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Geoffrey Manne was quoted in Bloomberg Technology on the effects that California laws have on the rest of the country:

Even supporters of state legislation on net neutrality think this may go too far. California State Senator Scott Wiener introduced a bill this week that would only apply to behavior within the state, saying any other approach would be too vulnerable to legal challenge. “We’re expecting that there will be litigation,” he said. Wiener said that the internet providers who backed Pai’s plan shouldn’t flinch at his bill. “They say that, as a matter of internal policy, they adhere to net neutrality.”

But this wouldn’t be the first time a large state threw around its weight in ways that reverberate beyond its borders. The texbook industry, for instance, has long accommodated the standards of California and Texas. Just last month, more than a dozen states asked the Supreme Court to block a California law that required egg sellers to abide to certain guidelines in their treatment of hens, arguing it attempts to regulate industry in other states.

“California has a long and questionable history of passing laws and regulations that end up applying to the whole country, because companies don’t want to or can’t change their products to sell them just in California,” said Geoffrey Manne, executive director of the International Center for Law & Economics, a research group. If California, Washington and New York all passed similar guidelines, it could carry a significant amount of weight.

Click to read the Bloomberg Technology article here. 

Geoffrey Manne was quoted in Axios on the antitrust claims involving Google’s new ad blocker in its Chrome web browser:

Why it matters: The move is meant to help clean up the web, and create better ad experiences for all Chrome users, but some see it as an antitrust problem, because the world’s biggest advertiser will have the ability to block ads through a browser it owns.

While U.S. antitrust officials have been pretty quiet about the news since this summer, E.U. regulators have been more vocal about their concerns. In response to the implementation news over the summer, European Commissioner for Competition Margrethe Vestager responded on Twitter: “We will follow this new feature and it’s effects closely.”

Others think an antitrust argument would be difficult to make. “If the ad-blocker improves Chrome by building into it the ability to thwart harmful ads (say, ads with malware or that slow computers) regardless of ad platform, and if users can continue to install other ad-blockers, an antitrust case would be a very hard sell,” says Geoffrey A. Manne, Executive Director of the International Center for Law & Economics.

Click to read the Axios article here. 

The National Law Review, covering last week’s Federal Trade Commission “Informational Injury Workshop,” reported on ICLE Executive Director Geoffrey Manne’s participation:

Another area of sharp disagreement between the panelists was whether risk of future injury from disclosure constitutes an injury in and of itself… Geoffrey Manne, Executive Director of the International Center for Law & Economics, pushed back on these points, arguing that there cannot be an injury to consumers just because the risk of disclosure has been increased because defining injury in this way would prevent businesses from taking any risks.

Several panelists focused on the role of consumer agency in assessing whether an injury had occurred… Professor Cooper and Mr. Manne both emphasized the benefit to consumers from data collection practices, such as broader information sharing and insights that may be derived from data aggregation.

In discussing the role of government intervention in assessing injury, the panelists took a number of positions… Mr. Manne warned against deterring experimentation and the development of new technologies through over-regulation. All the panelists agreed that not all injuries necessitate government intervention and that a clearer definition of injury is needed to guide the FTC in bringing enforcement actions.

Read the full article.

 

 

 

Today, the Federal Communications Commission voted to approve the Restoring Internet Freedom Order (“RIF Order”). This initiative by FCC Chairman Ajit Pai restores the legal regime that governed the Internet throughout its first two decades of explosive growth —  a regime that was sharply curtailed by the sudden change of FCC policy in 2015 under then Chairman Tom Wheeler.

The RIF Order has a number of critical components:

By returning fixed broadband to a Title I classification and cellular broadband to a “private mobile service” classification, the Order removes the onerous, ex ante regulatory regime imposed by Title II classification.

The RIF Order applies a new, stringent transparency standard that will provide government regulators with comprehensive disclosures of Internet Service Providers’ (ISPs’) conduct that will facilitate effective regulatory enforcement.

