy it, and produce identical chips that are then sold to local computer makers. What form of
intellectual property has been wrongly appropriated?
A) patent
B) copyright
C) trademark
D) trade secrets
E) technological
Answer: A
41) Counterfeiting is:

A) the use of a formal legal document for illegal purposes.
B) the ownership of a written, recorded, performed or filmed creative work.
C) the unauthorized copying or production of a product.
D) the use of a product name that has different meaning than the original brand.
E) the use of a distinctive mark of a brand that is no longer producing the original brand.
Answer: C
42) The unauthorized publication or reproduction of copyrighted work is referred to as:
A) associative counterfeit.
B) imitation.
C) mistake.
D) trade secrets.
E) piracy.
Answer: E
43) What are some of the challenges facing Amazon related to being dominant in online
retailing?
Answer: There have also been calls on both sides of the Atlantic for regulators to challenge the
dominance of online retailing giant Amazon. For example, during the 2016 U.S. presidential
campaign, candidate Donald Trump singled out the company for criticism, complaining,
"Amazon is controlling so much." Amazon's admirers point out that, despite or perhaps because
of its size, Amazon is a "consumer first" company that offers low prices on some 400 million
different products. The broader question is whether existing antitrust laws and regulations need
to be revised to reflect the Internet age. Some observers want companies such as Facebook and
Google to be regulated as public utilities!
44) Which of the following would constitute a copyright violation?

A) manufacturing and selling illegal videocassette copies of "Spiderman"
B) manufacturing and selling illegal copies of Levi jeans
C) printing and selling illegal copies of Harry Potter books
D) A, B, and C are copyright violations.
E) A and B are copyright violations.
Answer: D
45) In accordance with GATT, new U.S. patents are granted for a period of ________ years from
the filing date.
A) 10
B) 17
C) 20
D) 27
E) 30
Answer: C
Difficulty: 1: Easy
46) Companies such as Caterpillar have been unable to protect critical innovations in Japan
because:
A) products very similar to those made by U.S. companies can be patented without fear of
infringement.
B) the Japanese government enforces strict control over infringement rights for security reasons.
C) inventions that are based on software can be easily downloaded.
D) U.S. patent laws now harmonize with those in the EU as well as Japan.
E) patents in Japan are broader than those in the United States.
Answer: A
47) What is the reason behind the formation of the American Innovation Act? What does this Act
address?
Answer: In 2011, the U.S. government overhauled the patent system once again with the
passage of the American Innovation Act. This Act addressed the problem of so-called patent
trolls who file multiple patent applications with the intent of getting large tech companies such as
Facebook, Apple, and Google to pay large sums to settle patent claims. A new entity, the Patent
Trial and Appeal Board, was created to expedite the process of resolving patent infringement
cases. Some observers have noted that the push-back on patent protection has led to a decline of
U.S. investment in life sciences and software.
48) Uber's rapid growth is an example that ________ is gaining traction.
A) digital technology
B) collaborative consumption
C) ride sharing
D) transport convenience
E) tourism
Answer: B
49) All of the following statements are true regarding services provided by Uber except:
A) in Brussels, a court fines drivers who use the service.
B) in London and other major cities, drivers have staged demonstrations claiming unfair
competition.
C) regulators in Germany succeeded in obtaining a temporary injunction banning the service.
D) Uber was banned in the Delhi region after a driver was accused of sexually assaulting a
female passenger.
E) Uber is considered as an "information-society service" in 250 cities where it operates.
Answer: E
50) In 2005, representatives from several wine regions in the United States and the EU signed a
Joint Declaration to Protect Wine Place & Origin. In addition, a Wine Accord signed by the
United States and EU bans the:
A) use of alcohol in public places.
B) purchase of wine from country of origin.
C) misuse of place names by marketers of wine products that do not originate in those places.
D) misuse of labels which do not include the origin of ingredients.
E) use of the word "champagne" on wine made in the United States.
Answer: C
51) Harley-Davidson has applied for federal protection of an unusual form of intellectual
property; the "soul-pleasing rumble" produced by its motorcycles. What type of protection is
Harley-Davidson seeking?
A) copyright
B) trademark
C) license
D) patent
E) trade dress
Answer: B
52) Which of the following statements is correct?

