Sometimes Congress does something right, and one example is the Bayh-Dole Act of 1980. This bipartisan patent law is widely recognized as one of the great legislative achievements of the past 60 years. It has massively boosted innovation and economic growth by incentivizing researchers and universities to commercialize their new inventions by, paradoxically, removing them from public control by the government. The Biden administration has now announced a plan to twist this law to reimpose government control over these inventions in the form of price controls. This proposal would kill this “golden goose” of innovation.

Read the full piece here.

INTEREST OF AMICUS CURIAE[1]

The International Center for Law & Economics (“ICLE”) is a nonprofit, non-partisan global research and policy center aimed at building the intellectual foundations for sensible, economically grounded policy. ICLE promotes the use of law and economics methodologies, as well as the results of economic research, to inform public policy debates, and it has longstanding expertise in antitrust law. It has filed amicus briefs in this Court and others around the country. See, e.g., Apple Inc. v. Epic Games, Inc., No. 23-344 (U.S.); United States v. Am. Airlines Grp. Inc., No. 23-1802 (1st Cir.); Giordano v. Saks Inc., No. 23-600 (2d Cir.).

ICLE respectfully submits that the decision below undermines the economic foundations of antitrust law by presuming that a potentially procompetitive restraint is per se unlawful, rather than analyzing the restraint under the default rule of reason. The Court should grant the petition for a writ of certiorari to clarify that the type of restraint at issue here is presumptively procompetitive and thus subject to the rule of reason.

ICLE scholars have written extensively on issues closely related to this case, and respectfully submit that their expertise will help clarify the economic problems with the decision below and highlight the reasons for the Court to grant certiorari.

SUMMARY OF ARGUMENT

This Court has clearly and repeatedly recognized that “[t]he rule of reason is the accepted standard for testing whether a practice restrains trade in violation of [Sherman Act] § 1” and that per se prohibitions are “con- fined to restraints … ‘that would always or almost al- ways tend to restrict competition and decrease output.’” Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 885–86 (2007) (quoting Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 723 (1988)). The decision below cannot be reconciled with those important principles.

The Seventh Circuit committed at least three errors that threaten the economic foundations of antitrust law and are worthy of this Court’s attention.

First, the Seventh Circuit inverted the strong presumption in favor of rule of reason analysis—a presumption that is critical in preventing antitrust law from deterring productive and beneficial conduct. Plaintiffs can overcome that presumption, but only when they show that the challenged restraint falls squarely within a class or category that “always or almost always” harms competition. Leegin, 551 U.S. at 885–86. For a court to make that prediction with confidence, it must have sufficient experience with the restraint. Here, the Seventh Circuit turned settled law on its head. From a dearth of experience, the court of appeals reasoned that a per se claim was plausible and sustainable. This approach threatens to chill Interbrand competition.

Second, the Seventh Circuit sustained a per se challenge to a restraint that has significant procompetitive virtues. The challenged contractual provision was designed, and chiefly functioned, as a vertical restraint. The economic literature shows that intrabrand vertical restraints tend to benefit competition. While there are circumstances under which certain vertical restraints can be anticompetitive, there is no literature demonstrating that they are typically anticompetitive. In the franchise context, intrabrand vertical restraints strengthen the franchise’s brand overall and thus foster competition. The existence of some horizontal aspects or applications of such a restraint, moreover, does not negate these procompetitive virtues. The rule of reason fosters consideration of such issues, whereas the Seventh Circuit’s decision curtails it.

Third, the Seventh Circuit held that positive effects on consumers cannot justify a restraint in the labor market. This holding is in deep tension with this Court’s admonition that antitrust analysis focus on “the commercial realities” of a business or industry rather than on “formalistic distinctions.” See Ohio v. Am. Express Co., 138 S. Ct. 2274, 2285 (2018) (“AmEx”) (quoting Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 466–67 (1992)). Second, the decision below is at odds with this Court’s teaching that “reasonableness” is a holistic endeavor, which incorporates consideration of consumer welfare. See NCAA v. Alston, 141 S. Ct. 2141, 2151 (2021). As petitioners explain, a growing circuit split on this fundamental, analytical issue warrants this Court’s immediate attention.

[1] Pursuant to S. Ct. Rule 37.2(a), counsel for all parties have been notified about the filing of this brief. No counsel for a party authored this brief in whole or in part and no person or entity other than amicus, its members, or counsel made a monetary contribution to its preparation or submission.

Abstract

This paper examines algorithmic collusion from legal and economic perspectives, highlighting the growing role of algorithms in digital markets and their potential for anti-competitive behavior. Using bandit algorithms as a model, traditionally applied in uncertain decision-making contexts, we illuminate the dynamics of implicit collusion without overt communication. Legally, the challenge is discerning and classifying these algorithmic signals, especially as unilateral communications. Economically, distinguishing between rational pricing and collusive patterns becomes intricate with algorithm-driven decisions. The paper emphasizes the imperative for competition authorities to identify unusual market behaviors, hinting at shifting the burden of proof to firms with algorithmic pricing. Balancing algorithmic transparency and collusion prevention is crucial. While regulations might address these concerns, they could hinder algorithmic development. As this form of collusion becomes central in antitrust, understanding through models like bandit algorithms is vital, since these last ones may converge faster towards an anticompetitive equilibrium.