The RIF Order takes a nuanced approach to the economics underlying the broadband industry and avoids overly prescriptive ex ante rules, creating a regulatory regime better suited to the fast moving online world.

The Order fixes a major regulatory loophole, created by the 2015 Open Internet Order, that removed the FTC as an effective regulator of ISPs.

When the FCC reclassified ISPs as “telecommunications service providers” in 2015, it displaced the Federal Trade Commission — the nation’s chief consumer protection and competition agency — from regulating broadband providers. Chairman Pai has enabled the FTC to return to its proper regulatory role by restoring the the classification of ISPs as “information service providers.”  

Former Chairman Wheeler’s 2015 OIO also dismissed crucial economics literature, sometimes completely mischaracterizing entire fields of study. One of the FCC’s own economists observed at the time that “[e]conomics was in the Open Internet Order, but a fair amount of the economics was wrong, unsupported, or irrelevant.”

By contrast, Chairman Pai’s RIF Order makes extensive use of existing empirical studies as well as expert analysis submitted to the docket to craft a more optimal regulatory regime. It is this sort of nuanced understanding of the facts of broadband deployment that will promote the development of next generation services from ISPs as well as edge providers.

Chairman Pai’s open and transparent approach throughout this proceeding should be a model to regulators everywhere.

The Commission should be commended for performing this regulatory reevaluation in such an open manner. The 2015 OIO was shrouded in secrecy and, arguably, inappropriately guided by electoral politics. Incredibly, the final text of the 2015 OIO was not released to the public until 14 days after the vote.

By contrast, Chairman Pai has made great efforts to give the public access to this important process, releasing the text of the proposed Order weeks in advance of when it was scheduled for a vote.

Finally, as we have said before, Congress can end the ping-pong of hyperbolic Internet doomsday scenarios clouding the substance of the debate by amending the Communications Act or passing a new law. Until then, Chairman Pai is to be commended for restoring the FCC’s historically light-touch, pro-innovation approach to regulating broadband Internet access services.

Geoffrey Manne was quoted in the LA Times on the risk that AT&T would use the merger to keep certain programming away from rivals:

The government’s lawsuit argued that AT&T would use its market clout to keep Time Warner programming, such as CNN, HBO and sports programming on TNT and TBS, away from its rivals. But analysts say that is unlikely because TV programmers make more money by selling their programming to as many outlets as possible.

“They are going to have a hard time proving that in the courts,” said Geoffrey A. Manne, executive director of the International Center for Law and Economics in Portland, Ore. “There are so many factors that make that theory unlikely — it’s a stretch.”

The Justice Department also argues that the merger could stymie technology innovations, including the expansion of streaming services. The government argues that AT&T would have an incentive to thwart Netflix, Google Amazon.com and other innovators because they compete with AT&T’s satellite TV service, DirecTV, and its U-Verse service.

Click here to read the LA Times article.

The following may be attributed to Geoffrey Manne, Executive Director, ICLE

Today, Federal Communications Commission Chairman Ajit Pai announced the restoration of the Commission’s historically light-touch, pro-innovation approach to regulating broadband Internet access services. The full text of the Restoring Internet Freedom Order will be available to the public here tomorrow.

Chairman Pai’s proposed Order rescinds the misguided 2015 Open Internet Order and reasserts the primacy of competition and consumer protection laws to govern conduct by Internet providers, just as they do everywhere else in the economy.

As Chairman Pai puts it:

“[A]s a result of my proposal, the Federal Trade Commission will once again be able to police ISPs, protect consumers, and promote competition, just as it did before 2015. Notably, my proposal will put the federal government’s most experienced privacy cop, the FTC, back on the beat to protect consumers’ online privacy.”

Consumers are not left without government oversight. Not only does the Order return authority to the FTC, it also requires ISPs to disclose how they will treat traffic and be held accountable for any deviation from their claims. As under Section 5 of the FTC Act, deceptive disclosures or unfair practices — practices that have the actual effect of harming consumers — will be subject to FTC enforcement.

