Three on Antitrust

D. Daniel Sokol has been blogging up a storm at the Antitrust & Competition Policy Blog. I thought I'd highlight a few things I'd seen there, plus some other sources.

1) The ABA Antitrust Source is out, with a preview of the upcoming Supreme Court term.

2) You can catch the Kirkpatrick Antitrust Conference (on Conservative Economic Influence on U.S. Antitrust Policy) on a webcast that Georgetown is generously providing. (It can also be downloaded via iTunes.)

For a taste of the proceedings, check out my colleague Marina Lao's careful critique of the Supreme Court's 5-4 decision in Leegin. It will be featured in a forthcoming book, Where the Chicago School Overshot The Mark: Effect of Conservative Economic Analysis on U.S. Antitrust (ed. Robert Pitofsky, Oxford Univ. Press).

3) And for some humor, check out a Rockefeller's attack on antitrust, reviewed here by Seth Bloom (Senior Counsel on the staff of the Senate Antitrust Subcommittee).

As Bloom writes,

Rockefeller's Pollyannaish views of the virtues of an unregulated free market, without the intervention of antitrust law, might cheer those who wish to renew the Standard Oil trust, but should be unsatisfying for the rest of us. Anyone who has tried to win an argument over a bill with his or her cable television company, or tried to avoid an "early termination fee" 18 months into a two-year contract with his or her cell phone provider has experienced the market power controlled by a dominant firm with little competition. Anyone who has seen air fares rise when a competing airline exits a market in the face of predatory pricing, or is merged into a dominant carrier, would not be very happy to forego antitrust enforcement. Anyone who has observed what happens to prices when they are controlled by cartels - for example, crude oil in the hands of the OPEC cartel - might not be so willing to dismiss the need to prohibit price-fixing.

What I'm wondering is if Rockefeller will reach out and attack the IP laws next. As James Boyle has argued,

We appear to have a kind of bipolar disorder in our view of the state. When it comes to breaking up high tech monopolies through antitrust, we are deep sceptics. We point out the unanticipated consequences and deadweight losses to state intervention. We say the state is a blundering second or third best to the genius of the market, its efforts to establish limits and quotas will create a mess that even the Invisible Hand cannot sweep clean.

But when it comes to setting up some of those same quotas, limits and monopolies in the first place - in this case, by overly broad intellectual property rights that clog the channels of competition and allow companies to leverage their existing property into a control over tied services - we are much more sanguine. This, after all, is property, not regulation. Here there seems to be an optimism about unintended consequences, a willingness to believe that vague state regulatory schemes have got it right - even when existing market leaders can twist them to prevent challenges to their position. In one view, the state is a bumbling idiot, in the other a scalpel-wielding genius, carving just the right pound of flesh to satisfy our debts to creators without shedding a drop of the blood of competitors and future innovators. Can this be the same state we are talking about?

To Cato's credit, they have questioned some expansive IP laws, and have provided a forum for Boldrin and Levine.

Posted by Frank Pasquale at 06:50 AM | Comments (0) | TrackBack

Global Trends To Mitigate Local Special Interests: India and Antitrust

India has a booming economy and although China gets much of the press regarding new economic power, India is usually mentioned as right behind. Indeed, James Wolfensohn, former head of the world bank, has specifically argued that India and China will return to commanding a large portion of the world’s GDP. Thus when India recently tried to change or update its merger laws, the idea was to improve the law so it would keep pace with the potential for economic growth. The law as intended and the law as passed, however, seem to be quite different. The Deal reports that “The new law requires companies with as little as $126 million of assets in India, even if they are only subsidiary operations, to notify officials there of any acquisition from around the globe. Reporting the merger plans and waiting 210 days before completing the deal would be required even if the target is not located in India and doesn't do any business there.” As such the ABA and several other attorney groups have contacted the Indian government to urge it to change the law which they see as a anticompetitive.

