Search Results

As I mentioned previously, I testified at Thursday’s hearing on the AT&T / T-Mobile merger.  My written testimony is available here.  Links to the testimony from other witnesses are available at the link above.  I’ll post transcripts when they become available; same with the video link should one become available (I’m not aware of one — if you are, let me know).

Nothing much to report that is outside the written testimony.  Not surprisingly, most of the Committee’s attention was focused on the left hand side of the witness table.  Certainly, there was plenty of “firm counting” analysis and “what will this do for my constituents?” to go around.  But that one interesting development was that many of the hearing questions — certainly more than I anticipated based upon the Senate hearing — focused on vertical aspects of the merger (e.g. backhaul).

Filed under: antitrust, economics, federal communications commission, merger guidelines, mergers & acquisitions, wireless

Our book, Competition Policy and Patent Law Under Uncertainty: Regulating Innovation will be published by Cambridge University Press in July.  The book’s page on the CUP website is here.

I just looked at the site to check on the publication date and I was delighted to see the advance reviews of the book.  They are pretty incredible, and we’re honored to have such impressive scholars, among the very top in our field and among our most significant influences, saying such nice things about the book:

After a century of exponential growth in innovation, we have reached an era of serious doubts about the sustainability of the trend. Manne and Wright have put together a first-rate collection of essays addressing two of the important policy levers – competition law and patent law – that society can pull to stimulate or retard technological progress. Anyone interested in the future of innovation should read it.

Daniel A. Crane, University of Michigan

Here, in one volume, is a collection of papers by outstanding scholars who offer readers insightful new discussions of a wide variety of patent policy problems and puzzles. If you seek fresh, bright thoughts on these matters, this is your source.

Harold Demsetz, University of California, Los Angeles

This volume is an essential compendium of the best current thinking on a range of intersecting subjects – antitrust and patent law, dynamic versus static competition analysis, incentives for innovation, and the importance of humility in the formulation of policies concerning these subjects, about which all but first principles are uncertain and disputed. The essays originate in two conferences organized by the editors, who attracted the leading scholars in their respective fields to make contributions; the result is that rara avis, a contributed volume more valuable even than the sum of its considerable parts.

Douglas H. Ginsburg, Judge, US Court of Appeals, Washington, DC

Competition Policy and Patent Law under Uncertainty is a splendid collection of essays edited by two top scholars of competition policy and intellectual property. The contributions come from many of the world’s leading experts in patent law, competition policy, and industrial economics. This anthology takes on a broad range of topics in a comprehensive and even-handed way, including the political economy of patents, the patent process, and patent law as a system of property rights. It also includes excellent essays on post-issuance patent practices, the types of practices that might be deemed anticompetitive, the appropriate role of antitrust law, and even network effects and some legal history. This volume is a must-read for every serious scholar of patent and antitrust law. I cannot think of another book that offers this broad and rich a view of its subject.

Herbert Hovenkamp, University of Iowa

With these contributors:

Robert Cooter, Richard A. Epstein, Stan J. Liebowitz, Stephen E. Margolis, Daniel F. Spulber, Marco Iansiti, Greg Richards, David Teece, Joshua D. Wright, Keith N. Hylton, Haizhen Lee, Vincenzo Denicolò, Luigi Alberto Franzoni, Mark Lemley, Douglas G. Lichtman, Michael Meurer, Adam Mossoff, Henry Smith, F. Scott Kieff, Anne Layne-Farrar, Gerard Llobet, Jorge Padilla, Damien Geradin and Bruce H. Kobayashi

I would have said the book was self-recommending.  But I’ll take these recommendations any day.

Filed under: announcements, antitrust, economics, law and economics, patent, scholarship

Tomorrow morning.  I’ll post my written testimony here tomorrow.

Hearing on: “How Will the Proposed Merger Between AT&T and T-Mobile Affect Wireless Telecommunications Competition?”

Thursday 5/26/2011 – 10:30 a.m.

2141 Rayburn House Office Building

Subcommittee on Intellectual Property, Competition and the Internet

Witness List

Mr. Randall Stephenson
Chairman, Chief Executive Office and President
AT&T, Inc.