As Chairman Pai describes the proposed rules in today’s op-ed:

“[T]he FCC simply would require internet service providers to be transparent so that consumers can buy the plan that’s best for them. And entrepreneurs and other small businesses would have the technical information they need to innovate…. Instead of being flyspecked by lawyers and bureaucrats, the internet would once again thrive under engineers and entrepreneurs.”

Chairman Pai must be commended for the process by which he has introduced the new rules. Today he shares his proposed rules with his fellow commissioners and tomorrow he will release the full text of the rules to the public, a full three weeks before the Commission will vote on them.

Sadly, this has not been the norm. Rather, since the 1970s the Commission has voted on proposed rules without public disclosure of the text until an undetermined time after the vote.

The last time around, under Chairman Wheeler, the text of the Open Internet Order wasn’t released until 14 days after the vote, and the Order itself had undergone a complete transformation from NPRM to Order.

Nothing about that process was open or transparent, and, not surprisingly, the 2015 Order evinces virtually no consideration of opposing views or rigorous analysis of complex and controversial issues.

Chairman Pai has changed all of that, and followed basic rules of good governance that actually facilitate discussion and debate over the proposed regulations.

A fuller analysis of Chairman Pai’s proposed Order will have to await its release (and the wearing off of the stultifying effects of L-Tryptophan and over-indulgence). But it seems clear that the Chairman’s office has taken a careful, rigorous, and humble approach to fixing the regulatory mess of the 2015 OIO.

Selected ICLE work on this issue:

• ICLE Notice of Ex Parte on Restoring Internet Freedom, here
• ICLE Economics and Policy Comments on Restoring Internet Freedom, here
• ICLE Privacy Comments on Restoring Internet Freedom, here
• US Telecom v. FCC, US Supreme Court Amicus of ICLE and affiliate Gus Hurwitz, here
• The Feds Lost on Net Neutrality, But Won Control of the Internet, Wired, here
• Net Neutrality’s Hollow Promise to Startups, Computerworld, here
• Since When Is Free Web Access a Bad Thing? The Wall Street Journal, here
• How to Break the Internet, Reason Magazine, here
• Net Neutrality is Bad for Consumers and Probably Illegal, Truth on the Market, here
• Court strikes down Net neutrality rules but grants FCC sweeping new power over Internet, Truth on the Market, here
• Thirty-two Scholars of Law and Economics Urge the FTC to Advise the FCC to Employ Case-by-Case Rules in Regulating Net Neutrality, Letter to the FTC , here

About ICLE:

The International Center for Law & Economics is a nonprofit, nonpartisan research center. Working with a roster of more than fifty academic affiliates and research centers from around the globe, we develop and disseminate academic output to build the intellectual foundation for rigorous, economically-grounded policy.

FOR IMMEDIATE RELEASE

November 20, 2017

The following statement is attributable to Geoffrey A. Manne, Executive Director, ICLE:

PORTLAND, OR — Today the US Department of Justice filed suit to stop the proposed AT&T/Time Warner merger.

Under current antitrust law the DOJ’s challenge is likely to fail; the courts haven’t rejected a so-called “vertical merger” for decades. But the weakness of the DOJ’s case is also a matter of well-established economics.

According to the DOJ’s complaint:

“AT&T/DirecTV would hinder its rivals by forcing them to pay hundreds of millions of dollars more per year for Time Warner’s networks, and it would use its increased power to slow the industry’s transition to new and exciting video distribution models that provide greater choice for consumers. The proposed merger would result in fewer innovative offerings and higher bills for American families.”

None of these claims holds water.

The bulk of Time Warner’s revenue comes from distributing its programming via every feasible means. Withholding content from competitors simply makes no financial sense — especially when AT&T is shelling out some $85 billion for the privilege.

A price hike isn’t in the cards, either. Under US antitrust law, any conceivable harm must be “merger-specific.” But there is nothing about AT&T owning HBO, CNN, or any other Time Warner content that suddenly makes that content more valuable. If a price increase did make sense, Time Warner would already have done it.

