Before we proceeded, I'd like to add a few words to what we talked about in the previous episodes when we studied antitrust regulation. And I would, here, provide some measures or guidelines that have been prepared for the companies to assess the concentration in a certain industry. I'm not putting much focus on that, because these are formal, just to you to have an idea about that, because right now, much more informal measures are being used. The measure of concentration historically was the so-called HHI that stands for Herfindahl-Hirschman index, that is just the sum of market shares squared and those are measured in percentage points and guidelines are as follows. If HHI is less than 1,000 then the industry is thought to be a low concentration industry. For example, if we have 20 companies and they have five percent each, then the index will be five squared times 20, 500 if the index is between 1,000 and 1,800, well, for example, it's like eight companies we're at 10 percent rate squared and then two companies, and two companies we have the remaining well this is 80 percent, and that one company we have just 20 percent, and that gives you 1,200 so that falls right here, and that industry is thought to be sort of medium concentration industry. And then finally, if HHI exceeds 1,800 that is thought to be a high concentration industry. For example, if there are four companies and each has a 25 percent market share then this is 625 and we arrive at 2,500. Well, this measure is highly mechanical if you will, because right now when will it in the world of Major IT giants some of them may have a market share that exceeds 50 percent sometimes even higher. And although by these guidelines they have to be treated as extremely high concentration histories, but still, sometimes, better logic is applied and if these companies they still provide much better services than anyone else and although they technically speaking may be treated as monopolies, but they do not produce adverse effect on the market and therefore, these are just for the information and again, that brings us logically to the next topic of this episode and we know that when we talked about antitrust the main idea was to avoid monopolization, because this is bad for the market by the same token other pieces of legislation that we will discuss in just a moment. They're aimed at another very important topic which is linked to that, how we can protect investors or market participants of that, for this will reason that can't protect themselves. Remember we dealt with that back in our first course about capital markets, when we talked about deposit insurance, for example. We said that the deposit insurance is aimed that protection of the weakest, of the smallest investors, while the big guys of people who have deposits or assets that count and millions and millions of dollars they're supposed to be able to protect themselves. Now, so here, we, first of all have to recall securities laws, we have some idea about that and here we talked about registration and in general I would say protection, securities. We talk about capital markets for us about various regulatory guidelines and laws that govern this. But again, the idea is that you cannot issue securities the way that may be harmful for the majority of investors. Now the next thing, I would add some of that is tender offer regulation, so this is closer to our topic and here we have to first of all, recall the Williams Act 1968. Now, Williams Act basically talks about more information disseminated to the public, then it talks about the minimum length of the offer so that people cannot be, cannot be found in a situation when they say, "Well, we just realize what is going on but it's a day after a fair." So, there must be some time period over which the people can make a decision. And basically, it specifically allowed the targets to sue bidders in case that these bidders they commit something wrong. Now, all of that must be demanded by two other very strong acts that deal with potential abuses in this market that are somewhere in between securities and M & As. And this is, first of all, Insider Trading Sanctions Act that is 1984, and the key story here is that if you engage in insider trading and you're indicted you haven't committed that, then the plaintiffs can sue you for triple damages. So, that's really very strong and it must be added to that the famous RICO Act of 1970. RICO stands for Racketeer Influenced and Corrupt Organizations. Here, not only winning plaintiffs are entitled for triple damages but also for assets seizure. So basically, if you're indicted of having committed the crime under the RICO Act, you may be really crashed. The famous case when Michael Milken was sued by plaintiffs, that happened under the RICO Act. So, he went to jail and also his company actually faced big damages. So, that is basically what we know about this and now its time to say a few final words about, so we talked about laws. Now, just other regulatory issues, again the idea here is as follows. You must do something in the corners of certain guidelines. If you fail to do so, then we go back to the previous pages of a slip chart and you can be sued on the grounds of some of these acts. So first of all, we deal with disclosure, so you have to provide certain information and you cannot afford to lie. Now, there are clearly some regulatory bodies that watchful that, then also there is another dimension like I said it's international both antitrust and other related laws and there's one more thing that we thought in much greater detail close to the end of this course. But now we mentioned that, this is corporate governance issues. We will see that, that is all aimed at protection of small investors and protection of minority participants. So, in our jargon of the weakest. Now, and there are some challenges to the regulatory environment that are observed right now in recent years. So these challenges include, I would put it like fake news because this area is extremely delicate so you can say, "Well, this company is actual lying to its investors." Well, you can prove that this is not true, that takes time and maybe some investors will say, "Well, we'll wait until that's all clarified and the transaction may fall apart." And also now, we see channels like social media and other channels, information channels, I will put it like this. So here, again, anyone can say, can post on his or her face on a page on Facebook say, "Well, something's going wrong here." It may be well fake news is probably tough word, but people might think about that. They have not yet approved, but they doubt something and that in itself may be actually very harmful for the potential transaction success and therefore value creation, oftentimes without any ground. So basically, I would like to say that the key story in the regulation again is protection of the weak and at this angle we have to look at that. In the remaining two episodes of this first week, we will talk about some other issues that are close to regulation namely about some accounting expert aspects and some tax factors that also influence M & A transactions.
