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Do Expert Agencies Outperform Generalist Judges? Some Preliminary Evidence from the Federal Trade Commission

Popular Media 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 . . .

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

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Antitrust & Consumer Protection

Further Empirical Evidence on Forum Shopping in Philadelphia Civil Courts

TOTM Late last year, with support from the International Center for Law and Economics, I published a paper that empirically analyzed the Philadelphia civil court system. . . .

Late last year, with support from the International Center for Law and Economics, I published a paper that empirically analyzed the Philadelphia civil court system. That study focused upon the Philadelphia Complex Litigation Center (PCLC) which handles large mass tort programs including asbestos cases, hormone therapy replacement cases, various prescription drug-related injuries, and other mass tort programs. The PCLC has recently come under criticism for the use of a number of controversial procedures including the consolidation of asbestos cases and the use of reverse-bifurcation methods, where a plaintiff’s damages are calculated prior to the establishment of liability. That paper considered publicly available data from the Administrative Office of Pennsylvania Courts to analyze trends in docketed and pending civil cases in Philadelphia compared to other non-Philadelphia Pennsylvania counties, cases in federal court, and a national sample of state courts.

Read the full piece here

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Financial Regulation & Corporate Governance

Congratulations to Bill Baer

Popular Media President Obama has, as rumored, appointed Bill Baer (Arnold & Porter) to head the Antitrust Division.  Reuters reports: Baer, who is the chair of Arnold . . .

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

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Antitrust & Consumer Protection

Wright v. Rule at Columbia Law on Google and Antitrust

Popular Media Charles (“Rick”) Rule, who represents Microsoft and is the head of the antitrust practice at Cadwalader, Wickersham & Taft LLP, and I had an opportunity . . .

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.”
I would add one addendum to the description of my argument.  Rule focused more intently upon some of the issues on the advertising side with his limited time.  I focused more extensively upon on search bias.  Indeed, much of my time was allocated not to whether or not “competition is one click away” for users in some theoretical sense but rather on the empirical evidence on what has been described as search bias (including my own evidence, here, which is also discussed on the blog here, here, here and here) by both Google and Microsoft, what sort of evidence would be sufficient to satisfy the Section 2 standard for allegedly exclusionary conduct, and why I believe the apparent lack of evidence concerning harm to competition rather than merely harm to competitors remains a fatal flaw in the allegations against Google concerning search evaluated from a consumer-welfare perspective.

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

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Antitrust & Consumer Protection

Competition for the Field on the Internet

Popular Media Keith Woolcock (Time Business) offers an interesting perspective on what economists would describe as “competition for the field” between Apple, Facebook, Google, and Facebook.  It . . .

Keith Woolcock (Time Business) offers an interesting perspective on what economists would describe as “competition for the field” between Apple, Facebook, Google, and Facebook.  It gives a good sense of the many dimensions of competition upon which these firms compete.

The upcoming IPO of Facebook, the flak surrounding Twitter’s decision to censor some tweets, and Google’s weaker-than-expected 4th-quarter earnings all point to one of the big events of our times: The crazy, chaotic, idealistic days of the Internet are ending. Once, the Prairies were open and shared by everyone. Then the farmers arrived and fenced them in. The same is happening to the Internet: Apple, Amazon and Facebook are putting up fences — and Google is increasingly being left outside.

The old Internet on which Google has thrived is still there, of course, but like the wilderness it is shrinking. Often these days, we sign up for Facebook or Amazon’s private version of the Internet. At other times, we use a smartphone and download an App instead of using Google search.

The danger to Google, in other words, is that as social networking, smartphones and tablets increasingly come to dominate the Internet, Google’s chance to earn advertising revenues from searching will shrink along with its influence.

Yes, Google has the Android and Google+, but these may not be enough to fight the shift to the closed Internet. Google+, of course, has just a tiny fraction of Facebook’s scale and there’s currently little reason to think it can catch up. The Android operating system, also an attempt by Google to build its own internet eco-system, is a more conspicuous success. Most commentators focus on the rapid growth of Android and the fact that it has greater market share than the iPhone.

But this analysis misses the point: The Android may have market share, but more than half of mobile searches come from iPhone users. Google may have developed Android but, unlike Apple’s iPhone, it does not really control it. Licensees like Samsung and HTC are able to adapt Android software to their own ends. And smart companies like Amazon are getting a free ride on Android while sharing little of the spoils with Google.

Don’t get me wrong: Google is still a force, just as Microsoft, Intel and IBM are. But they are no longer at the epicentre of the zeitgeist. Like Microsoft before it, Google can fight the good fight on many different fronts. Whether it can ever find an engine of growth capable of supplanting its core business is another question.

Check out the whole thing.

 

 

Filed under: antitrust, business, economics, google, monopolization, technology

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Antitrust & Consumer Protection

FTC Closes UFC Investigation

Popular Media 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 . . .

