Archive for the ‘Antitrust’ Category
Stanford Law Review Online: The 2011 Basketball Lockout
posted by Stanford Law Review
The Stanford Law Review Online has just published an Essay by William B. Gould IV entitled The 2011 Basketball Lockout: The Union Lives to Fight Another Day—Just Barely. Gould, a former chairman of the National Labor Relations Board, provides a succinct postmortem on the 2011 lockout:
The backdrop for the 2011 negotiations was the economic weapon once regarded as a dirty word in the lexicon of American labor-management relations—the lockout. This economic weaponry, endorsed by the Supreme Court since 1965, became the flavor of the two prior decades; baseball flirted with it in 1990, basketball in 1995 and 1999. One of hockey’s lockouts even resulted in the cancellation of the entire 2004-05 season. The lockout again was utilized in 2011 by recently peaceable football as well as by basketball. The owners gravitated towards the lockout tactic because in the event of strike (protesting changes in conditions in employment, which proved ineffective), players who crossed the union picket line could play and still sue in antitrust simultaneously. The lockout put more pressure on the players to settle. . . . The union now was represented by David Boies, who had only a few months before represented the NFL and successfully deprived that union of its only effective antitrust remedy—i.e., an injunction against the lockout, which would have required the owners to open the camps in early summer. Thus the basketball union now would not pursue the injunction remedy, notwithstanding the persuasiveness of Judge Bye’s dissenting opinion in the football case. Of course, Boies would have met himself coming around the corner if he argued for it in basketball.
He concludes:
Nonetheless, even though the union was stripped of its most effective antitrust remedy, litigation seems to have moved the parties together. It most certainly called the NBA’s bluff, in that the league’s regressive or inferior option was quickly forgotten. True, the NBA obtained givebacks that are estimated to be worth more than $300 million. Not only did it win on revenue sharing with the players—the players will possess between 49% and 51% as opposed to 57%—but more stringent luxury tax penalties for violators also have been instituted. As National Basketball Players Association Executive Director Billy Hunter said, the latter element constitutes the “harshest element of the new system.” At the same time, guaranteed contracts were preserved, restricted free agents will benefit from the reduction of the so-called “match period” when teams may match competing offers from seven to three days, which may encourage bidding on these players. The cap remains soft in that the so-called incumbent “Bird” players (named for Celtics superstar Larry Bird) may exceed the cap and have more expansive increases and lengths of contracts than other players. A so-called “amnesty” for bad contracts was permitted, in that even though the contracts must be paid, a player on each club may be waived and his salary not counted towards his team’s cap. What appeared to be a rout of the players in November emerged as a reasonable face-saving compromise.
Read the full article, The 2011 Basketball Lockout: The Union Lives to Fight Another Day—Just Barely by William B. Gould IV, at the Stanford Law Review Online.
Note: Updated quotation.
January 25, 2012 at 1:34 pm
Tags: Antitrust, labor law, lockout, NBA, professional sports, strike, unions
Posted in: Antitrust, Current Events, Law Rev (Stanford), Supreme Court
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Expensive Glasses: Monopol-eye?
posted by Frank Pasquale
Why are eyeglasses so expensive? Take a listen to this podcast. If you’re like me, you’ll learn a lot about how to save on your next pair. And there’s a lesson or two about the failures of contemporary antitrust law. Finally, it mentioned a company called WarbyParker.com, which apparently not only has reasonable prices, but also gives away a free pair to the needy for every pair it sells.
September 23, 2011 at 9:56 am
Posted in: Antitrust
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Health Reform and Accountable Care Organizations
posted by Frank Pasquale
Critics of the ACA have frequently complained that the legislation does not do enough to improve quality or to cut costs. However, the Act did create incentives for new alliances of hospitals and doctors, known as “Accountable Care Organizations.” Now provider lobbies are demanding some pretty dramatic changes to health care regulation in order to implement ACOs. In this post, I want to explain what ACOs are, and why they challenge traditional health care regulatory models.
