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TOTM Amazon is again accused of being a predatory pricer, once again the evidence and theory to support this is nonexistent. Shaoul Sussman's complicated argument that the use of grey market sellers to force higher prices throughout the economy, doesn't add up.
These days, lacking a coherent legal theory presents no challenge to the would-be antitrust crusader. In a previous post, we noted how Shaoul Sussman’s predatory pricing claims against Amazon lacked a serious legal foundation. Sussman has returned with a new post, trying to build out his fledgling theory, but fares little better under even casual scrutiny.
Read the full piece here.
TOTM Contrary to established Supreme Court precedent, the district court’s decision relies on mere inferences to establish anticompetitive effect. The decision, if it stands, would render a wide range of potentially procompetitive conduct presumptively illegal and thus harm consumer welfare.
The ICLE amicus brief focuses on the ways that the district court exceeded the “error cost” guardrails erected by the Supreme Court to minimize the risk and cost of mistaken antitrust decisions, particularly those that wrongly condemn procompetitive behavior. As the brief notes at the outset…
Regulatory Comments In this ex parte letter, ICLE analyzes the law and economics of both the underlying statute and the FCC's proposed rulemaking that would affect the interpretation of cable franchise fees. For a variety of reasons set forth in the letter, we believe that the Commission is on firm legal and economic footing to adopt its proposed Order. Congress intentionally enacted the five percent revenue cap to prevent LFAs from relying on cable franchise fees as an unlimited general revenue source. In order to maintain the proper incentives for network buildout — which are ever more-critical as our economy increasingly relies on high-speed broadband networks — the Commission should adopt the proposed Order.
Congress passed the 1984 Cable Act in order to create a unified national framework for regulating networks for cable networks involving municipalities, cable operators, and the FCC. As described by its primary sponsor, Sen. Barry Goldwater of Arizona, the Cable Act was drafted in order to reduce barriers standing in the way of the adoption of cable technology.
The Act was passed and later amended in a way that carefully drew lines around the acceptable scope of local franchising authorities’ de facto monopoly power in granting cable franchises. The thrust of the Act was to encourage competition and build-out by discouraging franchising authorities from viewing cable providers as a captive source of unlimited revenue. It did this while also giving franchising authorities the tools necessary to support public, educational, and governmental (“PEG”) programming and enabling them to be fairly compensated for use of the public rights of way. Unfortunately, since the 1984 Cable Act was passed, an increasing number of local and state franchising authorities (collectively, “LFAs”) have attempted to work around the Act’s careful balance. In particular, these efforts have created two main problems:
First, LFAs frequently attempt to evade the Act’s limitation on franchise fees to five percent of cable revenues by seeking a variety of in-kind contributions from cable operators that impose costs over and above the five percent limit. LFAs do this despite the plain language of the statute defining franchise fees quite broadly as including any “tax, fee, or assessment of any kind imposed by a franchising authority or any other governmental entity.”
Although not nominally “fees,” such requirements are indisputably “assessments,” and the costs of such obligations are equivalent to the marginal cost of a cable operator providing those “free” services and facilities, as well as the opportunity cost (i.e., the foregone revenue) of using its fixed assets in the absence of a state or local franchise obligation. Any such costs will, to some extent, be passed on to customers as higher subscription prices, reduced quality, or both. By carefully limiting the ability of LFAs to abuse their bargaining position, Congress ensured that they could not extract disproportionate rents from cable operators (and, ultimately, their subscribers).
Second, LFAs also attempt to circumvent the franchise fee cap of five percent of gross cable revenues by seeking additional fees for non-cable services provided over mixed use networks (i.e. imposing additional franchise fees on the provision of broadband and other non-cable services over cable networks). But the statute is similarly clear that LFAs or other governmental entities cannot regulate non-cable services provided via franchised cable systems.
In this ex parte letter, ICLE analyzes the law and economics of both the underlying statute and the FCC’s proposed rulemaking that would affect the interpretation of cable franchise fees. For a variety of reasons set forth in the letter, we believe that the Commission is on firm legal and economic footing to adopt its proposed Order. It should be unavailing – and legally irrelevant – to argue, as many LFAs have, that declining cable franchise revenue leaves municipalities with an insufficient source of funds to finance their activities, and thus that recourse to these other sources is required. Congress intentionally enacted the five percent revenue cap to prevent LFAs from relying on cable franchise fees as an unlimited general revenue source. In order to maintain the proper incentives for network buildout — which are ever more-critical as our economy increasingly relies on high-speed broadband networks — the Commission should adopt the proposed Order.