It is entirely possible that the law was not only went “in a different direction during the give and take in Parliament” but reflects some real concerns any developing country will have about corporate law. Those concerns are not clear in the article and should be taken seriously. But taken at face value this situation offers a view of a potential way to see how government may take advantage of international law or at least how global trade can influence the voices in a debate. In one scenario an administration may bow to local interests and protectionist impulses. It may then engage in international deals or even treaties. When the two conflict, the international treaty may demand that the local laws are harmonized and the previous law could change (There are of course many steps and debates to be had over the conflcits between international and domestic law. Still, intellectual property law offers an example of possibly using international norms to achieve one interest group's (i.e. the copyright industry's) objectives). This process is not necessarily laudable as the local interests may be undercut and the democratic aspect of lawmaking comes into question. Nonetheless, it is a way the process may proceed.

Alternatively, it seems that the outside voices may provide more information and perspectives regarding the true ramifications of certain laws. If so, the advantage would be that the government may move slower and have too many compromises based on internal pressures, but international groups indicating how they view the law at least ensures that the government has a better sense of the impact of the law at both the domestic and international levels.

image credit: Indian School of Business from WikiCommons

Posted by Deven Desai at 03:23 PM | Comments (0) | TrackBack

Can Antitrust Accommodate Privacy Concerns?

The proposed Google/DoubleClick merger has provoked a complaint from EPIC and concern from many privacy advocates. EPIC claims that Google's standard M.O. amounts to a "deceptive trade practice:"

Upon arriving at the Google homepage, a Google user is not informed of Google’s data collection practices until he or she clicks through four links. Most users will not reach this page. . . . Google collects user search terms in connection with his or her IP address without adequate notice to the user. Therefore, Google’s representations concerning its data retention practices were, and are, deceptive practices.

One key question raised by the proposed merger is whether privacy concerns like these can be folded into traditional antitrust analysis. Peter Swire argues that they can; he believes that "privacy harms reduce consumer welfare [and] lead to a reduction in the quality of a good or service." I am broadly sympathetic with Swire's aims, but I worry that contemporary antitrust doctrine is too etiolated to encompass his concerns.

First, here is Swire's perspective on how things may change for the worse for consumers after the merger:

Google often has "deep" information about an individual's actions, such as detailed information about search terms. Currently, DoubleClick sets one or more cookies on an individual's computers, and receives detailed information about which sites the person visits while surfing. DoubleClick has "broad" information about an individual's actions, with its leading ability to pinpoint where a person surfs.

If the merger is approved, then individuals using the market leader in search may face a search product that has both "deep" and "broad" collection of information. For the many millions of individuals with high privacy preferences, this may be a significant reduction in the quality of the search product—search previously was conducted without the combined deep and broad tracking, and now the combination will exist.

Initial points of contention here include a) the definition of the products at issue and b) how to weigh the costs and benefits of a merger. The combined company would have different segments of "customers" in a multi-sided market:

1) searchers trying to find sites
2) ad-buyers trying to reach searchers

Swire argues that many people care about privacy, and "[i]t would be illogical to count the harms to consumers from higher prices while excluding the harms from privacy invasions—both sorts of harms reduce consumer surplus and consumer welfare in the relevant market." But the web searcher category not only includes people who care about privacy, but also includes many people who don't care. According to Eric Goldman's work on personalized search, some may even consider the gathering of data about them to be a service. The more information is gathered about them, the more targeted ads to them may become. If you're going to "pay" for a service by viewing ads, you may well be paying less if the ads bear some relation to things you might buy.

So while Swire models advertising and data collection as a cost to be endured, Google/Click is likely to say that "deep and broad tracking" (and the resulting ads) are a service to customers. Swire might respond that individuals hyperbolically discount future privacy protection for small monetary gains in the present, and that public policy should prevent that.

But in my view, privacy might better be considered an "irreducibly social good" than some quantum of enjoyment individuals trade off for money. As Sunstein and Frank suggested in their work on CBA and relative position, given the importance of positional goods in today's society, people who trade off safety/privacy/etc. will likely "outcompete" peers who won't do so. Though their work was inspired by health and safety regulations, its upshot applies equally well to privacy:

When a regulation requires all [individuals to purchase] additional [privacy], each . . . gives up the same amount of other goods, so no [one] experiences a decline in relative living standards. The upshot is that an individual will value an across-the-board increase in [privacy] much more highly than an increase in safety that he alone purchases.