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November 22, 2010 at 12:28 pm
Posted in: Administrative Law, Antitrust, Health Law
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Future of the Internet Symposium: Preserving Open Space for User Innovation
posted by Salil Mehra
First off, thanks to Concurring Opinions and Danielle Citron for hosting this online symposium on Jonathan Zittrain’s The Future of the Internet – and How to Stop it. Before I launch into my own thoughts, I want to add my own version of the praise that the book has already won. It is an immensely readable work that succeeds in showing us where we’ve been, how we got to where we are, and the steps to take to avoid going where we’d rather not be.
I have three brief points, involving a comparison with Japan, some thoughts about competition, consumer protection and innovation, and finally, a somewhat different take on the lessons of Wikipedia.
This symposium is incredibly timely, particularly given the concern in recent weeks about the Google/Verizon agreement. In TFOTI, Zittrain highlights the risks that threaten the Internet’s future, and explains how the net neutrality debate is in some ways a mismatch for those risks. For example, he points out that the migration from the Internet to, in his words, tethered appliances like the iPhone and TiVo, ultimately provide an end-run around net neutrality on the Internet (pp. 177-185). Accordingly, he argues that preserving generativity is a better-tailored principle.
The lead in The Economist this week also takes on the Google/Verizon agreement, and critiques net neutrality from a different angle calling America’s “vitriolic net-neutrality debate” “a reflection of the lack of competition in broadband access.” If you’re reading this symposium, you probably already know, possibly because you read this, that in many other industrialized countries incumbent telcos were forced years ago – and not just in a superficial way – to open up wholesale broadband to competitors.
I’m in Tokyo this academic year thanks to Temple’s long reach across the globe and to my gracious hosts at Keio University Law School. I’ve been travelling to Japan repeatedly since the late 1980s, and one of the changes I’ve been struck by is how a country that in the 1990s was generally held to be well behind the U.S. in telecommunications now seems ahead in broadband and mobile Internet. Read the rest of this post »
September 7, 2010 at 7:32 pm
Posted in: Antitrust, Consumer Protection Law, Cyberlaw, Intellectual Property, Symposium (Future of Internet), Wiki
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On the Colloquy: The Credit Crisis, Refusal-to-Deal, Procreation & the Constitution, and Open Records vs. Death-Related Privacy Rights
posted by Northwestern University Law Review
This summer started off with a three part series from Professor Olufunmilayo B. Arewa looking at the credit crisis and possible changes that would focus on averting future market failures, rather than continuing to create regulations that only address past ones. Part I of Prof. Arewa’s looks at the failure of risk management within the financial industry. Part II analyzes the regulatory failures that contributed to the credit crisis as well as potential reforms. Part III concludes by addressing recent legislation and whether it will actually help solve these very real problems.
Next, Professors Alan Devlin and Michael Jacobs take on an issue at the “heart of a highly divisive, international debate over the proper application of antitrust laws” – what should be done when a dominant firm refuses to share its intellectual property, even at monopoly prices.
Professor Carter Dillard then discussed the circumstances in which it may be morally permissible, and possibly even legally permissible, for a state to intervene and prohibit procreation.
Rounding out the summer was Professor Clay Calvert’s article looking at journalists’ use of open record laws and death-related privacy rights. Calvert questions whether journalists have a responsibility beyond simply reporting dying words and graphic images. He concludes that, at the very least, journalists should listen to the impact their reporting has on surviving family members.
September 5, 2010 at 1:15 pm
Tags: Antitrust, Constitutional Law, copyright, discrimination, financial crisis, free speech, Intellectual Property, Privacy, trademark
Posted in: Antitrust, Bioethics, Civil Rights, Constitutional Law, Corporate Finance, First Amendment, Intellectual Property, Privacy, Securities, Securities Regulation
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Here Comes FinReg
posted by Frank Pasquale
Via Ezra Klein’s Wonkbook (definitely one of my favorite morning emails), a variety of takes on what’s in the financial reform bill:
1. From Deloitte’s 12-page summary:
Because the new U.S. law is complex, it can be helpful to remind ourselves that its underlying purpose is relatively simple and has two powerful strands: 1. ‘De-risk’ the financial system by constraining individual organizations’ risk-taking activities and capturing a broader set of organizations’, including the so-called “shadow” banking system, in the regulatory net 2. Enhance consumer protections. . . .For example, the need for “arm’s-length” swap desk affiliates combined with the move from over- the-counter to exchange trading for derivatives, tighter constraints on leverage and risk-taking, and higher liquidity requirements imply lower profit margins in future from those activities.
