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MGSC05 Midterm Notes
MGSC05 Midterm Notes
The public media claimed that the banks were going to win this proposal, because
they believed that the big players of the economy would make it certain that would
make it pass.
From public policy point of view:
● Many people believed it to be good with merging.
○ Globalization and sovereignty
● The internationalization of banking and economy made it difficult for the 5
big banks to be a player, they needed to merge to become more influential.
● Also makes it difficult for other global players from entering the Canadian
banking market.
NDP (new democratic party) were having problems with the banking sector with the
transaction fees, they would only have the power over them is they are Canadian
banks. As America banks they have other global options.
Tobacco Case
Phillip Morris was the single largest taxpayer and RJR was not far behind. There was
an issue whether the industry should be paying for the healthcare costs, whether it
should be regulated as a drug, to what extent it should be advertised.
Original Deal:
Government got:
● 368B
● No ads with people or cartoon
● Tabacco would not fight FDA regulations
Tobacco got:
● No state lawsuits
● No class action law suits
● Capon individual lawsuits
● FDA would delay regulations
Other:
● $368B for medical care to 50 states that have to pay for patients with lung
cancers in the result of tobacco usage.
● They also agreed to not fight if the FDA wanted to regulate it as a drug, to not
use a cartoon characters to market their product.
● In return, Tobacco received certainty going forward which was important for
the industry. $368B was a lot but they could raise the price per packet by a
little over 60 cents and would recover the loss.
● Demand for Tobacco doesn't change with price, because people are
addicted.
● In effect, the tobacco industry does not do badly with eliminating the cartoon
characters as this was going to be across the board (it's a wash).
How did the deal come to an end?
● The emergence of whistle-blowers (in the 90s)
● There is now something that protects whistle blowing and became a part of
the culture. → Easier for politicians to go after the tobacco industries and
garner votes.
● Tobacco companies denied that tobaccos are addictive → individuals often
lost their lawsuits → saying that it's their choice to smoke
○ Fracture to this argument is that tobaccos causes second hand smoke
those people don't choose to smoke
● The environment become unfavorable for the tobacco industry and their
certainty is no longer guaranteed.
● The attorney general in every state realized that they can sue the tobacco
companies for healthcare expenses:
○ Unlike individual smokers, they don't have a choice and they have to
pay the expenses of healthcare
○ Michael Moore, AG of Mississippi realized that they had a case against
the Tobacco industry
○ In the mid-90s, three things happened:
■ Whistle blowers
■ Second hand smoke
■ Awareness of a new kind of lawsuit
● For the first time, a tobacco company settled to payout a class action suit
instead of going to court/ Liggett Company
● The statement made by the owner was that he was a General of a company
and settled because he knew that he would probably have to payout more if
they had to go to court.
● There was a disunity among the AGs as well:
○ Debate between Michael Moore and Hubert Humphrey III (AG of
Minnesota)
○ They leveraged this agreement and played a good cop/ bad cop
routine with the tobacco industry
○ Humphrey wanted to outright ban the tobacco industry
In April 1997 negotiations began with the CEO of RJR handling the easiest
issue first:
● The negotiations were private at first, then they were leaked to WSJ
● Phillip Morris shares went up by 11%
● People in the market knew that the Tobacco industry was heading into the
time of trouble, the market showed appreciation that the industry was
placing a ceiling on the costs.
● Jack Spitzer’s argument was that cars are more dangerous than tobacco and
he doesn't see why the government regulates tobacco not cars:
○ This didn't work in many factors, one of them being that cars serve a
social benefit to the public versus tobacco
● Burgess made the argument that government won’t create conflicting
policies (i.e., support for the farmers but no support for tobacco)
More reasons why the deal fail apart:
● Since the tobacco company wanted the deal so much, there must be more to
get → federal government came in and blew up the deal
○ Sometimes when the other side is too enthusiastically involved, they
might be getting a better deal than you originally have thought
● Congress did not approve the tobacco deal, instead made its own deal:
New Deal:
Government Got:
● $500B
● No longer be people or animal figures on their packet
Tobacco Got:
● Allow class action lawsuits
● No capon individual lawsuits
● FDA will regulate
In summary, these notes highlight the various concerns and interests involved in
the deregulation of intercity busing in Ontario, including competition,
cross-subsidization, the impact on urban transit, and the role of lobbying and
expert reports in shaping the outcome.
Considerations of Deregulation
1. Small Companies and Local Service: Small companies would operate small
buses tailored to the needs of small towns. Deregulation was seen as a way
to maintain good relations, and it was believed that local companies could
easily serve local communities.
2. Exaggeration by Big Companies: There was a perception that larger busing
companies were exaggerating the threat of deregulation, potentially to
protect their interests.
3. Rural Mayors' Motivations: Some rural mayors supported deregulation
because they governed towns with no bus service. They were indifferent to
the loss of services as they had none to begin with. They felt that regulated
towns had an unfair advantage and were resentful of this situation.
4. Balancing Political Forces: Deregulation created a powerful political force
that opposed the political force supporting regulation. Provincial
representatives for each district, particularly those representing small towns,
played a significant role in shifting the political balance.
5. Convenience and Fewer Stops: Many rural passengers preferred fewer
stops on bus routes, opting to travel from larger city centers. This preference
for convenience was a consideration in the deregulation discussion.
6. Misunderstanding of Regulators' Views: There seemed to be a
misunderstanding of the views and motivations of regulators, which may
have impacted the deregulation debate.
7. Greyhound's Concerns About TW Monopoly: Greyhound expressed
concerns about Trentway Weygar (TW) potentially establishing a monopoly
on the Montreal to Toronto (MTL to YYZ) route. The fear was that TW might
use cross-subsidization to offer lower prices, which could impact
Greyhound's position.
8. New Pitch to Keep Regulator in Toronto: A new proposal suggested
keeping the regulator in small towns while removing it in Toronto. This
proposal seemed to align with the interests of the city.