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ICLE Issue Brief As has been rumored in the press for a few weeks, Comcast announced today that it is considering a renewed bid for a large chunk of Twenty-First Century Fox’s (Fox) assets. In December 2017, Fox’s board rejected a bid from Comcast that was some 16% higher than the one it ultimately accepted from Disney.
As has been rumored in the press for a few weeks, Comcast announced today that it is considering a renewed bid for a large chunk of Twenty-First Century Fox’s (Fox) assets. In December 2017, Fox’s board rejected a bid from Comcast that was some 16% higher than the one it ultimately accepted from Disney.
The board’s decision was based largely on its assessment that a merger with Comcast created unacceptable antitrust risk, where a merger with Disney did not.
In a brief analysis of the proposed deal, ICLE executive director and antitrust expert, Geoffrey Manne, posits that there is no basis for ascribing a greater antitrust risk to Comcast’s purchase of Fox’s assets than to Disney’s.
Among other things, Manne discusses why the DOJ’s AT&T/Time Warner merger challenge doesn’t increase the risk that the DOJ would challenge a Comcast/Fox deal. His analysis also touches on:
In sum, Manne finds that while a Comcast/Fox deal may pose some antitrust enforcement risk, it certainly doesn’t entail sufficient risk to deem the deal dead on arrival — and it seems to represent less regulatory risk than a Disney/Fox tie-up.
Continue reading the full paper
TOTM Although not always front page news, International Trade Commission (“ITC”) decisions can have major impacts on trade policy and antitrust law. Scott Kieff, a former . . .
Although not always front page news, International Trade Commission (“ITC”) decisions can have major impacts on trade policy and antitrust law. Scott Kieff, a former ITC Commissioner, recently published a thoughtful analysis of Certain Carbon and Alloy Steel Products — a potentially important ITC investigation that implicates the intersection of these two policy areas. Scott was on the ITC when the investigation was initiated in 2016, but left in 2017 before the decision was finally issued in March of this year.
Read the full piece here.
ICLE White Paper In 1973, Michigan Senator Philip A. Hart introduced Senate Bill 1167, the Industrial Reorganization Act, in order to address perceived problems arising from industrial concentration. The bill was rooted in the belief that industry concentration led inexorably to monopoly power.
In 1973, Michigan Senator Philip A. Hart introduced Senate Bill 1167, the Industrial Reorganization Act, in order to address perceived problems arising from industrial concentration. The bill was rooted in the belief that industry concentration led inexorably to monopoly power; that monopoly power, however obtained, posed an inexorable threat to freedom and prosperity; and that the antitrust laws (i.e., the Sherman and Clayton Acts) were insufficient to address the purported problems.
That sentiment — rooted in the reflexive application of the (largely-discredited) structure-conduct-performance (SCP) paradigm — had become largely passe?, but has resurfaced today as the asserted justification for similar (although less onerous) antitrust reform legislation and the general approach to antitrust analysis commonly known as “hipster antitrust.”
The critiques leveled against the asserted economic underpinnings of efforts like the Industrial Reorganization Act are as relevant today as they were then.
The proposed bill itself was the subject of a series of hearings in both the Senate and the House, including one on April 9, 1974, at which Henry G. Manne (then professor of law and political science at the University of Rochester) testified (along with UCLA economist, Harold Demsetz) in opposition to the bill. His trenchant testimony, reprinted in full in Section 2, below, should be required reading for advocates of a return to antitrust law and policy rooted in the SCP paradigm.
As Henry Manne notes in his testimony:
To be successful in this stated aim [“getting the government out of the market”] the following dreams would have to come true: The members of both the special commission and the court established by the bill would have to be satisfied merely to complete their assigned task and then abdicate their tremendous power and authority; they would have to know how to satisfactorily define and identify the limits of the industries to be restructured; the Government’s regulation would not sacrifice significant efficiencies or economies of scale; and the incentive for new firms to enter an industry would not be diminished by the threat of a punitive response to success.
The lessons of history, economic theory, and practical politics argue overwhelmingly against every one of these assumptions.
Manne’s trenchant testimony, reprinted in full in this white paper (with introductory material by Geoffrey Manne) should be required reading for advocates of a return to antitrust law and policy rooted in the SCP paradigm.
ICLE White Paper A pair of recent, long-form articles in the New York Times Magazine and Wired UK — the latest in a virtual journalistic cottage industry of such articles — chronicle the downfall of British price comparison site and stalwart Google provocateur, Foundem, and attribute its demise to anticompetitive behavior on the part of Google.
A pair of recent, long-form articles in the New York Times Magazine and Wired UK — the latest in a virtual journalistic cottage industry of such articles — chronicle the downfall of British price comparison site and stalwart Google provocateur, Foundem, and attribute its demise to anticompetitive behavior on the part of Google.
Unfortunately, the media’s hagiographies of Foundem and its founders, Shivaun and Adam Raff, approach the antitrust question as if it were imbued with the simple morality of a David vs. Goliath tale. The reality is far more complicated. In fact, these articles misunderstand and misstate the critical economic, business, and legal realities of Google Search, of Foundem’s claims of harm, and of the relationship between the two.
Was Foundem’s failure really the result of anticompetitive “gatekeeping” on Google’s part? Or could it simply be a pedestrian tale of yet another tech start-up that failed because its founders didn’t appreciate that a successful business is built on more than just a good idea?
While the import of the Foundem story has been misconstrued by journalists and EU regulators, it is useful in illuminating what may actually be the fundamental question regarding the antitrust fortunes of the platform economy:
What, if anything, does a successful platform “owe” to the companies that make themselves dependent upon it?
Continue reading the full paper.
