Category: Antitrust

Google Antitrust: the FTC Folds

Both Eric Goldman and James Grimmelmann have the details on the FTC’s rather extraordinary capitulation today. It is a big win for Google. Still, a few questions remain. I have the following:

1) Commissioner Rosch included this intriguing footnote in his concurrence/dissent:

I . . . have concerns that insofar as Google has monopoly or near-monopoly power in the search advertising market and this power is due in whole or in part to its power over searches generally, nothing in this “settlement” prevents Google from telling “half-truths”–for example, that its gathering of information about the characteristics of a consumer is done solely for the consumer’s benefit, instead of also to maintain a monopoly or near-monopoly position. . . .That is a genuine cause for “strong concern.”

Did Google ever say that it was gathering data purely for consumers’ benefit? That would seem to be an odd representation for a for-profit company to make.
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My Brand Journey, Part II (and a conference)

After the genericism piece, brands were on my mind and luckily some friends knew it. My brand project was the focus of my work at Princeton’s Center for Information Technology. Brett Frischmann knew that Spencer Waller was thinking about brands as was I. Spencer and I connected, and Brands, Competition and the Law was born. We argued that brands do much more than trademark or antitrust law recognizes. Brands indicate more than source and quality, enable non-price factors to differentiate products, and drive consumption for non-functional reasons. Furthermore, as business and marketing folks know, brands allow for rent extraction. Brands allow prices to remain high even in markets where one might expect them to converge. Brands “ensconce[e] price dispersion, … instead of a competitive market that brings prices down, prices remain dispersed above marginal cost.” Michael Baye and John Morgan’s work shows this for an online market no less. We turned to antitrust and found that antitrust law simply does not account for brands well. Market definition is odd here. For a strong brand is in a way its own market. Glynn Lunney’s work on Trademark Monopolies (no ssrn that I saw) was most helpful there. Price discrimination might signal a change in how one defines the market. Brands allow such actions but are ignored. There’s more on how understanding brands would change the way anti-trust might run. But I leave those interested to read the paper OR there is this offer.

The work led to a conference at University College London hosted by Ioannis Lianos where our abstract framed the day’s discussion.

Now, if you like, the follow up conference is in the U.S.

It will be in Chicago on October 19, 2012. Registration is here.

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Stanford Law Review Online: The Obama Justice Department’s Merger Enforcement Record

Stanford Law Review

Continuing our dialog on antitrust enforcement, the Stanford Law Review Online has just published an Essay by Daniel A. Crane entitled The Obama Justice Department’s Merger Enforcement Record. Professor Crane responds to Carl Shapiro and Jonathan Baker’s criticism of his response to his earlier Essay:

My recent Essay, Has the Obama Justice Department Reinvigorated Antitrust Enforcement?, examined the three major areas of antitrust enforcement—cartels, mergers, and civil non-merger—and argued that, contrary to some popular impressions, the Obama Justice Department has not “reinvigorated” antitrust enforcement. Jonathan Baker and Carl Shapiro have published a response, which focuses solely on merger enforcement. Baker and Shapiro’s argument that the Obama Justice Department actually did reinvigorate merger enforcement is unconvincing.

He concludes:

Jon Baker and Carl Shapiro are smart, effective economists for whom I have great respect. I have few quarrels with how they or the Obama Administration in general conduct antitrust enforcement. The point of my essay was that antitrust enforcement has become largely technocratic and independent of political ideology. I have heard nothing that dissuades me from that view.

Read the full article, The Obama Justice Department’s Merger Enforcement Record by Daniel A. Crane, at the Stanford Law Review Online.

FTC Agonistes: From the Nader Report to the Wired Report

In 1968, a group of law student researchers helped Ralph Nader publish a highly critical report on the Federal Trade Commission. They concluded that the FTC failed to “detect violations systematically,” to “establish efficient priorities for its enforcement energy,” to “enforce the powers it has with energy and speed,” and to “seek sufficient statutory authority to make its work effective.” As Tim Muris notes, the report “lambast[ed] the agency and characteriz[ed] its overall performance as ‘shockingly poor.'”

The FTC has taken many important initiatives to respond to concerns identified in the report. But we must now reconsider agency’s record, as the digital world changes kaleidoscopically and budget restraints hamstring even the best-intentioned FTC staff.

About the closest thing we’re likely to get to another “Nader Report” was Peter Maass’s expose in Wired on challenges facing privacy enforcement and consumer protection in the digital age. Here’s one of the many issues he identifies:

The mismatch between FTC aspirations and abilities is exemplified by its Mobile Technology Unit, created earlier this year to oversee the exploding mobile phone sector. The six-person unit consists of a paralegal, a program specialist, two attorneys, a technologist and its director, Patricia Poss. For the FTC, the unit represents an important allocation of resources to protect the privacy rights of more than 100 million smartphone owners in America. For Silicon Valley, a six-person team is barely a garage startup. Earlier this year, the unit issued a highly publicized report on mobile apps for kids; its conclusion was reflected in the subtitle, “Current Privacy Disclosures Are Disappointing.” It was a thin report, however. Rather than actually checking the personal data accessed by the report’s sampling of 400 apps, the [17 page] report just looked at whether the apps disclose, on the sites where they are sold, the types of personal data that would be accessed and what the data would be used for.