Mr. Rene Obermann
CEO

Deutsche Telekom AG

Mr. Steven K. Berry
President and CEO
Rural Cellular Association

Ms. Parul P. Desai
Communications Policy Counsel
Consumers Union

Professor Joshua Wright
George Mason University School of Law

Professor Andrew I. Gavil
Howard University School of Law

Filed under: antitrust, doj, economics, federal communications commission, merger guidelines, mergers & acquisitions, wireless

“Sure, but they don’t have to carry exactly the same products. It’s not that there was no competition before — we carried some of the same items — but we had matching pricing.”  That’s Shirley Ng, owner of the Country Cheese Coffee Market at 1578 Hopkins Street in Berkeley, CA.  (HT: Marginal Revolution)  The story is about how “friendly spirit of the neighborhood is at stake,” because the owners of the nearby Monterey Market “have begun to deliberately stock items that they specialize in — including certain cheeses, wine and flowers — and they are selling them at predatory prices, which threatens the local merchants’ livelihoods.”

The article ends referencing a meeting between Monterey Market and the group of unhappy specialty merchants:

Meyer said that recently the group had been approached by a representative of Monterey Market to set up a meeting. “That discussion will determine where we go from here,” he said.

Asked what he expected from the Market, Meyer said: “They should talk to their fellow merchants about how they could all flourish.”

No such flourishing for consumers in Berkeley.  Also, I’d probably skip the meeting if I were a merchant in the area.

Good comments in the thread at the original story.

Filed under: antitrust, cartels, economics

What happens when Wal-Mart comes to town?  One thing is for sure, the line for jobs is long:

In contrast, a new Walmart in Cleveland recently received 6000 applicants for 300 positions, and, not long ago, two Walmart stores in the Chicago area received 25,000 and 15,000 applications. The Cleveland store hired one in twenty applicants. The Chicago hiring rates were far more modest.

HT: (American Thinker).

Meantime, in Washington DC, various groups are protesting the prospect of Wal-Mart coming to town, including picketing the home of a developer.  From the group’s website:

We are not interested in negotiating the terms of Wal-Mart’s arrival. We know the harmful impact that Wal-Mart always has, from thousands of case studies around the country, and around the world. We believe in our hearts, and in our minds, that DC must continue to be Wal-Mart Free.

Other labor-backed anti-Walmart groups are insisting on a community benefits agreement extracting concessions from Walmart, including, apparently, reduced hours of operation (see, e.g. here).

One need not look at the long list of job applicants to figure the social benefits.  But often left out when the policy discussion is framed as unions versus corporations are consumers.  Consider Hausman & Ephraig’s (a version of the paper here) analysis of the impact of Wal-Mart on consumer welfare, finding (looking at the benefits of food prices alone) the following:

We find that an appropriate approach to the analysis is to let the choice to shop at
Wal-Mart be considered as a “new good” to consumers when Wal-Mart enters a
geographic market. Some consumers continue to shop at traditional supermarkets while other consumers choose to shop at Wal-Mart. Many consumers shop at both types of stores. Thus, we specify a utility consistent two level model of choice among types of shopping destinations. We then estimate a fixed effects binomial logit choice model to estimate the parameters of the utility model that differs across households. We use the estimated parameters to calculate the exact compensating variation that arises from the direct variety effect of the entry and expansion of supercenters and find the average estimate to be 20.2% of average food expenditure. We similarly estimate the exact compensating variation from the indirect price effect that arises from the increased competition that supercenters create. We find this average effect to be 4.8%. Thus, we estimate the average effect of the total the compensating variation to be 25% of food expenditure, a sizeable estimate.

Since we find that lower income households tend to shop more at these low priced
outlets and their compensating variation is higher from supercenters than higher income households, a significant decrease in consumer surplus arises from zoning regulations and pressure group tactics that restrict the entry and expansion of supercenters into particular geographic markets.

Note again that these are significant benefits in terms of consumer welfare — and just for food.   Further, these gains are disproportionately enjoyed by low-income households.  Hausman & Ephraig find that household incomes below $10,000 benefit by approximately 50 percent more than average.

Jason Furman (yes, this one) points out that this result is a pretty big deal:

[T]hat’s a huge savings for households in the bottom quintile, which, on average, spend 26 percent of their income on food. In fact, it is equivalent to a 6.5 percent boost in household income—unless the family lives in New York City or one of the other places that have successfully kept Wal-Mart and its ilk away.

