I promised that I would write about why I think that Professor Elhauge’s claim in his new working paper, “Loyalty Discounts and Naked Exclusion,” that he has proven that loyalty discounts generally involve anticompetitive effects is mistaken. Let me begin by saying that this is a very provocative claim from a very serious antitrust analyst and deserves careful attention. Loyalty discounts are an important and highly controversial issue in antitrust at the moment and so economic analysis that enlightens us to their effects in the marketplace should be applauded. I should also note, as I made clear in the first post, that I admire Elhauge’s work and have a great deal of respect for him. Obviously, with that many caveats, you know what is coming next. I strongly disagree that Elhauge’s economic analysis lives up to his claims.

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2008 has been a busy year for Harvard Professor Einer Elhauge so far from the looks of his SSRN page (not to mention advising Senator Obama on legal policies). He’s posted three new working papers covering a diverse set of antitrust topics…

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FTC Chairman William Kovacic, easily one of the most insightful thinkers and writers on issues of global competition policy, has posted a new paper offering a thoughtful analysis of where the EU and US competition policy systems have been, where they are going, what institutional differences might cause the systems to converge or diverge further, and what to do about it. Kovacic notes that while “the apparent agreement on overall objectives would seem to be, and is, an important step toward achieving convergence between the two systems” it is important not to avoid frank discussions of what both US and EU officials mean when they invoke the concept of “consumer welfare” or “protecting competition, not competitors” precisely because these phrases can “are so open-ended that their true meaning in practice depends on how they are applied.” Kovacic goes on to discuss various institutional forces favoring both convergence and divergence and offering some suggestions for facilitating the adoption of superior norms. The paper is a must-read for anybody interested in global competition issues.

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Mike Jensen, the distinguished financial economist and co-founder of SSRN, is interviewed here by Growthology’s Tim Kane. Everyone knows that electronic distribution of working papers has been extremely important for academic research in business and the social sciences. By the time most papers are published, they’ve already been read by many, if not most, of the target readers, from working-paper circulation, conference presentations, informal discussions, and the like. Jensen points out that electronic distribution has also had an important democratization effect. The elites always had access to cutting-edge research in advance of publication through informal networks, NBER workshops, and the like. “In my own field, I was part of a very small group doing cutting-edge work in the early days of modern finance, and I noticed that elites in all fields were 2-3 years ahead of other scholars just because they knew about research that took so much time to get distributed widely. The Internet allowed everyone to see the frontier.”

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In Part V of the series on the future of law and economics (Parts I, II, III, and IV), Henry Manne graciously offered a reply to my thoughts on where L&E might be headed and why. I encourage the readers interested in the series to take time to re-read Henry’s response in its entirety. While Henry and I agree on many points concerning the problems facing L&E and what might be causing them, I interpret his post as raising two major points of disagreement. The first is that I largely ignored issues of ideology (see also Brian Tamahana’s comment here) and their role as a force pushing modern L&E out of law schools. That is fair enough. I agree with this point in the sense that I don’t think there is any doubt that the shift in the content of modern L&E toward empiricism, behavioral law and economics, and theoretical modeling is consistent with a theory that those forms of L&E are likely to be much more acceptable to the political left than the L&E scholarship of the previous several decades.

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I’ve had a wonderful time writing this series on the future of law and economics. When I started the series (Part I, Part II, Part III, and Part IV), I thought it would be a fun thought experiment for me to think through aloud and hopefully start a valuable conversation. By that measure, it has been a success. I’ve received many valuable comments, critiques and responses in blog posts, emails, and in person. But I couldn’t possibly dream up a better way to end the series than with a response from Henry Manne, a founder of the L&E movement, who is perhaps more responsible than any other single figure for its dissemination throughout the legal academy. I think this response is a treat for our readers who are interested in this topic and want to personally thank him for taking the time to offer his thoughts on my series.

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Abstract

This chapter provides a survey of the law and literature on monopolization. The focus is American law, but the issues considered are equally applicable to European law. After briefly reviewing the history of monopolization law in the U.S., I review various approaches to the legal standard for monopolization suggested in the literature. I then attempt to model monopolization standards, and assess their desirability in light of error costs.

In April 2000, the FTC issued a Complaint against women’s shoe distributor Nine West, claiming that Nine West had engaged in minimum resale price maintenance (RPM) (i.e., the setting of minimum prices that retailers could charge for its shoes). Apparently, Nine West was providing retailers with lists of “off limits” or “non-promote” shoes that weren’t to be promoted except during defined periods. Because Nine West sought acquiescence in those policies by threatening to terminate offending dealers, the FTC maintained that it had engaged in a minimum RPM agreement. At that time, such agreements were deemed to be per se unreasonable–and thus automatically illegal–restraints of trade. Nine West ultimately agreed to a broadly worded Consent Order requiring it to refrain from (among other things) fixing prices at which its retailers may sell, advertise, or promote its products; “otherwise pressuring” its dealers to adhere to resale prices; and “[s]ecuring or attempting to secure any commitment or assurance from any dealer concerning the resale price at which the dealer may advertise, promote, offer for sale or sell any Nine West Products.”

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It is springtime, but already the thrills of March Madness have fallen into a painful abyss. Die-hard college basketball fans, so recently frantic over their brackets and whooping their way to dreams of a national championship, now turn to the sports pages with fear and loathing. Will their team’s freshman power forward, or All-American point guard, give up college for a multimillion dollar contract? Oh, the pain, terror, and non-academic karma of it all.

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