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Regulatory Comments Introduction These comments seek to address the questions raised by the Department of Justice in its current review of the ASCAP and BMI consent decrees. . . .
These comments seek to address the questions raised by the Department of Justice in its current review of the ASCAP and BMI consent decrees. The origin of the decrees — and business models that depend on compulsory licenses, for that matter — are rooted in an economic and technological context that is strikingly different than that of the twenty-first century. The decrees were an imperfect way to deal with a difficult situation, and often resulted in problems, particularly with respect to songwriters and small publishers.
As we note in our comments, the law and economics are not on the side of maintaining the decrees, and they should therefore be terminated.
TOTM Advanced broadband networks are hot topics, but little attention is paid to the critical investments in infrastructure necessary to make these networks a reality. The FCC’s proposed 621 Order is an important measure to help providers deploy high speed broadband across a fragmented municipal regulatory environment.
Advanced broadband networks, including 5G, fiber, and high speed cable, are hot topics, but little attention is paid to the critical investments in infrastructure necessary to make these networks a reality. Each type of network has its own unique set of challenges to solve, both technically and legally. Advanced broadband delivered over cable systems, for example, not only has to incorporate support and upgrades for the physical infrastructure that facilitates modern high-definition television signals and high-speed Internet service, but also needs to be deployed within a regulatory environment that is fragmented across the many thousands of municipalities in the US. Oftentimes, the complexity of managing such a regulatory environment can be just as difficult as managing the actual provision of service.
Read the full piece here.
TOTM Predatory pricing is a rather rare anticompetitive practice because the “predator” runs the risk of bankrupting itself in the process of trying to drive rivals out of business with below-cost pricing.
In 2014, Benedict Evans, a venture capitalist at Andreessen Horowitz, wrote “Why Amazon Has No Profits (And Why It Works),” a blog post in which he tried to explain Amazon’s business model. He began with a chart of Amazon’s revenue and net income that has now become (in)famous…
TOTM One of the main concerns I had during the IANA transition was the extent to which the newly independent organization would be able to behave impartially, implementing . . .
One of the main concerns I had during the IANA transition was the extent to which the newly independent organization would be able to behave impartially, implementing its own policies and bylaws in an objective and non-discriminatory manner, and not be unduly influenced by specific “stakeholders”. Chief among my concerns at the time was the extent to which an independent ICANN would be able to resist the influence of governments: when a powerful government leaned on ICANN’s board, would it be able to adhere to its own policies and follow the process the larger multistakeholder community put in place?
TOTM The following is adapted from a recent ICLE Issue Brief on the flawed essential facilities arguments undergirding the EU competition investigations into Amazon’s marketplace that Kristian Stout wrote with Geoffrey Manne.
Amazon has largely avoided the crosshairs of antitrust enforcers to date. The reasons seem obvious: in the US it handles a mere 5% of all retail sales (with lower shares worldwide), and it consistently provides access to a wide array of affordable goods. Yet, even with Amazon’s obvious lack of dominance in the general retail market, the EU and some of its member states are opening investigations.
ICLE Issue Brief Amazon has largely avoided the crosshairs of antitrust enforcers to date (leaving aside the embarrassing dangerous threats of arbitrary enforcement by some US presidential candidates). The reasons seem obvious: in the US it handles a mere 5% of all retail sales (with lower shares in the EU), and it consistently provides access to a wide array of affordable goods.
Amazon has largely avoided the crosshairs of antitrust enforcers to date (leaving aside the embarrassing dangerous threats of arbitrary enforcement by some US presidential candidates). The reasons seem obvious: in the US it handles a mere 5% of all retail sales (with lower shares in the EU), and it consistently provides access to a wide array of affordable goods. Yet even with Amazon’s obvious lack of dominance in the general retail market, the EU and some of its member states are opening investigations.
This isn’t new: the EU and its member states have pursued many competition claims against the big tech platforms. In the last two years alone, the EU imposed over $9B USD in fines on Google for “harms” that were highly speculative and hard to square with concern for consumers.
The theories of harm in the pending investigations of Amazon demonstrate some of the same confused antitrust theories that cropped up in the EU Google Shopping case. Platforms like Amazon and Google are criticized for allegedly discriminating against certain platform users who are also competitors or potential competitors of one or more of the platform’s services (or, in some cases, the platform itself).
Commissioner Margarethe Vestager’s probe into Amazon came to light in September, and centers on whether Amazon is illegally using its dominant position vis-á-vis third party merchants on its platforms in order to obtain data that it then uses either to promote its own direct sales, or else to develop competing products under its private label brands. More recently, Austria and Germany have launched separate investigations of Amazon rooted in much the same concerns as those of the European Commission.