That’s some pretty low-hanging fruit in terms of policy wouldn’t you say?  Consumers do not have a loud voice in the relevant policy and political debate.   And the anti-Wal-Mart crowd seems to be laboring under the unfortunate assumption that their preferred policy amounts to a mere wealth transfer between Wal-Mart and workers.  Hausman & Ephraig’s results demonstrate the magnitude of the cost to consumers of this economic naivete.  The relative silence of consumer interests should not be confused with the notion that the consumer welfare losses imposed by deterring Wal-Mart entry are not real — or pretending that they are not concentrated precisely on low-income households.

Filed under: business, economics, markets, politics

Call for Papers Announcement

 

AALS Section on Antitrust and Economic Regulation

AALS Section on Law & Economics

 

Behavioral Economics & Antitrust Law

 

January 5-8, 2012

2012 AALS Annual Meeting

Washington, DC

 

The AALS Section on Antitrust and Economic Regulation and the Section on Law & Economics will hold a joint program on Behavioral Economics and Antitrust Law during the AALS 2012 Annual Meeting in Washington, DC.  The program will focus on the influence of Behavioral Economics on Antitrust Law and Policy.   Behavioral economics, which examines how individual and market behavior are affected by deviations from the rationality assumptions underlying conventional economics, has generated significant attention from both academics and policy makers.  The program will feature presentations by leading scholars who have addressed how behavioral economics impacts antirust law and policy.  Confirmed panelists include Maurice Stucke (University of Tennessee), Steve Salop (Georgetown University), Avishalom Tor (Haifa University), and Josh Wright (George Mason University).  We are looking to add at least one additional panelist through this call for papers.

 

Submission Procedure:

Those with an interest in the subject are encouraged to submit a draft paper or proposal via email to Bruce H. Kobayashi, at [email protected] by September 1, 2011. 

 

Eligibility:

Faculty members of AALS member and fee-paid law schools are eligible to submit papers.  Foreign, visiting, and adjunct faculty members, graduate students, and fellows are not eligible to submit.

 

Registration Fee and Expenses:

Call for Paper participants will be responsible for paying their annual meeting registration fee and travel expenses.

 

How will papers be reviewed?

Paper will be selected after review of submissions by members of the Executive Committee of the AALS Section on Antirust and Economic Regulation and the AALS Section on Law & Economics.  This committee consists of Scott Hemphill (Columbia Law School), Bruce H. Kobayashi (George Mason University Law School), Michael A. Carrier (Rutgers University School of Law), Darren Bush (University of Houston Law Center), D. Daniel Sokol (University of Florida Levin College of Law), Daniel A. Crane (University of Michigan Law School), and Hillary Greene (University of Connecticut School of Law).

 

Will program be published in a Journal? 

Yes, as a symposium in the Journal of Law, Economics & Policy.

 

Deadline date for submission:

September 1, 2011.  Decisions will be announced by September 30, 2011.

 

Program Date and Time:

Friday January 6, 2012, 10:30am-12:15pm.

 

Contact for submission and inquires:

Bruce H. Kobayashi

Chair, AALS Section on Antitrust and Economic Regulation

George Mason Law School

3301 Fairfax Drive

Arlington, VA 22201

703 993-8034

[email protected]

Filed under: antitrust, behavioral economics, legal scholarship

Tom Barnett (Covington & Burling) represents Expedia in, among other things, its efforts to persuade a US antitrust agency to bring a case against Google involving the alleged use of its search engine results to harm competition.  In that role, in a recent piece in Bloomberg, Barnett wrote the following things:

• “The U.S. Justice Department stood up for consumers last month by requiring Google Inc. to submit to significant conditions on its takeover of ITA Software Inc., a company that specializes in organizing airline data.”
• “According to the department, without the judicially monitored restrictions, Google’s control over this key asset “would have substantially lessened competition among providers of comparative flight search websites in the United States, resulting in reduced choice and less innovation for consumers.”
• “Now Google also offers services that compete with other sites to provide specialized “vertical” search services in particular segments (such as books, videos, maps and, soon, travel) and information sought by users (such as hotel and restaurant reviews in Google Places).  So Google now has an incentive to use its control over search traffic to steer users to its own services and to foreclose the visibility of competing websites.”
• “Search Display: Google has led users to expect that the top results it displays are those that its search algorithm indicates are most likely to be relevant to their query. This is why the vast majority of user clicks are on the top three or four results.  Google now steers users to its own pages by inserting links to its services at the top of the search results page, often without disclosing what it has done. If you search for hotels in a particular city, for example, Google frequently inserts links to its Places pages.”
• “All of these activities by Google warrant serious antitrust scrutiny. … It’s important for consumers that antitrust enforcers thoroughly investigate Google’s activities to ensure that competition and innovation on the Internet remain vibrant. The ITA decision is a great win for consumers; even bigger issues and threats remain.”

