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Popular Media Mark Twain once said “there are three kinds of lies: lies, damned lies, and statistics.” This has never been more true than in the debate . . .
Mark Twain once said “there are three kinds of lies: lies, damned lies, and statistics.”
This has never been more true than in the debate over whether there are disparities in access to broadband internet due to racial discrimination.
In a recent letter to the Federal Communications Commission (FCC), U.S. Sen. Ben Ray Luján, D-N.M., chair of the U.S. Commerce Committee’s broadband subcommittee, urged the commission to move quickly to adopt new rules to prohibit such digital discrimination.
Read the full piece here.
TOTM While the dog days of August have sent many people to the pool to cool off, the Telecom Hootenanny dance floor is heating up. We’ve . . .
While the dog days of August have sent many people to the pool to cool off, the Telecom Hootenanny dance floor is heating up. We’ve got hiccups in BEAD deployment, a former Federal Communications Commission (FCC) member urging the agency to free-up 12 GHz spectrum for fixed wireless, and another former FCC commissioner urging a rewrite of the rules governing low-earth orbit (LEO) satellites.
It’s been less than two months since the National Telecommunications and Information Administration (NTIA) announced state funding under the Broadband Equity Access and Deployment (BEAD) program. Already, states are grumbling about implementation headaches.
TL;DR Background: In October 2022, supermarkets Kroger and Albertsons announced their intent to merge in a $24.6 billion deal. The combined company would be the third-largest . . .
Background: In October 2022, supermarkets Kroger and Albertsons announced their intent to merge in a $24.6 billion deal. The combined company would be the third-largest food and grocery retailer, behind Walmart and Amazon, and would account for roughly 9% of nationwide sales. Based on the Federal Trade Commission’s (FTC) recently released draft merger guidelines and comments by FTC Chair Lina Khan, it appears likely that the agency will move to block the merger, even if the companies offer to divest stores to competing chains.
But… If the FTC does seek to block the deal, it will face an uphill battle. The retail industry has changed dramatically over the past few decades. Partly due to the tremendous growth of supercenters, club stores, and online retail, U.S. consumers are no longer “one-stop shoppers.” These market changes have placed tremendous competitive pressure on traditional retail.
Some of the deal’s critics have also raised concerns about the prospect of monopsony power in labor markets, but these claims are speculative at best and unlikely to hold up in court.
The FTC has for decades clung to a narrow definition of supermarkets that includes only those stores that allow consumers to buy nearly all of their weekly food and grocery needs in a single trip. This definition encompasses traditional food and grocery retailers, such as Kroger and Albertsons, as well as supercenters with grocery sections, such as some Walmart and Target stores. But critically, the FTC’s definition excludes warehouse clubs like Costco and e-commerce services like Amazon.
The FTC’s hypothetical customer is no longer typical. Grocery shopping has shifted toward more frequent shopping trips across various formats, including not only warehouse clubs and e-commerce services, but online-delivery platforms like Instacart; limited-assortment stores like Trader Joe’s and Aldi; natural and organic markets like Whole Foods; and ethnic-specialty stores like H Mart.
Due to these enormous changes, the market definition used in earlier FTC consent orders likely will be, and should be, challenged. This means there are fewer geographic areas where the deal would lead to problematic post-merger market positions.
Over the past 25 years or so, warehouse clubs and supercenters like Walmart have doubled their share of retail sales, while supermarkets’ share has dropped by more than 25%. Indeed, according to data from the industry magazine Progressive Grocer, if the merger goes through, Kroger/Albertsons will still be about 50% smaller than Walmart.
Along similar lines, online shopping and home delivery have grown from niche services that served only 10,000 households nationwide a quarter century ago to a scenario in which 12.5% of U.S. consumers now purchase groceries mostly or exclusively online.
Amazon is now the second-largest food and grocery retailer in the United States. Meanwhile, millions of consumers use delivery services like Instacart to purchase food and groceries from supermarkets, supercenters, club stores, wholesalers, and ethnic markets.
These new businesses place significant competitive pressure on traditional retailers, making the prospect of post-merger market power even more unlikely.
Some opponents of the merger argue that it would lead to monopsony power in labor markets and depress supermarket employee wages. But these concerns are overblown and will be nearly impossible to demonstrate if the merger were to be litigated.
The market for labor in the retail sector is highly competitive, with workers having a wide range of alternative employment options. More importantly, both Kroger and Albertsons are highly unionized firms. Through their collective-bargaining agreements, these unions exert their own market power.
Finally, some point to Haggen’s disastrous acquisition of stores spun-off from the Albertsons/Safeway merger as evidence that divestitures don’t work. But several factors idiosyncratic to Haggen and its acquisition strategy led to that failure, rather than the divestiture itself.
Before it acquired the stores, Haggen was a small regional chain with only 18 stores, mostly in Washington State. In addition, buying the stores left Haggen’s owners heavily in debt.
These issues could—and should—have been addressed when the FTC and the merging parties were negotiating their consent order. Today’s enforcers should thus learn from the Haggen experience—by devising workable remedies—rather than view it as a justification to reject reasonable divestiture options.
For more on this issue, see the International Center for Law & Economics (ICLE) issue brief “Five Problems with a Potential FTC Challenge to the Kroger/Albertsons Merger.”
TL;DR Background: Artificial intelligence—or “AI”—is everywhere these days. It powers our smartphones, cars, homes, and entertainment. It helps us diagnose diseases, teach children, and create art. . . .
Background: Artificial intelligence—or “AI”—is everywhere these days. It powers our smartphones, cars, homes, and entertainment. It helps us diagnose diseases, teach children, and create art. It promises to revolutionize every aspect of our lives, for better or worse.