The Austrian investigation will examine “whether Amazon abused its dominant position against retailers, that are active on the Amazon market place.” According to Andreas Mundt, president of the German competition authority, “Amazon functions as a kind of ‘gatekeeper’ [for sellers’ access] to customers. Its double role as the largest retailer and largest marketplace has the potential to hinder other sellers on its platform.” The German investigation also focuses on whether the terms of the contractual relationships that third-party sellers enter into with Amazon are unfair because these sellers are “dependent” on it.
Claims of competitive harm arising from this so-called vertical discrimination or bias are light on both theory and empirics. One of the fundamental, erroneous assumptions upon which they are built is the alleged “essentiality” of the underlying platform or input. But these cases are more often based on stories of firms that, unfortunately, chose to build their businesses to rely on a specific platform. In other words, their own decisions — from which they substantially benefited — made their investments highly “asset specific” and thus vulnerable to otherwise avoidable risks. When a platform on which these businesses rely makes a disruptive move, the third parties cry foul, even though the platform was not — nor should have been — under any obligation to preserve the status quo on behalf of third parties.
This issue brief explores the flaws in designating Amazon as something like an “essential facility,” as well as the attendant errors of treating the distribution mechanism of Internet-based commerce as though it were a market definition, and the problems with failing to learn the innovation-damaging effects of the Microsoft case.
Click here to read the full issue brief.
Presentations & Interviews ICLE Associate Director, Kristian Stout joins Matt Stoller of Open Markets Institute on the panel titled "Is Big Tech Too Big?" at the Cato Institute conference, "Who’s Afraid of Big Tech?"
ICLE Associate Director, Kristian Stout joins Matt Stoller of Open Markets Institute on the panel titled “Is Big Tech Too Big?” at the Cato Institute conference, “Who’s Afraid of Big Tech?” The full video is embedded below.
TOTM The US Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights recently held hearings to see what, if anything, the U.S. might learn from the approaches of other countries regarding antitrust and consumer protection.
The US Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights recently held hearings to see what, if anything, the U.S. might learn from the approaches of other countries regarding antitrust and consumer protection. US lawmakers would do well to be wary of examples from other jurisdictions, however, that are rooted in different legal and cultural traditions. Shortly before the hearing, for example, Australia’s Competition and Consumer Protection Commission (ACCC) announced that it was exploring broad new regulations, predicated on theoretical harms, that would threaten both consumer welfare and individuals’ rights to free expression that are completely at odds with American norms.
Scholarship Although the FTC is well-staffed with highly skilled economists, its approach to data security is disappointingly light on economic analysis. The unfortunate result of this lacuna is an approach to these complex issues lacking in analytical rigor and the humility borne of analysis grounded in sound economics.
Although the FTC is well-staffed with highly skilled economists, its approach to data security is disappointingly light on economic analysis. The unfortunate result of this lacuna is an approach to these complex issues lacking in analytical rigor and the humility borne of analysis grounded in sound economics. In particular, the Commission’s “reasonableness” approach to assessing whether data security practices are unfair under Section 5 of the FTC Act lacks all but the most superficial trappings of the well-established law and economics of torts, from which the concept is borrowed.
In actuality, however, the Commission’s manufactured “reasonableness” standard — which, as its name suggests, purports to evaluate data security practices under a negligence-like framework — actually amounts in effect to a rule of strict liability for any company that collects personally identifiable data. This is manifestly not what Section 5 intends.
In its recent LabMD opinion, the Commission describes its approach as “cost-benefit analysis.” But simply listing out (some) costs and benefits is not the same thing as analyzing them. Recognizing that tradeoffs exist is a good start, but it is not a sufficient end, and “reasonableness” — if it is to be anything other than the mercurial preferences of three FTC commissioners — must contain analytical content.
Persistent and unyielding uncertainty over the contours of the FTC’s data security standard means that companies may be required to accept the reality that, no matter what they do short of the extremes, liability is possible. Worse, there is no way reliably to judge whether conduct (short of obvious fringe cases) is even likely to increase liability risk.
The FTC’s recent LabMD case highlights the scope of the problem and the lack of economic analytical rigor endemic to the FTC’s purported data security standard. To be sure, other factors also contribute to the lack of certainty and sufficient rigor, (i.e., matters of process at the agency), but at root sits a “standardless” standard, masquerading as an economic framework.
This paper explores these defects, paying particular attention to the FTC’s decision in LabMD and subsequent district court proceedings in the case.
