Showing 9 of 72 Publications in Collusion & Cartels

The FTC and Debarment as an Antitrust Sanction

Popular Media 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 . . .

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.

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Antitrust & Consumer Protection

DOJ Investigates Alleged UPS-FedEx Boycott

Popular Media The AP Reports: The Justice Department is investigating claims of anticompetitive behavior by shipping companies FedEx Corp. and UPS Inc. Los Angeles antitrust attorney Maxwell Blecher . . .

The AP Reports:

The Justice Department is investigating claims of anticompetitive behavior by shipping companies FedEx Corp. and UPS Inc.

Los Angeles antitrust attorney Maxwell Blecher said in a sworn court document filed last month that on Nov. 22 a trial attorney in the Justice Department’s antitrust division called him and said they had begun a formal investigation of UPS and FedEx.

The Justice Department declined to confirm the investigation on Friday. FedEx and UPS say they are aware of the investigation.

Blecher represents a firm called AFMS Logistics Management Group that helps companies negotiate lower rates from UPS and FedEx. The company’s federal lawsuit accuses UPS and FedEx of announcing on the same day that they would no longer deal with such consultants. Blecher said on Friday that the moves were “devastating” for AFMS’s business.

The underlying private civil case is AFMS LLC v. United Parcel Service Co., (10-cv-5830, U.S. District Court, Central District of California (Los Angeles)).  I do not have a copy of the complaint in that case which references the DOJ investigation, but will post if I do.

UPDATE: Here is a copy of the complaint (HT: Dale Collins).  Briefs are also available here.

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Antitrust & Consumer Protection

Amicus Brief in Fifth Circuit Tobacco Master Settlement Case

Amicus Brief On November 23, 1998, the Attorneys General of 46 states signed an agreement settling allegations that the largest four tobacco manufacturers defrauded the states of Medicaid expenses.

Summary

On November 23, 1998, the Attorneys General of 46 states signed an agreement settling allegations that the largest four tobacco manufacturers defrauded the states of Medicaid expenses. The Master Settlement Agreement obligates the Majors and other manufacturers who opt in to the MSA to make annual payments totaling $206 billion. Under the MSA‘s terms, PMs‘ payments are calculated on the basis of their current national market shares. The annual payments are then allocated to the settling states. The MSA also prohibits PMs from various tobacco-related lobbying and advertising activity. MSA §§ III(b)-(i); III(m)-(p). The MSA raises the costs of cigarettes by approximately 35 cents per pack.

Structuring damage payments in this way would have created a significant competitive advantage for NPMs, which would have been able to undercut PMs‘ resulting inflated prices. The MSA contemplates this consequence by including several provisions that provide incentives for NPMs to join the settlement, thereby mitigating the competitive consequences of the PMs‘ annual payments to the states. These NPMs are often smaller companies which would stand to gain substantial market share by not joining the MSA. The MSA‘s incentives are accordingly generous.

First, new participants in the settlement which subject themselves to the tax increase within 90 days make zero MSA payments at all on sales at or below a benchmark level, defined as the higher of their 1998 sales or 125 percent of their 1997 sales. MSA § IX(i). To put the magnitude of this subsidy in perspective, a small manufacturer with sales of $100,000 per month would be entitled to a $1.5 million annual tax subsidy. See Jeremy Bulow, Director, Bureau of Econ., Fed. Trade Comm‘n, The State Tobacco Set- tlements and Antitrust (June 25, 2007).

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Antitrust & Consumer Protection

Judd Stone on Misbehavioral Economics: The Misguided Imposition of Behavioral Economics on Antitrust

TOTM Behavioral law and economics has arisen to international prominence; between Cass Sunstein’s appointment to head the Office of Information and Regulatory Affairs the United Kingdom’s . . .

Behavioral law and economics has arisen to international prominence; between Cass Sunstein’s appointment to head the Office of Information and Regulatory Affairs the United Kingdom’s appointment of a “nudge” bureau, behavioralism has enjoyed a meteoric impact on policymakers.  Thus far, behavioral economists have almost exclusively focused on the myriad foibles or purported cognitive errors which hamper consumer decision-making.  These traits include “optimism bias,” the tendency for an individual to underestimate the likelihood of negative results from their behavior, and hyperbolic discounting, where individuals reveal time-inconsistent preferences (often by over-valuing immediate consumption, at least as measured against some third party’s valuation).

Read the full piece here.