And even if AT&T were to withhold certain content from competitors, exclusive or preferential arrangements between input providers and distributors are virtually always beneficial for consumers. As one group of former FTC economists (including, oddly enough, the DOJ’s current chief economist) put it: “there is a paucity of support for the proposition that vertical restraints/vertical integration are likely to harm consumers.”

In the case of film and tv content, such arrangements lead to more content creation and more innovative means of distributing it. And as users are ever-more rapidly cord-cutting and unbundling their viewing, multiple distribution models — each with increasingly different collections of content — ably compete for viewers’ attention.

Of course, certain competitors are bound to complain — but US antitrust laws don’t protect competitors at the expense of consumers.

Finally, the government already has a mechanism for policing the distribution of content by cable networks. Under Section 628 of the Communications Act, the FCC prohibits cable companies from “unfairly” refusing to make their own content available to competitors.

Post merger, if AT&T were to offer HBO or other Time Warner content exclusively on DirecTV, competing cable operators could challenge that conduct under the FCC rules. And if the exclusion were found to have the “purpose or effect” of “significantly hindering or preventing” a rival from providing competitive service, the exclusive deal would be prohibited.

It is disingenuous for the DOJ to act as if there is no viable way for the government to ensure that Time Warner content is widely available to consumers absent merger enforcement. And there is certainly no valid economic rationale to prohibit or condition the merger.

Canada’s large merchants have called on the government to impose price controls on interchange fees, claiming this would benefit not only merchants but also consumers. But experience elsewhere contradicts this claim.

In a recently released Macdonald Laurier Institute report, Julian Morris, Geoffrey A. Manne, Ian Lee, and Todd J. Zywicki detail how price controls on credit card interchange fees would result in reduced reward earnings and higher annual fees on credit cards, with adverse effects on consumers, many merchants and the economy as a whole.

This study draws on the experience with fee caps imposed in other jurisdictions, highlighting in particular the effects in Australia, where interchange fees were capped in 2003. There, the caps resulted in a significant decrease in the rewards earned per dollar spent and an increase in annual card fees. If similar restrictions were imposed in Canada, resulting in a 40 percent reduction in interchange fees, the authors of the report anticipate that:

1. On average, each adult Canadian would be worse off to the tune of between $89 and $250 per year due to a loss of rewards and increase in annual card fees:
   1. For an individual or household earning $40,000, the net loss would be $66 to $187; and
   2. for an individual or household earning $90,000, the net loss would be $199 to $562.
2. Spending at merchants in aggregate would decline by between $1.6 billion and $4.7 billion, resulting in a net loss to merchants of between $1.6 billion and $2.8 billion.
3. GDP would fall by between 0.12 percent and 0.19 percent per year.
4. Federal government revenue would fall by between 0.14 percent and 0.40 percent.

Moreover, tighter fee caps would “have a more dramatic negative effect on middle class households and the economy as a whole.”

You can read the full report here.

This week, the International Center for Law & Economics (ICLE) filed an ex parte notice in the FCC’s Restoring Internet Freedom docket. In it, we reviewed two of the major items that were contained in our formal comments. First, we noted that

the process by which [the Commission] enacted the 2015 [Open Internet Order]… demonstrated scant attention to empirical evidence, and even less attention to a large body of empirical and theoretical work by academics. The 2015 OIO, in short, was not supported by reasoned analysis.

Further, on the issue of preemption, we stressed that

[F]ollowing the adoption of an Order in this proceeding, a number of states may enact their own laws or regulations aimed at regulating broadband service… The resulting threat of a patchwork of conflicting state regulations, many of which would be unlikely to further the public interest, is a serious one…

[T]he Commission should explicitly state that… broadband services may not be subject to certain forms of state regulations, including conduct regulations that prescribe how ISPs can use their networks. This position would also be consistent with the FCC’s treatment of interstate information services in the past.

Our full ex parte comments can be viewed here.