A collective commitment to privacy may be far more valuable than a private, transactional approach that all but guarantees a "race to the bottom."

Can contemporary antitrust accommodate such concerns? Many now believe that consumer welfare only takes into account allocative efficiency. For example, the DOJ was hard-pressed to adequately factor in a basic democratic commitment to diverse communicative channels during many media mergers. The FTC might find it equally difficult to address the political and cultural implications of search engines now.

But what if we shift from thinking of loss of privacy as a "cost" of web searching, to considering it as a reduction in the quality of the product of web searching? Swire quotes National Society of Professional Engineers v. U.S., to validate this consideration:

"The assumption that competition is the best method of allocating resources in a free market recognizes that all elements of a bargain: quality, service, safety, and durability - and not just the immediate cost, are favorably affected by the free opportunity to select among alternative offers" (435 U.S. 679, 695 (1978)). The Merger Guidelines, § 4, specifically mention "improved quality" among the possible effects of efficient market behavior, along with lower prices and new products

Here I think Douglas Kysar's work on the product/process distinction may help Swire's case. Kysar has claimed that consumers should have a right to make choices of products based on how the products are made, not just how well they work. Kysar argues "in favor of acknowledging and accommodating consumer process preferences within theoretical frameworks for policy analysis, given the potential significance that such preferences may serve in the future as outlets for public-regarding behavior."

Admittedly, the valuation problems here might be difficult; how exactly are we to determine how much consumers are willing to pay to avoid privacy-eroding companies? But on the other hand, consider the array of incommensurables already entering into the decisionmaking process: the different markets for "Google/Click"'s products, the weighing of the value of potential new services against the potential diminution in quality of old ones, etc. Perhaps, as Heinzerling and Ackerman suggest in their book Priceless, we should stop even trying to pretend that these decisions can be made on anything approaching a quantitative basis. Or at least acknowledge that the numbers can be cooked in many different ways to produce a desired end result.

Perhaps consumer concerns like the ones Kysar raises can't fit easily into contemporary antitrust analysis. But that might be one reason to establish a regulatory body that could take a more holistic view of the role of search in the contemporary economy--and to suspect any proposals to move from ordinary regulation to antitrust as the sole constraint on business conduct in certain fields.

One final point on the merger's non-privacy implications: In our piece Federal Search Commission?, Oren Bracha and I briefly mention some complexities caused by Google's purchase of YouTube. For example, does Google weight its merger with a company in its ranking algorithm? How well are YouTube's rivals doing in searches on Google for videos? And how will DoubleClick's current rivals do in search results for ad-serving companies after the merger? Just as Google wants the carriers to be open about how they manage traffic, it might be proper for Google to be transparent about exactly how its acquisition of a company affects that company's position in its search results. As Google becomes the centralized clearinghouse of information about us, someone needs to be in a position to watch this watcher.

Posted by Frank Pasquale at 11:00 AM | Comments (0) | TrackBack

Questionable Advice On Net Neutrality

The DOJ Antitrust Division's just-released public comment on net neutrality (available here) has been getting a lot of press. Unfortunately, it appears that the shoddy analysis that Jack Goldsmith saw in the DOJ's torture memos may also be infecting its approach to net neutrality. I just want to raise three worries apparent on a quick read of the document:

1) Pollyanna Prevails: The DOJ document presumes that a laissez-faire approach has done wonders for US broadband access. But just as visitors from Japan and Europe find our cell phones crippled, so too our internet access is lagging. As the WaPo notes, "In sharp contrast to the Bush administration over the same time period, regulators [in Japan] compelled big phone companies to open up wires to upstart Internet providers"--and saw extraordinary results. But (again, on a quick read), I did not see a single reference in the DOJ document on how other countries handle the policy issues the FCC is facing, except for the Canadian Telus dispute (which it called "irrelevant").

