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Yesterday, AT&T announced it was halting its plan to acquire T-Mobile. Presumably AT&T did not think it could prevail in defending the merger in two places simultaneously—one before a federal district court judge (to defend against the DOJ’s case) and another before an administrative law judge (to defend against the FCC’s case). Staff at both agencies appeared intractable in their opposition. AT&T’s option of defending cases sequentially, first against the DOJ then against the FCC, was removed by the DOJ’s threat to withdraw its complaint unless AT&T re-submit its merger application to the FCC. The FCC rarely makes a major license-transfer decision without the green light from the DOJ on antitrust issues. Instead, the FCC typically piles on conditions to transfer value created by the merger to complaining parties after the DOJ has approved a merger. Prevailing first against the DOJ would have rendered the FCC’s opposition moot.

Read the full piece here.

Summary

The regulation of innovation and the optimal design of legal institutions in an environment of uncertainty are two of the most important policy challenges of the twenty-first century. Innovation is critical to economic growth. Regulatory design decisions, and, in particular, competition policy and intellectual property regimes, can have profound consequences for economic growth. However, remarkably little is known about the relationship between innovation, competition, and regulatory policy.

Any legal regime must attempt to assess the tradeoffs associated with rules that will affect incentives to innovate, allocative efficiency, competition, and freedom of economic actors to commercialize the fruits of their innovative labors. The essays in this book approach this critical set of problems from an economic perspective, relying on the tools of microeconomics, quantitative analysis, and comparative institutional analysis to explore and begin to provide answers to the myriad challenges facing policymakers.

Available from Cambridge University Press

Summary

Free lunches are hard to turn down for a city staring into the fiscal abyss. As it faces dwindling revenues and the increased demand for public services that usually accompanies a recession, Philadelphia, like most other U.S. cities, is looking for new ways to make a buck. However, with unemployment above 10 percent and a fear of providing even more excuses for businesses and more-affluent residents to flee for the suburbs, the city is not inclined to hike income and property taxes.

Spurred by this bleak outlook, Mayor Michael Nutter, like politicians in New York, California, and a host of other places, has hit upon an ingenious idea. Given that, among its other problems, Philadelphia is wrestling with a growing obesity epidemic, why not kill two birds with one stone and tax sodas? While taxing cheesesteaks or Tastykakes might lead to protests up and down Broad Street, a few additional cents’ tax on each soda sold in the city holds the prospect of expanding the budget while trimming waistlines.

This double-dividend argument has been used before by public finance scholars in other contexts, from fossil fuels to alcohol. While almost all taxes are problematic because, in the process of raising revenues, they discourage a desirable activity, taxing “bad” activities supposedly generates cash flow while discouraging the underlying activity.

I will be discussing the titular topic at a Federalist Society panel (sponsored by the NY City Lawyers Chapter) along with Richard Epstein (NYU Law) and Jonathan Baker (Chief Economist, FCC) Tuesday night at the Cornell Club.  Registration details are available at the link above.  Here is the event description:

The Federal Trade Commission is more active than ever in its assertion of authority in the virtual world. The FTC’s role is generally understood to include competition analysis, consumer protection, and policy advocacy. How are each of these functions best accomplished by the FTC in the virtual world? Are there special attributes of the internet and e-commerce that require the FTC to modify its traditional regulatory approach? Will the FTC’s planned “Do Not Track” policy be an overall good, or a market inhibiter? Our experts will examine these and other questions.

I’m very much looking forward to it.

C. Boyden Gray and John Shu offer a very helpful discussion on this issue in an article in Engage.  Here is the abstract:

President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank” or “the Act”) into law on July 21, 2010. The massive and complex Act is reportedly the result of many compromises. Dodd-Frank’s intent, according to its title page, is “[t]o promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘too big to fail,’ to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.”

Of particular interest to me was this portion of the discussion of the Bureau of Consumer Financial Protection (BCFP):

One of the BCFP’s stated objectives is to protect consumers “from unfair, deceptive, or abusive acts and practices and from discrimination.”75 The BCFP may halt a company or service provider from “committing or engaging in an unfair, deceptive, or abusive act or practice” with respect to offering or transacting in a consumer financial product or service.76 In fact, Dodd-Frank makes it unlawful for consumer financial product companies or service providers to “engage in any unfair, deceptive, or abusive act or practice.”77 The Act extends this liability to any entity that “knowingly or recklessly provide[d] substantial assistance” to the offender.78

clearly defi ne vague terms such as “unfair,” “deceptive,” “abusive,” and “discrimination.” BCFP is vested with the sole discretion to decide what those terms mean and how they are applied to consumer financial products and services and the consumer financial industry.79 For example, Dodd- Frank defines an act or practice as “abusive” if it “materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service,” or if it takes “unreasonable advantage” of a consumer’s “lack of understanding” of the “material risks, costs, or conditions of the product or service” or a consumer’s “inability” to protect his own interests “in selecting or using a consumer financial product or service.”80 Given that each and every consumer has different abilities to understand a term, condition, material risk, and cost; and each and every consumer has varying levels of ability—or desire—to protect his own interests, the Act’s standard can readily be caricatured as “we know it when we see it.”

Moreover, the Act does not seem to include the concepts of deception or fraud with respect to the term “abusive,” which would mean that the BCFP could still declare illegal products and services whose terms, conditions, risks and costs are fully disclosed, so long as the BCFP labels them “abusive.” Moreover, the BCFP’s charter
is so vast that its power could be characterized as including the practical authority to re-write consumer financial protection laws if it chooses to do so. Accordingly, it is reasonable to argue that Congress must do the re-writing, not an agency that escapes
meaningful oversight.

Those challenging Dodd-Frank will maintain that Congress structured the BCFP in such a way that it unconstitutionally escapes both Article I and Article II oversight. The key is that the Act houses the BCFP within the Federal Reserve, thereby placing one protected entity (the BCFP) within another (the Fed).81

The article provides a good summary of the provisions of Dodd-Frank as well.

Professors Henderson and Ribstein touch on two theoretical failures of the behavioralist movement which both reveal the prematurity of ‘behaviorally-informed’ regulatory proposals: the behavioralist assumptions that (1) behavioral biases theoretically necessitate, or at least enable, public intervention, and (2) governmental entities can net improve individual outcomes over the status quo of unfettered, if limited, human capabilities.  I think both of these observations highlight the shocking dearth of theoretical exploration amongst behavioralists thus far.  I want to focus on connecting these assumptions to the connection between behavioral economics and administrative regulation.

Read the full piece here. 

Washington Post columnist Steve Pearlstein offers a novel explanation for “regulatory failure.”  The D.C. Circuit, has, Pearlstein asserts, “has intimidated, undermined and demoralized the regulatory apparatus” by giving insufficient deference to regulators and “opinions that routinely ignore the plain language of statute and the clear intent of Congress.”   Pearlstein holds up three Republican appointees as examples of this sort of runaway anti-regulatory judicial activism.  Strong stuff.  What’s the evidence?  Pearlstein relies on the recent Comcast v. FCC, an opinion authored by Judge Tatel (Clinton appointee, in case you were wondering).  It is also worth noting that two of the judges cited have taken senior status and only Kavanaugh joined recently.  Pearlstein then refers to the D.C. Circuit’s review of the Federal Trade Commission’s case against Rambus.  He describes it as follows…

Read the full piece here. 

The DOJ has posted the transcript from the recent DOJ/USDA hearings on antitrust in agriculture here.  I figured our readers might be especially interested in seeing Christine Varney’s comments (especially without having to slog through all 350 pages to find them!).  I have bolded some of the most interesting parts of her comments.

Read the full piece here.