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PORTLAND, Ore. (May 19, 2022) — Legislation introduced today in the U.S. Senate to address alleged “conflicts of interest” in the digital-advertising market would instead threaten to halt decades of technological innovation that have benefited both advertisers and publishers, scholars with the International Center for Law & Economics (ICLE) warn.

Dubbed the Competition and Transparency in Digital Advertising Act, the bill would impose a host of new duties on firms with more than $5 billion in digital-advertising revenue and mandate that firms with more than $20 billion in digital-advertising revenue may not participate in the market as any combination of a buy-side broker, sell-side broker, seller of digital-advertising space, and/or owner of a digital-advertising exchange.

The following statement may be attributed to ICLE President and Founder Geoffrey Manne:

“This legislation fundamentally misunderstands the role that intermediaries have played in creating a market that matches advertisers and websites automatically and that serves users the most relevant ads. This revolution in targeted advertising has allowed websites to monetize their products without having to charge user fees, allowing people to access entertaining and informative content for free. Platforms like digital-ad exchanges have incentive to balance costs and benefits to participants on all sides of the transaction. To the extent that they fail to do that efficiently or effectively, digital advertising is a market with low barriers to entry and new competitors emerge all the time. This legislation threatens to take us back to the old days of massive inefficiency in the advertising industry, and of consumers being inundated with marketing pitches for goods and services they would never want.”

We also recommend reading this recent Wall Street Journal op-ed by ICLE Academic Affiliate Todd Henderson and this blog post on Truth on the Market by Senior Scholar Eric Fruits. Journalists interested in interviewing ICLE scholars about the legislation or the law & economics of digital advertising should contact ICLE Editor-in-Chief R.J. Lehmann at [email protected] or 908-265-5272.

Congress has been considering legislation in recent months that would mark the most significant change to antitrust law in a generation. At issue is whether the bills would increase competition in digital markets, and what attendant impacts may be anticipated.

A recent comment letter from the American Bar Association Antitrust Law Section, the world’s largest professional organization for antitrust and competition law and consumer protection, discussed one of those bills, the American Innovation and Choice Online Act (S. 2992), at length in an effort to assist with ongoing consideration of the measure.

Professor Sean Sullivan, a member of the ABA Antitrust Law Section, will join representatives from ICLE and UVA in his individual capacity to discuss AICOA, the Section’s comments, and what reform could mean for consumers, digital platforms, and the future of antitrust law.

Please join us May 19, 2022, at 2 p.m. ET for this discussion. You can register for the event here.

	Sean Sullivan Law professor at University of Iowa and ABA Antitrust Section
	Elyse Dorsey Visiting Scholar at the University of Virginia and an Adjunct Professor at Antonin Scalia Law School at George Mason University
	Geoff Manne Moderator & speaker President & Founder, ICLE

On Sept. 15 and 16, 2022, the International Center for Law & Economics (ICLE) will host a research roundtable at our headquarters in Portland, Oregon, to bring together authors and commentators to discuss research relating to market structure and regulation.

We are soliciting proposals from potential authors for this event. Proposals should briefly describe the thesis, argument, or hypothesis the author is exploring; its importance as a research topic and relevance to contemporary policy discussions; the intended methodological approach; the current state of the work (both early- and mid-stage research is suitable for this event); and any challenges that the author anticipates needing to overcome to complete this work.

Authors of proposals selected for inclusion will receive $12,000 honoraria to facilitate this work. This honorarium will be awarded in stages: upon participation in the roundtable, including submission of a draft paper written for an academic audience by Sept. 2, 2022; upon publication of a short-form version of the work written for a non-academic audience; and upon acceptance of the paper for publication in an established academic journal.

We also welcome expressions of interest from potential commentators who would like to participate in this event.

Topics of Interest

We seek papers relating broadly to the following. We are primarily interested in policy-relevant research and are open to work from a range of disciplines, including those that may not currently be much engaged in policy debates on these topics (e.g., business, political science, history, engineering, sociology, anthropology) and using a range of approaches and methodologies, including both empirical and nonempirical work.