Some estimates I’ve seen have estimated the profit margins might be around 15% lower.
2. Simon Johnson on the Kanjorski Amendment as a “new kind of antitrust:”
Effective size caps on banks were imposed by the banking reforms of the 1930’s, and there was an effort to maintain such restrictions in the Riegle-Neal Act of 1994. But all of these limitations fell by the wayside during the wholesale deregulation of the past 15 years. Now, however, a new form of antitrust arrives – in the form of the Kanjorski Amendment, whose language was embedded in the Dodd-Frank bill. Once the bill becomes law, federal regulators will have the right and the responsibility to limit the scope of big banks and, as necessary, break them up when they pose a “grave risk” to financial stability.
July 15, 2010 at 9:42 am
Posted in: Antitrust, Consumer Protection Law, Corporate Finance, Corruption, Current Events, Economic Analysis of Law, Securities, Securities Regulation
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Breaking Up Behemoth Banks
posted by Lawrence Cunningham
Thanks to banking industry mistakes and government’s orchestration of its rescue, the country now has ten banks that together command some $10 trillion in assets, roughly equal to nearly 70% of the country’s gross domestic product. Pending legislation would break those up into a total of about 36, each still commanding about $285 billion in assets apiece—larger than the next largest bank is now.
That break up would eliminate the continuing threat to the US economic and political system posed by banks deemed so big that government lavishes trillions in aid to avoid letting them fail—at enormous cost to ordinary citizens and the real economy. It is by far the cleanest and most reliable solution to the manifest havoc massive banks wreak, not addressable by any pending technocratic tinkering like better regulation or capital requirements.
The break-up idea is not as radical as it is controversial, due to foes of ex ante legal constraints on private power. All passage of the legislation would mean is substantially a return to the scale and distribution of the US banking system as of the mid-1990s, when no bank commanded assets exceeding more than a few percent of GDP. In important part, as the lists below suggest, the conglomerate mergers of the past two decades that caused this massive concentration of economic and political power would be reversed. Read the rest of this post »
May 5, 2010 at 1:49 pm
Posted in: Antitrust, Consumer Protection Law, Corporate Finance, Current Events
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Banks, Bankers, and the New Political Economy
posted by Frank Pasquale
As post-mortems of the financial crisis proliferate, it’s helpful to keep an eye on some foundational causes. Michael Lewis recently commented that “the people who squandered the most money paid themselves the most”—and continue to do so. We’ve all heard about agency problems, but rarely are they as crisply illustrated as in this post by James Kwak:
[The hedge fund] Magnetar made the Wall Street banks look like chumps. [In] one deal . . . Magnetar put up $10 million in equity and then shorted $1 billion of AAA-rated bonds issued by the CDO. It turned out that in this deal, JPMorgan Chase, the investment bank, actually held onto those AAA-rated bonds and eventually took a loss of $880 million. This was in exchange for about $20 million in up-front fees it earned.
But who’s the chump? Sure, JPMorgan Chase the bank lost $880 million. But of that $20 million in fees, about $10 million was paid out in compensation (investment banks pay out about half of their net revenues as compensation), much of it to the bankers who did the deal. JPMorgan’s bankers did just fine, despite having placed a ticking time bomb on their own bank’s balance sheet. Here’s the second lesson: the idea that bankers’ pay is based on their performance is also hogwash. (The idea that their pay is based on their net contribution to society is even more absurd.)
