Search Results

“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

News comes that the DOJ and SEC are “examining whether some of the world’s biggest banks colluded to manipulate a key interest rate before and during the financial crisis, affecting trillions of dollars in loans and derivatives, say people familiar with the situation.”  The Wall Street Journal Reports that:

The inquiry, led by the U.S. Justice Department and Securities and Exchange Commission, is analyzing whether banks were understating their borrowing costs. At the time, banks were struggling with souring assets on balance sheets and questions about liquidity. A bank that borrowed at higher rates than peers would likely have signaled that its troubles could be worse than it had publicly admitted.

Roughly $10 trillion in loans and $350 trillion in derivatives are tied to Libor, which affects costs for everything from corporate bonds to car loans. If the rate was kept artificially low, borrowers likely weren’t harmed, though lenders could complain that the rates they charged for loans were too low. Derivatives contracts could be mispriced because of any manipulation of Libor.

Filed under: antitrust, banking, cartels, economics, financial regulation

The Wall Street Journal reports major conflicts between the DOJ and the FTC over antitrust jurisdiction.  There are only two of them, and they are not subject to rules against collusion and open agreements.  Nonetheless, they can’t get along and they cannot decide on market division.    Maybe they will take this as information about difficulties of collusion, even in duopoly situations.

Filed under: antitrust, cartels, federal trade commission

I’ve been in a blue funk since last Tuesday, when my home institution, the University of Missouri Law School, fell into the third tier in the U.S. News & World Report annual ranking of law schools. Since the rankings began, Missouri has pretty consistently ranked in the 50s and 60s. Last year, we fell to 93. This year, to 107. That’s pretty demoralizing.

It’s completely ridiculous, of course. On the metrics that really matter (academic reputation, student quality, bar passage, etc.), we do pretty well — near the top of tier 2 (schools 50-100). With respect to scholarly productivity, our faculty ranks sixth among law schools outside the top fifty. We do less well with employment, but that’s largely because (1) we don’t manipulate the numbers, as many schools do, and (2) many of our graduates go into prosecution and public defense, where hiring decisions are not made until after the bar examination. Where we really get beat up is on expenditures per “full-time equivalent” student. Last year, we ranked 173 out of 190 on that measure. In my view, that means we’re efficient — we get a heck of a lot out of our financial resources. According to U.S. News, though, the fact that we spend less money educating our students means that the quality of our educational offering must be sub-par. Non sequitur, anyone?

Despite the stupidity of the U.S. News rankings, they matter. We will have a harder time attracting top students next year. In the past, we’ve been able to attract sharp students that were accepted at, say, Iowa, Illinois, or Washington University because our tuition (especially in-state tuition) is much, much lower. Given all this talk of higher education bubbles and the widespread questioning of whether law school is really worth the steep price, this should be an ideal time for Missouri to exploit its low tuition. Unfortunately, that’s tougher to do when you’ve fallen into the U.S. News third tier and prospective students, who don’t yet realize the insanity of the rankings metrics, wrongly perceive that you’re selling a shoddy product. We may also have a harder time attracting high-quality faculty, though this fall’s outstanding class of entrants (two John Roberts clerks, a Jose Cabranes clerk, and an outstanding Virginia J.D./Ph.D) will surely help on that front. We Missouri professors may even have a harder time placing our scholarship, given that the third-year law students who select articles for publication tend to evaluate scholarship, in part, on the basis of the author’s “prestige” as measured by the ranking of her home institution.

So what should we do? If I were dean, I believe I would simply opt out of U.S. News. I’m serious. We know the rankings are a joke, and they’re actually hurting us. I would simply refuse to fill out the magazine’s survey form and then take out explanatory ads, on the day the 2012 rankings were released, in the New York Times and Wall Street Journal. Reed College has taken this sort of principled stand in the U.S. News college rankings and has gotten loads of favorable media attention.  I believe its stance has actually boosted its excellent reputation.