But … How should public policy respond to this powerful and rapidly evolving force? How should we ensure that AI serves our interests and values, rather than undermining or subverting them?
Some observers and policymakers fear that AI could pose existential threats to humanity, such as unleashing rogue superintelligences, triggering mass job losses, or sparking global wars. They argue that governments should take a prescriptive approach to AI regulation to preempt speculated threats.
Some argue that we need to impose strict and specific rules on AI development and deployment, before it is too late. In a recent U.S. Senate Judiciary Committee hearing, OpenAI CEO Sam Altman suggested that the United States needs a central regulator for AI.
However … This approach is likely to be both misguided and counterproductive. Overregulation could stifle innovation and competition, depriving us of the benefits and opportunities that AI offers. It could put some countries at a disadvantage relative to those that pursue AI openly and aggressively. It could also stifle learning from AI and developing better AI.
A more sensible and effective approach to oversight is to pursue an adaptive framework that relies on existing laws and institutions, rather than creating new regulations, agencies, and enforcement mechanisms.
There are already laws, policies, agencies, and courts in place to address actual harms and risks, rather than hypothetical or speculative ones. This is what we’ve done with earlier transformative technologies like biotech, nanotech, and the internet. Each has been regulated by applying existing laws and principles, such as antitrust, torts, contracts, and consumer protection.
In addition, an adaptive approach would foster international dialogue and cooperation, which have been essential for establishing norms and standards for emerging technologies.
Pursuing an adaptive approach does not mean that we should be complacent or naive about AI. Where the technology is misused or causes harm, there should be actionable legal consequences. For example, if a real-estate developer intentionally used AI tools to screen out individuals from purchasing homes on the basis of protected characteristics, that should be actionable. If a criminal found a novel way to use ChatGPT to commit fraud, that should be actionable. If generative AI is used to create “deep fakes” that amounts to libel, that should be actionable. But in each of these cases, it is not the AI itself that is the relevant unit of legal analysis, but the actions of criminals and the harms they cause.
Ultimately, it would be fruitless to try to build a regulatory framework that would make it impossible for bad actors to misuse AI. Bad actors will always find ways to misuse tools, and heavy-handed regulatory requirements would chill the development of the very AI tools that could combat misuse.
If history is any guide, it is likely that AI tools will allow firms and individuals to do more with less, expanding their productivity and improving their incomes.
By freeing capital from easily automated tasks, existing firms and new entrepreneurs could better focus on their core business missions. For example, investments in marketing or HR could be redeployed to R&D. At this point, we have little idea how AI will be used by people and firms. And more importantly, neither do politicians, policymakers, or regulators.
Overly burdensome AI regulation would likely hinder the entry and growth of new AI firms. For example, as an established player in the AI market, it should be no surprise that OpenAI’s CEO would favor a strong central regulator that can impose entry barriers on newcomers. It is well-known in both law and economics that incumbent firms can profit from raising their rivals’ regulatory costs.
This dynamic can create strong strategic incentives for industry incumbents to promote regulation and can lead to a cozy relationship between agencies and incumbent firms in a process known as “regulatory capture.”
The key challenge confronting policymakers lies in navigating the dichotomy of mitigating actual risks posed by AI, while simultaneously fostering the substantial benefits it offers.
To be sure, AI will bring about disruption and may provide a conduit for bad actors, just as technologies like the printing press and the internet have done in the past. This does not, however, merit taking an overly cautious stance that would suppress many of the potential benefits of AI.
Policymakers must eschew dystopian science-fiction narratives and instead base policy on realistic scenarios. Moreover, they should recognize the laws, policies, and agencies that already have enormous authority and power to find and punish those who misuse AI.
For more on this issue, see the International Center for Law & Economics’ (ICLE) response to the National Telecommunications and Information Administration’s AI Accountability Policy, as well as ICLE’s response to the similar inquiry from the White House Office of Science and Technology Policy.
Popular Media There has been growing speculation about whether the Federal Trade Commission will seek to challenge the $24.6 billion merger that Cincinnati-based Kroger and Idaho-based Albertsons announced in . . .
There has been growing speculation about whether the Federal Trade Commission will seek to challenge the $24.6 billion merger that Cincinnati-based Kroger and Idaho-based Albertsons announced in October 2022. The combined company would be the third-largest food and grocery retailer, behind Walmart and Amazon. Based on the draft merger guidelines the FTC recently announced jointly with the U.S. Justice Department, as well as recent comments from FTC Chair Lina Khan, those reading the tea leaves expect the agency will move to block the merger, even if the companies offer to spin off stores to competing chains.
TOTM The Telecom Hootenanny is back from a little summer break. As they say on AM radio: “If you miss a little, you miss a lot.” . . .
TOTM With the first day of summer less than a week away and political silly season just around the corner, we don’t have much time for . . .
With the first day of summer less than a week away and political silly season just around the corner, we don’t have much time for hootenannies. Congress needs to channel the wisdom of Jerry Reed, who noted: “We’ve got a long way to go and a short time to get there.”
TOTM The Oregon State Legislature is considering HB 3631, a bill that would ensure that consumers have a “right to repair” their electronics devices. The legislation would . . .
The Oregon State Legislature is considering HB 3631, a bill that would ensure that consumers have a “right to repair” their electronics devices. The legislation would require that manufacturers provide consumers and independent repair shops access to relevant repair information, as well to make available any parts or tools necessary to carry out the repair.
TOTM Grab a partner, find a group, and square up for Truth on the Market’s second Telecom Hootenanny. We’ve got spectrum auctions, broadband subsidies, and a . . .
Grab a partner, find a group, and square up for Truth on the Market’s second Telecom Hootenanny. We’ve got spectrum auctions, broadband subsidies, and a European 5G tango.