• Conglomerate business models: This topic includes work that studies potential benefits and harms for consumers arising from conglomerate business models and other large platform-based industries. Potential benefits and harms include economic issues (e.g., changes in prices or quality of service), but also may include topics such as impacts on trust in and governance of public institutions.
• Market-structuring regulation: There is a long history of using regulation to structure markets, including scholarly debate about the effectiveness of such regulation. Proposals relating to this topic should evaluate how or whether such regulation can be used in the contemporary setting, in particular relating to the structure or operation of platform-based industries. We note a special interest in empirical work that considers the structure of network markets and their regulation, the role of switching costs, the measurement of network effects, and similar topics.
• Vertical integration: This topic is relatively straightforward. There has been extensive discussion of vertical integration in recent years, including proposals for regulation (especially in the context of, e.g., self-preferencing, interoperability, and the like). Proposals relating to this topic may address issues relating to vertical integration generally but may also be responsive to contemporary policy proposals (including, e.g., how to effectively implement them or the risks and tradeoffs they may create).
• Other topics: While we have special interest in the topics listed above, it is not an exclusive or exhaustive list. We welcome proposals relating broadly to themes suggested by this call for proposals. In addition, recognizing that some research (especially empirical research) might require additional funding (e.g., to obtain access to data or research assistance), we are happy to include requests for additional funding as is necessary to support work selected for inclusion in this roundtable.

Submission Details

Research proposals should be submitted to both Gus Hurwitz ([email protected]) and Keith Fierro Benson ([email protected]). Any proposal submitted by Monday, June 13, will be given consideration. Proposals received after June 13 will be considered on a rolling basis.

BRUSSELS (May 11, 2022) — European policymakers should proceed with caution as they look to update the legal framework that underpins licensing of standard-essential patents (SEPs), scholars with the International Center for Law & Economics (ICLE) argue in comments filed with the European Commission.

Responding to concerns about patent holdup and royalty stacking affecting SEPs, the commission is considering changes that would constrain SEP holders’ ability to seek injunctions against alleged infringers. But the empirical evidence suggests that the current system works and that the ills associated with the alleged overenforcement of intellectual-property rights do not materialize in industries that rely on SEPs, according to the filing from ICLE President Geoffrey Manne, Director of Competition Policy Dirk Auer, Director of Innovation Policy Kristian Stout, and Associate Director of Legal Research Ben Sperry.

“It is simply not helpful for a regulatory body to impose a particular vision of licensing negotiations if the goal is more innovation and greater ultimate returns to consumers,” the ICLE scholars write. “Instead, where possible, policy should prefer allowing parties to negotiate at arm’s length and to resolve disputes through courts. In addition to maintaining the sometimes-necessary remedy of injunctive relief against bad-faith implementers, this approach allows courts to explore when injunctive relief is appropriate on a case-by-case basis.”

ICLE cautions that weakening protections for SEP holders would encourage firms to integrate vertically, rather than to specialize; reduce startup companies’ access to capital markets by making it harder to collateralize intellectual property; and erode American and European firms’ technological leadership.

Journalists interested in interviewing ICLE scholars about standard-essential patents should contact ICLE Editor-in-Chief R.J. Lehmann at [email protected] or 908-265-5272.

PORTLAND, Ore. (May 4, 2022) — As the Senate Judiciary Committee convenes a hearing this morning on the subject of swipe fees and competition in the credit- and debit-card markets, scholars with the International Center for Law & Economics (ICLE) caution lawmakers that capping interchange fees has done far more harm than good, transferred wealth from consumers to the shareholders of large merchants, and impeded competition, and that such caps should not be expanded.

Congress imposed price caps on interchange fees for debit cards issued by banks with more than $10 billion in assets in 2010, under an amendment to the Dodd-Frank Act introduced by current Judiciary Committee Chairman Richard Durbin (D-Ill.). While Durbin’s stated goal was to save consumers money at the checkout counter, a recent ICLE literature review details that, in practice, the caps have had the opposite effect. To offset lost revenue from interchange fees, banks increased account fees and other charges, passing through 42% of their losses. Meanwhile, merchants passed through, at most, 28% of the savings they realized from lower debit-card interchange fees.

“Poorer consumers were hit the hardest, because banks reduced the availability of free checking accounts and raised the minimum deposit amounts to qualify for free checking,” ICLE Senior Scholar Julian Morris said. “Many poorer customers appear to have left the banking system as a result.”

The Durbin amendment also introduced requirements prohibiting exclusivity arrangements among debit-card issuers and payment networks, on the premise that this would lead to competition in the routing of debit-card payments. But according to Morris, this has primarily affected community banks and credit unions, who have been forced to accept the lower interchange fees charged by some PIN debit networks. Credit unions alone have lost more than $6 billion in interchange-fee revenue, Morris notes, with many forced to increase other fees and/or reduce lending.

“Ironically, the Durbin Amendment also seems to have delayed entry by financial technology or ‘fintech’ companies. Since these companies are at the cutting edge of innovation, offering new products and reducing costs, it would appear that the Durbin amendment has actually hindered competition,” Morris said.