The themes are fairly straightforward: (1) Google is a dominant search engine, and its size and share of the search market warrants concern, (2) Google is becoming vertically integrated, which also warrants concern, (3) Google uses its search engine results in manner that harms rivals through actions that “warrant serious antitrust scrutiny,” and (4) Barnett appears to applaud judicial monitoring of Google’s contracts involving one of its “key assets.”   Sigh.

The notion of firms “coming full circle” in antitrust, a la Microsoft’s journey from antitrust defendant to complainant, is nothing new.   Neither is it too surprising or noteworthy when an antitrust lawyer, including very good ones like Barnett, say things when representing a client that are at tension with prior statements made when representing other clients.  By itself, that is not really worth a post.  What I think is interesting here is that the prior statements from Barnett about the appropriate scope of antitrust enforcement generally, and monopolization in the specific, were made as Assistant Attorney General for the Antitrust Division — and thus, I think are more likely to reflect Barnett’s actual views on the law, economics, and competition policy than the statements that appear in Bloomberg.  The comments also expose some shortcomings in the current debate over competition policy and the search market.

But lets get to it.  Here is a list of statements that Barnett made in a variety of contexts while at the Antitrust Division.

• “Mere size does not demonstrate competitive harm.”  (Section 2 of the Sherman Act Presentation, June 20, 2006)
• “…if the government is too willing to step in as a regulator, rivals will devote their resources to legal challenges rather than business innovation. This is entirely rational from an individual rival’s perspective: seeking government help to grab a share of your competitor’s profit is likely to be low cost and low risk, whereas innovating on your own is a risky, expensive proposition. But it is entirely irrational as a matter of antitrust policy to encourage such efforts.
  (Interoperability Between Antitrust and Intellectual Property, George Mason University School of Law Symposium, September 13, 2006)
• “Rather, rivals should be encouraged to innovate on their own – to engage in leapfrog or Schumpeterian competition. New innovation expands the pie for rivals and consumers alike. We would do well to heed Justice Scalia’s observation in Trinko, that creating a legal avenue for such challenges can ‘distort investment’ of both the dominant and the rival firms.” (emphasis added)
  (Interoperability Between Antitrust and Intellectual Property, George Mason University School of Law Symposium, September 13, 2006)
• “Because a Section 2 violation hurts competitors, they are often the focus of section 2 remedial efforts.  But competitor well-being, in itself, is not the purpose of our antitrust laws.  The Darwinian process of natural selection described by Judge Easterbrook and Professor Schumpeter cannot drive growth and innovation unless tigers and other denizens of the jungle are forced to survive the crucible of competition.”  (Cite).
• “Implementing a remedy that is too broad runs the risk of distorting markets, impairing competition, and prohibiting perfectly legal and efficient conduct.” (same)
• “Access remedies also raise efficiency and innovation concerns.  By forcing a firm to share the benefits of its investments and relieving its rivals of the incentive to develop comparable assets of their own, access remedies can reduce the competitive vitality of an industry.” (same)
• “The extensively discussed problems with behavioral remedies need not be repeated in detail here.  Suffice it to say that agencies and courts lack the resources and expertise to run businesses in an efficient manner. … [R]emedies that require government entities to make business decisions or that require extensive monitoring or other government activity should be avoided wherever possible.”  (Cite).
• “We need to recognize the incentive created by imposing a duty on a defendant to provide competitors access to its assets.  Such a remedy can undermine the incentive of those other competitors to develop their own assets as well as undermine the incentive for the defendant competitor to develop the assets in the first instance.  If, for example, you compel access to the single bridge across the Missouri River, you might improve competitive options in the short term but harm competition in the longer term by ending up with only one bridge as opposed to two or three.” (same)
• “There seems to be consensus that we should prohibit unilateral conduct only where it is demonstrated through rigorous economic analysis to harm competition and thereby harm consumer welfare.” (same)

