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ICLE Statement on FTC-Amgen Settlement

PORTLAND, Ore. (Sept. 1, 2023) – In light of Amgen Inc.’s announced agreement with the Federal Trade Commission (FTC) and attorneys general from six U.S. states settling challenges . . .

PORTLAND, Ore. (Sept. 1, 2023) – In light of Amgen Inc.’s announced agreement with the Federal Trade Commission (FTC) and attorneys general from six U.S. states settling challenges to the company’s planned acquisition of Horizon Therapeutics, the International Center for Law & Economics (ICLE) offers the following statement from ICLE President Geoffrey A. Manne:

“This is the result that ICLE and 11 antitrust law and economics scholars recommended in our brief to the court. The FTC suit to stop the merger was clear overreach.

“The FTC had no chance to win. This is a clear admission of that fact. Every recent merger settlement with the FTC has included a provision requiring that all future mergers get prior approval from the FTC. In this settlement, prior approval is required only for those drugs that compete directly with the Horizon drugs. This would never have been allowed anyway, as those drugs have no competitors currently.”

ICLE’s amicus brief is available to download here. To schedule an interview with Geoff Manne or other ICLE scholars, contact R.J. Lehmann at [email protected] or (908) 265-5272.

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ICLE Issue Brief Highlights Problems with Any FTC Challenge to the Kroger/Albertsons Merger

PORTLAND, Ore. (July 27, 2023) – While it remains unclear whether the Federal Trade Commission (FTC) will move to block the $24.6 billion merger that supermarkets . . .

PORTLAND, Ore. (July 27, 2023) – While it remains unclear whether the Federal Trade Commission (FTC) will move to block the $24.6 billion merger that supermarkets Kroger Co. and Albertsons Cos. Inc. announced in October 2022, a new issue brief from the International Center for Law & Economics (ICLE) argues that any such challenge is unlikely to prevail in court, and would likely fail to account for the dramatic changes in the retail food and grocery landscape since the last litigated supermarket merger.

Authored by ICLE’s Brian C. Albrecht, Dirk Auer, Eric Fruits and Geoffrey A. Manne, “Five Problems with a Potential FTC Challenge to the Kroger/Albertsons Merger” anticipates that the merger will likely be challenged, given the FTC’s increasingly aggressive enforcement stance against mergers and acquisitions, and that the merging parties’ apparent willingness to litigate the case makes the likelihood of a protracted legal battle high.

Such a challenge would, however, quickly find itself “on a collision course with the law as it is currently enforced by U.S. courts,” the authors write. They note that the few market overlaps between the merging parties could be resolved by straightforward divestitures, which are routinely accepted by courts, and that the FTC’s likely market definition and potential theories of harm pertaining to labor monopsony and purchasing power are speculative, at best.

Kroger is currently the fourth-largest food and grocery retailer in the United States, behind Walmart, Amazon, and Costco. If the merger goes through, the combined firm would move into third place in market share, but would still account for just 9% of nationwide sales, the authors note.

“The upshot is that the food and grocery industry is arguably as competitive as it has ever been,” the authors write. “Unfortunately, recent developments suggest the FTC may well ignore or dismiss the economic realities of this rapid transformation of the food and grocery industry, substituting instead the outdated approach to market definition and industry concentration signaled by the draft merger guidelines.”

The FTC has in similar cases defined the relevant market as “supermarkets”—that is, retail stores that allow consumers to purchase all their weekly food and grocery needs in a single visit. This excludes warehouse clubs like Costco, organic markets like Whole Foods, online-delivery platforms like Instacart, limited-assortment stores like Aldi, and a range of e-commerce and ethnic-specialty options.

But in the years since merger of Ahold and Giant a quarter-century ago, the authors note, warehouse clubs and supercenters like Walmart have doubled their share of retail sales, while supermarkets’ share has dropped by more than 25%. Over the same period, online shopping and home delivery have grown from niche services serving only 10,000 households nationwide to a landscape where approximately one-in-eight consumers purchase groceries exclusively or mostly online.

“Based on these observations, the product-market definition that the FTC has employed in its consent orders over more than two decades is likely to be—and should be—challenged to include warehouse clubs, in addition to accounting for online retail and delivery,” the authors write.

