Summary

This white paper counsels extreme caution in the use of past statistical studies of the purported effects of health insurance company mergers to infer that today’s proposed mergers — between Aetna/Humana and Anthem/Cigna — will likely have similar effects. Focusing on one influential study — Paying a Premium on Your Premium (“Paying a Premium”) by Dafny, Duggan & Ramanarayanan (“Dafny, et al.”) — as a jumping off point, we highlight some of the many reasons that past is not prologue.

In short: extrapolated, long-term, cumulative, average effects drawn from 17-year old data may grab headlines, but they really don’t tell us much of anything about the likely effects of a particular merger today, or about the effects of increased concentration in any particular product or geographic market.

ICLE Executive Director Geoffrey Manne took part in a hearing in Paris on big data and competition before the OECD’s Competition Committee. The panel included:

• Maurice Stucke (Professor of Law at the University of Tennessee and co-founder
  of the Konkurrenz Group)
• Hal Varian (Chief Economist at Google and Professor at Berkeley School of
  Information)
• Geoffrey Manne (Executive Director of the International Centre for Law and
  Economics and member of the FCC’s Consumer Advisory Committee)
• Annabelle Gawer (Professor of Digital Economy at the University of Surrey)
• Alec Burnside (Managing Partner at Cadwalader)

Manne argued that antitrust law is not well-suited to promote privacy rights, which should be a matter of consumer-protection law. As he explained, firms do not need to have market power in order to violate privacy rights and, even if they do, it would still be necessary to prove that such conduct would amount to an abuse of dominance.

He also pointed out that not all product characteristics are necessarily relevant for a competitive analysis: despite the claims that consumers value privacy, there is evidence that consumers are usually willing to disclose sensitive information for a small reward, suggesting that the value of privacy is lower than what it is usually considered. Therefore, incorporating privacy into antitrust has the risk of increasing the level of subjectivity in competition-law enforcement, due to the inherent difficulties of measuring consumers’ willingness to pay for privacy and, eventually, it could prevent companies from using data to actually improve the quality of their products.

In response to the frequent concern that data could be used to monopolize an industry, Manne reinforced Professor Varian’s arguments that data is cheap and can be collected from many alternative sources, particularly due to the massive size of the data-broker industry.

A copy of his presentation can be found here.

Earlier this month, Google filed its response to the European Commission’s Android antitrust complaint, which alleges that Google thwarts its competitors in search, mobile apps, and mobile devices by limiting their access to Android users through self-serving licensing terms.

But the EC’s objections, rooted in an outdated understanding of marketplace dynamics, are a contrivance. They go like this: ‘Google Search is dominant’… if you exclude Amazon and Facebook from its market. ‘Android enjoys a monopoly’… if you forget about iPhones. ‘Google excludes competing apps on Android’ … if you ignore the ease with which users install alternatives.

Read the full piece here.

Over the weekend, Sen. Al Franken and Federal Communications Commission Commissioner Mignon Clyburn issued an impassioned statement calling for the FCC to thwart the use of mandatory arbitration clauses in internet service providers’ consumer service agreements — starting with a ban on mandatory arbitration of privacy claims in the chairman’s proposed privacy rules. Unfortunately, their call to arms rests upon a number of inaccurate or weak claims. Before the commissioners vote on the proposed privacy rules later this week, they should carefully consider whether consumers would actually be served by such a ban.

Read the full piece here.

Next week the FCC is slated to vote on the second iteration of Chairman Wheeler’s proposed broadband privacy rules. Of course, as has become all too common, none of us outside the Commission has actually seen the proposal. But earlier this month Chairman Wheeler released a Fact Sheet that suggests some of the ways it would update the rules he initially proposed.

According to the Fact Sheet, the new proposed rules are…

Read the full piece here. 

Summary

“Dear Ms. Dortch:

I write to express my concerns regarding the consumer welfare effects of the revised broadband privacy proposal summarized in a Fact Sheet by Federal Communications Commission (“FCC”) Chairman Tom Wheeler earlier this month. While the Fact Sheet appears to indicate that the Chairman’s revised proposal includes some welcome changes from the initial broadband privacy NPRM adopted by the Commission this Spring, it also raises a number of problematic issues that merit the Commission’s attention before final rules are
adopted.

While the Fact Sheet asserts that the Chairman’s new proposal is “in harmony” with the privacy framework outlined by the Federal Trade Commission (“FTC”) (as well as the Administration’s proposed Consumer Privacy Bill of Rights), the purported changes in this regard are merely rhetorical, and do not, in fact, amount to a substantive alignment of the
Chairman’s proposed approach with that of the FTC.

• First, unlike the FTC’s framework, the proposal described by the Fact Sheet ignores the crucial role of “context” in determining the appropriate level of consumer choice before affected companies may use consumer data, instead taking a rigid approach that would stifle innovation and harm consumers.
• Second, the Fact Sheet significantly expands the scope of information that would be considered “sensitive” well beyond that contemplated by the FTC, imposing onerous and unnecessary consumer consent obligations that would deter welfare-enhancing uses of data.

I agree with the Chairman that, if adopted, the FCC’s rule should align with the FTC’s. But the proposed rule reflected in the Fact Sheet does not. I urge the Commission to ensure that these important deviations from the FTC’s framework are addressed before moving forward with adopting any broadband privacy rules…”

Summary

Late last year, Tim Wu of Columbia Law School (and now the White House Office of Management and Budget), Michael Luca of Harvard Business School (and a consultant for Yelp), and a group of Yelp data scientists released a study claiming that Google has been purposefully degrading search results from its more-specialized competitors in the area of local search.  The authors’ claim is that Google is leveraging its dominant position in general search to thwart competition from specialized search engines by favoring its own, less-popular, less-relevant results over those of its competitors:

To improve the popularity of its specialized search features, Google has used the power of its dominant general search engine. The primary means for doing so is what is called the “universal search” or the “OneBox.”

This is not a new claim, and researchers have been attempting (and failing ) to prove Google’s “bias” for some time. Likewise, these critics have drawn consistent policy conclusions from their claims, asserting that antitrust violations lie at the heart of the perceived bias.

But the studies are systematically marred by questionable methodology and bad economics. The primary difference now is the saliency of the “Father of Net Neutrality,” Tim Wu, along with a cadre of researchers employed by Yelp (one of Google’s competitors and one of its chief antitrust provocateurs ), saying the same thing in a new research paper, with slightly different but equally questionable methodology, bad economics, and a smattering of new, but weak, social science.

Geoffrey Manne took part in a panel on “dominant platforms” hosted by the Capitol Forum, which also featured Jonathan Kanter of Paul Weiss LLP and Barry Lynn of New America and was moderated by the Capitol Forum’s Teddy Downey. Video of the event is embedded below.

Since the European Commission (EC) announced its first inquiry into Google’s business practices in 2010, the company has been the subject of lengthy investigations by courts and competition agencies around the globe. Regulatory authorities in the United States, France, the United Kingdom, Canada, Brazil, and South Korea have all opened and rejected similar antitrust claims.

And yet the EC marches on, bolstered by Google’s myriad competitors, who continue to agitate for further investigations and enforcement actions, even as we — companies and consumers alike — enjoy the benefits of an increasingly dynamic online marketplace.

Read the full piece here.