I was recently at a conference on “Too Big to Fail” banks organized by Zephyr Teachout, and several experts explained how the tail of massive compensation was wagging the dog of societal capital allocation. William K. Black‘s theory of “control fraud” is one of many efforts to illuminate the persistent conflicts of interest between banks, bankers, and investors, but one needn’t designate any of these conflicts “fraudulent” in order to see how socially destructive they have become. Rather, pulling back to see the big picture—from the lens of political economy—illuminates the key drivers of the crisis. As Kwak notes, “the crisis was no accident: it was the result of the financial sector’s ability to use its political power to engineer a favorable regulatory environment for itself.” Thinkers across the political spectrum—from Kling to Kuttner—can recognize the critical role of political connectedness in driving bankers’ compensation.
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April 13, 2010 at 11:42 pm
Posted in: Antitrust, Corporate Finance, Current Events, Economic Analysis of Law, Philosophy of Social Science, Politics
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Me, Justice Stevens, and the Dublin Marathon
posted by Spencer Waller
Here is a sentence I never expected to write. So there I was on Monday in the middle of running the Dublin Marathon when I decided to listen on my Ipod to a C-Span podcast interview with Justice Stevens. I had traveled to Dublin to run the actual Dublin marathon and to co-host Antitrust Marathon IV: Marathon with Authority, a round table discussion co-hosted with the British Institute of International and Comparative Law and the Irish Competition Authority.
Around Mile 11, I was hurting and turned from a combination of Irish rock and random songs to some pod casts. After some short New York Times and NPR pod casts, I remembered that I had downloaded a series of C-Span interviews with the current Justices and Sandra Day O’Connor.
I have a special fondness for Justice Stevens. We are both Chicagoans, Cub Fans, and Northwestern Law grads. More improbably, we even had the same antitrust professor (James Rahl) at Northwestern, albeit about 35 years apart. That plus the fact he was primarily an antitrust litigator before going on the bench was enough to get me to devote the next 30 some minutes, and about 3 miles, to the Stevens interview.
A lot of it was a fluffy discussion of his chambers and personal history. But mixed among the fluff and the questions for non-lawyers (What is certiorari?), there were a handful of interesting tidbits. Justice Stevens talked about the reasons and impact of not participating in the cert pool, the importance of writing his own first drafts, and his interest in having the court hear a few more cases than its current docket. There are no smoking guns or shocking revelations, but Justice Stevens does mention the need for Justices from diverse legal backgrounds, such as veterans and litigators, as an important mix for the Court to have on the bench. Justice Stevens is of course both and as far as I know the only current Justice to actually have made his living as a litigator.
The main thing I came away with was the genuine niceness of the good Justice which was my impression from the only time I ever met him. In 1993, I taught in a summer program in Innsbruck, Austria where Justice Stevens was lecturing. Instead of staying for the three days as promised, he stayed and lectured the entire week and interacted warmly with the students and the rest of the faculty. At one point, a student asked him to sign the packet of course materials which he did after class. Because he did not want to play favorites, he then stayed and patiently signed for more than a hundred students.
In the pod cast interview, Stevens demurred on picking a most important or favorite case. But when asked about a most memorable experience, he didn’t hesitate and proudly mentioned throwing out the first pitch at Wrigley Field before a Cubs game at the age of 85.
With that, I grinned, quickened my pace a bit, and headed up the next of an endless series of hills on my way around Dublin on a surprisingly warm and sunny late October day.
I have not listened to the rest of the interviews. But if anyone else has, please post if there are particularly revealing or interesting moments.
October 28, 2009 at 2:15 pm
Tags: Antitrust, baseball, Chicago Cubs, Dublin, John Paul Stevens, marathon, Supreme Court, Wrigley Field
Posted in: Antitrust, Interviews, Supreme Court
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Antitrust in Obamaland
posted by Spencer Waller
Antitrust enforcement was one area where most observers expected significant changes from the Bush years, particularly at the Antitrust Division of the Justice Department. For the past eight years, the Antitrust Division had vigorously prosecuted cartels, but had not been active in monopolization or merger enforcement. In addition to bringing relatively few cases in these areas, the Division had filed a number of amicus briefs in support of defendants, opposed a petition for certiorari sought by its sister agency the Federal Trade Commission, and issued a number of reports and policy recommendations that restricted the reach of the antitrust laws or imposed significant burdens on private plaintiffs. During this same period, the FTC proved to be more active in the competition area, particularly in the health care and intellectual property fields which suggests that the FTC will have a greater continuity in the competition area despite key changes at the Commissioner and staff levels.