Of course, if a school fails to fill out the U.S. News form, the magazine will simply incorporate a somewhat punitive “estimate” of the uncooperative school’s data, so its ranking may be artificially depressed. But at this point, what do we at Missouri have to lose?  We’re already down to 107!  Anyone who does the slightest bit of investigation will see that Missouri Law — one of the oldest law schools west of the Mississippi River, the flagship public law school in a fairly populous state with two significant legal markets, the home of a productive faculty that also cares deeply about teaching — is not what participants on the Princeton Review’s old message board used to call a “Third Tier Toilet.” If we opt out of the rankings (a decision U.S. News will have to note), readers will surmise that our low ranking results from our decision not to play with U.S. News. Right now, they think there’s something wrong with Missouri, not with the screwy rankings system. Our opt-out would at least draw attention to the stupidity of the ranking metrics.

Of course, this move would entail significant risk. As it did with Reed College, U.S. News would likely adopt punitive estimates of the data we refused to provide, causing us to fall further in the rankings. Readers might not notice the disclaimer that we refused to return our survey and that our ranking is therefore based on estimated data. The media (mainstream and other) might not draw as much attention to our bold stand as I expect they would. While I think it would take a perfect storm for an opt-out strategy to tarnish our reputation even further, such storms do occasionally occur.

We could reduce the riskiness of our strategy if we could persuade some other law schools — perhaps other low-tuition, efficient schools that find themselves similarly disadvantaged by the rankings’ inapposite focus on expenditures per student — to withhold data from U.S. News. This would require U.S. News to include more “based on estimated data” asterisks, which would reveal the punitive nature of the magazine’s estimates and undermine confidence in the flawed ranking system.

But would this sort of concerted strategy run afoul of the antitrust laws? Initially, I thought it might. After all, what I’m contemplating is essentially an agreement among competitors to withhold information from a publication that tends to enhance competition among those very rivals. Moreover, the cooperating rivals would be withholding this information precisely because they think the competition stimulated by the publication is, to use the old fashioned term, “ruinous.”  It smells pretty fishy.

The more I think about it, though, the less troubling I find this strategy. The fact is, the methodology underlying the U.S. News rankings is so unsound that the rankings themselves are misleading.  And the misrepresentations they convey actually hurt a number of schools like Missouri.  I believe we who are unfairly disadvantaged by the U.S. News methodology could, without impunity, bind together in an attempt to undermine the flawed rankings.  Indeed, it is in our individual competitive interests to do so.

So how would a court evaluate a boycott of U.S. News by a group of law schools that perceive themselves to be disadvantaged by the magazine’s ranking methodology (say, less expensive, more efficient law schools with low per-student expenditures)?

First, the court would likely determine that the agreement not to participate in the ranking survey is ancillary, not naked.  As Herb Hovenkamp has explained, “[a] serviceable definition of a naked restraint is one whose profitability depends on the exercise of market power” (i.e., on a constriction of output aimed at artificially raising prices so as to enhance profits).  The agreement I’m contemplating makes perfect business sense apart from any exercise of market power. Each law school that would participate in the agreement is personally injured by the screwy rankings scheme, and each has an independent incentive — regardless of what other schools do — to refrain from participation. The participating law schools, it is true, would prefer to have others join them, but that is not because they are seeking to exercise market power; rather, they realize that the message their non-participation will convey (i.e., that U.S. News’s rankings methodology is nonsense) will be stronger if more schools join the boycott.

Since the restraint I contemplate is ancillary, not naked, it would be evaluated under the rule of reason. Indeed, any court that sought to utilize a less probing analysis (per se or quick look) would have to confront the Supreme Court’s California Dental decision, which held that a pretty doggone naked restraint among competing dentists was entitled to a full rule of reason analysis because it could enhance competition by reducing fraudulent advertising.

Under the rule of reason, the arrangement I’m contemplating would likely pass muster. Because widespread misinformation among consumers reduces the competitiveness of a market, an effort to reduce such misinformation, even a concerted effort, is pro-, not anti-, competitive.  Because the “agreement” aspect of my contemplated restraint increases the degree to which the arrangement undermines the misleading, competition-impairing U.S. News rankings, it enhances the restraint’s procompetitive effect. 

So what do others think?  Am I underestimating the antitrust risk of this strategy?  The business risk?  My TOTM colleagues from Illinois and George Mason, both of which do quite well under the U.S. News formula, probably have little personal interest in these musings.  But I suspect others do.  What do you think?

