A Conspiracy of Paper-Pushers
posted by David Zaring
Perhaps you have wondered why the money that law school professors pull down is only obvious at certain law schools subject to state cognates of the Freedom of Information Act. Antitrust may be the culprit. Pursuant to a consent decree with the United States resolving a case brought under the Sherman Act, the ABA’s school accreditation committee has, among other things, “agreed to refrain from using law school compensation data and from adopting or enforcing any standards that have the purpose or effect of imposing requirements as to the base salary, stipends, fringe benefits or other compensation paid to law school deans, administrators, faculty, librarians or other employees.”
This consent decree sunsets on June 25, after a ten year run during which a number of new law schools entered the market, and salary data got enshrouded in an aura of mystery. Did the consent decree affect legal education, was it a good thing, and what will happen when it expires?
Antitrust ain’t my raison d’etre. I only wonder – and I confess I only wonder this because of a tip from a colleague – if the law reviews, with their concerted action on article length are going to be the next up against the wall. [ed. Uh, the article length thing isn’t commercial and varies from review to review. Oh really? Each of the eleven law reviews that got the ball rolling on article length signed on to a joint statement, each is “committed to rethinking and modifying its policies,” presumably at the behest of the other ten, and each is “actively exploring how to address” article length in concert with one another. So I recommend against loose talk around Thomas Barnett.]
Anyway, I farmed this one out to an expert. I asked Josh Wright, a prominent and businessey professor blogger, what he thought about the sunset of the ABA accreditation decree, in exchange for an offer to cross-post the result. Here’s what he said:
“The consent decree prohibited activity that was plainly anticompetitive: colluding with respect to faculty salaries and other benefits as well as boycotting non-ABA approved schools. Forcing existing law schools to face competition from schools, even those that offer lower salaries and fewer amenities, can only improve legal education. However, my guess is that the expiration of the decree will not tempt further collusion, because any such attempt would be both highly visible and likely to attract antitrust scrutiny.”
But Josh and I would welcome further thoughts.
March 28, 2006 at 3:01 pm
Posted in: Law School
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Responses (14)
Matt Bodie - March 28, 2006 at 3:26 pm
Thanks to David and Josh for those thoughts. Here are my questions:
(1) I can’t believe that simply collecting and sharing the data would be anticompetitive. There would need to be a sense that law schools had to adhere to some standard in order for antitrust concerns to surface. So is there anything to prevent the collection of data from starting up again?
(2) There’s nothing to prevent the AALS from collecting and disseminating this data, is there?
(3) I would think law schools don’t want this data collected and published. Any reason to think it would start up again, even if it could?
Christine - March 28, 2006 at 4:46 pm
Why wouldn’t law schools be incentivized to compete on price? Law firms seem content to outbid one another for salaries instead of colluding. Law firms could easily collude by gathering the few big employers in a geographic area. Because law schools are usually competing against the other 50 schools in their tier that are spread across the country, collusion would seem to be more difficult.
David Zaring - March 28, 2006 at 5:07 pm
Matt – I think the ABA’s stopped collecting it period, as well as stopping to use the size of faculty salary as a possible accreditation move. I don’t see why AALS couldn’t collect the salary info, but, as the SALT survey suggests, data collection without teeth may not be very reliable.
Christine – Very true – and prices are usually public, right? I don’t know what cascades are supposed to do to pricing, but I could see a dean at rival law school B being delighted to know exactly how much people at law school A make. Wouldn’t necessarily have to be collusion to be copying … but eh – this is something for the antitrust crowd.
Oh, and because they sell law reviews, I guess it could be argued that that’s in commerce too. But enough about then – and huzzah to length limits!
m - March 29, 2006 at 10:08 am
In a hypothetical antitrust action against law reviews for implementing length limits, what would the alleged antritrust injury be? First, what’s anticompetitive about it? Second, what’s commercial about it? Also, could the same action be brought against all peer review journals in all other academic fields, which, to a journal, limit length?
BDG - March 29, 2006 at 10:29 am
Matt, I can’t remember the cases off-hand (I’m pretty sure one was a lumber industry case), but there’s good authority for the proposition that compiling price information can be anti-competitive, in that it facilitates cartelization.
That is, it’s a lot easier to sanction defectors from the cartel when you know who’s defecting. True, there’s always a certain amount of information sharing via customers who demand that you match someone else’s price, but they could be lying. And many defections (usually discounts) are secret. (Note that this is my understanding of the caselaw; I have no real personal views about antitrust economics.)
I know this was an issue for Orbitz, among others.
David Zaring - March 29, 2006 at 11:55 am
It wouldn’t be that anticompetitive because there’s a difference between the market for the review and the coordinated limits on the people submitting content for the review. And see the editorial comments in the post for my considered view. So we’re very much doing a thought experiment here. But I dunno, if a bunch of competitors got together and promulgated uniform standards that their suppliers had to meet, I could see antitrust regulators holding a meeting about it. At the margins, etc. It’s a concern people have with harmonization through ISO standard, etc, right?
m - March 29, 2006 at 2:10 pm
I noticed your huzzah above–just wanted to raise the hypothetical. I’m still not sure what the alleged antitrust injury would be, especially given that the standards are hardly uniform. But even if they were, what’s anticompetitive about them?