For more details on the economics of payment-card networks, see the ICLE white papers “The Effects of Price Controls on Payment-Card Interchange Fees: A Review and Update” and “Credit Cards and the Reverse Robin Hood Fallacy: Do Credit Card Rewards Really Steal from the Poor and Give to the Rich?” Journalists interested in interviewing Julian Morris or other ICLE scholars about the economics of payment-card networks should contact ICLE Editor-in-Chief R.J. Lehmann at [email protected] or 908-265-5272.

PORTLAND, Ore. (April 22, 2022)— The Federal Trade Commission (FTC) and U.S. Justice Department’s (DOJ) request for information (RFI) on whether and how to update the antitrust agencies’ merger-enforcement guidelines is based on several faulty premises and appears to presuppose a preferred outcome, according to a response to the RFI filed by the International Center for Law & Economics (ICLE).

Written by ICLE President Geoffrey Manne, Director of Competition Policy Dirk Auer, Chief Economist Brian Albrecht, and Seniors Scholars Eric Fruits and Lazar Radic, ICLE’s comments observe that the RFI misconstrues the role of merger guidelines, which is to reflect the state of the art in a certain area of antitrust. The RFI instead seeks information to support a broad invigoration of merger enforcement, the scholars argue.

“The RFI telegraphs an attempt by the agencies to pronounce as settled what are hotly disputed, sometimes stubbornly unresolved issues among experts, all to fit a preconceived political agenda,” the ICLE scholars write. “This not only overreaches the FTC’s and DOJ’s powers, but it also risks galvanizing opposition from the courts, thereby undermining the utility of adopting guidelines in the first place.”

Among the most pressing and problematic substantive questions raised in the RFI are:

• An uncritical acceptance of the contentious narrative that lax antitrust enforcement has caused increased concentration in U.S. markets, when empirical data demonstrates that concentration is decreasing in local markets and that increased national-level concentration has been caused by productivity advances;
• An interpretation that existing merger-control tools, such as the Herfindahl-Hirschman Index (HHI), allow too many anticompetitive mergers to slip through the cracks, without grappling with the role that such tools play in the overall antitrust framework to reduce total error costs and the cost of administration;
• An eagerness to welcome new guidelines for mergers that affect labor markets and “monopsony” markets more broadly, despite little scholarly analysis of the fundamental complexity involved in applying merger-control rules to monopsony markets, where output is the relevant consideration;
• An unwarranted presumption of a negative relationship between market concentration and innovation, or between market concentration and investment, when the opposite is often true;
• A tendency to blur the longstanding demarcation between vertical and horizontal mergers, in ways that are likely to have chilling effects on procompetitive vertical mergers;
• An inclination to treat firms’ possession of data as a special factor in merger rules, rather than as any other intangible asset; and
• A premature desire to apply the notion of “attention markets” in a merger-control context, despite a lack of scholarship offering objective, let alone quantifiable, criteria to identify firms that are unique competitors for user attention.

To schedule an interview about the DOJ/FTC merger guidelines with Geoffrey Manne or any of the other ICLE competition scholars, contact ICLE Editor-in-Chief R.J. Lehmann at [email protected] or 908-265-5272.

Truth on the Market will host a virtual symposium, starting April 25, on the limits of the Federal Trade Commission’s (FTC) rulemaking authority over unfair methods of competition (UMC). This symposium will be the first to incorporate a “new voices” writing competition: early-career scholars are encouraged to submit contributions. Winners, who will be selected by a panel of former FTC officials, will be published as part of the symposium. A first prize of $2,500 will be awarded to the best contribution, as selected by this panel.

The Limits of FTC UMC Rulemaking Symposium

There is widespread interest in the potential tools that the Biden administration FTC may use to address a range of competition-related and competition-adjacent concerns. Among other issues, there have been indications that the FTC may use its broad UMC authority under Section 5 of the FTC Act to make rules that address a wide range of conduct.

The symposium will feature contributions of 1,500 to 4,000 words discussing these issues, and written by academics, practitioners, and former agency officials. Sample topics of interest include (but are not limited to):

• Constitutional limits on UMC rulemaking: does such rulemaking potentially present “major question” or delegation issues? If so, what is the scope of permissible rulemaking?
• Substantive issues in UMC rulemaking: costs and benefits to be considered, prudential concerns, and the like.
• Using UMC to address competition-adjacent issues: there is lots of discussion about how or whether to use the FTC’s UMC authority to address firm conduct that is governed by other statutory or regulatory regimes. For instance, firms using copyright law and the Digital Millennium Copyright Act (DMCA) to limit competitors’ ability to alter or repair products, or labor or entry issues that might be governed by licensure or similar laws.

