ICLE Editor-in-Chief R.J. Lehmann joined the Heard Tell Show to discuss Elon Musk’s bid to buy Twitter, shareholder rights, platform moderation, and regulatory review of the transaction. The full episode is embedded below.

The Federal Trade Commission’s (FTC) current leadership appears likely to issue substantive rules concerning “unfair methods of competition” (UMC) at some point. FTC Chair Lina Khan, in an article with former FTC Commissioner Rohit Chopra, argued that the commission has the authority to issue UMC rules pursuant to the Federal Trade Commission Act based on Petroleum Refiners Association v. FTC and a subsequently enacted provision in 1975. But Petroleum Refiners is a nearly 50-year-old, untested, and heavily criticized opinion that predates the major questions doctrine and widespread adoption of textualism in the courts. Application of the major questions doctrine and modern, textualist methods of statutory interpretation almost certainly would lead to a determination that the commission lacks UMC rulemaking authority.

Read the full piece here.

In 1972, a case came before Aubrey E. Robinson, Jr., a judge on the U.S. District Court for the District of Columbia, involving the scope of the Federal Trade Commission’s (FTC) regulatory authority. Section 5(a)(1) of the Federal Trade Commission Act outlaws “unfair methods of competition.” Section 6(g) says that the FTC may “make rules and regulations for the purposes of carrying out” the FTC Act.

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Abstract

The People’s Republic of China (PRC) has begun to use sanctions against people who speak out against its policies, including even lawyers in their ordinary work representing the interests of their clients. This paper explores the deleterious impact such sanctions can have on the entire legal profession, the broader community putatively served by the profession, and the rule of law.

Executive Summary

Our comments in response to the agencies’ merger guidelines RFI are broken into two parts. The first raises concerns regarding the agencies’ ultimate intentions as reflected in the RFI, the authority of the assumptions undergirding it, and the agencies’ (mis)understanding of the role of merger guidelines. The second part responds to several of the most pressing and problematic substantive questions raised in the RFI.

With respect to the (for lack of a better term) “process” elements of the agencies’ apparent intended course of action, we argue that the RFI is based on several faulty premises which, if left unchecked, will taint any subsequent soft law proposals based thereon:

First, the RFI seems to presuppose a particular, preferred outcome and does not generally read like an objective request for the best information necessary to reach optimal results. Although some of the language is superficially neutral, the overarching tone is (as Doug Melamed put it) “very tendentious”: the RFI seeks information to support a broad invigoration of merger enforcement. While some certainly contend that strengthening merger-enforcement standards is appropriate, merger guidelines that start from that position can hardly be relied upon by courts as a source of information to differentiate in difficult cases, if and when that may be warranted.

Indeed, the RFI misconstrues the role of merger guidelines, which is to reflect the state of the art in a certain area of antitrust and not to artificially push the accepted scope of knowledge and practice toward a politically preferred and tenuous frontier. The RFI telegraphs an attempt by the agencies to pronounce as settled what are hotly disputed, sometimes stubbornly unresolved issues among experts, all to fit a preconceived political agenda. This not only overreaches the FTC’s and DOJ’s powers, but it also risks galvanizing opposition from the courts, thereby undermining the utility of adopting guidelines in the first place.

Second, underlying the RFI and the agencies’ apparently intended course of action is the uncritical acceptance of a popular, but highly contentious, narrative positing that there is an inexorable trend toward increased concentration, caused by lax antitrust enforcement, that has caused significant harm to the economy. As we explain, however, every element of this narrative withers under closer scrutiny. Rather, the root causes of increased concentration (if it is happening in the first place) are decidedly uncertain; concentration is decreasing in the local markets in which consumers actually make consumption decisions; and there is evidence that, because much increased concentration has been caused by productivity advances rather than anticompetitive conduct, consumers likely benefit from it.

Lastly, the RFI assumes that the current merger-control laws and tools are no longer fit for purpose. Specifically, the agencies imply that current enforcement thresholds and longstanding presumptions, such as the HHI levels that trigger enforcement, allow too many anticompetitive mergers to slip through the cracks. We contend that this kind of myopic thinking fails to apply the relevant error-cost framework. In merger enforcement, as in antitrust law, it is not appropriate to focus narrowly on one set of errors in guiding legal and policy reform.  Instead, general-purpose tools and presumptions should be assessed with an eye toward reducing the totality of errors, rather than those arising in one segment at the expense of another.

Substantively, our comments address the following issues:

First, the RFI is concerned with the state of merger enforcement in labor markets (and “monopsony” markets more broadly). While some discussion may be welcome regarding new guidelines for how agencies and courts might begin to approach mergers that affect labor markets, the paucity of past actions in this area (the vast bulk of which have been in a single industry: hospitals); the significant dearth of scholarly analysis of relevant market definition in labor markets; and, above all, the fundamental complexities it raises for the proper metrics of harm in mergers that affect multiple markets, all raise the specter that aiming for specific outcomes in labor markets may undermine the standards that support proper merger enforcement overall. If the agencies are to apply merger-control rules to monopsony markets, they must make clear that the relevant market to analyze is the output market, and not (only) the input market. Ultimately, this is the only way to separate mergers that generate efficiencies from those that create monopsony power, since both have the effect of depressing input prices. If antitrust law is to stay grounded in the consumer welfare standard, as it should, it must avoid blocking mergers that are consumer-facing simply because they decrease the price of an input. The issue of monopsony is further complicated by the fact that many inputs are highly substitutable across a wide range of industries, rendering the relevant market even more difficult to pin down than in traditional product markets.