The key officials in the Obama administration came into the antitrust agencies promising change. Christine Varney, the new head of the Antitrust Division, gave a speech in her early days promising more vigorous enforcement and hearkening back to the days of Thurman Arnold during the latter half of the New Deal. At the same time, she repudiated a highly restrictive report on monopoly power issued during the waning days of the prior administration issued by the Justice Department alone because a majority of the FTC had refused to endorse. In addition, the Division has reversed policy and filed an amicus brief in support of plaintiffs in a key Supreme Court case involving the pharmaceutical industry. Most recently, the Justice Department and the FTC jointly announced a new initiative to revisit the Merger Guidelines of the 1990s used by both agencies to decide which mergers and acquisitions to challenge on competition grounds. Read the rest of this post »
October 1, 2009 at 12:57 pm
Tags: Antitrust, DOJ, FTC, Live Nation, Obama administration, Ticket Master
Posted in: Antitrust, Consumer Protection Law, Uncategorized
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The Informant!
posted by Michael Kang
It’s not often that I hear about a new Hollywood movie based on the facts of a case that I first encountered while clerking, but The Informant!, directed by Steven Soderbergh and starring Matt Damon, is just such a film. It tells the story of Mark Whitacre, a central actor in a case decided while I was clerking for my judge on the Seventh Circuit. Whitacre served as the key informant in a successful FBI investigation into price-fixing charges against Archer Daniels Midland Co. that sent top executives to prison. As my co-clerk Kevin Metz observed, the case featured the type of direct evidence of an agreement to fix prices that antitrust professors explain is almost never available in antitrust prosecution. Whitacre secretly recorded many hours of conversations with co-conspirators in the lysine industry over three years, all while bragging carelessly to others about his role as an FBI informant and embezzling millions from ADM under the FBI’s nose. During my clerkship year, we worked on a number of memorable cases, but United States v. Andreas probably featured the most colorful facts. Whitacre was a very odd and unpredictable personality who suffered from bipolar disorder, which Matt Damon plays up for comic effect in the movie.
September 11, 2009 at 12:51 pm
Posted in: Antitrust, Criminal Law, Movies & Television
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Google Books and the Limits of Courts
posted by Frank Pasquale
The Google Books litigation has inspired a lot of commentary on the web. As an early October fairness hearing approaches, a consensus appears to be building: the proposed settlement is too important and complex for a court to approve in its current form. Agent Lynn Chu has complained that “No one elected the[] ‘class representatives’ to represent America’s tens of thousands of authors and publishers to convey their digital rights to Google.” Pamela Samuelson, by all accounts one of the leading academics in American intellectual property law, has this to say:
The Google Book Search settlement will be, if approved, the most significant book industry development in the modern era [emphasis added]. . . . The Authors Guild has about 8000 members. OCLC has estimated that there are 22 million authors of books published in the U.S. since 1923 (the year before which books can be presumed to be in the public domain). Jan Constantine, a lawyer for the Authors Guild, is optimistic that authors and publishers of out-of-print books will sign up with the Registry, but there are many reasons to question this.
For one thing, the proposed settlement agreement implicitly estimates that only about 750,000 copyright owners will sign up with the Registry, at least in the near term. Second, many books are “orphans,” that is, books whose rights holders cannot be located by a reasonably diligent search. Third, many easily findable rights holders, particularly academic authors, would much rather make their works available on an open access basis than to sign up with the Registry. Fourth, signing up with the Registry will not be a simple matter, since the Registry won’t just take your word for it that you are the rights holder. You are going to have to prove your ownership claim.
