In this morning’s New York Times, Professor Paul Krugman laments the state of America, and, as a remedy, proposes . . . surprise! . . .  more government spending. He writes: “When we save a schoolteacher’s job, that unambiguously aids employment; when we give millionaires more money instead, there’s a good chance that most of that money will just sit idle.” I’m not an economist, but this sentence seems horribly flawed for someone who is. I agree that in a world with zero interest rates and 10 percent unemployment, some government priming of the pump might make sense. Macro-economic conditions need to be changed, and the government is uniquely positioned to do this. After all, it sets the rules, prints the money, sets the level of taxes, and determines through public policy where investment will flow. But the question is how and where to act. Krugman believes taxing us to raise money to pay teachers is part of the answer. I doubt it, for several reasons.

Read the full piece here. 

Earlier this year, the US Supreme Court granted a writ of certiorari to Costco in the case of OMEGA SA v. Costco Wholesale Corp. (541 F. 3d 982 (2008)).  At issue is whether the ‘first sale doctrine’ of US copyright law (17 U.S.C. § 109(a)), which limits the copyright owner’s ability to restrict distribution of its product after first sale, applies to foreign-manufactured products whose first sale was outside the U.S. and whose importation to the U.S. was not authorized by the manufacturer. (I happened to run across a July 31 op-ed by Eric Felten at the WSJ lamenting the potential for the case to limit the ability of libraries to lend books, particularly books originally published and purchased overseas.) The case raises some interesting issues about the role and purpose of copyright protection, segregated market price discrimination in a global economy, and the role of the gray markets in arbitraging global price disparities.

Read the full piece here. 

One of the first reactions I had when reading the settlement is that it is quite striking how much and at what level of detail the settlement micro-manages Intel’s business decisions.  Lets consider a just a handful of provisions and look at the language in the settlement.  Again, I think these provisions should be read with the benefit of some perspective in market performance during the relevant time period.

Read the full piece here. 

Let me add on a few brief observations on the Intel settlement to Dan’s earlier comments, with which I largely agree.  There is a lot to say about the settlement: the predatory design aspects, Section 5, the (I found) quite odd self-congratulatory settlement press conference and webcast, and of course, what the settlement means for consumers.  I’m very interested in all of these issues, but perhaps none is more important than the last.   We cannot simply assume that the settlement equates to a victory for consumers.  Readers of this blog will be very familiar with the argument that merely counting cases, or agency activity, and of course settlements, are not reliable measures of the quality of agency performance or meaningful from a consumer welfare perspective.  But problems with this case make that warning especially appropriate here.  Thus, before delving into some first reactions based on language in the settlement over the days and maybe weeks to come, some perspective is in order.

Read the full piece here. 

The Comprehensive Alcohol Regulatory Effectiveness Act — yes, the “CARE Act” — or HR 5034, is a piece of legislation aimed at supporting “State-based alcohol regulation.”  Recall the Supreme Court’s decision in Granholm v. Heald, which held that states could either allow in-state and out-of-state retailers to directly ship wine to consumers or could prohibit it for both, but couldn’t ban direct shipment only for out-of-state sellers while allowing in for in-state sellers.  Most states thus far have opened up direct shipping laws to the benefit of consumers.    While we occasionally criticize the Federal Trade Commission from time to time here at TOTM, its own research demonstrating that state regulation banning direct shipment and e-commerce harmed consumers is an excellent example of the potential for competition research and development impacting regulatory debates.  Indeed, Justice Kennedy’s majority opinion in Granholm cites the FTC study (not to mention co-blogger Mike Sykuta’s work here) a number of times.  But in addition to direct shipment laws, there are a whole host of state laws regulating the sale and distribution of alcohol.  Some of them have obviously pernicious competitive consequences for consumers as well as producers.  The beneficiaries are the wholesalers who have successfully lobbied for the protection of the state.  Fundamentally, the CARE Act aims to place these laws beyond the reach of any challenge under the Commerce Clause as per Granholm, the Sherman Act, or any other federal legislation.  Whether the CARE Act has any ancillary social benefits is an important empirical question — but you can bet that the first-order effect of the law, if it were to go into effect, would be to increase beer, wine and liquor prices.  More on the CARE Act and state regulation of alcoholic beverages below the fold.

Read the full piece here. 

Connecticut AG Richard Blumenthal has reportedly contacted Apple and Amazon concerning their pricing arrangements with publishers (WSJ, CNN):

Mr. Blumenthal said he has sent letters to Amazon and Apple asking them to “meet with his office” to address his concerns that agreements in place may restrict rivals from offering cheaper e-books. For instance, he said, “both Amazon and Apple have reached agreements with the largest e-book publishers that ensure both will receive the best prices for e-books over any competitors.”

A “most favored nation” (MFN) clause is a contractual agreement between a supplier and a customer that requires the supplier to sell to the customer on pricing terms at least as favorable as the pricing terms on which that supplier sells to other customers.

Read the full piece here.

Dan Crane’s post on the DOJ’s antitrust activity, and in particular, monopolization enforcement, during the Obama administration notes the dissonance between rhetoric and reality.  I thought I’d post the following data from the DOJ website concerning Section 2 investigations initiated and cases won over the last 40 years for some perspective.

Read the full piece here.

In a recent NY Times column largely devoted to improving soccer in various ways and how those methods might be used to improve financial regulation as well, behavioral economist and Nudge author Richard Thaler writes the following about the Consumer Financial Protection Bureau…

Read the full piece here. 

While Intel Corporation nears its settlement deadline with the Federal Trade Commission, it received good news from a federal district court in Delaware evaluating the evidence of alleged consumer harm from the discounts Intel offers to buyers.  It is also very important to note that this pass from a US court applying standards of consumer harm embedded in US Section 2 case law — that is, actual harm to consumers and the competitive process rather than allowing harm to competitors to serve as a sufficient condition for proof of the former — is the first to evaluate the consumer welfare effects of Intel’s conduct from this more rigorous perspective.  One has to wonder whether this ruling will shift settlement negotiations in favor of Intel.   Its true that the FTC can use Section 5 to evade this Section 2 competitive effects analysis.  But not without eventually testing their interpretation of Section 5 in front of a panel at the D.C. Circuit.

Read the full piece here.