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My work (with GMU 3L Angela Diveley) featured on the University of Pennsylvania’s RegBlog.  An excerpt:

The comparison we conducted is one between institutions – the FTC and the federal judicial system – and not individual judges and commissioners. There is no doubt the antitrust and economic experts at the FTC are well equipped to analyze all modes of business dealings; in this sense, agencies certainly have greater economic expertise than courts as a general rule. However, like the FTC, courts incorporate economic expertise into their decision-making. While the FTC seeks to incorporate its staff’s expertise, courts seek to incorporate the expertise of expert witnesses. Both institutions are organizations with complex internal structures with different modes of transmitting economic expertise into decision-making outputs and different constraints and incentives.

We sought to determine whether the FTC’s institutional structure facilitates the transmission of economic inputs into its adjudicatory decisions more effectively than Article III judges in similar cases. The implicit assumption underlying the expertise hypothesis, and many of the calls for increased delegation to the agencies, is that they are better equipped to convert that expertise to litigation outcomes. If agencies do not hold such an advantage in converting expertise to outputs, interesting and important questions are raised concerning the optimal institutional design of the FTC and of administrative agencies generally. Our preliminary evidence suggests precisely this outcome as we find no advantage for administrative agencies.

Filed under: antitrust, economics, federal trade commission

This analysis evaluates the antitrust law ramifications of proposals requiring pharmacy benefit managers (“PBMs”) to open up their networks to “any willing provider” meeting the same terms and  conditions as other network members. Providers which have failed to meet a PBM’s terms have frequently sought the enactment of any-willing-provider (“AWP”) legislation (or comparable administrative action). A recent federal proposal, The Pharmacy Competition and Consumer Choice Act of 2011 (“the Act”) — provides a useful model for this analysis. Both economic analysis and available empirical evidence suggest  the bill will harm consumers by restricting competition.

Read the full piece here.

I’ve posted a new project in progress (co-authored with Angela Diveley) to SSRN.  In “Do Expert Agencies Outperform Generalist Judges?”, we attempt to examine the relative performance FTC Commissioners and generalist Article III federal court judges in antitrust cases and find some evidence undermining the oft-invoked assumption that Commission expertise leads to superior performance in adjudicatory decision-making.  Here is the abstract:

In the context of U.S. antitrust law, many commentators have recently called for an expansion of the Federal Trade Commission’s adjudicatory decision-making authority pursuant to Section 5 of the FTC Act, increased rulemaking, and carving out exceptions for the agency from increased burdens of production facing private plaintiffs. These claims are often expressly grounded in the assertion that expert agencies generate higher quality decisions than federal district court judges. We call this assertion the expertise hypothesis and attempt to test it. The relevant question is whether the expert inputs available to generalist federal district court judges translate to higher quality outputs and better performance than the Commission produces in its role as an adjudicatory decision-maker. While many appear to assume agencies have courts beat on this margin, to our knowledge, this oft-cited reason to increase the discretion of agencies and the deference afforded them by reviewing courts is void of empirical support. Contrary to the expertise hypothesis, we find evidence suggesting the Commission does not perform as well as generalist judges in its adjudicatory antitrust decision-making role. Furthermore, while the available evidence is more limited, there is no clear evidence the Commission adds significant incremental value to the ALJ decisions it reviews. In light of these findings, we conclude there is little empirical basis for the various proposals to expand agency authority and deference to agency decisions. More generally, our results highlight the need for research on the relationship between institutional design and agency expertise in the antitrust context.

We are in the progress of expanding the analysis and, as always, comments welcome here or at my email address on the sidebar.

Filed under: antitrust, economics, federal trade commission, scholarship, SSRN

President Obama has, as rumored, appointed Bill Baer (Arnold & Porter) to head the Antitrust Division.  Reuters reports:

Baer, who is the chair of Arnold and Porter’s Antitrust Practice Group, also previously headed the Federal Trade Commission’s competition division when it stopped a merger between Staples and Office Depot in 1997.

He will replace Sharis Pozen, the acting assistant attorney general for antitrust, who plans to step down at the end of April. Pozen succeeded Christine Varney, who left last August.

Baer’s nomination, which was widely expected, still must be confirmed by the U.S. Senate.

…
Baer is seen as someone who would continue the present policies of the Justice Department’s antitrust office.

The division’s key outstanding cases include the purchase of Nortel’s patent assets by a consortium led by Apple, and Google’s purchase of Motorola Mobility. It also has a number of criminal price-fixing probes.

Mr. Baer is a very well respected figure in the antitrust community and I expect this to be perceived — as it should be — as a very high quality appointment.

Filed under: antitrust

Charles (“Rick”) Rule, who represents Microsoft and is the head of the antitrust practice at Cadwalader, Wickersham & Taft LLP, and I had an opportunity to debate the various antitrust issues involving Google and its search engine on last week.  I didn’t have much of a chance to report here on the blog over the past week, but the Columbia Law School has done the work for me.  Here’s a recent report:

Joshua Wright, professor of law at George Mason University School of Law, took the position that there is no significant evidence that Google is guilty of antitrust violations. Even if Google, like other search engines, favors its own content when producing the results of a search request, he argued, dissatisfied customers can easily switch search engines. In other words, the competition is just a click away.