The non-representativeness of the class is one ground on which it is possible to object to the proposed Book Search settlement. Other reasons to object or express concerns will be explored in subsequent articles. Objections must be filed with the court by September 4, 2009.
A suitable platform for hosting public discussions of the deal only launched a few weeks ago, thanks to the diligent efforts of James Grimmelmann (who is also organizing an academic conference on the issue in October). The proposed settlement raises a number of issues, which may only be addressed by extensive regulation of the project — or a public alternative dedicated to serving those marginalized by the current proposal.
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August 11, 2009 at 9:39 am
Posted in: Antitrust, Economic Analysis of Law, Google & Search Engines, Intellectual Property, Law and Inequality, Privacy, Uncategorized
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From Antitrust to Anti-Systemic Risk
posted by Frank Pasquale
The “optimal size and complexity of developing countries’ financial systems” has been hotly debated in the economics community. Writing for the Harvard Business Review & Boston Globe, Duncan Watts focuses on our own dilemmas in a provocative account of complex systems:
[G]lobally interconnected and integrated financial networks just may be too complex to prevent crises like the current one from reoccurring. . . . A 2006 report co-sponsored by the Federal Reserve Bank of New York and the National Academy of Sciences concluded that even defining systemic risk was beyond the scope of any existing economic theory. Actually managing such a thing would be harder still, if only because the number of contingencies that a systemic risk model must anticipate grows exponentially with the connectivity of the system.
So if the complexity of our financial systems exceeds that of even the most sophisticated risk models, how can government regulators hope to manage the problem? There is no simple solution, but one approach is close to what the government already does when it decides that some institutions are “too big to fail,” and therefore must be saved – a strategy that, as we have seen recently, can cost hundreds of billions of taxpayer dollars. . . .
An alternate approach is to deal with the problem before crises emerge. On a routine basis, regulators could review the largest and most connected firms in each industry, and ask themselves essentially the same question that crisis situations already force them to answer: “Would the sudden failure of this company generate intolerable knock-on effects for the wider economy?” If the answer is “yes,” the firm could be required to downsize, or shed business lines in an orderly manner until regulators are satisfied that it no longer poses a serious systemic risk. Correspondingly, proposed mergers and acquisitions could be reviewed for their potential to create an entity that could not then be permitted to fail.
Of course, our system has been headed in precisely the opposite direction, largely thanks to the “best and brightest” now at Treasury and the Fed. As Simon Johnson puts it, we “pay too much deference to the expertise and presumed wisdom of a sector that screwed up massively.”
July 20, 2009 at 8:57 am
Posted in: Antitrust, Corporate Finance, Economic Analysis of Law
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Google Book Search Scrutiny
posted by Frank Pasquale
Writing in Slate, Mark Gimein knocks down a number of straw man arguments against the Google Book search deal. I look forward to seeing how he grapples with more serious concerns, like those raised by James Grimmelmann. I’ve also been impressed by Christopher Suarez’s working paper on the need for antitrust scrutiny of the proposed deal . Suarez proposes a number of sensible settlement modifications that I hope the court will take seriously. It doesn’t have much time to get this right, as the following conference announcement shows:
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July 1, 2009 at 4:29 pm
Posted in: Antitrust, Economic Analysis of Law, Google & Search Engines, Intellectual Property
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Toward a Public Alternative in Digital Archiving and Search
posted by Frank Pasquale
With inimitable clarity, Cory Doctorow made the case for an open alternative to Google in The Guardian earlier this month. He focused on the secrecy of search:
[S]earch engines routinely disappear websites for violating unpublished, invisible rules. Many of these sites are spammers, link-farmers, malware sneezers and other gamers of the system. . . . The stakes for search-engine placement are so high that it’s inevitable that some people will try anything to get the right placement for their products, services, ideas and agendas. Hence the search engine’s prerogative of enforcing the death penalty on sites that undermine the quality of search.
[Nevertheless, i]t’s a terrible idea to vest this much power with one company, even one as fun, user-centered and technologically excellent as Google. It’s too much power for a handful of companies to wield.
