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TL;DR Section 230 of the Communications Decency Act has come under close scrutiny. Section 230 provides important immunity to online platforms for the content of third-party users.
Section 230 of the Communications Decency Act has come under close scrutiny. Section 230 provides important immunity to online platforms for the content of third-party users. Section 230 also guarantees legal immunity when platforms moderate objectionable content on their services: so-called “good samaritan” immunity.
Reform efforts are aimed at creating more carve-outs to Section 230 immunities, and limiting the scope of content platforms can moderate.
Many of these proposals would make bad policy by creating disincentives to moderate content in order to avoid a flood of litigation.
Read the full explainer here.
TL;DR Data doesn’t create a barrier to entry, but privacy regulations might.
Data doesn’t create a barrier to entry, but privacy regulations might.
Some fear that incumbents’ access to user data gives them the ability to improve and target their products in ways that new entrants cannot replicate, creating a barrier to entry that holds back competition in ways that are harmful to consumers.
While access to data may confer some advantages on incumbents, they are not insurmountable by others, and they are akin to other benefits like reputation that are not considered to be barriers to entry.
Download the tl;dr explainer PDF here
Scholarship Geoffrey A. Manne, Kristian Stout, Eric Fruits, "The Fatal Economic Flaws of the Contemporary Campaign Against Vertical Integration", Kansas Law Review, Kansas Law Review Inc. 2019 vol. 68(5)
This paper proceeds as follows. First, we examine the academic calls for stronger presumptions against vertical mergers based on, among other things, the alleged substitutability of contract for merger as a means of vertical integration, and the alleged equivalence of harms that arise from vertical and horizontal mergers. We analyze these claims on their own terms before proceeding in the next part to survey the economic literature that undermines the foundation of these arguments. We then proceed to analyze the critical differences between horizontal and vertical mergers that makes conflation of these two distinct methods of business combination impossible to truly treat as analytically equivalent. Next, we discuss the mistake of substituting static analysis for a more thorough dynamic analysis, particularly in industries marked by fluid product cycles and flexible business models.
Scholarship "Platform competition is more complicated than simple theories of vertical discrimination would have it, and there is certainly no basis for a presumption of harm."
Over the past several years, a growing number of critics have argued that big tech platforms harm competition by favoring their own content over that of their complementors. Over time, this “vertical discrimination presumption” has become the go-to argument for big tech’s staunchest critics seeking to level novel charges of anticompetitive conduct against these platforms. Indeed, judging by the grandiose claim made by one critic at a recent Senate hearing—“Digital platform self-preferencing threatens the American Dream”—the argument may be the very apotheosis of “populist antitrust.”
According to this line of argument, complementors are “at the mercy” of tech platforms. By discriminating in favor of their own content and against independent “edge providers,” tech platforms cause “the rewards for edge innovation [to be] dampened by runaway appropriation,” leading to “dismal” prospects “for independents in the internet economy—and edge innovation generally.”
The problem, however, is that the claims of presumptive harm from vertical discrimination are based neither on sound economics nor evidence.
Written Testimonies & Filings Pursuant to the House Judiciary Committee’s request for information to aid its inquiry concerning the state of existing antitrust laws, Antitrust Economists, Legal Scholars, and Practitioners offer the following joint submission.
Pursuant to the Committee’s request for information to aid its inquiry concerning the state of existing antitrust laws, we offer the following joint submission:
We are economists, legal scholars, and practitioners—focused on antitrust law, economics, and policy—who believe in maintaining healthy markets and well-functioning antitrust institutions. We value the important role of antitrust as the “Magna Carta of free enterprise,” which sets the rules that govern how firms compete against one another in our modern economy. Many of us have served in antitrust enforcement agencies. Each of us believes it is vital that the antitrust laws promote competitive markets, innovation, and productivity by deterring anticompetitive conduct throughout our economy, including in digital markets.
We write because the modern antitrust debate has become characterized by sustained attacks on the integrity of antitrust institutions and by unsubstantiated dismissals of debate. This atmosphere has led to a variety of proposals for radical changes to the antitrust laws and their enforcement that we believe are unsupported by the evidence, counterproductive to promoting competition and consumer welfare, and offered with an unwarranted degree of certainty.