2) Shunning the Scholars: From a quick text-search of the document's footnotes, it appears that DOJ fails to reckon with the work of a single one of the following prominent pro-net-neutrality scholars: van Schewick, Economides, Frischmann & Waller, Crawford, or Wu.

van Schewick's work provides an interesting contrast to many of the citations in the DOJ filing:

Barbara van Schewick [argues that there is a] severe threat of discrimination without network neutrality regulation, and that discrimination will reduce application-level innovation. van Schewick's work is not funded by any of the special interests involved in this issue -- nor is it sponsored by the "independent" think tanks that are funded by the special interests involved in this issue.

Even more surprisingly, the DOJ fails to cite the leading legal academic voice against net neutrality, Christopher Yoo.

3) Errant Economism: Economic analysis has its place, and DOJ does cite several economists who claim that network neutrality rules would "skew investment, delay innovation, and diminish consumer welfare." Even if I were to cede that very questionable claim, is that the end of the issue? Economic analysis is one tool among many for evaluating the normative desirability of a policy proposal. Would the DOJ think FCC Commissioner Deborah Taylor Tate out of line for being concerned about sex and violence as she helps craft these rules? A narrow focus on economics does not help us achieve what the DOJ itself admits is the clear "public policy objective here. . . .: a thriving and dynamic Internet capable of meeting the demands of consumers for fast and reliable access to a rich variety of content and applications."

Posted by Frank Pasquale at 10:35 PM | Comments (2) | TrackBack

Pomegranate Juice and the War on Terror

The blogs are abuzz this morning talking about the Times' profile of Stephen Abraham, an Army reserve officer who filed a crucial affidavit in the latest Guantanamo litigation. The article explains Abraham's unique role:

As an intelligence officer responsible for running the central computer depository of evidence for the hearings, he said, he saw many of the documents in hundreds of the 558 cases. He also worked as a liaison with intelligence agencies and served on one three-member hearing panel.

All of which has left Colonel Abraham, 46, a civilian business lawyer who has lately been busy with a lawsuit between makers of pomegranate juice, with a central role in the public debate over Guantánamo. His account has been widely discussed in Congress, the administration and the press. On Friday, a federal appeals court judge took note of it in describing what she said were problems with the Pentagon’s hearing process.

I thought I'd do some digging into that aspect of this story that will interest our non-constitutional readers: why are pomegranate juice sellers suing each other?

PACER searches disposed of the mystery quickly. POM Wonderful LLC v. Purely Juice, Inc. et al., CV 07-2633 (C.D. Ca.) was filed on April 20, 2007. POM lawsuit against Purely Juice alleges that Purely Juice violated the federal Lanham Act (and its state analogue) by falsely marketing its product as "all natural, consist[ing] of 100% pomegranate juice" with "NO added sugar or sweeteners."

Abraham represents Purely Juice. Just a few days ago, his client won an important victory in the case. On July 11, 2007, Judge Christina Snyder denied POM's TRO. The order itself (download the PDF here) is notable for its length and careful attention to the law. POM had independently tested Purely Juice's product, and allegedly found that "it is clear that consumers of 'Purely Juice . . .' are not receiving the nutrients and antioxidant polyphenol health benefits that one would expect from 100% authentic pomegranate juice." [Editorial comment: anytime you are asking a judge to make a claim about “antioxidant polyphenol health benefits” on a TRO, you seem likely to be in for a tough fight.] But, Abraham argued that, basically, the FDA hasn't yet made clear what constitutes 100% pomegranate juice, and it was otherwise compliant with 21 CFR 101.30, regulating percent juice claims. The Court agreed with Abraham. As for the plaintiff’s claim that the “NO added sugar” was misleading, the Court found that there was insufficient evidence to find that defendant had added sugar, accepting Abraham’s defense that "the laboratory results could have been caused by the natural variation in the pomegranate fruit, growing conditions, harvesting, storage conditions or processing conditions." (Notably, this seems like a non-denial denial to me.)

Abraham's good lawyering saved his client a significant chunk of change. According to a declaration filed in the case, Purely Juice has 800,000 bottles in its inventory, each of which retails for $3.79. ($3.79! For juice!)

So what’s the moral here? You can be a busy commercial lawyer and a participant in the great issues of constitutional moment at the same time? Or, perhaps, as various players seek to control the last lucrative, non-commodity, juice market, the great Pomegranate Wars have begun.