A) The Paris Convention protects patents; the Berne Convention protects copyrights.
B) The Paris Convention protects copyrights; the Berne Convention protects patents.
C) The Berne Convention and Paris Convention are different names for the same thing.
D) Neither the Berne Convention nor the Paris Convention is concerned with intellectual
property.
E) The International Union for the Protection of Literary and Artistic Property is different from
the Berne Convention.
Answer: A
53) Which of the following is true about protection of computer software?

A) Copyright laws protect both the actual code and the idea embodied in the code.
B) Patent laws protect both the actual code and the idea embodied in the code.
C) Patent laws protect the actual code, while copyright laws protect the idea.
D) Copyright laws protect the actual code, while patent laws protect the idea.
E) License protects both the actual code and the idea embodied in the code.
Answer: D
54) Which of the following is true about revised U.S. patent laws?
A) Patents are valid for 17 years after the patent is granted.
B) Patents are valid for 17 years after the patent is filed.
C) Patents are valid for 20 years after the patent is granted.
D) Patents are valid for 20 years after the filing date of the application.
E) Patents are valid as long as the product is manufactured.
Answer: D
55) As part of their alliance relationship, Northwest Airlines and KLM Royal Dutch set air fare
prices jointly and coordinate flight schedules. Normally, such behavior would be considered
harmful to competition, but the U.S. government has granted the two airlines special exemptions
from laws concerning:
A) intellectual property.
B) antitrust.
C) jurisdiction.
D) licensing.
E) arbitration.
Answer: B
56) The European Commission has jurisdiction over European-based companies as well as non-
European ones that generate significant revenues in Europe. If Microsoft applies in Europe, the
Commission has a right to all of the following except:
A) it can block a proposed merger.
B) it can block a proposed joint venture.
C) it can approve with minor modifications.
D) it can demand substantial concessions before granting approval.
E) it can refer serious matters to the UN Security Council.
Answer: E
57) A proposed merger between two Swiss-based global pharmaceutical companies, Ciba-Geigy
AG and Sandoz AG, would be subject to review by regulators from which of the following?
A) European Commission
B) UN Conference on International Trade Law
C) International Chamber of Commerce
D) International Court of Justice
E) none of the above
Answer: A
58) Which of the following actions were approved by the Antitrust Ruling in the United States?
A) acquisition of Honeywell (U.S.) by GE (U.S.)
B) joint venture between music businesses of EMI group (Great Britain) and Washington Post
(U.S.)
C) merger of Sony Music (Japan) and BMG (Germany)
D) merger of WorldCom (U.S.) and MCI (U.S.)
E) merger of British Airways (U.K.) and American Airlines (U.S.)
Answer: A
59) Consten, a French company, had exclusive rights to import and distribute German Grundig's
electronic products into France. One of the competitors started bringing "parallel imports" into
France illegally, importing Grundig products bought from a foreign supplier. Which of the
following does not represent an action taken by different legal bodies?
A) Consten's complaint was upheld by two French courts.
B) The Paris Court of Appeals suspended the judgment of the French courts.
C) The Paris Court of Appeal's judgment was based on a ruling by the European Commission.
D) The European Commission ruled against Consten on the grounds that territorial protection
proved to be damaging to the Common Market.
E) The European Commission ruled that Grundig was in violation of the laws of the Common
Market.
Answer: E
60) OPEC is a cartel, a group of separate companies that collectively:
A) sets prices, controls output, or takes other actions to maximize profits.
B) dictates how other countries should use their products.
C) produces more products in order to beat the competition.
D) conducts activities that are considered illegal in the United States.
E) works on forming a union against management of other companies.
Answer: A
61) Which of the following best describes the legal basis for protection of trade secrets, patents,
and copyrights in the United States?
A) Trade secrets, patents, and copyrights are protected by federal statutes.
B) Trade secrets, patents, and copyrights are protected by state law.
C) Trade secrets are protected by state law, while patents and copyrights are protected by federal
statutes.
D) Trade secrets are protected by federal statutes, while patents and copyrights are protected by
state law.
E) Trade secrets, patents, and copyrights are not protected by any laws.
Answer: C
62) The U.S. Justice Department objected to a recent patent license agreement between S.C.
Johnson & Sons and Bayer AG. The antitrust unit at the Justice department objected to:
A) the duration of the license.
B) the amount of royalties Johnson agreed to pay.
C) Bayer's attempts to circumvent FDA policies.
D) the exclusive nature of the license agreement.
E) the hostile arrangement between Bayer and Johnson.
Answer: D
63) According to Transparency International's Corruption Perceptions Index scores for 2016, the
country which was listed as most corrupt was:
A) Iraq.
B) Uzbekistan.
C) Chad.
D) Afghanistan.
E) Somalia.
Answer: E
Difficulty: 1: Easy
64) The following criminal penalties may be imposed for violations of the FCPA'S (Foreign
Corrupt Practices Act) antibribery provisions except:
A) corporations are subject to a fine of up to $2,000,000.
B) officers, directors, stockholders, employees, and agents are subject to a fine of up to
$100,000.
C) fines imposed on individuals can be paid by their employer or principal.
D) the fines may be much higher, up to twice the benefit sought by the defendant.
E) in addition to fines, there may be imprisonment for up to five years.
Answer: C
65) Patents and trademarks that are protected in one country are protected in another, so global
marketers must ensure that patents and trademarks are registered.
Answer: FALSE
66) To establish ownership of a written, recorded, performed, or filmed creative work, it is