Vigorous debate and disagreement have long been a hallmark of antitrust scholarship and policy. Competition policy has been formed through an iterative process echoed in the courts’evolving doctrine over more than a century. Today, however, efforts to sidestep the discussion, or to declare it over, and to force hasty and far-reaching changes have come to the fore. These proposals are numerous and include: (1) abandoning the consumer welfare standard; (2) overturning unanimous and supermajority judicial precedents, which are foundational to modern antitrust law; (3) imposing obsolete and arbitrary market share tests to determine the legality of mergers; (4) shifting the burden of proof from plaintiffs to defendants to render large swaths of business behavior presumptively unlawful; (5) creating another federal regulator to oversee competition in digital markets; (6) breaking up major tech companies or their products without evidence of antitrust harm or that the remedy would make consumers better off; and (7) imposing a general prohibition on all mergers either involving specific firms or during the current health crisis.
Such proposals would abandon the legal and political traditions that helped transform antitrust from an unprincipled and incoherent body of law, marred by internal contradictions, into a workable system that contributes positively to American competitiveness and consumer welfare. It should be noted that we use the term “consumer welfare” throughout this letter, consistent with modern parlance about competition policy, to include the benefits of competition to the welfare of workers and other input suppliers, as well as consumers. Thus, the consumer welfare standard is not a narrowly circumscribed objective, but rather a prescription for the general social wellbeing generated by the competitive process. By contrast, many of the current proposals would (1) undermine the rule of law; (2) undo the healthy evolution of antitrust law in the courts over time; (3) require antitrust agencies to micromanage the economy by picking winners and losers; (4) abandon a focus on consumer welfare in favor of vague and politically-oriented goals; and (5) undermine successful American businesses and their competitiveness in the global economy at the worst-imaginable time.
The assertions about the state of antitrust law and policy that purportedly justify these radical changes are not supported by the evidence. A more accurate reading of the evidence supports the following view of the American economy and the role of antitrust law:
We believe open discussion of existing evidence is necessary to advance contemporary debates about the performance of antitrust institutions in the digital economy. We welcome that discussion. We discuss below various dimensions of antitrust law, economics, and institutions that have been the targets of radical reform proposals. The signatories to this letter hold a steadfast belief that antitrust institutions, including the courts, are up to the task of protecting competition, and that the federal antitrust laws as written are effective in accomplishing that goal. While many signatories have offered diverse proposals to improve the functioning of those institutions—a few of which we share in this letter—we hold the common view that the proposed radical reforms would make consumers worse off in the short run and over the long haul by chilling efficient behavior and stymieing innovation.
Read the full submission here.
Scholarship This Article makes the case in support of the current consumer welfare standard and against a sweeping set of unsupported populist antitrust reforms.
Populist antitrust notions suddenly are fashionable again. At their core is the view that antitrust law is responsible for a myriad of purported socio-political problems plaguing society today, including but not limited to rising income inequality, declining wages, and increasing economic and political concentration. Seizing on Americans’ fears about changes to the modern US economy, proponents of populist antitrust policies assert the need to fundamentally reshape how we apply our nation’s competition laws in order to implement a variety of prescriptions necessary to remedy these perceived social ills. The proposals are varied and expansive but have the unifying theme of returning antitrust to the “big-is-bad” enforcement era prevalent in the first half of the twentieth century.
But the criticisms populist antitrust proponents raise are generally unsupported and often dramatized, and the resulting policy proposals are, accordingly, fatally flawed. There is sparse evidence today suggesting that the underlying trends these critics purportedly identify are real or in any way linked to lax antitrust enforcement. Ironically, populist antitrust proponents ignore that antitrust law debated over 50 years ago the same proposals that they are raising anew today. At that time, leading jurists, economists, enforcers, and practitioners from across the political spectrum rejected the use of liability standards that seek to evaluate a variety of vague and often contradictory socio-political goals or that condemn conduct based simply on the size of a company. They recognized that these tests led to incoherent and paradoxical results that often did more to hinder than to promote competition by undermining the rule of law and fostering corporate welfare. Instead, antitrust evolved the elegant “consumer welfare standard” that simplified the core issue of what constitutes harm to competition into a straightforward question: does the conduct at issue harm consumers?