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

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Antitrust & Consumer Protection

FTC Mobile Payments Workshop on April 26, 2012

Popular Media 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 . . .

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

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Antitrust & Consumer Protection

Call for Papers for the Haas-Sloan Conference on the Law & Economics of Organization

Popular Media Haas-Sloan Conference on  The Law & Economics of Organization: New Challenges and Directions Nov. 30-Dec. 1, 2012 The Walter A. Haas School of Business, with . . .

Haas-Sloan Conference on 

The Law & Economics of Organization: New Challenges and Directions

Nov. 30-Dec. 1, 2012

The Walter A. Haas School of Business, with support from the Alfred P. Sloan Foundation, is issuing a call for original research papers to be presented at the Conference on The Law & Economics of Organization: New Challenges and Directions. The conference will be held at the Haas School of Business in Berkeley, CA, on Friday, November 30, and Saturday, December 1, 2012. A reception and dinner will follow a keynote address by Nobel Laureate Oliver Williamson on Friday.

The purpose of the conference is to take stock of recent advances in the analysis of economic organization and institutions inspired by the work of 2009 Nobel Laureate Oliver Williamson and to examine its implications for contemporary problems of organization and regulation. Empirical research and research informed by detailed industry and institutional knowledge is especially welcome.

Relevant topics include but are not limited to

  • the nature, role, and implications of bounded rationality and opportunism as they relate to issues of contracting and the institutional framework governing contractual relationships
  • government intervention in the market through regulation, antitrust policies, and direct investment (e.g., energy market and health care regulation; patent enforcement; concession contracts in alternative legal environments; government tax preferences for and subsidization of technologies and markets)
  • the operation and regulation of financial markets and institutions (e.g., the origins of and responses to the financial crisis; the role of credit rating agencies; financial and futures market organization and regulation)
  • legal and economic determinants of corporate organization, from joint ventures to the organization of corporate boards (e.g, labor restrictions and corporate organization; organization of high technology companies; regulation of corporate boards)

Paper proposals or, if available, completed papers should be submitted on line at http://www.bus.umich.edu/Conferences/Haas-Sloan-LEO-Conference by March 31, 2012. The deadline for completed papers is November 1, 2012. Selections will be made by the conference organizers, Professors Pablo Spiller (Berkeley), Scott Masten (Michigan), and Alan Schwartz (Yale). Conference papers will be published in a special issue of the Journal of Law, Economics, & Organization.

Filed under: antitrust, behavioral economics, economics

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Antitrust & Consumer Protection

Stan Liebowitz on Piracy and Music Sales

Popular Media Stan Liebowitz (UT-Dallas) offers a characteristically thoughtful and provocative op-ed in the WSJ today commenting on SOPA and the Protect IP Act.  Here’s an excerpt: . . .

Stan Liebowitz (UT-Dallas) offers a characteristically thoughtful and provocative op-ed in the WSJ today commenting on SOPA and the Protect IP Act.  Here’s an excerpt:

You may have noticed last Wednesday’s blackout of Wikipedia or Google’s strange blindfolded-logo screen. These were attempts to kill the Protect IP Act and the Stop Online Piracy Act, proposed legislation intended to hinder piracy and counterfeiting. The laws now before Congress may not be perfect, and they can still be amended. But to do nothing and stay with the status quo is to keep our creative industries at risk by failing to enforce their property rights.

Critics of these proposed laws claim that they are unnecessary and will lead to frivolous claims, reduce innovation and stifle free speech. Those are gross exaggerations. The same critics have been making these claims about every previous attempt to rein in piracy, including the Digital Millennium Copyright Act that was called a draconian antipiracy measure at the time of its passage in 1998. As we all know, the DMCA did not kill the Internet, or even do any noticeable damage to freedom—or to pirates.

Scads of Internet pundits and bloggers have vehemently argued that piracy is really a sales-promoting activity—because it gives people a free sample that might lead to a purchase—or that any piracy problems have been due to a failure of industry to embrace the Internet. Yet these claims are little more than wishful thinking. Some reflect a hostility to commercial activities—think Occupy Wall Street, or self-interest. Others make “freedom” claims on behalf of sites that profit by helping individuals find pirate sites, makers of complementary hardware, or companies that benefit from Internet usage and collect revenues whether the material being accessed was legally obtained or not.

In my examination of peer-reviewed studies, the great majority have results that conform to common sense: Piracy harms copyright owners. I was also somewhat surprised to discover that the typical finding of such academic studies was that the entire enormous decline that has occurred is due to piracy.

Contrary to an often-repeated myth, providing consumers with convenient downloads at reasonable prices, as iTunes did, does not appear to have ameliorated piracy at all. The sales decline after iTunes exploded on the scene was about the same as the decline before iTunes existed. Apparently it really is difficult to compete with free. Is that really such a surprise?

Do check out the whole thing.

 

 

Filed under: business, copyright, economics, intellectual property, music, technology

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Financial Regulation & Corporate Governance