necessary to apply for and be granted a patent.
Answer: FALSE
67) Some legal experts believe that the pressures of global competition have resulted in an
increased incidence of price-fixing and collusion among companies.
Answer: TRUE
68) A key issue is global patent protection for software. Although copyright law protects the
computer code, it does not apply to the idea embodied in the software.
Answer: TRUE
69) Antitrust laws in the United States and other countries are designed to combat restrictive
business practices and to discourage competition.
Answer: FALSE
70) A recent rash of antitrust actions brought in the United States against foreign companies has
raised concerns that the United States is violating international law as well as the sovereignty of
other nations.
Answer: TRUE
71) Trade secrets are confidential information or knowledge that has commercial value, is in the
public domain and for which steps have been taken to keep it secret.
Answer: TRUE
72) Nippon Paper Industries was found guilty in a U.S. court of conspiring with other Japanese
companies to raise fax paper prices in the United States.
Answer: TRUE
73) Formation of a cartel like OPEC, consisting of oil-producing companies, would most likely
be illegal in the United States.
Answer: TRUE
74) According to U.S. laws, there is no restriction on remittances of royalties received abroad
based on the commercial negotiation between licensor and licensee.
Answer: TRUE
75) The TRIPs agreement requires signatory countries to protect against acquisition, disclosure,
or use of trade secrets "in a manner contrary to honest commercial practices."
Answer: FALSE
76) What are some of the criticisms of the Foreign Corrupt Practices Act (FCPA)? Give
examples in support of your answer.
Answer: One of the criticisms of FCPA is that this law does not let a person do indirectly (e.g.,
through an agent, joint venture partner, or other third party) what it prohibits directly. For
example, Rolls-Royce (the aircraft engine manufacturer, not the luxury car brand) is one well-
known company that has run afoul of the anti-bribery laws in the United States and elsewhere.
The UK-based firm has businesses in a variety of sectors, including civil aviation. Its energy
business was sold to Germany's Siemens in 2014 but prior to the sale there was evidence of
multiple offenses that occurred in Brazil, Kazakhstan, Nigeria, and Russia. Rolls-Royce agreed
to pay a $919 million fine to the United Kingdom, the United States, and Brazil. In exchange, the
company was not prosecuted on criminal charges. However, several former Rolls-Royce
employees, charged by the U.S. Department of Justice with conspiring to violate the FCPA,
pleaded guilty.
AACSB: Analytical thinking
77) In the United States, the Foreign Corrupt Practices Act (FCPA) is a legacy of the Watergate
scandal during Richard Nixon's presidency. Administered by the Department of Justice and the
Securities and Exchange Commission, the act is concerned with disclosure and prohibition. What
is this law concerned with, and why is it a subject of criticism by many?
Answer: The act concerns disclosure and prohibition. The disclosure part of the act required
publicly held companies to institute internal accounting controls that would record all
transactions. The prohibition part makes it a crime for U.S. corporations to bribe an official of a
foreign government or political party to obtain or retain business. Payments to third parties were
also prohibited when they can be channeled to some related official as a bribe. Some critics of
the FCPA feel strongly that this act is a sort of regrettable display of moral imperialism. The
problem is the extra-territorial extension and sovereignty of U.S. law. To impose U.S. laws,
standards, values, and mores on American companies and citizens worldwide is considered
wrong. A second criticism of the FCPA is that it puts U.S. companies in a difficult position vis-
à-vis foreign competitors. It is perceived that the act adversely affects U.S. businesses overseas.
Bribes offered by non-U.S. companies are considerable and can provide a competitive advantage
to other companies.
78) What should a U.S. company do if competitors are willing to offer a bribe for business in a
