Abstract

This paper is a draft chapter from an ongoing book project I am calling The Corporation and the Twentieth Century. In The Visible Hand, Alfred Chandler explained the rise of the large vertically integrated corporation in the United States mostly in terms of forces of technology and economic geography. Institutions, including government policy, played a quite minor role. In my own attempt to explain the decline of the vertically integrated form in the late twentieth century, I stayed true to Chandler’s largely institution-free approach. This book will be an exercise in bringing institutions back in. It will argue that institutions, notably various forms of non-market controls imposed by the federal government, are a critical piece of the explanation of the rise and decline of the multi-unit enterprise in the U. S. Indeed, non-market controls, including those imposed in response to the dramatic events of the century, account in significant measure for the dominance of the Chandlerian corporation in the middle of the twentieth century. One important form of non-market control – though by no means the only form – has been antitrust policy. This chapter traces the history of antitrust and argues that, far from being a coherent attempt to address an actual economic problem of monopoly, the Sherman Antitrust Act emerged from the distributional political economy of the nineteenth century. More importantly, the chapter argues that the form in which antitrust emerged would prove significant for the corporation, as the Sherman Act and its successors outlawed virtually all types of inter-firm coordinating mechanisms, thus effectively evacuating the space between anonymous market transactions and full integration.

Copyright law, ever a sore point in some quarters, has found a new field of battle in the FCC’s recent set-top box proposal. At the request of members of Congress, the Copyright Office recently wrote a rather thorough letter outlining its view of the FCC’s proposal on rightsholders.

Read the full piece here.

On Friday the the International Center for Law & Economics filed comments with the FCC in response to Chairman Wheeler’s NPRM (proposed rules) to “unlock” the MVPD (i.e., cable and satellite subscription video, essentially) set-top box market. Plenty has been written on the proposed rulemaking—for a few quick hits (among many others) see, e.g., Richard Bennett, Glenn Manishin, Larry Downes, Stuart Brotman, Scott Wallsten, and me—so I’ll dispense with the background and focus on the key points we make in our comments.

Our comments explain that the proposal’s assertion that the MVPD set-top box market isn’t competitive is a product of its failure to appreciate the dynamics of the market (and its disregard for economics). Similarly, the proposal fails to acknowledge the complexity of the markets it intends to regulate, and, in particular, it ignores the harmful effects on content production and distribution the rules would likely bring about.

Read the full piece here.

Abstract

This Comment provides an argument for applying a wellbeing-analysis approach to eminent domain compensation, discussing the inefficiencies that result from compensating individuals with only the fair market value of their properties and arguing that a well-being-analysis approach provides a way out of the practical compromises made in eminent domain jurisprudence. Although happiness regressions do not demonstrate the exact valuation that an individual has of her property, using a multiplier that reflects the average subjective premium generated by a happiness regression is consistent with value-of-life evidence, which uses information about others to estimate an average multiplier that ensures more-accurate damages.

This Comment demonstrates that the BHPS data set, along with certain assumptions about why individuals move, implies that a wedge exists between the subjective valuation of an owned property and its fair market value. Not only does this wedge exist but it measures somewhere around or above 22 percent of fair market value. Given such a potentially large effect, this Comment aims to inspire future survey work with respect to individuals who are required to move. Such survey data would measure changes in happiness when the move—since it is due to eminent domain—is exogenous. For this reason, regression analyses based on such moves will provide even more-accurate estimates for the average undercompensation that occurs when individuals are paid only the fair market value of their properties in the context of eminent domain.

As ICLE argued in its amicus brief, the Second Circuit’s ruling in United States v. Apple Inc. is in direct conflict with the Supreme Court’s 2007 Leegin decision, and creates a circuit split with the Third Circuit based on that court’s Toledo Mack ruling. Moreover, the negative consequences of the court’s ruling will be particularly acute for modern, high-technology sectors of the economy, where entrepreneurs planning to deploy new business models will now face exactly the sort of artificial deterrents that the Court condemned in Trinko…

Read the full piece here.

The appellate court’s 2015 decision affirming the district court’s finding of per se liability in United States v. Apple provoked controversy over the legal and economic merits of the case, its significance for antitrust jurisprudence, and its implications for entrepreneurs, startups, and other economic actors throughout the economy. Apple has filed a cert petition with the Supreme Court, which will decide on February 19th whether to hear the case.

Read the full piece here.

Geoff Manne took part in the Fifth Annual Henry G. Manne Law & Economics Conference in a session on the economic aspects of required disclosure under federal securities law. Video of the event is embedded below.

