Corporate law is anything but monolithic. A 10,000-foot view could make it seem as if corporate legislation affects business owners of all stripes in the same ways, but the specific regulatory landscapes of different sectors of the economy are as diverse as the sectors themselves. While an operator in the Formal Wear and Costume Rental industry is not beholden to specific regulation, the Credit Card Issuing industry must remain compliant with the Truth in Lending Act, the Credit Card Accountability, Responsibility and Disclosure Act and other industry-specific laws.
For operators in industries shouldering high and increasing regulatory burdens, legal representation is a must. IBISWorld has identified three sectors with industries experiencing high and growing regulation that could drastically change their landscape going forward. While some, such as the Healthcare and Social Assistance sector, are intrinsically linked with regulation, others, like the Manufacturing sector, have more significant legislative oversight.
Four of the 10 industries in the utilities sector covered by IBISWorld have high and increasing regulation. Lawyers advise companies in the utilities sector on a variety of matters, including determination of utility rates, antitrust issues, mergers and acquisitions, service dispute litigation and compliance with federal and state utilities regulations. A rapidly evolving regulatory climate and changing economic factors have helped bolster demand for legal services from the utilities sector.
For example, law firms have benefited from the Environmental Protection Agency’s new Clean Power Plan (CPP), which was proposed in June 2014 under Section 111(d) of the Clean Air Act. The CCP presents ambitious carbon dioxide reduction targets for each state, including a 30.0% nationwide decrease in carbon dioxide emissions.
This statute has substantially increased the need for legal assistance in the sector, as operators are required to remain compliant with these ongoing emissions targets. Higher compliance costs associated with the CCP have led to the shutdown of some of the coal-fueled power plants featured in the Coal and Natural Gas Power industry. Filling the void in demand left by these plants has also benefited law firms, as lawyers commonly advise utilities companies on the certification of new power plants and transmission lines run by the Electric Power Transmission industry.
Rate compliance is another area that will provide added revenue for law firms specializing in the utilities sector moving forward. The generation and transmission of electric power is regulated by the Public Utilities Regulatory Policies Act. Electric utility companies must provide electricity at applicable lawful rates and must file rate schedules with the Public Service Commission. Sometimes these rates are challenged and administrative hearings are held to allow utilities to petition for rate increases. There has been an elevated level of activity in this area in recent years, as increased costs driven by environmental compliance and renewable generation mandates have caused more companies to push for rate hikes.
The manufacturing sector contains an array of industries and law firms generally advise manufacturers on key regulatory issues, including intellectual property rights, federal and state product standards, inspection and compliance issues. Of the 60 manufacturing industries covered by IBISWorld, about one-fourth have high and growing regulation and the majority have high and steady levels.
Over the past five years, law firms have benefited from steady growth in demand for intellectual property legal services, which has been closely tied to the 3.1% annualized increase in research and development expenditures over the past five years. As manufacturers increasingly invest in new products, these companies commonly consult attorneys, to ensure that these products do not infringe on existing patents. Industry attorneys are also often involved in drafting and filing patents, copyrights and trademarks, and an increase in new product developments naturally raises the likelihood of patent infringement disputes. More specifically, demand from patent-intensive industries such as the Medical Device Manufacturing industry and Brand Name Pharmaceutical Manufacturing industry have grown strongly in recent years. Operators in these industries vigorously enforce intellectual property regulations and patents, as proprietary technologies provide a source of critical advantage over the competition.
Medical device and pharmaceutical manufacturers are also subject to numerous regulations by government agencies and international groups, most notably the Food and Drug Administration. Medical device manufacturers also hire outside legal counsel to help determine whether 510(k) or Premarket Approval applications are necessary. The 510(k) process requires industry participants to demonstrate that a new medical device they intend to market is substantially equivalent to a medical device first marketed before May 1976. As existing medical devices are rapidly being altered, updated and improved upon, law firms help manufacturers determine whether such changes warrant 510(k) clearance.
Health Care and Social Assistance sector
The Health Care and Social Assistance sector consists of a number of treatment centers and social aid industries. IBISWorld estimates that the sector’s contribution to the economy has grown an annualized 3.5% since 2012, which is significantly higher than overall GDP growth of an annualized 2.1% over the five years to 2017 and marks it as a growth area for the domestic economy. The sector has also been a real demand boon for legal experts, as the constantly updating compliance guidelines related to public policy, insurance coverage and subsidization compels a high need legal representation.
Regulatory changes have been the primary driver of legal demand growth in this sector in recent years. An aging population has burgeoned demand for healthcare services, but the implementation of the Patient Protection and Affordable Care Act (PPACA) and the associated increase in the number of insured Americans have drastically shaken up how healthcare operates. With more citizens covered by insurance, patient visits grew and the Primary Care Doctors and Specialist Doctors industries experienced growth. Accompanying increases in coverage have caused uncertainty about reimbursement rates for Medicare and Medicaid patients. Legal assistance is necessary to make sure that doctors and the Hospitals industry are being fairly compensated for their services and dispute issues in payment. Additionally, these healthcare providers need lawyers to oversee the implementation and operation of Accountable Care Organizations, challenge issues regarding penalization from excessive readmission rates and ensure compliance with treatment quality regulations.
This legislation has been the law of the land for years, but industries are still adapting to the changes it has caused. With a growing insured population, the number of establishments in this sector has risen, expanding pool of potential clients with high regulatory pressures. However, this establishment growth is not quite certain, but rising legal demand from the sector is all but guaranteed. The possible repeal and replacement of the PPACA with the American Health Care Act would present an entirely new set of regulatory changes and affected industries will likely lean heavily on legal experts to navigate the shifting tide.