foreign country?
Answer: Managers have to realize the fact that bribery is a fact of life in world markets. It is not
going to change overnight or based on how ethical the U.S. companies feel about their business.
In fact, bribery payments are considered a deductible business expense in many European
countries. Two alternative courses of action are possible. One is to ignore bribery and act as if it
does not exist. This may be a very hard option. The other is to recognize the existence of bribery
and evaluate its effect on the customer's purchase decision, in other words, treating it as just
another element of the marketing mix. The overall value of a company's offer must be as good
as, or better than, the competitor's overall offering, including bribe. If possible, a lower price, a
better product, a better distribution system, or better advertisement/promotion can be undertaken
to beat the competition. The best line of defense is to have a product or service that is superior to
that of the competition, whether a bribe is included or not. Thus, a bribe should not be a factor
that will sway the purchase decision.
79) When companies operate abroad in the absence of home-country legal constraints, the best
choice for ethical conduct would be:
A) to ignore bribery and act as if it does not exist.
B) to maintain home-country ethics worldwide with no adaptations.
C) to abandon any attempt to maintain company ethics.
D) to have a product that is clearly superior to that of the competition.
E) to adapt in varying degrees to local customs and practices.
Answer: D
Chapter LO: 5.4: Describe the available alternatives for conflict resolution and dispute
settlement when doing business outside the home country.
80) The United States has more lawyers than any other country in the world and is arguably the
most litigious nation on earth. This is a reflection of:
A) the lack of class action lawsuits.
B) the low-context nature of the American culture.
C) the lack of spirit of confrontational competitiveness.
D) the fact that lawyers cannot undertake cases on contingency fee basis.
E) the fact that conflicts arise more in the United States.
Answer: B
81) Which of the following is true of the arbitration framework created by the New York
Convention?
A) Signatory countries can require parties to an arbitration agreement to actually use arbitration.
B) Signatory countries recognize and can enforce arbitration judgments.
C) There are limited grounds for appealing arbitration decisions.
D) The grounds that are recognized are different than the typical appeals that are permitted in a
court of law.
E) all of the above
Answer: E
82) Denmark ranks highest in bribery as listed by the Corruption Perceptions Index (CPI) by
Transparency International in 2016.
Answer: FALSE
Difficulty: 1: Easy
83) If an American businessperson pays a Russian customs agent a $20 cash "processing fee" to
avoid delay in leaving Russia, the businessperson has violated the Foreign Corrupt Practices Act
(FCPA).
Answer: FALSE
84) Under the Alternative Fines Act, fines imposed on individuals can be paid by their employer
or principal.
Answer: TRUE
85) In December 2012, U.S. President Barack Obama signed the Russia and Moldova Jackson-
Vanik Repeal and Sergei Magnitsky Rule of Law Accountability Act. What does this law entail
and how does it affect Russia-U.S. relations?
Answer: The first part of the law normalizes trade relations with Russia and Moldova by
repealing Jackson-Vanik, a law dating back to mid-1970s. At that time, the Soviet Union was a
non-market economy and restricted the right of its citizens to emigrate abroad. Jackson-Vanik
denied most-favored-nation trading status to any country that blocked emigration rights.
However, the Soviet Union broke apart in 1991, Russia has transitioned to a market economy,
and today its citizens are free to travel abroad and emigrate. Moreover, Russia joined the World
Trade Organization in 2012. For these reasons, Jackson-Vanik is no longer relevant.
The second part of the law is concerned with civil rights issues in Russia at the present time.
Sergei Magnitsky was a Russian lawyer who uncovered evidence that Russian government
officials had stolen $230 million in tax payments made by the Heritage Capital Management
