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Regulation & Competitive Impact

June 7, 2011

I wrote recently about the challenges created by increasing regulation and the extent to which it can affect national and international competitiveness. When last I commented, it was because of the growing competition between US states to lower regulatory burdens as a way to attract business. Today, I was alerted to the on-going challenges to offshore outsourcing and the way this might affect operational decisions.

AmEx Sued for Forfeiting Customer Rights by Outsourcing to Foreign Nationals Overseas was the headline that greeted me on a brief from Washington D.C. law firm Beins, Goldberg & Hennessey, LLP. The case gravitates around the claim that AmEx has failed to disclose to certain clients their loss of US 4th Amendement privileges as a result of outsourcing financial data management to overseas locations staffed by foreign nationals. Specifically, this means (according to the suit) that customer records become subject to seizure by the US Government, which ‘routinely seizes and searches communications that are received by or sent from foreign nationals’.

Whether or not the case proceeds, it is  an illustration of the complexity being caused by the mass of regulation now impacting international trade and organizational decisions. The extra-territorial reach of much of this regulation has become a significant source of concern. I know of European financial institutions, for example, that are reluctant to do business with US companies offering data services precisely because of the considerations mentioned in this suit.

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