Click here to read the full ex parte letter.
TOTM This morning a diverse group of more than 75 academics, scholars, and civil society organizations — including ICLE and several of its academic affiliates — published a set of seven “Principles for Lawmakers” on liability for user-generated content online, aimed at guiding discussions around potential amendments to Section 230 of the Communications Decency Act of 1996.
This morning a diverse group of more than 75 academics, scholars, and civil society organizations — including ICLE and several of its academic affiliates — published a set of seven “Principles for Lawmakers” on liability for user-generated content online, aimed at guiding discussions around potential amendments to Section 230 of the Communications Decency Act of 1996.
Regulatory Comments The Department should be commended for undertaking this workshop “to explore industry dynamics in media advertising and the implications for antitrust enforcement and policy.... and the competitive dynamics of media advertising in general.” The competitive dynamics of advertising markets—and digital advertising markets, in particular—are complicated and not well-understood.
The Department should be commended for undertaking this workshop “to explore industry dynamics in media advertising and the implications for antitrust enforcement and policy…. and the competitive dynamics of media advertising in general.” The competitive dynamics of advertising markets—and digital advertising markets, in particular—are complicated and not well-understood. As more and more attention is paid to online markets and the welfare implications of various practices, it is crucial that enforcers make measured and informed decisions. As these are rapidly changing markets characterized by novel business models and nonstandard contracts, it is important not to fall prey to the concern that Ronald Coase pointed out half a century ago:
[I]f an economist finds something—a business practice of one sort or another—that he does not understand, he looks for a monopoly explanation. And as in this field we are very ignorant, the number of ununderstandable practices tends to be very large, and the reliance on a monopoly explanation, frequent.
Economic learning has come a long way since then, but markets have also been transformed. This workshop is a valuable step toward updating the economic learning relevant to these novel and economically important markets, and toward ensuring that antitrust enforcement follows suit. As Robert Bork said (and AAG Delrahim quoted in his introductory remarks):
Though the goals of the antitrust statutes as they now stand should be constant, the economic rules that implement that goal should not. It has been understood from the beginning that the rules will and should alter as economic understanding progresses.
We hope that this workshop will be the beginning, not the end, of this discussion undertaken by the US antitrust agencies.
Click here to reach full comments.
Written Testimonies & Filings FTC Hearings on Competition & Consumer Protection in the 21st Century. Comments of the International Center for Law & Economics: Toward a Proper Understanding of Consumer Privacy and Its Regulation: Market Realities and the Consumer Welfare Costs of Abandoning Regulatory Restraint. Hearing #12 (Apr. 9-10). Submitted May 31, 2019.
Digital privacy and data security are important ongoing concerns for lawmakers, particularly in light of recent, high-profile data breaches and allegations of data misuse. Understandably, in the wake of such incidents advocates regularly call for tighter restrictions on data collection and use. But, as we detail below, privacy is a highly complex topic comprising a wide variety of differing, and often conflicting, consumer preferences. While undoubtedly in need of ongoing assessment in the face of new challenges, the US federal government’s sectoral, tailored model of privacy regulation remains the soundest method of regulating privacy.
Although the US does not have a single, omnibus, privacy regulation, this does not mean that the US does not have “privacy law.” In the US, there already exist generally applicable laws at both the federal and state level that provide a wide scope of protection for individuals, including consumer protection laws that apply to companies’ data use and security practices, as well as those that have been developed in common law (property, contract, and tort) and criminal codes. In addition, there are specific regulations pertaining to certain kinds of information, such as medical records, personal information collected online from children, credit reporting, as well as the use of data in a manner that might lead to certain kinds of illegal discrimination.
Before engaging in a deeply interventionist regulatory experiment—such as intervening in the design of algorithms or imposing strict privacy regulations in contravention to revealed consumer preferences—there should be empirically justifiable reasons for doing so; in the language of economics, there should be demonstrable market failures in the provision of “privacy” (however we define that term), before centralized regulation co-opts the voluntary choices of consumers and firms in the economy.
It surely might be the case that some consumers, abstractly speaking, would prefer one-hundred percent perfect privacy and security. It is also a certainty that, faced with tradeoffs—including the price of services, the number of features, the pace of innovation, ease of use and convenience—consumers are willing to settle for some lesser degree of privacy and security.