Filed under: antitrust, cartels, Education, law school, universities

If you’re currently a law professor and you’re thinking you might want to change schools (because, for example, your school continued its precipitous slide in the law school rankings . . . more about that later), you’d better hop on the phone. Today is your last day to snag a visiting offer from another law school. (You’ve already missed the deadline for procuring a permanent offer. That was March 1.)

The competing law schools, you see, have agreed to limit competition amongst themselves for law professor talent. Pursuant to the Association of American Law Schools’ Statement of Good Practices for the Recruitment of and Resignation by Full-Time Faculty Members, the law schools have pledged to “make an[y] offer of an indefinite appointment as a teacher during the following academic year no later than March 1 and of a visiting appointment no later than March 15.”

If this arrangement strikes you as legally suspect, congratulations. You know more about antitrust law than does the Executive Committee of the AALS. This arrangement is, quite simply, an unreasonable horizontal restraint of trade — not unlike an agreement among Ford, Chrysler, and GM that they will not poach engineers and designers from one another during the six-month period preceding the debut of new models. They’d no doubt love to adopt an agreement like that, but their lawyers would wisely counsel against doing so.

Members of the AALS, of course, contend that their little arrangement is fine. First, they insist it’s merely a “statement of good practices,” not an actual agreement, which is necessary to satisfy the “contract, combination, or conspiracy” element of Sherman Act Section 1. In addition, they maintain, it’s not an “unreasonable” restraint of trade. They’re wrong on both points.

As anyone who’s spent time teaching in a law school knows, law school administrators treat the hiring arrangement as though it is an actual agreement that binds them. They speed up recruiting to ensure that they make lateral offers before the cut-off dates. They talk to each other about the arrangement as though they recognize it as a common commitment.  Moreover, even if the arrangement were not the product of an express agreement, a reasonable factfinder would infer agreement from the fact that the law schools, in collectively adhering to the “good practice,” are engaging in consciously parallel behavior that would make no sense to adopt unilaterally (i.e., any law school that unilaterally adopted a policy of refusing to poach from its rivals after a certain date would hurt itself without procuring any economic benefit).  Thus, there is no question that the arrangement represents an antitrust “agreement” under prevailing legal standards.

The restraint is also unreasonable.  Most likely, the agreement would be deemed a “naked” restraint of trade.  Herbert Hovenkamp has written that “a serviceable definition of a naked restraint is one whose profitability depends on the exercise of market power.”  (The Antitrust Enterprise: Principle and Execution 112 (2005).)  If the participants in this agreement didn’t have market power — e.g., if only 20 of the nearly 200 law schools in the AALS adopted this policy — the policy wouldn’t really work.  An exercise of market power seems to be required for the arrangement to have efficacy, so the restraint is probably naked.  And if it’s naked, then it’s per se unreasonable and thus illegal.

But even if the arrangement is not naked, it would be condemned under a more probing analysis — either a “quick look” or a full-on rule of reason analysis.  Because it precludes law professors from procuring other offers when they’re most valuable to their existing employers (and thus in the best position to extract salaries approaching their actual worth), the arrangement systematically drives faculty salaries below the levels that persist in free competition.  This is especially galling because most law professors do not learn what they will be paid the following year until after the deadline for procuring another offer has passed.

The law schools would contend, of course, that this anticompetitive effect is outweighed by an important benefit: avoidance of the disruption that inevitably occurs when a professor resigns late in the spring term, after the fall schedule has been completed and students have selected courses.  There are at least two problems with that argument.

First, the argument really amounts to an assertion that vigorous competition among schools for professor talent is itself unreasonable because it leads to messy results.  The Supreme Court has rejected that line of argument in no uncertain terms.  In the Professional Engineers case, the Court condemned an agreement among engineers not to discuss price with potential clients, despite the engineers’ insistence that the agreement was necessary to prevent the shoddy design work that would result from low engineering prices.  The engineers’ public safety argument would not fly, the Court concluded, because “the Rule of Reason does not support a defense based on the assumption that competition itself is unreasonable.”  The Court explained that the Sherman Act is premised on “[t]he assumption that competition is the best method of allocating resources in a free market,” and it insisted that “[e]ven assuming occasional exceptions to the presumed [good] consequences of competition, the statutory policy precludes inquiry into the question whether competition is good or bad.”  Thus, the competing law schools can’t agree not to compete for labor just because doing so is hard.