The full issue brief can be downloaded here. To schedule an interview with one of the authors, contact R.J. Lehmann at [email protected] or (908) 265-5272.

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ANNOUNCEMENT: Updated Merger Enforcement Guidelines from FTC & DOJ Usher in New Era of Hostility Toward Merger Activity

PORTLAND, Ore. (July 19, 2023)—Updated merger enforcement guidelines from the Federal Trade Commission (FTC) and U.S. Justice Department (DOJ) released today signal an attempt to . . .

PORTLAND, Ore. (July 19, 2023)—Updated merger enforcement guidelines from the Federal Trade Commission (FTC) and U.S. Justice Department (DOJ) released today signal an attempt to discourage all mergers, not just anticompetitive mergers, according to scholars of the International Center for Law & Economics.

ICLE President Geoffrey Manne observes, “the overbroad guidelines are clearly designed to deter merger activity as a whole, regardless of the risk posed to competition. In so doing, the FTC and DOJ have reduced the utility of the guidelines to courts and frustrated the very coordination benefits that guidelines have historically sought to create.”

Chief Economist Brian Albrecht notes, “the FTC and DOJ cannot simply declare the existence of new antitrust law since courts are the ultimate arbiters of merger disputes. Small and medium sized firms without the benefit of costly specialist attorneys stand to suffer most directly as a result of the disruption caused by these new guidelines.”

Among the most troubling substantive developments presented by the new guidelines are:

  • On merger types: the conflation of vertical and horizontal mergers, ignoring the time-honored and judicially endorsed distinction between the two.
  • On potential competition: the treatment of any acquisition of a “potential rival” as part of a broader foreclosure strategy, thereby ignoring the reality that acquisition is often a more realistic approach to exit than an IPO.
  • On labor markets: the creation of a false symmetry between product markets and labor markets. The guidelines fail to appreciate that, while products are static, people are not.
  • On multi-sided platforms: the guidelines err on the side of protecting competitors over consumers by assuming all acquisitions are undertaken to lessen competition.

Previous ICLE commentary concerning the FTC and DOJ merger enforcement reform is available here and here.

President Geoffrey Manne and Chief Economist Brian Albrecht are available all week to discuss the far reaching implications of the new guidance.

To schedule an interview, contact ICLE Media and Communications Manager Elizabeth Lincicome at [email protected] or 919-744-8087.

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ICLE Welcomes Becky Hogan as Director of Finance & Administration

Becky Hogan joined ICLE as Director of Finance and Administration in May 2023. She’s enjoyed living in Portland, Oregon since the early 1990’s. Prior to . . .

Becky Hogan joined ICLE as Director of Finance and Administration in May 2023. She’s enjoyed living in Portland, Oregon since the early 1990’s.

Prior to joining ICLE, Becky was Director of Finance and Operations at Swift, a Wunderman Thompson agency, Intercompany Accountant at Columbia Sportswear, and Finance Manager at a boutique hotel in Portland. She graduated from UC Davis, with a bachelor’s degree in Economics.

When she’s not working, she can be found at Providence Park cheering for the Thorns and the Timbers, or wherever a musical is playing.

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ICLE White Paper Highlights Regulatory Differences Between Stock Trading and Digital Ads

PORTLAND, Ore. (April 12, 2023) – Advocates for legislation that would remake the online display-advertising market—most recently introduced by Sen. Mike Lee (R-Utah) as Advertising Middlemen Endangering . . .

PORTLAND, Ore. (April 12, 2023) – Advocates for legislation that would remake the online display-advertising market—most recently introduced by Sen. Mike Lee (R-Utah) as Advertising Middlemen Endangering Rigorous Internet Competition Accountability (AMERICA) Act—often claim the changes they seek are based on analogous rules used in the regulation of securities markets.

But a new white paper from the International Center for Law & Economics demonstrates that such analogies are based on fundamental misunderstandings of how securities regulation works and why it exists.

The AMERICA Act and Lee’s earlier Competition and Transparency in Digital Advertising Act (CTDA) both propose to bar companies that own a digital-advertising exchange with more than $20 billion in annual ad revenue from also providing services to buyers and sellers of ads, or from selling advertising space themselves. This requirement for “physical separation” could force the breakup of vertically integrated digital-advertising platforms like Google.