David Zaring - March 29, 2006 at 2:57 pm
Hmmm. Putting aside the serious commerce problem, and the precedent for technical coordination among competitors, there’s only the let’s-just-think-it-through point about collaborating with your competitors on specs for articles supplied. Rather than competing with them on all facets of the supply, including the length of the piece. Might keep some long-writing suppliers out of the market, no? But I really must confess that this isn’t my area.
Matt Bodie - March 29, 2006 at 3:03 pm
BDG:
But those are prices, right? Any case involving salaries? Law schools compile and publish their prices.
Matt
Joshua Wright - March 29, 2006 at 4:10 pm
It seems like we have two running hypos, one about an agreement to disseminate law school salaries and the other about law review limit length. No comment on the latter for now, but with respect to the former, here are some thoughts:
Matt: salaries are just prices in the labor market aren’t they? I’m not sure why you think that antitrust law would treat salaries any differently than retail price? I do not believe there is any real debate that antitrust law would condemn an agreement between law firms, or law schools for that matter, to fix salaries.
Of course, you are right that simply compiling and publishing data is not going to be sufficient to trigger a violation. But the ABA case fits exactly the description you raised in your comment (1). It was about not only disseminating this data, but setting standards that law schools should conform with in terms of setting their own salaries and then wielding the ABA-accreditation hammer over those who do not comply with the cartel as a sanction. As BDG points out, the ability to identify and sanction those who would deviate from a cartel is a crucial component of even short-lived cartel success.
Matt Bodie - March 29, 2006 at 4:45 pm
Sure, you can have a conspiracy to set salaries — that’s why the sports unions talk about decertifying to get around the labor law antitrust exemption and sue the leagues. But I guess I’m having a tough time with the economics of the ABA’s involvement. In BDG’s examples, prices are set to create an inflated market price. In the sports examples, wages are capped in order to keep wages low. But the ABA was allegedly setting a floor, not a ceiling. What was the purpose of the floor? To inflate law professors’ salaries? Why would the ABA want to do that? Aren’t most ABA members attorneys, who will have higher law school bills or will have to pay their fellow law firm associates more money to pay their bills?
I guess my point is this. In the other examples, the collusion over price or salary is an end unto itself. Cartels want to keep prices high and wages low. But here the ABA wage floor seems like it’s at best a proxy for other concerns — namely, limiting the number of law schools and keeping out the “riff-raff.” But the ABA does that in dozens of different ways. The ABA accreditation process creates the cartel. And the states have said that the ABA can have that cartel. So focusing on the salary requirement seems a little nit-picky to me — focusing on one of the many trees in the forest.
Joshua Wright - March 29, 2006 at 5:42 pm
As to the question of “why would they do this?” The crux of the complaint was that the legal educators, to use the words of the DOJ’s complaint itself, had “captured the ABA’s law school accredidation process.” The ABA House of Delegates granted authority to the ABA Section of Legal Education to administer the accreditation process — 90% of this Section’s members were (allegedly) legal educators and conspired to increase law professor salaries.
As to the second point, you correctly note that the ABA has dozens of ways to limit competition. Perhaps you will be happy to know that the DOJ’s complaint was not *just* about law school salaries, but also a number of anticompetitive standards and practices? That said, I’m not sure why the price fixing element of the practices is nit-picky? In my view, it seems to be the most natural aspect of the cartel to focus on.
Further, I’m not sure why the fact that the Department of Education grants the ABA the right to control the accreditation process is relevant to the antitrust inquiry. The formation of the ABA itself was not the challenged conduct or agreement. State and local governments grant permits and exclusionary rights to firms that compete in all sorts of industries. This does not mean they may violate the antitrust laws willy-nilly. The ABA sought to create and enforce such an agreement to limit competition in the market for legal education. The antitrust laws are relatively clear (i.e. Engineers) that keeping out the “riff-raff,” who are willing to provide “lower quality” and “lower priced” services or goods is not a valid antitrust justification.
Matt Bodie - March 30, 2006 at 7:51 am
The ABA “capture” makes more sense — ABA members may not want higher law prof salaries, but law profs would. But there are two “cartels” here: profs trying to limit (cheaper) competition from other profs, and the ABA trying to limit the number of law schools and future lawyers. As to the prof cartel, a salary floor helps law profs, although limitations on the number of adjuncts are probably more effective. As to the ABA cartel, I suppose the salary floor does limit the number of law schools, but I still think the ABA has a lot of other tools at its disposal to do that. The whole accreditation process is designed to limit the number of law schools. So when does the ABA cross the line between quality control and restraint of trade?
Joshua Wright - March 30, 2006 at 12:52 pm
Interesting thoughts, Matt. I maintain that there are a few very clear lines that antitrust law imposes on such associations. First, an agreement on salaries is plainly both a violation of Section 1 and anticompetitive. Second, while it is true that the line involving the use of accreditation standards to exclude competitors is a murkier one, there are some cases of purported quality control are also clear violations of Section 1. Back to Engineers, the Supreme Court’s antitrust jurisprudence is clear that “quality control” is not a business justification for an otherwise anticompetitive cartel when such arguments are a pretext for complaints about the competitive process. For example, the ABA Standards required that an accredited law school must be a non-profit educational institution, and had NEVER accredited a proprietary law school.
In other words, consumers of legal education can determine whether these low quality/ lower price law schools should survive. The ABA’s role in assuring quality education by informing consumers is surely immune from antitrust scrutiny. But the DOJ’s complaint was that the ABA’s accreditation process, to quote, “has also focused on salaries, perquisites and other terms and conditions of employment.”
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