Second, even if the policy at issue creates a good effect — reduced disruption from untimely resignations — there are less restrictive means of securing that end.  Each individual law school could negotiate resignation rules with its own professors.  For example, a law school could agree with its professors that they may not resign after Date X, and it could even bargain for a liquidated damages provision that would compensate it for any disruption occurring from breach.  Law schools would then compete with each other on this contract term — some would allow later resignations than others.  They could even have different resignation dates for different professors.  This sort of unilateral, non-collusive solution to the problem of untimely resignations would preserve competition for labor resources, causing them to be allocated more efficiently.

Of course, the members of the AALS know that they’re unlikely to be sued over this policy.  After all, any disgruntled law professors that brought suit over the policy would signal that they are prone to litigate and would thereby reduce their attractiveness as lateral candidates.  You’d think, though, that the AALS would show a little more respect for the law. 

Filed under: antitrust, cartels, law school

The Supreme Court denied cert in both S&M Brands v. Caldwell and Wine Country Gift Baskets v. Steen.  I had participated in drafting amicus briefs, along with my colleague Todd Zywicki, supporting certiorari in each.  The briefs are available here and here.  Maybe I’ll have better luck next year.

Filed under: 21st amendment, alcohol, antitrust, cartels, Supreme Court, wine

[UPDATE:  Josh links to a WSJ article telling us that EU antitrust enforcers raided several (unnamed) e-book publishers as part of an apparent antitrust investigation into the agency model and whether it is “improperly restrictive.”  Whatever that means.  Key grafs:

At issue for antitrust regulators is whether agency models are improperly restrictive. Europe, in particular, has strong anticollusion laws that limit the extent to which companies can agree on the prices consumers will eventually be charged.

Amazon, in particular, has vociferously opposed the agency practice, saying it would like to set prices as it sees fit. Publishers, by contrast, resist the notion of online retailers’ deep discounting.

It is unclear whether the animating question is whether the publishers might have agreed to a particular pricing model, or to particular prices within that model.  As a legal matter that distinction probably doesn’t matter at all; as an economic matter it would seem to be more complicated–to be explored further another day . . . .]

A year ago I wrote about the economics of the e-book publishing market in the context of the dispute between Amazon and some publishers (notably Macmillan) over pricing.  At the time I suggested a few things about how the future might pan out (never a god good idea . . . ):

And that’s really the twist.  Amazon is not ready to be a platform in this business.  The economic conditions are not yet right and it is clearly making a lot of money selling physical books directly to its users.  The Kindle is not ubiquitous and demand for electronic versions of books is not very significant–and thus Amazon does not want to take on the full platform development and distribution risk.  Where seller control over price usually entails a distribution of inventory risk away from suppliers and toward sellers, supplier control over price correspondingly distributes platform development risk toward sellers.  Under the old system Amazon was able to encourage the distribution of the platform (the Kindle) through loss-leader pricing on e-books, ensuring that publishers shared somewhat in the costs of platform distribution (from selling correspondingly fewer physical books) and allowing Amazon to subsidize Kindle sales in a way that helped to encourage consumer familiarity with e-books.  Under the new system it does not have that ability and can only subsidize Kindle use by reducing the price of Kindles–which impedes Amazon from engaging in effective price discrimination for the Kindle, does not tie the subsidy to increased use, and will make widespread distribution of the device more expensive and more risky for Amazon.

This “agency model,” if you recall, is one where, essentially, publishers, rather than Amazon, determine the price for electronic versions of their books sold via Amazon and pay Amazon a percentage.  The problem from Amazon’s point of view, as I mention in the quote above, is that without the ability to control the price of the books it sells, Amazon is limited essentially to fiddling with the price of the reader–the platform–itself in order to encourage more participation on the reader side of the market.  But I surmised (again in the quote above), that fiddling with the price of the platform would be far more blunt and potentially costly than controlling the price of the books themselves, mainly because the latter correlates almost perfectly with usage, and the former does not–and in the end Amazon may end up subsidizing lots of Kindle purchases from which it is then never able to recoup its losses because it accidentally subsidized lots of Kindle purchases by people who had no interest in actually using the devices very much (either because they’re sticking with paper or because Apple has leapfrogged the competition).