TOTM There are some who view a host of claimed negative social ills allegedly related to the large size of firms like Amazon as an occasion to . . .
There are some who view a host of claimed negative social ills allegedly related to the large size of firms like Amazon as an occasion to call for the company’s break up. And, unfortunately, these critics find an unlikely ally in President Trump, whose tweet storms claim that tech platforms are too big and extract unfair rents at the expense of small businesses. But these critics are wrong: Amazon is not a dangerous monopoly, and it certainly should not be broken up.
Scholarship Abstract This paper, drafted as an adjudicator’s opinion in a recent case of nearly first impression, explores an approach to aligning the strengths and opportunities . . .
This paper, drafted as an adjudicator’s opinion in a recent case of nearly first impression, explores an approach to aligning the strengths and opportunities available through the U.S. International Trade Commission (ITC) by considering how more ordinary antitrust issues can be adjudicated through the Section 337 portion of the ITC’s docket. This might be done using existing law. The basic theme is that there are several significant reasons why even a skeptic of the ITC’s Anti-dumping, Countervailing Duty, and Safeguards docket (collectively, the “Title VII” docket) – as well as an antitrust skeptic – should be significantly less worried when cases normally expected to be brought in the Title VII portion of the ITC’s docket as petitions are instead brought in the Section 337 portion of the ITC docket as complaints alleging ordinary violations of the antitrust laws. Private antitrust litigation fits well within the ITC’s Section 337 docket for several reasons. It squarely fits with the plain meaning of the ITC’s statute. It also squarely fits the well-established antitrust case law. In addition, it offers some practical benefits. Unlike the relatively easy-to-satisfy legal requirement for assessing injury in the Title VII portion of the docket, a 337 investigation involving established antitrust law would turn on the substantive legal standards within that body of established antitrust law that are seen by a broad consensus to be focused on a middle of the road attempt to represent true public interest in avoiding actual economic harm to a market as a whole. In addition, a 337 investigation, which involves initial inter-partes adversarial litigation before an Administrative Law Judge (ALJ), implicates less reliance on administrative deference than an action in the Title VII portion of the docket, and more reliance than in the Title VII portion of the docket on a detailed factual record involving the full panoply of procedural devices ordinarily available in federal court for truth-testing of evidence including cross examination of testimony, all in a timeframe likely to be significantly shorter (around 18 months) than the many years typically required for antitrust litigation in federal court. Nevertheless, at least one recent high-profile dispute involving steel imported from China shows there is at least one significant barrier that may stand as a practical obstacle to a private litigant bringing an antitrust claim under the Section 337 portion of the ITC’s docket: the doctrine that federal courts developed called “antitrust injury,” During the initial phases of such a case recently brought against Chinese importers of steel by the domestic US steel industry, with support from both companies and unions, the ALJ dismissed the antitrust complaint for lack of antitrust injury in an initial determination that was then reviewed by the Commission. The ITC affirmed. This paper explores some reasons why the antitrust injury doctrine from federal court may not be a good fit for investigations brought under Section 337 at the ITC.
TOTM The urge to treat antitrust as a legal Swiss Army knife capable of correcting all manner of social and economic ills is apparently difficult for some to resist. Conflating size with market power, and market power with political power, many recent calls for regulation of industry — and the tech industry in particular — are framed in antitrust terms.
Following is the (slightly expanded and edited) text of my remarks from the panel, Antitrust and the Tech Industry: What Is at Stake?, hosted last Thursday by CCIA. Bruce Hoffman (keynote), Bill Kovacic, Nicolas Petit, and Christine Caffarra also spoke. If we’re lucky Bruce will post his remarks on the FTC website; they were very good.
Presentations & Interviews A U.S. Supreme Court case over the legitimacy of a credit card issuer’s terms of business with its merchant establishments is reverberating far and wide. . . .
A U.S. Supreme Court case over the legitimacy of a credit card issuer’s terms of business with its merchant establishments is reverberating far and wide. Among others, it is rattling technology companies — including Google, Facebook and Amazon — that have business models involving multiple customers.
The case prompting all those fears – Ohio v. American Express – which the Supreme Court heard on February 26, attempts to reverse a September 2016 ruling by the U.S. Court of Appeals for the Second Circuit that went in favor of American Express. At the core of the issue are so-called “anti-steering” restrictions that Amex imposes on merchant establishments, disallowing them to “steer” customers to using cards such as Visa, MasterCard or Discover that charge lower merchant fees than Amex. The merchants would typically do that by offering customers discounts on their purchases, or in essence, “sharing” what they would save in merchant fees if the customers use a lower-fee card such as a Visa or MasterCard.
Knowledge@Wharton discussed the larger implications of the case with Herbert Hovenkamp, a professor with a joint appointment at the University of Pennsylvania Law School and Wharton, and Geoffrey A. Manne, a founder and executive director of the International Center for Law and Economics (ICLE) in Portland, Ore. They shared their insights on the Knowledge@Wharton show on SiriusXM channel 111. (Listen to the podcast at the top of this page.)
The full episode is embedded below.
TOTM Excess is unflattering, no less when claiming that every evolution in legal doctrine is a slippery slope leading to damnation. In Friday’s New York Times, . . .
Excess is unflattering, no less when claiming that every evolution in legal doctrine is a slippery slope leading to damnation. In Friday’s New York Times, Lina Khan trots down this alarmist path while considering the implications for the pending Supreme Court case of Ohio v. American Express. One of the core issues in the case is the proper mode of antitrust analysis for credit card networks as two-sided markets. The Second Circuit Court of Appeals agreed with arguments, such as those that we have made, that it is important to consider the costs and benefits to both sides of a two-sided market when conducting an antitrust analysis. The Second Circuit’s opinion is under review in the American Express case.