Second, there is not enough evidence to create the presumption of a negative relationship between market concentration and innovation, or between market concentration and investment. In fact, as we show, it may often be the case that the opposite is true. The agencies should thus be wary of drawing any premature conclusions—let alone establishing any legal presumptions—on the connection between market structure and non-price effects, such as innovation and investment.

Third, the RFI blurs what has hitherto been a clear demarcation—and rightly so—between vertical and horizontal mergers by stretching the meaning of “potential competition” beyond any reasonable limits.  In doing, it ascribes stringent theories of harm based on far-fetched hypotheticals to otherwise neutral or benign business conduct. This “horizontalization” of vertical mergers, if allowed to translate into policy, is likely to have chilling effects on procompetitive merger activity to the detriment of consumers and, ultimately, society as a whole.  As we show, there is no legal or empirical justification to abandon the time-honed differentiation between horizontal and vertical mergers, or to impose a heightened burden of proof on the latter. The 2018 AT&T merger illustrates this.

Fourth, and despite some facially attractive rhetoric, data should not receive any special treatment under the merger rules. Instead, it should be treated as any other intangible asset, such as reputation, IP, know-how, etc.

Finally, the notion of “attention markets” is not ready to be applied in a merger-control context, as the attention-market scholarship fails to offer objective, let alone quantifiable, criteria that might enable authorities to identify firms that are unique competitors for user attention.

Read the full comments here.

Abstract

Competition policy generally prohibits coordination among buyers or sellers, especially coordination on price, price-related inputs, and output. In licensing markets for standard-essential patents (“SEPs”), it has been periodically proposed that this rule should be relaxed to permit the formation of licensing negotiation groups (“LNGs”), which is expected to reduce transaction costs and the purportedly “excessive” royalties paid to SEP licensors. Based on the economic structure of wireless technology markets, and empirical evidence from over three decades of SEP licensing, this policy intervention is likely to degrade, rather than enhance, competitive conditions in wireless communications and other 5G-enabled markets encompassed by the “Internet of Things.” In the short term, LNGs would most likely result in a redistributive (not an efficiency) effect that shifts economic value from innovators to implementers in the wireless technology supply chain without necessarily passing on cost-savings to consumers. In the medium to longer term, LNGs are liable to impose significant efficiency losses by endangering the viability of licensing-based monetization models that have funded continuous R&D investment, promoted broad dissemination of technology inputs, facilitated robust entry in device production, and enabled transformative business models across a wide range of industries. While LNGs may reduce the transaction costs of SEP licensing, pooling structures have a demonstrated record of having achieved the same objective in patent-intensive information technology markets at a substantially lower risk of competitive harm.

Barry Schwartz’s seminal work “The Paradox of Choice” has received substantial attention since its publication nearly 20 years ago. In it, Schwartz argued that, faced with an ever-increasing plethora of products to choose from, consumers often feel overwhelmed and seek to limit the number of choices they must make.

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Abstract

Over the past ten years, administrative law scholarship has increasingly focused on interactions between multiple agencies. As part of this trend, most scholars have called for policymakers to combine multiple agencies, rather than rely on a single agency, to solve policy problems. The literature in this area espouses the benefits of shared regulatory space. But very little of this scholarship addresses when shared jurisdiction is problematic. This is particularly concerning when an agency opts into or cedes oversight authority to another agency at will, with little regard for whether the second agency is an appropriate regulator. The case of cell-cultured (or lab-grown) meat presents one such example. In 2018, both the U.S. Food and Drug Administration and the U.S. Department of Agriculture separately announced that regulating cell-cultured meat fell under their sole purview, to the exclusion of the other agency. After much back-and-forth, the agencies issued a joint statement announcing a shared system of regulatory oversight.

This Article argues that the FDA should not have ceded any of its regulatory authority to the USDA because joint regulation of cell-cultured meat, as between the FDA and USDA, is both inappropriate and unnecessary. USDA involvement is inappropriate because the Department suffers from a mixed mandate problem. Not only is the Department tasked with maximizing agricultural industry profits (and minimizing losses), but it is also tasked with nourishing Americans (and improving nutrition and health). In the case of cell-cultured meat, these two goals are diametrically opposed. Further, USDA involvement is inappropriate given the Department’s purview, as set by Congress, and its concomitant expertise. As it relates to meat, the USDA exists specifically to monitor the safety and sanitation of the nation’s farms, slaughterhouses, and meat processing and packaging plants. Consequently, all the Department’s meat-related regulations and expertise are in these areas. USDA involvement in the regulation of cell-cultured meat is also unnecessary because it is redundant. Accordingly, this Article’s analysis belies the notion that all agency collaboration is good collaboration.

ICLE Director of Law & Economics Programs Gus Hurwitz joined Steptoe & Johnson’s The Cyberlaw Podcast to discuss Elon Musk’s bid to buy Twitter and how it has revealed hypocrisies on both the right and left.