It appears, nevertheless, that Amazon has indeed been pursuing this pricing strategy.  According to this post from Kevin Kelly,

In October 2009 John Walkenbach noticed that the price of the Kindle was falling at a consistent rate, lowering almost on a schedule. By June 2010, the rate was so unwavering that he could easily forecast the date at which the Kindle would be free: November 2011.

There’s even a nice graph to go along with it:

So what about the recoupment risk?  Here’s my new theory:  Amazon, having already begun offering free streaming videos for Prime customers, will also begin offering heavily-discounted Kindles and even e-book subsidies–but will also begin rescinding its shipping subsidy and otherwise make the purchase of dead tree books relatively more costly (including by maintaining less inventory–another way to recoup).  It will still face a substantial threat from competing platforms like the iPad but Amazon is at least in a position to affect a good deal of consumer demand for Kindle’s dead tree competitors.

For a take on what’s at stake (here relating to newspapers rather than books, but I’m sure the dynamic is similar), this tidbit linked from one of the comments to Kevin Kelly’s post is eye-opening:

If newspapers switched over to being all online, the cost base would be instantly and permanently transformed. The OECD report puts the cost of printing a typical paper at 28 per cent and the cost of sales and distribution at 24 per cent: so the physical being of the paper absorbs 52 per cent of all costs. (Administration costs another 8 per cent and advertising another 16.) That figure may well be conservative. A persuasive looking analysis in the Business Insider put the cost of printing and distributing the New York Times at $644 million, and then added this: ‘a source with knowledge of the real numbers tells us we’re so low in our estimate of the Times’s printing costs that we’re not even in the ballpark.’ Taking the lower figure, that means that New York Times, if it stopped printing a physical edition of the paper, could afford to give every subscriber a free Kindle. Not the bog-standard Kindle, but the one with free global data access. And not just one Kindle, but four Kindles. And not just once, but every year. And that’s using the low estimate for the costs of printing.

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

Apparently, the detergent industry has entered into what has been described as a “voluntary agreement” to reduce the use of phosphates in detergents (HT: Ted Frank).  A press release from Clean Water Action describes the agreement as follows:

On July 1, 2010 a voluntary ban on phosphates in dishwasher detergents will be implemented by many members of the American Cleaning Council (formerly the Soap and Detergent Association), a manufacturer’s trade group representing most detergent companies.”Industry’s announcement on phosphates in dishwasher detergents is welcome news, indeed, if somewhat overdue,” said Jonathan Scott, a spokesman for Clean Water Action, founded in the early 1970’s to fight for clean, safe water. “Even small amounts of phosphates can wreak havoc when they get into our water,” Scott says, “so it’s the last thing you want as an ingredient in detergents, which are specifically designed to end up in the water by way of household appliances and drain pipes.”

It is also apparent that some our none too pleased with the effects of reducing phosphate levels in detergents — with the primary downside being that the new product doesn’t work too well.  An article in the Weekly Standard describes the impact of the reduction:

The result is detergents that don’t work very well. There have been a handful of stories in the media about consumer complaints. The New York Times noted that on the review section of the website for Cascade—Procter & Gamble’s market-leading brand—ratings plummeted after the switch, with only 11 percent of consumers saying they would recommend the product. One woman in Florida told National Public Radio that she called Procter & Gamble to complain about how its detergent no longer worked. The customer rep told her to consider handwashing the dishes instead.

Some NPR commenters agreed. “Like so many -others, I had disassembled my dishwasher, run multiple empty ‘cleaning cycles’ using all kinds of various chemical treatments, all trying to get my dishwasher ‘fixed,’ ” said one. “We assumed that something was wrong with the machine, that it was limed up, and we tried vinegar and other remedies with limited success,” wrote another. “We do wash some dishes by hand now, using more hot water than before, and also have simply lowered our standards for what constitutes ‘clean.’ ” Another commenter complained: “I live in AZ and had the same thing happen last year when it was introduced out here. I thought it was a reaction between the ‘Green’ soap and the hard water. I wrote to the company and they sent me about $30 in coupons—for other items and for their non-green soap. I dumped the 3 unopened bottles plus the one I was using.”