As Maass notes, “The agency can take companies to court, but its overworked lawyers don’t really have the time to go the distance against the bottomless legal staffs in Silicon Valley.” Like an SEC pushed by budget constraints to pursue mere “cost of doing business” settlements, the FTC too often has to capitulate to symbolic penalties with dubious deterrent effect.
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Stanford Law Review Online: Evaluating Merger Enforcement During the Obama Administration

Stanford Law Review

The Stanford Law Review Online has just published an Essay by Jonathan Baker and Carl Shapiro entitled Evaluating Merger Enforcement During the Obama Administration. Professors Baker and Shapiro take issue with Daniel Crane’s assertions in his Essay of July 18:

We recently concluded that government merger enforcement statistics “provide clear evidence that the Obama Administration reinvigorated merger enforcement, as it set out to do.” Three weeks later, in an article published in the Stanford Law Review Online, Professor Daniel A. Crane reached the opposite conclusion, claiming that “[t]he merger statistics do not evidence ‘reinvigoration’ of merger enforcement under Obama.”

Crane is simply wrong. The data regarding merger enforcement unambiguously support our conclusion and cannot reasonably be read to support Crane’s assertions. Crane’s conclusion regarding merger enforcement is inaccurate because he relies upon flawed metrics and overlooks or misinterprets other important evidence.

They conclude:

Our analysis of merger enforcement at the DOJ during the George W. Bush Administration—based on the enforcement statistics and more—showed that it was unusually lax and in need of reinvigoration. It is too early to reach a comparably definitive conclusion about merger enforcement at the DOJ during the Obama Administration, but nothing in Daniel Crane’s article seriously challenges our interpretation of the preliminary data as demonstrating that the necessary reinvigoration has taken place.

Read the full article, Evaluating Merger Enforcement During the Obama Administration by Jonathan Baker and Carl Shapiro, at the Stanford Law Review Online.

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Has the Obama Justice Department Reinvigorated Antitrust Enforcement?

Stanford Law Review

The Stanford Law Review Online has just published an Essay by Daniel Crane entitled Has the Obama Justice Department Reinvigorated Antitrust Enforcement?. Professor Crane assesses antitrust enforcement in the Obama and Bush administrations using several empirical measures:

The Justice Department’s recently filed antitrust case against Apple and several major book publishers over e-book pricing, which comes on the heels of the Justice Department’s successful challenge to the proposed merger of AT&T and T-Mobile, has contributed to the perception that the Obama Administration is reinvigorating antitrust enforcement from its recent stupor. As a candidate for President, then-Senator Obama criticized the Bush Administration as having the “weakest record of antitrust enforcement of any administration in the last half century” and vowed to step up enforcement. Early in the Obama Administration, Justice Department officials furthered this perception by withdrawing the Bush Administration’s report on monopolization offenses and suggesting that the fault for the financial crisis might lie at the feet of lax antitrust enforcement. Even before the AT&T and Apple cases, media reports frequently suggested that antitrust enforcement is significantly tougher under President Obama.

For better or worse, the Administration’s enforcement record does not bear out this impression. With only a few exceptions, current enforcement looks much like enforcement under the Bush Administration. Antitrust enforcement in the modern era is a technical and technocratic enterprise. Although there will be tweaks at the margin from administration to administration, the core of antitrust enforcement has been practiced in a relatively nonideological and nonpartisan way over the last several decades.

He concludes:

Two points stressed earlier should be stressed again: (1) statistical measures of antitrust enforcement are an incomplete way of understanding the overall level of enforcement; and (2) to say that the Obama Administration’s record of enforcement is not materially different than the Bush Administration’s is not to chide Obama for weak enforcement. Rather, it is to debunk the claims that antitrust enforcement is strongly dependent on politics.

This examination of the “reinvigoration” claim should not be understood as acceptance that tougher antitrust enforcement is always better. Certainly, there have been occasions when an administration would be wise to ease off the gas pedal. At present, however, there is a high degree of continuity from one administration to the next.

Read the full article, Has the Obama Justice Department Reinvigorated Antitrust Enforcement? by Daniel Crane, at the Stanford Law Review Online.

Automated Arrangement of Information: Speech, Conduct, and Power

Tim Wu’s opinion piece on speech and computers has attracted a lot of attention. Wu’s position is a useful counterpoint to Eugene Volokh’s sweeping claims about 1st Amendment protection for automated arrangements of information. However, neither Wu nor Volokh can cut the Gordian knot of digital freedom of expression with maxims like “search is speech” or “computers can’t have free speech rights.” Any court that respects extant doctrine, and the normative complexity of the new speech environment, will need to take nuanced positions on a case-by-case basis.

