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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.
Read the full piece here.
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.
TOTM It might surprise some readers to learn that we think the Court’s decision today in Apple v. Pepper reaches — superficially — the correct result. But, we hasten to add, the Court’s reasoning (and, for that matter, the dissent’s) is completely wrongheaded.
It might surprise some readers to learn that we think the Court’s decision today in Apple v. Pepper reaches — superficially — the correct result. But, we hasten to add, the Court’s reasoning (and, for that matter, the dissent’s) is completely wrongheaded. It would be an understatement to say that the Court reached the right result for the wrong reason; in fact, the Court’s analysis wasn’t even in the same universe as the correct reasoning.
Amicus Brief To establish antitrust standing, Pulse must show not only “injury causally linked to an illegal presence in the market” but also antitrust injury “attributable to an anti-competitive aspect of the practice under scrutiny.”
To establish antitrust standing, Pulse must show not only “injury causally linked to an illegal presence in the market” but also antitrust injury “attributable to an anti-competitive aspect of the practice under scrutiny.” Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990) (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488-89 (1977)). Put differently, Pulse must prove the existence of an injury “of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.” Id. (quoting Brunswick Corp., 429 U.S. at 489). As the district court rightly decided, Pulse has failed to meet its burden.
Antitrust law does not punish firms for succeeding even if they become dominant. Congress enacted the Sherman Act for “the protection of competition, not competitors.” Id. at 338 (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)). Yet Pulse’s injury flows from increased competition due to Visa’s innovation in the debit- network industry. Pulse freely admits that it lacks the “scale and market relevance” needed to compete with Visa’s challenged business strategies. (Appellant’s Br. 34) That Pulse’s PIN product has (so far, anyway) failed to gain traction in the marketplace, however, is not proof of antitrust injury. On the contrary, mere injury to a competitor, rather than to competition, is not an injury “of the type the antitrust laws were intended to prevent.” Phototron Corp. v. Eastman Kodak Co., 842 F.2d 95, 99 (5th Cir. 1988) (quoting Brunswick Corp., 429 U.S. at 489).
What’s more, Pulse has sued Visa for conduct that Pulse admits lowered merchants’ per-transaction fees, contending that those lower fees caused Pulse to obtain fewer transactions and generate less revenue. Pulse complains that it cannot “undercut” Visa’s new pricing structure. (Appellant’s Br. 40) But non-predatory price competition is no basis for antitrust injury. “When a firm … lowers prices but maintains them above predatory levels, the business lost by rivals cannot be viewed as an ‘anticompetitive’ consequence of the claimed violation.” Atl. Richfield, 495 U.S. at 337. So even if it harms Pulse, Visa’s charging low, but not below-cost, per-transaction fees to win market share is not harm to competition. Instead, both Visa’s conduct and its effects are “fully consistent with competition on the merits.” Taylor Publ’g Co. v. Jostens, Inc., 216 F.3d 465, 477 (5th Cir. 2000).
True, when assessing standing, this Court will assume that an antitrust violation exists. Doctor’s Hosp. of Jefferson, Inc. v. Se. Med. All., Inc., 123 F.3d 301, 306 (5th Cir. 1997). But that is not enough. “[P]roof of a[n antitrust] violation and of antitrust injury are distinct matters that must be shown independently.” Atl. Richfield, 495 U.S. at 344 (quoting Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 334.2c, at 330 (1989 Supp.)). Unable to show how Visa’s conduct harmed competition in any way, Pulse seeks to wag the dog of antitrust injury with the tail of an assumed violation. But a competitor has standing only if it proves that its “loss stems from a competition- reducing aspect or effect of the defendant’s behavior.” Atl. Richfield, 495 U.S. at 344. Pulse has proven nothing of the sort.
Antitrust is about unleashing the forces of competition, not throttling them. Accepting Pulse’s watered-down approach to antitrust injury, however, would have just the opposite effect. It would invite struggling firms to use antitrust law as a sword rather than a shield. It would deter innovation in highly competitive markets. And it would permit competitors to seek treble damages for pro-competitive harms that antitrust law does not reach. Rather than ensure vigorous competition, reversing the judgment below would harm competition and consumers alike.
Click here to read the full brief.
TOTM Elizabeth Warren wants to break up the tech giants — Facebook, Google, Amazon, and Apple — claiming they have too much power and represent a danger to our democracy. As part of our response to her proposal, we shared a couple of headlines from 2007 claiming that MySpace had an unassailable monopoly in the social media market.
Elizabeth Warren wants to break up the tech giants — Facebook, Google, Amazon, and Apple — claiming they have too much power and represent a danger to our democracy. As part of our response to her proposal, we shared a couple of headlines from 2007 claiming that MySpace had an unassailable monopoly in the social media market.