Today, the consumer welfare standard offers a rigorous, objective, and evidence-based framework for antitrust analysis. It leverages developments in modern economics more reliably to predict when conduct is likely to harm consumers as a result of harm to competition. It offers a tractable test that is broad enough to contemplate a variety of evidence related to consumer welfare but also sufficiently objective and clear to cabin discretion and honor the principle of the rule of law. Perhaps most significantly, it is inherently an economic approach to antitrust that benefits from new economic learning and is capable of evaluating an evolving set of commercial practices and business models. These virtues are precisely the target of the new populist antitrust movement, which seeks to reject economics in favor of mere supposition.
This Article makes the case in support of the current consumer welfare standard and against a sweeping set of unsupported populist antitrust reforms. There is significant room for debate within the consumer welfare model for what types of conduct should face antitrust scrutiny, what evidence is relevant, and where liability standards should be drawn. Such debate is healthy and to the benefit of antitrust enforcement. But it does not require abandoning decades of experience and economic learning that would turn back the hands of time and return us to an era where antitrust enforcement was incoherent and deleterious.
Regulatory Comments The purpose of this submission is to highlight some of the findings of the relevant scholarship to help to inform the ACCC’s work, and to highlight some of the problems that may arise during the course of the study, given the misconceptions about competition between advertising-funded digital platforms that are common in the media and popular debate today.
The International Center for Law and Economics (ICLE) welcomes the opportunity to make a submission to the Australian Competition and Consumer Commission’s (ACCC) Digital Advertising Services Inquiry. As a nonprofit, nonpartisan research center, ICLE works with academics around the world to promote scholarship into the intersection of law and economics.
The purpose of this submission is to highlight some of the findings of the relevant scholarship to help to inform the ACCC’s work, and to highlight some of the problems that may arise during the course of the study, given the misconceptions about competition between advertising-funded digital platforms that are common in the media and popular debate today.
This submission will focus on three areas raised by the Issues Paper: concentration of market power in digital advertising, unequal access to data acting as a potentially anti-competitive barrier to entry, and the effect of vertical integration on competition and innovation.
Click here to read the submission.
Written Testimonies & Filings On Friday, April 17, 2020, ICLE President and Founder, Geoffrey A. Manne, submitted written testimony to the U.S. House of Representatives Committee on the Judiciary, Subcommittee on Antitrust, Commercial, and Administrative Law.
On Friday, April 17, 2020, ICLE President and Founder, Geoffrey A. Manne, submitted written testimony to the U.S. House of Representatives Committee on the Judiciary, Subcommittee on Antitrust, Commercial, and Administrative Law. Mr. Manne contends that underlying much of the contemporary antitrust debate are two visions of how an economy should work.
One vision, which tends to favor more intervention and regulation than the status quo, sees the economy and society as being constructed from above by laws and courts. In this view, suspect business behavior must be justified to be permitted, and . . . the optimal composition of markets can be known and can be designed by well-intentioned judges and legislators. On the other hand, there is the view of individual and company behavior as emerging from each person’s actions within a framework of property rights and the rule of law. This view sees the economy as a messy discovery process, with business behavior often being experimental in nature. This second conception often sees government intervention as risky, because it assumes a level of knowledge about the dynamics of markets that is impossible to obtain.
One vision, which tends to favor more intervention and regulation than the status quo, sees the economy and society as being constructed from above by laws and courts. In this view, suspect business behavior must be justified to be permitted, and . . . the optimal composition of markets can be known and can be designed by well-intentioned judges and legislators.
On the other hand, there is the view of individual and company behavior as emerging from each person’s actions within a framework of property rights and the rule of law. This view sees the economy as a messy discovery process, with business behavior often being experimental in nature. This second conception often sees government intervention as risky, because it assumes a level of knowledge about the dynamics of markets that is impossible to obtain.