Digital Opinions

Wu states that “The argument that machines speak was first made in the context of Internet search,” pointing to cases like Langdon v. Google, Kinderstart, and SearchKing. In each scenario, Google successfully argued to a federal district court that it could not be liable in tort for faulty or misleading results 1) because it “spoke” the offending arrangement of information and 2) the arrangement was Google’s “opinion,” and could not be proven factually wrong (a sine qua non for liability).
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Network Non-Discrimination and Quality of Service

Over the past ten years, the debate over “network neutrality” has remained one of the central debates in Internet policy. Governments all over the world have been investigating whether legislative or regulatory action is needed to limit the ability of providers of Internet access services to interfere with the applications, content and services on their networks.

In addition to rules that forbid network providers from blocking applications, content and services, rules that forbid discrimination are a key component of any network neutrality regime. Non-discrimination rules apply to any form of differential treatment that falls short of blocking. Policy makers who consider adopting network neutrality rules need to decide which, if any, forms of differential treatment should be banned. These decisions determine, for example, whether a network provider is allowed to provide low-delay service only to its own streaming video application, but not to competing video applications; whether network providers can count only traffic from unaffiliated video applicationsbut not their own Internet video applications towards users’ monthly bandwidth cap; or whether network providers can charge different Internet access charges depending on the application used, independent of the amount of traffic created by the application.

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Academic Biases (Regarding Google, and Beyond)

Yesterday a vice president of the European Commission announced preliminary conclusions regarding the EU’s antitrust investigation into Google. The EC has warned Google to “change or face fines,” as Alex Barker puts it, noting “possible antitrust problems in how Google favours its own products in search results.” I cannot predict exactly how far US cases will go, or if the EC’s efforts to guide the development of the search market will succeed. (I have offered some preliminary thoughts at Danny Sokol’s excellent symposium on Google at the Antitrust & Competition Law Blog.) However, I applaud the EC for its attention to the matter.

After attending the “Regulating Search” conference in 2005, I spent some of my early academic career trying to understand whether complaints about Google had merit. I was publishing on the matter in 2006, and have continued to do so. When I started writing about this topic, some established scholars mocked my interest in it. After I published Federal Search Commission? with a co-author, one IP professor loudly scoffed that “maybe we need a federal map commission” at a conference where the restaurant location was unclear. Establishment voices who have fought for net neutrality looked with disdain or bored incomprehension at someone who dared to question a Silicon Valley darling. One scholar even threw a draft of mine on the table at a faculty talk, loudly muttered “This is not scholarship!,” and boldly predicted that Google’s dominance of search couldn’t last for more than a few years. (That was in 2008.)

I don’t know whether the EU’s actions today will lead these skeptics to a different view of my work, or to condemnations of creeping socialism. But I do think the EU has now confirmed that it was appropriate for a legal scholar to raise the types of questions I have posed over the past six years. They deserved to be part of the agenda of internet law.

This is a somewhat roundabout (and hopefully not too self-pitying) response to Frank Bowman’s earlier post on the role of outside funding in academic research (and particularly Eugene Volokh’s intervention regarding First Amendment protection for search results). Like Bowman, I worry about the effect of outside money on research. However, I think it is often the academy’s own biases and presumptions that most threaten independent thought.
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The Right to Data Portability (RDP) as a Per Se Anti-tying Rule

Yesterday I gave a presentation on “The Right to Data Portability: Privacy and Antitrust Analysis” at a conference at the George Mason Law School. In an earlier post here, I asked whether the proposed EU right to data portability violates antitrust law.

I think the presentation helped sharpen the antitrust concern.  The presentation first develops the intuition that consumers should want a right to data portability (RDP), which is proposed in Article 18 of the EU Data Protection Regulation.  RDP seems attractive, at least initially, because it might prevent consumers getting locked in to a software platform, and because it advances the existing EU right of access to one’s own data.

Turning to antitrust law, I asked how antitrust law would consider a rule that, say, prohibits an operating system from being integrated with software for a browser.  We saw those facts, of course, in the Microsoft case decided by the DC Circuit over a decade ago.  Plaintiffs asserted an illegal “tying” arrangement between Windows and IE.  The court rejected a per se rule against tying of software, because integration of software can have many benefits and innovation in software relies on developers finding new ways to put things together.  The court instead held that the rule of reason applies.

RDP, however, amounts to a per se rule against tying of software.  Suppose a social network offers a networking service and integrates that with software that has various features for exporting or not exporting data in various formats.  We have the tying product (social network) and the tied product (module for export or not of data).  US antitrust law has rejected a per se rule here.  The EU proposed regulation essentially adopts a per se rule against that sort of tying arrangement.

Modern US and EU antitrust law seek to enhance “consumer welfare.”  If the Microsoft case is correct, then a per se rule of the sort in the Regulation quite plausibly reduces consumer welfare.  There may be other reasons to adopt RDP, as discussed in the slides (and I hope in my future writing).  RDP might advance human rights to access.  It might enhance openness more generally on the Internet.  But it quite possibly reduces consumer welfare, and that deserves careful attention.