Examples of past TOTM symposia are available here.

‘New Voices’ Writing Competition

We are happy to announce an open call for symposium submissions as part of a “new voices” writing competition. The competition is open to any untenured academic or aspiring academic (including students and fellows). Submissions should be lightly formatted and lightly footnoted and submitted as a Word or Google Doc document; hyperlinks instead of footnotes are strongly encouraged.

Submissions and questions should be sent to both Gus Hurwitz ([email protected]) and Keith Fierro Benson ([email protected]). Please submit your contribution by Tuesday, April 19.

“New Voices” submissions will be evaluated by a panel of judges comprising former FTC officials. Judges will both select papers for inclusion in the symposium and select the best submission, the author of which will receive a $2,500 prize.

BRUSSELS (March 24, 2022)— The following comment from the International Center for Law & Economics (ICLE) on today’s agreement to adopt the European Union’s Digital Markets Act (DMA) can be attributed to ICLE Director of Competition Policy Dirk Auer:

“Despite recent compromises and marginal changes, the DMA remains a flawed piece of legislation that seeks to bolster European firms against the predominantly American platforms that outcompeted them in the marketplace. Unfortunately, this protectionist ploy will impose significant costs on consumers.

“European legislators assume that implementing the DMA’s list of ‘dos and don’ts’  is a largely costless exercise. Nothing could be further from the truth. Mandated interoperability, bans on self-preferencing, and limits to platforms’ use of data—some of the DMA’s key provisions—all have significant costs. These will ultimately be passed on to consumers in the form of degraded functionality, higher prices, and increased ad loads. This is not just conjecture: consumers rightly complain about cookie consent forms and mandated choice screens, both of which will become even more ubiquitous under the DMA.

“In short, the DMA will produce unforeseen consequences that harm the very consumers it purports to protect.”

For further background, ICLE earlier this week published a white paper by Academic Affiliate Giuseppe Colangelo exploring the risks of double jeopardy and conflicting decisions expected to stem from the DMA’s intersection with national-level competition law, sector-specific regulations that target digital “gatekeepers,” and rules on relative market power and economic dependence.

To schedule an interview about the Digital Markets Act with Auer or other ICLE competition scholars, contact ICLE Editor-in-Chief R.J. Lehmann at [email protected] or 1-908-265-5272.

PORTLAND, Ore. (March 7, 2022) — Many of the most significant changes in the competitive landscape in recent years derive not, as some critics claim, from declining competition, but rather from the increasing importance of intangible capital, according to a new white paper from the International Center for Law & Economics (ICLE). 

The scalability, spillovers, and synergies associated with assets like R&D, brands, software, and organizational development can prove especially beneficial for large firms and incumbents, who enjoy higher returns from their portfolios of complementary intangibles, but it also means that challengers can grow quickly, authors Jonathan Haskel and Stian Westlake argue.

Haskel is professor of economics at Imperial College London’s Imperial College Business School and director of the school’s doctoral program. Westlake is chief executive of the Royal Statistical Society. The ICLE white paper is adapted from the pair’s forthcoming book Restarting the Future: How To Fix The Intangible Economy.

The pair note that recent empirical tests finding increased market concentration, a growing gap between the performance of market leaders and laggards, and a trend toward conglomeration have mostly been seen in the most intangible-intensive industries.

“The mark-ups of American firms and total rate of return are mostly unchanged when one accounts for intangibles in firms’ capital,” the authors write. “To put it another way, the runaway profitability of businesses is at least partly an artifact of using the wrong denominator, omitting an increasingly important part of the capital stock that businesses invest in.”

While the growing importance of intangibles provides reason for optimism about the future of competition, an intangible economy is unquestionably harder to regulate, requiring changes to the institutions that enforce competition policy, Haskel and Westlake write. They emphasize that competition policy should remain focused on consumer welfare and ensuring that markets are contestable. However, they note that regulators now need to understand a wide variety of new business models, market-access dynamics, and the impact of digital technologies on pricing.

The paper’s final section examines the effects of intangible capital on competition among individuals and workers, as seen in the competition for schools, jobs, and status. They document that the shift has increased workers’ incentives to invest in costly signaling devices, notably educational credentials. One path forward is to remove policies that unnecessarily funnel excessive resources into higher education.

The full white paper can be downloaded here. For more information or to schedule an interview with the authors, contact ICLE Editor-in-Chief R.J. Lehmann at [email protected] or (908) 265-5272.