In Manne’s view,
Antitrust law and enforcement policy should, above all, continue to adhere to the error-cost framework, which informs antitrust decision-making by considering the relative costs of mistaken intervention compared with mistaken non-intervention. Specific cases should be addressed as they come, with an implicit understanding that, especially in digital markets, precious few generalizable presumptions can be inferred from the previous case. The overall stance should be one of restraint, reflecting the state of our knowledge. We may well be able to identify anticompetitive harm in certain cases, and when we do, we should enforce the current laws. But dramatic new statutes that undo decades of antitrust jurisprudence or reallocate burdens of proof with the stroke of a pen are unjustified.
Manne goes on to address several of the most important and common misperceptions that seem to be fueling the current drive for new and invigorated antitrust laws. These misperceptions are that:
See his full testimony, here.
Regulatory Comments Although it is doubtless correct that the 1984 Nonhorizontal Merger Guidelines require updates in light of the last three decades of legal and economic developments, . . .
Although it is doubtless correct that the 1984 Nonhorizontal Merger Guidelines require updates in light of the last three decades of legal and economic developments, it is by no means clear that errors in judicial decisions or enforcement practices have led to widespread problems that are ad- dressed by the proposed changes. Indeed, harms could actually arise because there is ambiguity in the proposed guidelines that may lead either to uncertainty as to how the agencies will exercise their discretion, or, more troublingly, could lead courts to take seriously speculative theories of harm.
The purpose of this comment is to draw attention to an implicit underpinning of the draft guidelines that we believe the agencies should clearly disavow (or at least explain more clearly the complexity surrounding): the extent and implications of the presumed functional equivalence of vertical integration by contract and by merger.
Despite the fact that, among law and economics scholars, it has long been an essentially settled matter that vertical integration — whether partial integration by contract or full integration by merger — is typically procompetitive (or, at the very least, competitively ambiguous, and problematic in only very limited, stylized, and theoretical circumstances), vertical conduct of all sorts has come under increased scrutiny. Much of the new opprobrium for vertical conduct has come from the likes of presidential hopefuls, journalists, political pundits, and activists. But, more concerning, a fair amount of the resurgence in opposition to vertical restraints and mergers has come from academic economic quarters. Surprisingly, this criticism of vertical conduct also misunderstands or ignores fundamental economic concepts.
One prominent line of criticism of vertical mergers, for example, equates vertical mergers with vertical contracts, and proposes to prohibit or significantly deter vertical integration by merger because it inherently leads to competitive problems that either don’t exist or can more easily be corrected in vertical contracts. But the choice between merger and contract for firms is not so simple, especially in highly dynamic industries in which effective competition often demands both process and product innovation. In particular, the management of intangible, information assets — often the crucial in- puts in dynamic, high-tech firms — may not be as readily (or at all) accomplished by contract as by internal coordination. In the face of extreme informational uncertainties and the need for the inherently uncertain exercise of entrepreneurial judgment and dynamic capabilities (which reside in a firm’s individual decisionmakers, corporate culture, and collective ability to implement novel business processes), contracts cannot always replicate the competitive advantages of integration through merger.
This narrow view of vertical integration thus ignores and threatens to undermine dynamic competition and innovation. Indeed, if we take the organization theory and business strategy literature on the organization of firms in dynamic industries seriously, the status quo might even be over-enforcing, and leading to the deterrence of innovative, procompetitive mergers. It is insufficient merely to advert to potential price effects or innovation effects on foreclosed competitors or input providers, and there truncate the analysis. A proper evaluation of the competitive effects of vertical conduct requires an assessment of industrywide increases in innovation and of quality improvements that may accompany superficial price increases or localized constraints on innovation. Without this it is impossible to conclude that such conduct is anticompetitive.
We recently contributed two pieces to a symposium on Truth on the Market that explore the position set out above. We have attached these pieces to this comment for your convenience. We also explore all of these and related points more fully in a forthcoming article that will be published this spring by the Kansas Law Review. A draft of that article has likewise been attached.
We thank the agencies for the opportunity to comment on this important set of guidelines. We certainly advocate for clarity in the agencies’ enforcement practice with respect to vertical integration, but caution that the agencies carefully consider whether the status quo — as out of date as it may be — is truly inferior to updates that introduce more ambiguity.