investment firm. When Magnitsky went public with his allegations in 2008, he was arrested. The
law calls for the U.S. government to identify by name Russian officials believed to be complicit
in Magnitsky's death; those persons will not be allowed to enter the United States and any assets
held in the United States have been frozen.
86) A company stands a better chance of having an international arbitration decision upheld if its
home-country government has signed:
A) the Paris Convention.
B) the Prague Convention.
C) the New York Convention.
D) the Vienna Convention.
E) the Geneva Convention.
Answer: C
Chapter LO: 5.5: In general terms, outline the regulatory environment in the European Union.
87) Italy recently introduced the Reguzzoni-Versace Law, which is intended to regulate trade in
textiles, leather, and footwear. All of the following statements pertaining to the law are correct
except:
A) at least four stages of production should occur in Italy for the product to be labeled as "Made
in Italy."
B) the countries in which the remaining production stages took place must be identified.
C) Brussels objected on grounds that the law conflicts with restrictions provided by the European
Union.
D) EU regulators view the law as "protectionist."
E) the law is more stringent than the existing laws where only one production stage has to occur
in the country of origin.
Answer: A
88) The University of Florence in Italy was sued by a lecturer from Belgium on grounds of
discrimination. The case would go on to the European Court of Justice (ECJ), which would make
a ruling based on Italian laws.
Answer: FALSE
Difficulty: 1: Easy
89) In France, laws forbid the use of foreign words such as le weekend or le marketing in official
documents.
Answer: TRUE
90) Italy recently introduced the Reguzzoni-Versace Law which states that if at least two stages
of production—there are four stages altogether—occur in Italy, a garment can be labeled "Made
in Italy."
Answer: TRUE
91) In most of the European Union countries, the influence of regulatory agencies is pervasive.
What steps will be necessary of a corporation to protect business interest and advance new
programs?
Answer: Executives of companies who would like to go global should realize that the influence
of regulatory agencies worldwide is getting very pervasive. One way to understand the operation
and legal aspects related to business environment is to have permanent representation of the
company in the country. International companies such as McDonald's, Nike, and Toyota have
several people representing their interests to the European Commission. Companies hire several
lobbyists to represent their interests as well as to influence the direction of the regulatory
process. U.S. law firms and consulting firms also have sharply increased in number and can be
seen having offices in Brussels. This way they can gain insight into EU politics and have access
to its policymakers. It may also be possible to hire local people as official representatives of the
companies. It is estimated that currently there are 15,000 lobbyists in Brussels representing about
1,400 companies and nonprofit organizations from around the world.

Chapter 5 The Political, Legal, and Regulatory Environments

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Global Marketing, 10e (Green/Keegan)

Chapter 5 The Political, Legal, and Regulatory Environments

5) Various types of political risk insurance to U.S. companies is provided by:

7) What do value added taxes (VAT) encourage in countries such as China?

9) ________ refers to governmental action to dispossess a foreign company or investor.

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30) Islamic law is a comprehensive code based in part on:

Counterfeiting is the unauthorized copying and production of a product. An associative

41) Counterfeiting is:

44) Which of the following would constitute a copyright violation?

52) Which of the following statements is correct?

53) Which of the following is true about protection of computer software?

66) To establish ownership of a written, recorded, performed, or filmed creative work, it is

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