The detergents were so problematic that they caused environmental delinquency even among NPR listeners. One disappointed commenter rationalized his backsliding:

We first heard about the new phosphate-free detergent formulations almost a year ago. Wanting to do the Right Thing we rushed out and bought some and immediately began using it. The results, although not as bad as reported by some, were still pretty underwhelming. Our dishes and glassware were covered by a gritty film and so was the inside of the dishwasher. We are in Southern California and have very hard water. Adding vinegar to the rinse cycle helped *some* but still we found excessive buildup on our dishes. Disgusted with the new detergent, we decided to go back to something with phosphate. We were not able to find phosphate detergent at the supermarket, but some local discount stores sell supplies that are apparently remaindered by the manufacturers. We bought six boxes of old Cascade with phosphate—about a year’s supply. We figured someone would buy it—might as well be us.

When Consumer Reports did laboratory testing on the new nil-phosphate detergents, they concluded that none of them “equaled the excellent (but now discontinued) product that topped our Ratings in August 2009.”

There is, of course, an interesting antitrust angle here.  Thom has posted previously on another voluntary industry agreement in the soda industry to refrain from selling high calorie soda (and limiting the size of even healthy drinks) in schools.  In the comments to that post I suggest that one important issue is whether the soda players actually reached an agreement:

The passing or collective endorsement of a set of “best practices” to which members of the industry can voluntary choose to adhere to or not is not necessarily an actionable antitrust conspiracy. Of course, calling something “voluntary guidelines” won’t immunize an actual agreement if it is there. But it seems that the parties were pretty careful — EXCEPT for in their commercials and in print!!! — to make sure to emphasize that the antitrust-relevant choices were made unilaterally. But I can’t imagine antitrust counsel would have given the thumbs up to the commercials…

So it is here.  I’ve no doubt that such an agreement, if it exists, is reachable under Section of the Sherman Act.  The question is whether the detergent industry has taken some steps to protect themselves from an “agreement” finding under Section 1.  I don’t have enough detail to know whether that is the case — but if anybody does, please send it along.

Filed under: antitrust, cartels, economics, environment

As a result of the FTC’s “Operation Short Change,” a number of firms and individuals have settled claims that they swindled millions from consumers by making unauthorized charges and debits to their bank accounts.  The FTC press release highlights that, in addition to a $2.08 million fine (judgment suspended due to bankruptcy filing), the FTC barred the principal from engaging in a number of related business activities:

Under the settlement Greenberg is banned from owning, controlling, or consulting for any Internet-related business that handles consumers’ credit card or debit card accounts.  He also is prohibited from making unauthorized charges to consumers’ accounts, making false or misleading statements while selling any goods or services, and using any false or assumed name, including an unregistered, fictitious company name, in his business dealings.

As Douglas Ginsburg and I point out in our piece on Antitrust Sanctions in Competition Policy International, debarment of this sort is common in these FTC enforcement actions, at the SEC for other forms of white collar crime (e.g. debarring a director from sitting on the board of a publicly traded company), and as an antitrust sanction for naked price-fixing in a number of countries, e.g. in the U.K. pursuant to the Company Directors Disqualification Act of 1986.

Debarment, however, is not currently in the mix of antitrust sanctions employed by the DOJ in criminal antitrust enforcement actions.  In the article, we make the case that debarment is desirable from an optimal deterrence perspective:

The U.S. Department of Justice should consider taking a similar approach to sentencing individuals convicted of a criminal violation of § 1 of the Sherman Act. We are aware of no reason for which the Department needs to wait for statutory authority to get started, as did the SEC, by negotiating consent orders providing for debarment.74 Prosecutors might, for example, if the conditions for leniency are met, agree to allow individual defendants to reduce or avoid jail time, in return for debarring them from working as a manager or director of any publicly traded corporation or for any company in a particular industry if it is either located in or sells into the United States.75

Negotiated orders of debarment would allow the Antitrust Division to accrue much of the benefit of a prison sentence—publicizing the offense and keeping the offender from recidivating— without undertaking the risk and cost of a criminal trial. The period of debarment should be calibrated to have the same average deterrent effect as jail.76 Further, as we have pointed out, debarment would bolster currently weak reputational penalties, thereby reducing the need for individual fines, which are less likely to deter efficiently because of individuals’ wealth constraints.

Read the whole thing.