The bills also would impose fiduciary-like duties on those who buy and sell online ads for others, which has been compared to “best interests” standards imposed on stockbrokers.

But according to the paper’s author, ICLE Academic Affiliate M. Todd Henderson of the University of Chicago, there isn’t an analogous requirement for physical separation in securities law. Many stockbrokers also own exchanges where stocks are traded.

Moreover, rules that stock trades be executed at the best-available price are imposed precisely because vertical integration is common. Such rules nonetheless do not significantly limit trading behavior, Henderson argues, and could not be imported to the “adtech” market without erecting a massive regulatory bureaucracy to police them.

“Whatever the facts on the ground in stock markets, any analogy to them is misplaced, because it fails to appreciate the purpose of stock-market regulation,” Henderson writes. “The sale of stocks is regulated in the way that it is because of the centrality of stocks to the savings and investments of everyday Americans, as well as the various vital roles stocks and stock markets play in the capitalist economy.”

“Stock-market regulation protects the nerve center of the economy. Ads are not stocks, and any claim that they should be regulated as stocks is deeply misleading,” he added.

The full paper can be downloaded here

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ICLE White Paper Recounts ‘Doomsday’ Merger Predictions that Never Came True

PORTLAND, Ore. (March 22, 2023) – As the Federal Trade Commission (FTC) and the U.S. Justice Department’s (DOJ) Antitrust Division prepare to release updated federal . . .

PORTLAND, Ore. (March 22, 2023) – As the Federal Trade Commission (FTC) and the U.S. Justice Department’s (DOJ) Antitrust Division prepare to release updated federal merger guidelines that the agencies say will better detect and prevent illegal and anticompetitive deals, a new research paper from the International Center for Law & Economics (ICLE) looks back at several recent high-profile mergers that drew apocalyptic warnings about potential harm to competition and consumers. 

Authors Brian C. Albrecht, Dirk Auer, Eric Fruits, and Geoffrey A. Manne note that a retrospective look at these past mergers finds that the critics—some of whom have since taken positions in the upper echelons of U.S. antitrust agencies—were frequently off-base in their dire predictions. For example:

  • Amazon’s 2017 deal to purchase Whole Foods would, we were told, allow the company to dominate the grocery business, much as it had online retail. Lina Khan, now chair of the FTC, even warned that it “would allow Amazon to potentially thwart future innovations.” Five years after the deal, the stocks of many rival retail companies significantly outperformed Amazon’s, while Whole Foods’ market share has not meaningfully increased since its acquisition by Amazon.
  • ABI’s 2016 deal to acquire SABMiller would, we were told, “eliminate competition” in the brewing industry and that “the effects on the craft-brewing industry would be devastating.” In fact, in the four years following the merger, the average U.S. market saw an 11% increase in the number of craft brewers, and the market concentration enjoyed by the four largest breweries has seen a long-term drop from 90.8% to 68.6%.
  • Bayer’s 2018 merger with Monsanto would, Sen. Amy Klobuchar (D-Minn.) warned at the time, “significantly reduce competition, limit seed options for farmers, and raise prices for both farmers and consumers.” In fact, corn and soybean prices actually fell in real inflation-adjusted terms. And rather than enjoying monopoly profits, Bayer’s stock is down more than 50% over the past five years.
  • Google’s 2019 purchase of Fitbit raised the hackles of both consumer privacy and antitrust advocates, with seven Democratic senators warning that adding “Fitbit’s consumer data to Google’s could further diminish the ability of companies to compete with Google in… ad technology markets.” In fact, Google’s share of online advertising spending has declined from 34.7% to 28.8%. Moreover, Fitbit’s share of the smartwatch market has actually fallen from 5.7% to 3.8%. And contrary to warnings from privacy advocates, Google does not use Fitbit data to target Google Ads.

The authors also examine a pair of deals that have drawn significantly more interest in recent years than they did at the time they were consummated.