Search engines like Google have some good reasons for keeping their algorithms confidential–if they were public, manipulators could quickly swamp Google users with irrelevant results. However, just as Comcast cannot circumvent net neutrality regulation by saying all its traffic management and spam-fighting methods are trade secrets, search engines should not be able to use such arguments to escape regulation altogether. Moreover, there are ways of developing a qualified transparency that would let a trusted third party examine a search engine’s conduct without exposing its business methods for all the world to see.
But Doctorow does not want regulation here–he wants an alternative. Having made a similar case for a “public option” in the case of health insurance, I like this line of argument, but I think Doctorow is underestimating the barriers to entry. Though he’s aware of the failure of Wikia, Doctorow wonders if a “wikipedia for search” could be built:
We can imagine a public, open process to write search engine ranking systems, crawlers and the other minutiae. But can an ad-hoc group of net-heads marshall the server resources to store copies of the entire Internet? . . . . It would require vast resources. But it would have one gigantic advantage over the proprietary search engines: rather than relying on weak “security through obscurity” to fight spammers, creeps and parasites, such a system could exploit the powerful principles of peer review that are the gold standard in all other areas of information security.
The “rival public system” approach has been suggested for search engines a few times before. About a decade ago, Introna & Nissenbaum demonstrated that “the conditions needed for a marketplace to function in a ‘democratic’ and efficient way are simply not met in the case of search engines.” Recognizing this, Jean-Noel Jeanneny made a case for a French language alternative to dominant US-based search engines. The Quaero project in the EU appears to be answering that call, though in a far more dirigiste manner than Doctorow would probably like.
I have a few thoughts on a “public option” in search, building on a talk I gave at Yale Law’s Library 2.0 conference in the spring.
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June 20, 2009 at 7:59 pm
Posted in: Antitrust, Google & Search Engines, Privacy
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An Antitrust Angle on the Public Plan
posted by Frank Pasquale
Is genuine health reform possible? Several recent developments are promising. President Obama’s big Congressional majorities (plus the Specter defection) are reminiscent of the Johnson-era milieu that led to Medicare and Medicaid.* Key interest groups are less “Harry and Louise” and more “try to appease.” Most importantly, the failures of managed care, consumer-directed health care, and other artifacts of the “ownership society” are now self-evident. As unemployment rises, lack of insurance spikes, compounding the misery of many of those unlucky enough to get thrown out of work.
What could derail real health reform? Most likely, fake health care reform, particularly the kind that assumes there is something near a “free market” in operation now. As health care antitrust scholar Thomas Greaney argued yesterday, markets for health care are often very concentrated or riddled with barriers to entry:
The unfortunate fact is that a majority of the country is served by a few dominant insurers. (In 16 states, one insurer accounts for more than 50 percent of private enrollment; in 36 states, three insurers have more than 65 percent of enrollment). Likewise, because of lax antitrust enforcement, most markets are characterized by dominant hospital systems and little competition among high-end physician specialists.
In these circumstances, which economists call ‘bilateral monopoly,” the players often reach an accommodation in which they share the monopoly profits rather than compete vigorously. A prime example is the experience in Massachusetts, where Blue Cross/Blue Shield, the dominant insurer, reached an understanding with the dominant hospital system, Partners Healthcare, that entrenched higher prices for health insurance and hospital care.
Some might hold out hope that the Obama administration’s new emphasis on antitrust enforcement might solve that problem, but I would not hold my breath. After losing seven hospital merger cases in a row, the government is not exactly in a position to go storming into health care markets to demand competition. Only new antitrust laws are likely to accomplish much in that direction, and even if they were by some miracle adopted this year, I can’t imagine them having much effect within any reasonable time frame.
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May 13, 2009 at 9:54 am
Posted in: Antitrust, Health Law
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The Googlization of Advertising
posted by Danielle Citron
Search engines are indispensable to the quest for helpful information in our data saturated age. Although custom search engines attract small audiences, the big three—Google, Yahoo, and Microsoft—run the lion share of online searches, with Google performing 62% of U.S. Internet searches and with Yahoo next in line running 17.5% of searches. Not surprisingly, Google attracts a disproportionate share of online advertisers, the main source of revenue for search companies. The recent joint venture advertising agreement between Google and Yahoo heralds the further concentration of online advertising in the search market from three to two hands by allowing Google to sell search ads that display next to Yahoo search results.