Click here to read full comments.
Written Testimonies & Filings FTC Hearings on Competition & Consumer Protection in the 21st Century. Comments of the International Center for Law & Economics: Properly Balancing Consumer Protection and Innovation in Broadband Markets: The Competition Law and Economics of Vertical Restraints in Broadband. Hearing #10 (Mar. 20, 2019). Submitted May 31, 2019.
The necessity of the FTC’s involvement in regulating broadband competition arises most recently from the Federal Communication Commission’s (“FCC”) 2018 Restoring Internet Freedom Order (“2018 RIFO”). In the 2018 RIFO, the FCC adopted a competition-oriented approach to preventing what are otherwise violations of so-called “net neutrality” principles. This approach, consistent with the FCC’s historical deregulatory approach to information services, directly implicates the FTC as an important part of preventing competitive injuries that harm downstream consumers.
Rather than simply presuming harm, the FCC undertook an extensive, thorough, and fact-based analysis to first assess the likely risk of competitive harms that could arise in the broadband market. Based on this analysis, it concluded that the risk of harmful conduct is low, in terms of both the likelihood that ISPs will engage in such conduct and its potential adverse effects on consumers. Because this risk is low, the FCC determined that a “light-touch,” competition-oriented regulatory approach was appropriate for regulation of broadband.
This conclusion also followed from the FCC’s review of the Communications Act. As the FCC observed, “[t]he Communications Act includes an antitrust savings clause, so the antitrust laws apply with equal vigor to entities regulated by the Commission.” Recognizing this, the Commission carefully structured the 2018 RIFO so that consumers would be protected under existing consumer protection and antitrust laws, while still leaving room for the historically applied light-touch regime for information services under Title I of the Communications Act.
In so doing, the FCC struck the proper balance between indirect antitrust enforcement and direct regulation under the Communications Act, which incorporates competition policy as the generally applicable regulatory “default” in the absence of specific statutory mandates.
Written Testimonies & Filings FTC Hearings on Competition & Consumer Protection in the 21 st Century. Comments of the International Center for Law & Economics: The FTC’s Flawed Data Security Enforcement Program and Suggestions for Reform. Hearing #9 (Dec. 11-12, 2018). Submitted May 31, 2019.
Several pressing issues are raised by the ongoing need for data security as underscored by high profile breaches. One of the core problems in this area, however, is not simply that firms have inadequate data security, but that lawmakers have, to date, broadly failed to offer a viable standard by which firms can guide their conduct in this area.
The flawed strategy which the FTC currently deploys to deal with data security issues is a prime example. In brief, the Commission’s over-reliance on enforcement by consent decrees has created a quasi-regulatory approach to data security, eschewed the fundamentally useful aspects of a true common law approach to developing liability rules, and as a consequence provided little record of what actually amounts to liability for “unreasonable” data security. A true standard would include such components as: the assessment of reasonable care on the part of the tortfeasor, the thorough analysis of causality, an economically grounded computation of harm, and the establishment that harm is likely absent some level of care.
Given these failings, the FTC should consider implementing reforms that might bring its decisional practice closer to the common law tradition. These include giving more weight to economic analysis (notably by allowing the FTC’s Bureau of Economics to play a greater role in data security proceedings), adopting modest measures that would increase the transparency of the FTC’s data security decisions (thereby increasing legal predictability), bringing greater judicial review to data security proceedings, and incentivizing firms to better communicate their data security activities.
Popular Media The courtroom trial in the Federal Trade Commission’s (FTC’s) antitrust case against Qualcomm ended in January with a promise from the judge in the case, Judge Lucy Koh, to issue a ruling as quickly as possible — caveated by her acknowledgement that the case is complicated and the evidence voluminous.
The courtroom trial in the Federal Trade Commission’s (FTC’s) antitrust case against Qualcomm ended in January with a promise from the judge in the case, Judge Lucy Koh, to issue a ruling as quickly as possible — caveated by her acknowledgement that the case is complicated and the evidence voluminous. Well, things have only gotten more complicated since the end of the trial. Not only did Apple and Qualcomm reach a settlement in the antitrust case against Qualcomm that Apple filed just three days after the FTC brought its suit, but the abbreviated trial in that case saw the presentation by Qualcomm of some damning evidence that, if accurate, seriously calls into (further) question the merits of the FTC’s case.