  • Facebook’s 2012 deal to purchase Instagram was largely ignored as insignificant at the time, or even derided as a poor business decision on Facebook’s part. In more recent years, it has been described as a “killer acquisition” that locked in Meta’s social-media monopoly, making it “the one that got away” from antitrust regulators. But, in fact, Meta’s stock has lost more than half its value since its peak in 2021, as the company has had to contend with the rise of TikTok. 
  • Ticketmaster’s 2010 merger with Live Nation has come under increased scrutiny in the wake of the company’s technical difficulties in rolling out sales for Taylor Swift’s 2023 tour. While the merger did draw objections at the time, the reality is that Ticketmaster has actually lost market share in the years since, partly due to the structural remedies it agreed to as part of the deal. Moreover, the technical problems it encountered in the Taylor Swift fiasco don’t appear to be related in any way to the Live Nation merger. 

“Most mergers, even the ones we picked as noteworthy, are largely benign but pose a set of tradeoffs,” the authors write. “These ambiguous effects are precisely why evidence-based antitrust enforcement—along with remedies that can separate the wheat from the chaff—is as important today as it has ever been.”

The full paper can be downloaded here. To schedule an interview with the authors, contact Elizabeth Lincicome at [email protected] or (919) 744-8087.

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L&E Scholars Argue that ‘No-Poach’ Clause Isn’t Inherently Anti-Competitive

PORTLAND, Ore. (Jan. 12, 2023) – A new amicus brief filed with the 7th U.S. Circuit Court of Appeals by the International Center for Law . . .

PORTLAND, Ore. (Jan. 12, 2023) – A new amicus brief filed with the 7th U.S. Circuit Court of Appeals by the International Center for Law & Economics (ICLE) and 20 distinguished scholars of law & economics highlights the importance of market definition in labor markets, as well as the proper antitrust approach to franchise-agreement terms.

The case in question, Deslandes & Turner v. McDonald’s USA LLC, involved certain “no-poach” agreements between McDonald’s and its individual franchisees that were in effect prior to 2017. The plaintiffs argued that these agreements amounted to horizontal restraints that harmed competition and workers across the nation in what was, in essence, a McDonald’s-specific labor market.

The amici disputed that the plaintiffs’ had defined a relevant market. They note that McDonald’s franchises in one state do not typically compete with franchises in other states for the same workers, but they do compete for labor in local markets with other fast-food restaurants, as well as with hundreds of other employers who seek low-wage labor. There is therefore no evidence that McDonald’s wields market power in the relevant labor markets.

“Plaintiffs’ proposed market is both implausible and economically unsound,” the signatories write. “Antitrust markets typically have two dimensions: (1) a geographic market and (2) a product or services market. Plaintiffs’ single-brand, nationwide market fails along both dimensions.”

To argue that the no-poach clause constituted a horizontal restraint, the plaintiffs note that McDonald’s has a few corporate-owned restaurants that are horizontal competitors with independently owned franchisees. But as the brief points out, in 20 states and in many local markets, there are no corporate-owned restaurants at all, undermining the argument that there could be a horizontal restraint at the national level.

They argue instead that the agreements are vertical restraints that should be subject to case-by-case, rule-of-reason analysis. While some no-poach agreements may indeed be suspect, the kinds of intrabrand restraints McDonald’s employed do not obviously harm competition.

“McDonald’s vigorously competes with numerous firms in both labor markets and the output market,” the amici write. “Its competitive efforts have included various intrabrand restraints among its franchisees that foster a strong, consistent brand identity, along with shared marketing and product development. That successful brand identity is what attracts individual franchisees to open and operate McDonald’s restaurants.”

Signatories to the brief included ICLE President Geoffrey A. Manne, Director of Competition Policy Dirk Auer, Director of Law & Economics Programs Gus Hurwitz, Senior Scholar Daniel Gilman, Academic Advisor Richard A. Epstein, and Academic Affiliates Jonathan M. Barnett, Luke Froeb, Stan Liebowitz, Scott Masten, Alan Meese, Paul Rubin and Michael Sykuta.

Other signatories included James C. Cooper, Tad Lipsky, and John Yun of George Mason University’s Scalia School of Law; former Federal Communications Commission member Harold Furchtgott-Roth; Janice Hauge of the University of North Texas; Daniel A. Lyons of Boston College Law School; Gregory J. Werden, formerly of the U.S. Justice Department’s Antitrust Division; and Nobel laureate Vernon L. Smith of Chapman University.