On the other side of the debate was Charles F. Rule, head of the antitrust practice at Cadwalader, Wickersham & Taft LLP. Rule, who has defended Microsoft in antitrust litigation, argued that ample anecdotal evidence exists that implicates Google in a mix of practices that have had the cumulative effect of excluding competitors’ content from appearing in a Google search, as well as monopolizing advertisers. He stressed that his opinions were his own.

…

Wright discussed the evolution of search engines in the last ten years. He conceded that the allegation of search bias, in which a search engine favors its own content at the expense of rivals, is a possible violation of Section 2 of the Sherman Antitrust Act. But Wright noted that leading case law indicates that the behavior in question must harm the competitive process and thereby harm consumers, to be dubbed “exclusionary.”

“We demand evidence of real harm to competition before we break out the antitrust hammer,” he said, “and I don’t think there’s significant evidence of that here. It’s not hard to switch to get what you are looking for.”

Rule dismissed the “just-a-click-away” argument at the beginning of his talk.

“It’s not quite that simple,” he said. “The fact is that because of some of Google’s practices, the company has made it difficult for other search engines like Bing to achieve the same level of performance.”

Rule explained that search engines make their money by selling eyeballs to advertisers, and cited statistics that establish Google’s long-time share of the search-engine advertising market at 90 percent and up. He offered detailed descriptions of specific Google practices that have had the alleged effect of excluding competitive search engines—not just by blocking their content, but also by denying them opportunities to reach advertisers.

“With respect to bias, you can see specific anecdotes where it appears that Google has allegedly blacklisted certain companies intentionally and, in a very focused way, degraded their results so they appear lower on the page,” he said. “But also on the advertising side, there are anecdotes that when Google perceived a potential competitive threat, it automatically dramatically increases the price competitors have to pay, sometimes five to ten thousand percent overnight.”

Filed under: antitrust, economics, federal trade commission, google, monopolization, technology

Sports Illustrated:

The Federal Trade Commission has concluded and closed a six-month, nonpublic investigation of Zuffa LLC., the owners of the Ultimate Fighting Championship, and will not take further action at this time, an FTC spokesperson confirmed to SI.com on Tuesday.

According to closing letters to parties involved that were made public Tuesday, the FTC Bureau of Competition investigation focused on Zuffa’s March 2011 acquisition of Explosion Entertainment LLC., which owned the rival Strikeforce promotion, and whether the purchase violated Section 7 of the Clayton Antitrust Act or Section 5 of the Federal Trade Commission Act.

Section 7 of the Clayton Act  “prohibits mergers and acquisitions when the effect may be substantially to lessen competition, or tend to a create a monopoly,” according to FTC guidelines.

Section 5 of the Federal Trade Commission Act prohibits “unfair or deceptive acts or practices in or affecting commerce.’’

“No action has been taken in regards to this part of the investigation,” said the FTC spokesperson, though he said the governmental agency reserves the right to revisit the matter in the public’s interest.

Zuffa purchased Explosion Entertainment, established by Scott Coker and Silicon Valley Sports and Entertainment, a sports franchise company, for a reported $40 million. Coker became the general manager for Strikeforce, which plans to hold six events on Showtime this year.

A remarkable set back for the unilateral effects enforcement agenda at the agencies to be sure.

Filed under: antitrust, federal trade commission, merger guidelines, mergers & acquisitions

The Federal Trade Commission conference announcement is below; note that public comments on the date of the conference.  This is an important space and should attract some excellent speakers.  The topics suggest a greater focus on consumer protection than competition issues.  Here is the announcement:

The Federal Trade Commission will host a workshop on April 26, 2012, to examine the use of mobile payments in the marketplace and how this emerging technology impacts consumers. This event will bring together consumer advocates, industry representatives, government regulators, technologists, and academics to examine a wide range of issues, including the technology and business models used in mobile payments, the consumer protection issues raised, and the experiences of other nations where mobile payments are more common. The workshop will be free and open to the public.

Topics may include:

• What different technologies are used to make mobile payments and how are the technologies funded (e.g., credit card, debit card, phone bill, prepaid card, gift card, etc.)?
• Which technologies are being used currently in the United States, and which are likely to be used in the future?
• What are the risks of financial losses related to mobile payments as compared to other forms of payment? What recourse do consumers have if they receive fraudulent, unauthorized, and inaccurate charges? Do consumers understand these risks? Do consumers receive disclosures about these risks and any legal protections they might have?
• When a consumer uses a mobile payment service, what information is collected, by whom, and for what purpose? Are these data collection practices disclosed to consumers? Is the data protected?
• How have mobile payment technologies been implemented in other countries, and with what success? What, if any, consumer protection issues have they faced, and how have they dealt with them?
• What steps should government and industry members take to protect consumers who use mobile payment services?

To aid in preparation for the workshop, FTC staff welcomes comments from the public, including original research, surveys and academic papers. Electronic comments can be made at https://ftcpublic.commentworks.com/ftc/mobilepayments. Paper comments should be mailed or delivered to: 600 Pennsylvania Avenue N.W., Room H-113 (Annex B), Washington, DC 20580.