I’ll take Barnett (2006-08) over Barnett (2011) in a technical knockout.  Concerns about administrable antitrust remedies, unintended consequences of those remedies, error costs, helping consumers and restoring competition rather than merely giving a handout to rivals, and maintaining the incentive to compete and innovate are all serious issues in the Section 2 context.  Antitrust scholars from Epstein and Posner to Areeda and Hovenkamp and others have all recognized these issues — as did Barnett when he was at the DOJ (and no doubt still).  I do not fault him for the inconsistency.  But on the merits, the current claims about the role of Section 2 in altering competition in the search engine space, and the applause for judicially monitored business activities, runs afoul of the well grounded views on Section 2 and remedies that Barnett espoused while at the DOJ.

Let me end with one illustration that I think drives the point home.   When one compares Barnett’s column in Bloomberg to his speeches at DOJ, there is one difference that jumps off the page and I think is illustrative of a real problem in the search engine antitrust debate.  Barnett’s focus in the Bloomberg piece, as counsel for Expedia, is largely harm to rivals.  Google is big.  Google has engaged in practices that might harm various Internet businesses.  The focus is not consumers, i.e. the users.  They are mentioned here and there — but in the context of Google’s practices that might “steer” users toward their own sites.  As Barnett (2006-08) well knew, and no doubt continues to know, is that vertical integration and vertical contracts with preferential placement of this sort can well be (and often are) pro-competitive.  This is precisely why Barnett (2006-08) counseled requiring hard proof of harm to consumers before he would recommend much less applaud an antitrust remedy tinkering with the way search business is conducted and running the risk of violating the “do no harm” principle.  By way of contrast, Barnett’s speeches at the DOJ frequently made clear that the notion that the antitrust laws “protection competition, not competitors,” was not just a mantra, but a serious core of sensible Section 2 enforcement.

The focus can and should remain upon consumers rather than rivals.  The economic question is whether, when and if Google uses search results to favor its own content, that conduct is efficient and pro-consumer or can plausibly cause antitrust injury.  Those leaping from “harm to rivals” to harm to consumers should proceed with caution.  Neither economic theory nor empirical evidence indicate that the leap is an easy one.  Quite the contrary, the evidence suggests these arrangements are generally pro-consumer and efficient.  On a case-by-case analysis, the facts might suggest a competitive problem in any given case.

Barnett (2006-08) has got Expedia’s antitrust lawyer dead to rights on this one.  Consumers would be better off if the antitrust agencies took the advice of the former and ignored the latter.

Filed under: antitrust, doj, economics, error costs, essential facilities, exclusionary conduct, federal trade commission, google, monopolization, technology

The new Consumer Financial Protection Agency seems designed to be accountable to no one…

Read the full piece here.

The hearing is Wednesday morning.  The Witness List suggests that the hearing will primarily serve as an opportunity for the merging parties, rivals, other interested parties, and lets not forget the Senators, to restate their positions “for the record.”  And while I get where the Committee is going with the “Humpty Dumpty” title, “the T-1000 of corporations” is much funnier (see video).

Here is the hearing notice:

The Senate Committee on the Judiciary, Subcommittee on Antitrust, Competition Policy and Consumer Rights, has scheduled a hearing entitled “The AT&T/T-Mobile Merger: Is Humpty Dumpty Being Put Back Together Again?” for Wednesday, May 11, 2011 at 10:15 a.m. in Room 226 of the Dirksen Senate Office Building.

Chairman Kohl to preside.

By order of the Chairman.

Witness List

Hearing before the
Senate Committee on the Judiciary
Subcommittee on Antitrust, Competition Policy and Consumer Rights

On

“The AT&T/T-Mobile Merger: Is Humpty Dumpty Being Put Back Together Again?”

Wednesday, May 11, 2011
Dirksen Senate Office Building, Room 226
10:15 a.m.

Randall L. Stephenson
President & CEO
AT&T
Dallas, TX

Philipp Humm
President & CEO
T-Mobile USA
Bellevue, WA

Daniel R. Hesse
CEO
Sprint Nextel Corporation
Overland Park, KS

Victor H. “Hu” Meena
President & CEO
Cellular South, Inc.
Ridgeland, MS

Gigi Sohn
President & Co-Founder
Public Knowledge
Washington, DC

Larry Cohen
President
Communications Workers of America
Washington, DC

Filed under: antitrust, merger guidelines, mergers & acquisitions, technology