The full brief can be downloaded here. To schedule an interview about the brief with ICLE scholars, contact Elizabeth Lincicome at [email protected].

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ICLE Scholars: FTC’s Noncompete Ban Is Wrong on Substance and Procedure

PORTLAND, Ore. (Jan. 5, 2023) – New rules proposed by the Federal Trade Commission (FTC) to ban workplace noncompete agreements both exceed the commission’s rulemaking . . .

PORTLAND, Ore. (Jan. 5, 2023) – New rules proposed by the Federal Trade Commission (FTC) to ban workplace noncompete agreements both exceed the commission’s rulemaking authority and threaten to erase the benefits that such agreements may provide to workers and firms alike, according to scholars with the International Center for Law & Economics (ICLE).

In many cases, noncompete agreements can help employers to capture the benefits of investments they make in employee training and trade secrets, upon which rivals could otherwise free ride by bidding away fully trained employees, according to ICLE Senior Scholar and former FTC Attorney Advisor Daniel Gilman, who added that even the FTC’s own Bureau of Economics staff have observed the benefits that such agreements can provide.

“Ultimately, these agreements offer both costs and benefits that each party must carefully weigh,” said ICLE Chief Economist Brian Albrecht. “This doesn’t mean that there’s never a reason for antitrust authorities to examine potentially abusive or anticompetitive noncompete clauses, but such examples should be assessed on a case-by-case basis, rather than through brightline rules.”

ICLE Director of Law & Economics Programs Gus Hurwitz also pointed to the dissenting statement from FTC Commissioner Christine S. Wilson, which raised questions about the commission’s authority to engage in “unfair methods of competition” rulemaking, as well as whether the rule violates the “major questions doctrine” addressed by the U.S. Supreme Court in their 2022 West Virginia v. EPA decision.

“Without any explicit guidance from Congress, the FTC in this rule proposes to rewrite millions of employment contracts and preempt what has traditionally been a matter for state contract law,” noted ICLE President Geoffrey A. Manne. 

“Between this rule and its recent guidance on the gig economy, the FTC is taking on a role as master labor regulator that no one in the world thinks it’s been granted,” Manne said. “This is particularly curious, given that we already have a U.S. Department of Labor.”

For other ICLE resources on noncompete agreements, see these comments filed with the FTC in September 2021 by Manne and Director of Competition Policy Dirk Auer; this 2022 paper by Academic Affiliate Alan Meese; and this 2020 paper co-authored by Academic Affiliate Jonathan M. Barnett. 

To schedule an interview with ICLE scholars about the FTC’s proposed noncompete rule, contact Communications Manager Elizabeth Lincicome at [email protected].

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ICLE Scholars Respond to FTC Inquiry on ‘Commercial Surveillance’

PORTLAND, Ore. (Nov. 22, 2022) – The Federal Trade Commission (FTC) appears set to propose sweeping data-security and privacy rules that ignore the tremendous benefits . . .

PORTLAND, Ore. (Nov. 22, 2022) – The Federal Trade Commission (FTC) appears set to propose sweeping data-security and privacy rules that ignore the tremendous benefits produced by the information economy and that barely acknowledge the limits of the FTC’s own authority, ICLE scholars argue in a response to an FTC advanced notice of proposed rulemaking (ANPR) on “commercial surveillance and data security.”

Written by ICLE President Geoffrey A. Manne, Director of Innovation Policy Kristian Stout and Senior Scholar Daniel Gilman—himself a veteran of the FTC’s Office of Policy Planning—the ICLE comments acknowledge the potential benefits of streamlined and uniform federal data-security or privacy regulations, and note that the commission is “uniquely positioned to understand the complexities entailed” in developing such rules. The ANPR fails to build on that expertise, however, and “its dearth of economic analysis is especially striking,” the ICLE scholars argue.

“Absent an express grant of authority and the requisite resources from Congress, the Commission would be ill-advised to consider, much less to adopt, the kinds of sweeping data regulations that the Commercial Surveillance ANPR appears to contemplate,” they write.

A copy of the full comments nation can be downloaded here. To schedule an interview with Geoff Manne, Dan Gilman or Kristian Stout, please contact ICLE Media and Communications Manager Elizabeth Lincicome at [email protected].

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