Facebook parent Meta Platforms Inc. filed suit against the Federal Trade Commission in the U.S. District Court for the District of Columbia on Nov. 29, alleging the FTC’s administrative proceedings against the company are “structurally unconstitutional,” and that they violate the Fifth Amendment’s Due Process Clause, the Seventh Amendment’s right to trial by jury, and Articles I and III of the U.S. Constitution.

The suit — which also names Commissioners Lina Khan, Rebecca Kelly Slaughter and Alvaro Bedoya — raises complex issues of constitutional and administrative law.

In brief, it’s about the limits of agency authority and, not incidentally, what authority Congress can properly delegate to federal agencies. It is also, at least arguably, an expression of backlash to regulatory overreach.

Such a backlash seemed increasingly likely, if not inevitable, given the FTC’s recent blitz of activity in the tech sector. That includes not just enforcement matters but an ambitious regulatory agenda.

Read the full piece here.

How did you come to be interested in the regulation of digital markets?

I am a full-time professor in competition law at Bilgi University in Istanbul. I first became interested in the application of competition law in digital markets when a PhD student of mine, Cihan Dogan, wrote his PhD thesis on the topic in 2020. We later co-authored a book together (“Regulation of Digital Platforms in Turkish Law”). Ever since, I have been following these increasingly prominent issues closely.

Read the full piece here.

For those of who’ve been doing the Telecom Two-Step over the past year, the holiday break can’t come soon enough. Last week, comments were due on the Federal Communications Commission’s (FCC) latest proposal to impose Title II common-carrier regulation under the guise of net neutrality national security. Before that, we had the FCC’s new and expansive “digital discrimination” rules. Early in the New Year, we’ve got reply comments due on Title II and comments on the FCC’s proposal to ban early termination fees for cable and satellite providers.

The FCC has pushed telecom folks to crank out more content than James Patterson. So, we can be forgiven for pouring ourselves a cup of cheer, turning on “The Muppet Christmas Carol,” and taking a brief hiatus.

Read the full piece here.

In a previous article, we refuted four common critiques of the consumer welfare standard (CWS). In this article, we argue that the CWS has key benefits which opponents overlook. Understood as a method rather than a set of goals, the CWS allows enforcers and courts to overcome fact-finding ambiguities inherent in competitive processes. Without the benefit of a consumer welfare standard as a yardstick, alternative frameworks such as “the protection of the competitive process” lack depth, are self-referential and, ultimately, arbitrary.

Read the full piece here.

The unexpected $540 million coming to Portland’s Clean Energy Fund should go back to Portlanders (“Portland’s Clean Energy Fund expected to raise additional $540M over next 5 years,” Dec. 13). Since the tax took effect in 2019, consumer prices have increased by about 20%, straining family budgets. The tax on sales underpinning the Clean Energy Fund worsens this strain. If the projections are correct, the clean energy taxes, including the $750 million that was already anticipated as well as this additional bump, amount to more than $900 a year per Portland household. Commissioner Carmen Rubio suggests spending half of the new windfall to boost the budget of cash-strapped city bureaus. She should send the other half back to Portland families.

Abstract

To date, Friedrich Hayek is the only winner of the Nobel Prize in Economics who also holds a law degree. The role of law is central to Hayek’s work and prominent in the research program of the Austrian School of Economics generally. Although Hayek’s contributions to jurisprudence are manifest, as are the influence of his economics ideas, his influence on the field of law and economics has remained modest. This lecture, delivered as the Keynote Lecture at the 2023 Asian Law & Economics Association Annual Meeting, provides an introduction to the fundamentals of an Austrian Law & Economics research program in contrast to the mainstream, Chicago-school research program that has dominated the field since its early history. Compared to the neoclassical approach, Austrian thinking provides a more insightful approach to many of the key concepts generally associated with the economic analysis of law: the nature and success of the common law as a system of law, the importance of stability and simple rules in the law, and the strong preference for private ordering via contract, personal autonomy, and voluntary exchange exhibited in the common law.

I identify and briefly describe six key distinguishing characteristics of the Austrian school that distinguishes it from neoclassical law and economics: (1) Methodological individualism, (2) utility and costs are subjective, (3) the division of knowledge, (4) spontaneous order, (5) competition as a discovery procedure, and (6) the nature of economic equilibrium. I will also highlight some of the ways in which examining law and economics through an Austrian framework provides valuable insights about law and economics.

Read at SSRN.