Excerpt

Electronic payments in general and payment cards in particular are rapidly replacing cash and checks as the preferred means of making consumer as well as many business purchases. By enabling faster, more secure, traceable transactions, payment cards have been a key element in promoting greater integration of the world economy.

Indeed, the entire growth of e-commerce and Internet shopping would be inconceivable without modern payment card networks. However, the pace of future innovation and growth is likely to be hampered by increasingly invasive government regulation, especially regarding the fees that may be charged by payment card networks.

Both consumers and merchants benefit from the use of payment cards. Consumers benefit from convenience, such as by making transactions from home and avoiding holding cash. Meanwhile, credit cards enable consumers to make purchases even when they don’t have sufficient liquid resources – enabling them to smooth out their consumption.

Merchants also benefit in several ways. First, they make more sales because consumers are not constrained by the amount of money in their wallet (or the need to make a trip to the bank or cash machine).

Second, they enable businesses to process transactions more quickly (about twice as fast as cash – which in turn is faster than check). Third, the infrastructure required to support electronic payments is less cumbersome, piggybacks in part on existing communications networks, and reduces the need for physical security of currency (e.g., armoured cars and safes). Fourth, credit cards enable retailers to offload the cost and risk of offering their own credit operations.

This has enabled small businesses to flourish and grow, enabling them to compete with larger companies without the need to run their own, expensive credit operations. Fifth, payment card networks facilitate the collection and processing of enormously valuable consumer data that can be used by merchants to expand their sales. Finally, electronic payments enable long-distance transactions (over the Internet, for example), dramatically increasing the size of merchants’ available markets.

Continue reading at Cayman Financial Review

 

 

On Thursday I will be participating in an ABA panel discussion on the Apple e-books case, along with Mark Ryan (former DOJ attorney) and Fiona Scott-Morton (former DOJ economist), both of whom were key members of the DOJ team that brought the case. Details are below. Judging from the prep call, it should be a spirited discussion!

Readers looking for background on the case (as well as my own views — decidedly in opposition to those of the DOJ) can find my previous commentary on the case and some of the issues involved here:

• Why I think the Apple e-books antitrust decision will (or at least should) be overturned
• Why I think the government will have a tough time winning the Apple e-books antitrust case
• The procompetitive story that could undermine the DOJ’s e-books antitrust case against Apple
• How Apple can defeat the DOJ’s e-book antitrust suit
• The US e-books case against Apple: The procompetitive story (in a special issue of Concurrences on “E-books and the boundaries of antitrust” that includes several other essays worth reading)
• Amazon vs. Macmillan: It’s all about control

Other TOTM authors have also weighed in. See, e.g.:

• Alden Abbott: The Second Circuit Misapplies the Per Se Rule in U.S. v. Apple
• Josh Wright: The Apple E-Book Kerfuffle Meets Alfred Marshall’s Principles of Economics
• Josh Wright: Apple and Amazon E-Book Most Favored Nation Clauses

DETAILS:

ABA Section of Antitrust Law

Federal Civil Enforcement Committee, Joint Conduct, Unilateral Conduct, and Media & Tech Committees Present:

“The 2d Cir.’s Apple E-Books decision: Debating the merits and the meaning”

July 16, 2015
12:00 noon to 1:30 pm Eastern / 9:00 am to 10:30 am Pacific

On June 30, the Second Circuit affirmed DOJ’s trial victory over Apple in the Ebooks Case. The three-judge panel fractured in an interesting way: two judges affirmed the finding that Apple’s role in a “hub and spokes” conspiracy was unlawful per se; one judge also would have found a rule-of-reason violation; and the dissent — stating Apple had a “vertical” position and was challenging the leading seller’s “monopoly” — would have found no liability at all. What is the reasoning and precedent of the decision? Is “marketplace vigilantism” (the concurring judge’s phrase) ever justified? Our panel — which includes the former DOJ head of litigation involved in the case — will debate the issues.

Moderator

• Ken Ewing, Steptoe & Johnson LLP

Panelists

• Geoff Manne, International Center for Law & Economics
• Fiona Scott Morton, Yale School of Management
• Mark Ryan, Mayer Brown LLP

Register HERE

Filed under: administrative, antitrust, cartels, contracts, doj, e-books, economics, Efficiencies, error costs, law and economics, litigation, market definition, MFNs, monopolization, resale price maintenance, technology, vertical restraints Tagged: agency model, Amazon, antitrust, Apple, doj, e-books, iBookstore, major publishers, MFN, most favored nations clause, per se, price-fixing, publishing industry, Rule of reason, vertical restraints