Posted by Dave Hoffman at 01:41 PM | Comments (1) | TrackBack

Can Lawyers Afford Not to Play the Rankings Game?

In an article in National Jurist, rankings expert Brian Leiter was quoted as saying that "The more info and the more competing measures there are out there, the less concerned law schools will be about pleasing their U.S. News master." In a different setting, I too have been enamored of a diversity of rankings. I've also hoped that law schools would more formally recognize, say, their top 10% of brief-writers, researchers, or oral advocates, elevating the visibility of those with exceptional skills in areas outside of exam-taking.

However, Leigh Jones reports that there are some costs associated with a diversity of rankings:

By some estimates, law firms have about 200 chances each year to participate in rankings, awards programs or so-called "league table" publications that they hope will distinguish them from the competition. Not only are firms finding their marketing resources stretched thin by the onslaught, but they also say it is getting tougher to wade through the rubbish. "Not a day goes by that I don't come across another one from someone I've just never heard of," said Lloyd Pearson at White & Case.

Pearson is the "communications manager at the 1,907-attorney firm," and "was brought aboard last year to handle the flood of surveys, questionnaires, phone calls and research related to awards and rankings that the firm pursues each year." What happens to firms who can't hire someone to manage the information overload?

Unfortunately, avoiding the rat race may not be much of an option. As law schools learned to their chagrin, an "echo chamber" effect can cause early ratings to become self-reinforcing. This dynamic sheds new light on lawsuits against websites that purport to rank or score lawyers. Plaintiffs may rightly worry that a low initial rating will become a self-fulfilling prophecy, handicapping their chances at getting good cases and thereby pushing them further down the pecking order.

Hat Tip: Eric Goldman.

Posted by Frank Pasquale at 07:04 PM | Comments (0) | TrackBack

RIAA's Turn to Be a Defendant

Matthew Sag has convincingly argued that RIAA's litigation war against downloaders is rational for the industry: it's basically self-financing, as just about every defendant is too terrified of massive statutory damages to put up a fight. But the record industry's declining fortunes may make its court victories Pyrrhic.

Moreover, a scorched earth litigation strategy against infringers is getting less viable as a few defendants fight back. For example, one litigant has found a creative way of subjecting RIAA's tactics to public scrutiny:

Former RIAA defendant Tanya Andersen is now suing the major record labels and the RIAA for negligent and illegal investigation and prosecution. In a thirteen count civil suit filed in Oregon District Court, she alleges that record labels didn’t use properly licensed investigators and violated her privacy.

I'm still waiting for someone to bring the antitrust lawsuit that was forestalled by Bertelsmann's purchase of Napster a few years ago. As Napster-slaying Judge Patel said of the RIAA's distribution strategy then, "These ventures look bad, smell bad and sound bad" from an antitrust perspective.

Of course, given the lassitude of federal authorities, the antitrust case will be hard to make. But I look forward to more privacy challenges. As Sonia Katyal has argued,

recent developments in copyright law. . . have invited intellectual property owners to create extrajudicial systems of monitoring and enforcement that detect, deter, and control acts of consumer infringement. As a result, . . . intellectual property rights have been fundamentally altered—from a defensive shield into an offensively oriented type of weapon that can be used by intellectual property creators to record the activities of their consumers, and also to enforce particular standards of use and expression. . . .

If agencies fail to police these tactics, perhaps only individuals can fight for themselves. But as Bruce Scheier asks, why doesn't the US have a privacy commissioner?

Hat Tip: BoingBoing.

Posted by Frank Pasquale at 10:59 PM | Comments (1) | TrackBack

International Readers' Survey: Antitrust

Daniel Sokol has asked me to link to his post surveying which countries teach antitrust in law school (or equivalent educational institutions). Please comment there if you have information on the topic.

Posted by Frank Pasquale at 07:04 PM | Comments (1) | TrackBack

Google, Google on the Wall. . .

