Authors: Andy C. M. Chen
Abstract: This paper examines how the study of the information asymmetry phenomenon might shape regulatory policies and laws. Using two cases decided by the Taiwan Fair Trade Commission as examples, this paper applies the basic ideas from information economics to establish a uniform framework in competition law that is capable of integrating two seemingly unrelated regulatory issues. Specifically, this paper suggests that the rationale underlying lawyer's ethical codes and the disclosure obligations in the franchise business are in essence a response to the information asymmetry problem existing in both industries. Relying on this observation, this paper further demonstrates why expansive readings of lawyer's ethical codes to ban online legal services and punishing franchisors for failing to disclose information on pre-estimated business expenses are analytically very similar in terms of their competition-restraining potentials. In addition, this paper offers a critical reassessment of the view endorsing the need for more regulations for an increasingly complex world. We argue that what initially appear to be new and unique regulatory issues may originate from the same economic problems addressable by the fundamental principles of competition law.
Keywords: information asymmetry; adverse selection; competition law; lawyer’s ethical codes; franchise; disclosure requirements