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Antitrust & Consumer Protection

When Cartels Unravel, Judicial Clerkship Market Edition

TOTM The National Law Journal reports (HT: Rick Hills): Are the Wild West days of federal clerk hiring back? That’s what some law school administrators and . . .

The National Law Journal reports (HT: Rick Hills):

Are the Wild West days of federal clerk hiring back? That’s what some law school administrators and judges fear. They worry that the voluntary system whereby federal judges wait until September of the 3L year to hire clerks is teetering. Judges are choosing clerks earlier in the year and are being inundated with applications as the legal job market narrows. And a trend toward hiring the already graduated means fewer positions are available for fresh law graduates.

There is a lot of support for “The Plan” in the legal profession, and amongst judges.  Well, for the latter, at least there is a lot of apparent support for it.  There is also, like most cartels, a lot of competition.  Hills’ comment is characteristic of a view often heard within law schools on the clerkship market…

Read the full piece here.

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CPI Symposium featuring Ginsburg and Wright on Antitrust Sanctions

TOTM Competition Policy International’s newest issue has been released.  The issue is focused on cartel sanctions and features a colloquium on a piece co-authored by Judge . . .

Competition Policy International’s newest issue has been released.  The issue is focused on cartel sanctions and features a colloquium on a piece co-authored by Judge Douglas Ginsburg and me on Antitrust Sanctions, with comments from a fantastic lineup of antitrust economists and lawyers: Joseph Harrington (Johns Hopkins), Pieter Kalbfleisch (Netherlands Competition Authority), Mariana Tavares de Araujo (SDE, Brazil), and Donald Klawiter (Sheppard Mullin).  The comments are interesting and agree and disagree with a variety of features of the Ginsburg & Wright proposal for even further (but not completely) shifting the focus of antitrust sanctions from the corporation toward responsible individuals, and adding debarment to the cartel enforcement toolkit.

Read the full piece here

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Antitrust & Consumer Protection

Misbehavioral Economics: The Case Against Behavioral Antitrust

TOTM In a policy speech earlier this year, Commissioner J. Thomas Rosch of the Federal Trade Commission advocating the incorporation of behavioral economics into antitrust analysis . . .

In a policy speech earlier this year, Commissioner J. Thomas Rosch of the Federal Trade Commission advocating the incorporation of behavioral economics into antitrust analysis suggested one concern that others might have with the approach was that “behavioral economics was simply liberalism masquerading as economic thinking.”   The Commissioner himself has been a vocal proponent of incorporating insights from behavioral economics into antitrust, as has already been done in the consumer protection realm (see, e.g. CFPB).  Indeed, with Cass Sunstein’s appointment at OIRA, the recent creation of a “Nudge” team in David Cameron’s Cabinet (aka “behavioral insight team”) in the UK, the CFPB, and the calls from at least one Federal Trade Commissioner to modify antitrust analysis suggest the behavioral regulatory regime is no longer right around the corner; it has arrived.

Read the full piece here.

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Antitrust & Consumer Protection

The Law and Economics of Privatizing Alcohol Sales

TOTM Economist and occasional TOTM guest blogger Steve Salop (Georgetown) recently sent me the following questions spurred by the local debate over Governor McConnell’s proposal to . . .

Economist and occasional TOTM guest blogger Steve Salop (Georgetown) recently sent me the following questions spurred by the local debate over Governor McConnell’s proposal to private the retailing of alcoholic beverages…

Read the full piece here

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Antitrust & Consumer Protection

Apple and Amazon E-Book Most Favored Nation Clauses

TOTM Connecticut AG Richard Blumenthal has reportedly contacted Apple and Amazon concerning their pricing arrangements with publishers (WSJ, CNN): Mr. Blumenthal said he has sent letters . . .

Connecticut AG Richard Blumenthal has reportedly contacted Apple and Amazon concerning their pricing arrangements with publishers (WSJ, CNN):

Mr. Blumenthal said he has sent letters to Amazon and Apple asking them to “meet with his office” to address his concerns that agreements in place may restrict rivals from offering cheaper e-books. For instance, he said, “both Amazon and Apple have reached agreements with the largest e-book publishers that ensure both will receive the best prices for e-books over any competitors.”

A “most favored nation” (MFN) clause is a contractual agreement between a supplier and a customer that requires the supplier to sell to the customer on pricing terms at least as favorable as the pricing terms on which that supplier sells to other customers.

Read the full piece here.

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Antitrust & Consumer Protection