Troubled and don't know what to do with your life? Ask a search engine!:

Eric Schmidt, Google’s chief executive, said gathering more personal data was a key way for Google to expand. . . . "The algorithms will get better and we will get better at personalisation. The goal is to enable Google users to be able to ask the question such as ‘What shall I do tomorrow?’ and ‘What job shall I take?’ ”

Guidance counselors may well go the way of the Maytag Repairman. It reminds me of a recent WSJ article on family "naming strategies" to assure Google-able children:

Attempting to counteract her own anonymity on the Web, Ms. Wilson now goes by "Abigail L. Garvey Wilson" when she publishes scientific papers. And recently she has been running names through search engines in anticipation of the arrival of her second child, a daughter due at the end of this month.

If search engines become the key filter through which we see the world, why not? But it is a little worrisome that they are taking on such importance as the search marketplace gets increasingly concentrated. Consider this piece from the WSJ on Microsoft's acquisition of aQuantive:

The deal . . . follows recent acquisitions of Web-ad companies by Google Inc., Yahoo Inc. and traditional advertising agencies. The emerging consensus: The online-ad market is maturing around an oligopoly of huge companies that sell and place the ads users see online. Placing those ads is increasingly seen as the business model that will fund almost everything on the Internet -- from search portals, news sites and video downloads to Web-based software services such as word processing. (emphasis added)

As far back as 2000, researchers predicted that "some search engines may dominate the search engine market." Admittedly, I have to plead guilty here to contributing to a self-fulfilling prophecy--the more that idea is pushed, the less likely it is that investors will fund potential rivals. But I think it important we realize its implications as search engines take on an ever more important cultural role. Just as Habermas has argued for state support for a quality press to provide alternatives to market outlets, I hope some government or foundation funds a viable open-source and open-access alternative to commercial search portals funded by ads.

Lastly, here's a funny anecdote about a rocker's struggle for name recognition:

A Los Angeles singer-songwriter ... in 2003 abandoned his given name and began going by his initials, "AM." At the time, he was launching a solo career and hoped the approach might help him stand out.

But even as AM began to experience some success, he soon realized that fans had trouble finding him on the Web. Google returned an estimated 2.3 billion results for "AM" -- ranging from American Greetings Corp. (ticker symbol: AM) to AM radio stations and a site called I-Am-Bored.com -- but no links to the long-haired L.A. singer within at least the first 20 pages.

AM titled a first self-released album "AM" -- which didn't help. "How much bad luck can a guy have when he's just blindly coming up with his image and he has no idea what the impact will be down the line?" asks AM, who declines to provide his age or real name.

Should have tried "AM Dawn".

Photo Credit: Flickr/Gegjohnson.

Posted by Frank Pasquale at 02:35 PM | Comments (2) | TrackBack

The XM-Sirius Merger

I've been puzzled as to what to think about the XM-Sirius merger for some time. Josh Wright has done a nice round-up of some interesting leads. James Surowiecki provides what, for me at least, is a killer argument in favor of letting it go ahead:

Many consumers have hesitated to subscribe to satellite because they didn’t know which company would survive. And desirable content is split between the companies: if you want major-league baseball and Bob Edwards, you need XM, but if you want N.F.L. games and Howard Stern, you need Sirius. Allowing Sirius and XM to merge would eliminate this problem in one stroke. And that would significantly increase the competitive pressure on traditional radio stations, perhaps forcing them to abandon their cookie-cutter model. Paradoxically, by reducing choice you could stimulate more diversity. Sometimes, it seems, you can have fewer competitors but more competition.

In other words, the merger appears analogous to standard-setting, which can be "a species of private ordering that [solves] a fundamental dilemma of intellectual property law: the fact that intellectual property rights seem to promote innovation in some industries but harm innovation in others." In other words, at one point we may well have hoped that satellite radio would be an innovation market with two eager rivals battling to control the field. But now that we see that the split of satellite content might kill this infant industry, a better industrial policy is to promote their consolidation (especially if it means undermining the Clear Channel leviathan!).

On the other hand, given that the FCC conditioned their licenses on their pledge not to merge, perhaps consumers who counted on that pledge as a guarantee of competition should at least get some assurance from the companies that they won't raise prices too precipitously upon merging. There seems to be some reliance interest there. On the other hand, such consumers can probably equip their cars with an iPod and cancel their subscription.

Posted by Frank Pasquale at 10:27 PM | Comments (5) | TrackBack