This Sunday, the Association of National Advertisers announced its opposition to the Google-Yahoo deal on the grounds that the partnership would “diminish competition, increase concentration of market power, limit choices currently available and raise prices to advertisers.” Frank Pasquale presented spirited and compelling testimony on this issue before the House Judiciary Committee’s Task Force on Competition Policy and Antitrust Laws this summer. (I attended the hearing and highly recommend viewing the C-SPAN recording—see here). As Pasquale brought alive at the hearing, the joint venture agreement would cement Google’s dominance over the online advertising market. Benjamin Edelman of Harvard Business School explains that such excessive market share allows Google to control the ads generally available (and unavailable) to consumers. For instance, in August 2004, Google banned an ad critical of President Bush, but, of course, consumers did not know what they were missing. Worth serious consideration is Pasquale’s concern that the opacity of Google’s practices enables it to conceal any abuse of its soon-to-be overwhelming power in the online advertising market.
September 9, 2008 at 5:01 pm
Posted in: Antitrust, Google & Search Engines
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If You Read One Article on Antitrust This Year. . .
posted by Frank Pasquale
make it Maurice Stucke’s Better Competition Advocacy, 82 St. John’s L. Rev. 951 (2008). In this work, he convincingly argues that “The goals of antitrust law enforcement are subsumed by, but not necessarily co-extensive with, the goals of competition policy.” Stucke’s article not only extends an impressive line of work on competition law, but also offers some insights on the dangers of over-specialization for legal scholars generally. I’ll offer some excerpts now, and try to apply the piece to some current controversies later this week.
Stucke addresses four main questions in his article:
Prevailing competition advocacy glosses over four fundamental questions: First, what is competition? Second, what are the goals of a competition policy? Third, how does one achieve, if one can, the objectives of such desired competition? Fourth, how does one know if the economy is progressing toward these goals?
Stucke argues that conventional competition policy based on the work of the Chicago School answers all these questions in narrow and unsatisfying ways.
July 13, 2008 at 8:59 pm
Posted in: Antitrust
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WALL*E and the Theory of the Firm
posted by Nate Oman
Over the weekend my son and I saw WALL*E, Pixar’s new story about the adventures of a robot living on a post-environmental apocalypse Earth in which the land has been entirely covered by mountains of trash. As it turns out, more than 700 years before humanity had ditched the planet under the leadership of BnL Corp., the super-retailer that seems to have taken over the world, replacing not only the government but all other economic actors. Despite the apparently heavy-handed plot that I just summarized, WALL*E is a delightful movie, and the obvious jabs at Wall*Mart and other big-box retailers are delivered with such charm and — oddly given the post-apocalyptic setting — understatement that some-time Wall*Mart apologist that I am, I found myself carried effortlessly along by the story. That said, the vision of a world ruled by BnL Corp. got me thinking about the implicit theory of the firm underlying Pixar’s dystopia.
Firms, of course, are an embarrassment to economic theory. If the market is so good at coordinating the production of goods and services, why would you even see firms, which exist as islands of central planning in a sea of unplanned spontaneous order? Since Coase’s ground breaking article in the 1930s, the answer has been “transaction costs.” The central planning of the firm necessarily imposes costs given the informational constraints that managers necessarily labor under. On the other hand, so long as those costs are less than the cost of coordinating the same activity through spot contracts in the market, the firm is more efficient than the alternatives. So what gives with BnL Corp.? Why would one firm get so big as to engulf all others? Here are some thoughts.
July 7, 2008 at 9:12 am
Posted in: Antitrust, Contract Law & Beyond, Corporate Law, Culture
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Three on Antitrust
posted by Frank Pasquale
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).
December 26, 2007 at 6:50 am
Posted in: Antitrust
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