The workshop is free and open to the public; it will be held at the FTC’s Satellite Building Conference Center, 601 New Jersey Avenue, N.W., Washington, D.C.

Filed under: antitrust, economics, financial regulation, technology, wireless

A Congressional Bill proposing a “Reasonable Profits Board” so that profits on the sale of oil and gas in excess of what is “reasonable” can be subjected to a windfall tax.  A brief description:

According to the bill, a windfall tax of 50 percent would be applied when the sale of oil or gas leads to a profit of between 100 percent and 102 percent of a reasonable profit. The windfall tax would jump to 75 percent when the profit is between 102 and 105 percent of a reasonable profit, and above that, the windfall tax would be 100 percent. The bill also specifies that the oil-and-gas companies, as the seller, would have to pay this tax.

We have a long archives of posts here at TOTM on a variety of forms of price gouging legislation in oil and gas.   Most recently, in discussing a White House Task Force aimed to detect price gouging and usurping jurisdiction from the Federal Trade Commission, I wrote:

One need only read the FTC’s 222 page report on gasoline prices post-Katrina and Rita to appreciate the Commission’s expertise in this area.  But perhaps most importantly, and undoubtedly related to the appointment of a working group outside the Commission, is that the Commission understands the relevant economics.  Indeed, as I noted just recently, then Bureau of Economics Director Michael Salinger gets it right when he observed  “as unpleasant as high-priced gasoline is, running out will be even worse.”  Further, it was the Commission Report that found not only scant evidence of what might be described as “gouging” — but did find examples of gas stations that shut down rather than risk a suit under a state price gouging law.  “Price Gouging Helps Consumers” doesn’t make for much of an election slogan, so perhaps this is all to be expected.  But nobody should be fooled into believing that enforcement of existing state price gouging laws, or a new federal task force devoted investigate “price gouging,” are going to make consumers better off.

The criticisms against price gouging laws become even stronger against a “Reasonable Profits Board,” which is even more blatantly political, even more likely to harm consumers, and even more likely to waste social resources than enforcement of state price gouging laws.

Filed under: economics, federal trade commission

I am very pleased to pass along this information about the 15th Annual Symposium on Antitrust Law on January 26th, 2012 sponsored by the George Mason Law Review, GMU Law & Economics Center, and Kelley Drye & Warren LLP.

The George Mason Law Review, in partnership with the George Mason University Law & Economics Center and sponsor Kelley Drye & Warren LLP, is pleased to present its 15^th Annual Symposium on Antitrust Law on January 26, 2012. The symposium, entitled “Antitrust in High-Tech Industries,” will be held in the Founders Hall Auditorium at George Mason University School of Law, located at 3301 Fairfax Drive, Arlington, Virginia.

The program will focus on the proper role of antitrust in high technology industries, including the extent to which current competition policy is adequate to address dynamic competition concerns that are prevalent in rapidly evolving sectors.  Specifically, panels will explore the application of antitrust laws to social media, mergers, online search, and online advertising.

The Keynote Address will be delivered by William Kovacic, former Chairman of the US Federal Trade Commission.

Please join us on January 26, 2012! To register, click here.

For a detailed description of the Symposium Panels, click here.

Fees:
General Admission: $150.00
Government/Academic: $50.00
Student: $50.00

Note: 5.5 CLE credit hours from the Virginia Bar Association are available for program attendees.

For more information, contact Katie Brown at [email protected] or call (703) 375-9529.

15th Annual Symposium Brochure

Speakers and Agenda:

8:00 – 8:30am            Registration and Continental Breakfast

8:30 – 8:35am             Welcome and Introduction

8:35 – 10:00am          Panel 1: Perspectives on High-Tech Antitrust

Howard Shelanski, Georgetown University Law Center

Herbert Hovenkamp, University of Iowa College of Law

George L. Priest, Yale Law School

Keith Hylton, Boston University School of Law

10:15 – 11:45pm        Panel 2: Social Media

Catherine E. Tucker, MIT Sloan School of Management

Spencer W. Waller, Loyola University, Chicago School of Law

Frank Pasquale, Seton Hall Law School

11:45 – 1:45pm          Luncheon and Keynote Address

William E. Kovacic, The George Washington University Law School

1:45 – 3:15pm             Panel 3: Mergers

Luke M. Froeb, Vanderbilt University

Thomas W. Hazlett, George Mason University School of Law

Jonathan B. Baker, American University Washington College of Law

3:30 – 4:45pm           Panel 4: Search and Online Advertising

William C. MacLeod, Kelly Drye & Warren LLP

Joshua D. Wright, George Mason University School of Law

Daniel Crane, University of Michigan Law School

Scott A. Sher, Wilson Sonsini Goodrich & Rosati

4:45 – 5:00pm           Closing Remarks

5:00 – 6:00pm           Refreshments/ Reception

Location:
George Mason University School of Law
Founders Hall Auditorium
3301 Fairfax Drive
Arlington, VA 22201

For directions, click here.

Filed under: antitrust, george mason university school of law