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TOTM Yesterday Learfield and IMG College inked their recently announced merger. Since the negotiations were made public several weeks ago, the deal has garnered some wild speculation and potentially negative attention. Now that . . .
Yesterday Learfield and IMG College inked their recently announced merger. Since the negotiations were made public several weeks ago, the deal has garnered some wild speculation and potentially negative attention. Now that the merger has been announced, it’s bound to attract even more attention and conjecture.
Read the full piece here.
TOTM In a recent post at the (appallingly misnamed) ProMarket blog (the blog of the Stigler Center at the University of Chicago Booth School of Business . . .
In a recent post at the (appallingly misnamed) ProMarket blog (the blog of the Stigler Center at the University of Chicago Booth School of Business — George Stigler is rolling in his grave…), Marshall Steinbaum keeps alive the hipster-antitrust assertion that lax antitrust enforcement — this time in the labor market — is to blame for… well, most? all? of what’s wrong with “the labor market and the broader macroeconomic conditions” in the country.
ICLE White Paper During the past decade, academics—predominantly scholars of behavioral law and economics—have increasingly turned to the claimed insights of behavioral economics in order to craft novel policy proposals in many fields, most significantly consumer credit regulation.
During the past decade, academics—predominantly scholars of behavioral law and economics—have increasingly turned to the claimed insights of behavioral economics in order to craft novel policy proposals in many fields, most significantly consumer credit regulation. Over the same period, these ideas have also gained traction with policymakers, resulting in a variety of legislative efforts, such as the creation of the Consumer Financial Protection Bureau.
In 2016 the issue reached the Supreme Court, which granted certiorari in Expressions Hair Design v. New York for the October 2016 term. The case, which centers on a decades-old New York state law that prohibits merchants from imposing surcharge fees for credit card purchases, represents the first major effort to ground constitutional law (here, First Amendment law) in the claims of behavioral economics.
In this article we examine the merits of that effort. Claims about the real-world application of behavioral economic theories should not be uncritically accepted— especially when advanced to challenge a state’s commercial regulation on constitutional grounds. And courts should be especially careful before relying on such claims where the available evidence fails to support them, where the underlying theories are so poorly developed that they have actually been employed elsewhere to support precisely opposite arguments, and where alternative theories grounded in more traditional economic reasoning are consistent with both the history of the challenged laws and the evidence of actual consumer behavior. The Petitioners in the case (five New York businesses) and their amici (scholars of both behavioral law and economics and First Amendment law) argue that New York’s ban on surcharge fees but not discounts for cash payments violates the free speech clause of the First Amendment. The argument relies on a claim derived from behavioral economics: namely, that a surcharge and a discount are mathematically equivalent, but that, because of behavioral biases, a price adjustment framed as a surcharge is more effective than one framed as a discount in inducing customers to pay with cash in lieu of credit. Because, Petitioners and amici claim, the only difference between the two is how they are labeled, the prohibition on surcharging is an impermissible restriction on commercial speech (and not a permissible regulation of conduct). Assessing the merits of the underlying economic arguments (but not the ultimate First Amendment claim), we conclude that, in this case, neither the behavioral economic
The Petitioners in the case (five New York businesses) and their amici (scholars of both behavioral law and economics and First Amendment law) argue that New York’s ban on surcharge fees but not discounts for cash payments violates the free speech clause of the First Amendment. The argument relies on a claim derived from behavioral economics: namely, that a surcharge and a discount are mathematically equivalent, but that, because of behavioral biases, a price adjustment framed as a surcharge is more effective than one framed as a discount in inducing customers to pay with cash in lieu of credit. Because, Petitioners and amici claim, the only difference between the two is how they are labeled, the prohibition on surcharging is an impermissible restriction on commercial speech (and not a permissible regulation of conduct). Assessing the merits of the underlying economic arguments (but not the ultimate First Amendment claim), we conclude that, in this case, neither the behavioral economic
Assessing the merits of the underlying economic arguments (but not the ultimate First Amendment claim), we conclude that, in this case, neither the behavioral economic theory, nor the evidence adduced to support it, justifies the Petitioners’ claims. The indeterminacy of the behavioral economics underlying the claims makes for a behavioral law and economics “just-so story”—an unsupported hypothesis about the relative effect of surcharges and discounts on consumer behavior adduced to achieve a desired legal result, but that happens to lack any empirical support. And not only does the evidence not support the contention that consumer welfare is increased by permitting card surcharge fees, it strongly suggests that, in fact, consumer welfare would be harmed by such fees, as they expose consumers to potential opportunistic holdup and rent extraction.
As far as we know, this is the first time the Supreme Court has been expressly asked to consider arguments rooted in behavioral law and economics in reaching its decision. It should decline the offer.
Regulatory Comments As the Commission’s NPRM notes, the 2015 Open Internet Order “has weakened Americans’ online privacy by stripping the Federal Trade Commission — the nation’s premier consumer protection agency — of its jurisdiction over ISPs’ privacy and data security practices.”
As the Commission’s NPRM notes, the 2015 Open Internet Order “has weakened Americans’ online privacy by stripping the Federal Trade Commission — the nation’s premier consumer protection agency — of its jurisdiction over ISPs’ privacy and data security practices.”1 The Restoring Internet Freedom NPRM further notes that:
To address the gap created by the Commission’s reclassification of broadband Internet access service as a common carriage service, the Title II Order called for a new rulemaking to apply section 222’s customer proprietary network information provisions to Internet service providers. In October 2016, the Commission adopted rules governing Internet service providers’ privacy practices and applied the rules it adopted to other providers of telecommunications services. In March 2017, Congress voted under the Congressional Review Act (CRA) to disapprove the Commission’s 2016 Privacy Order, which prevents us from adopting rules in substantially the same form.
The Restoring Internet Freedom NPRM proposes to return to the status quo in place before the Commission adopted its 2015 Open Internet Order with respect to privacy rules: not to adopt any new FCC rules, and leave regulation of privacy to the FTC.3 We offer these comments in response to the Commission’s request regarding that proposal.
Presentations & Interviews David Chavern (News Media Alliance, whose members include NYT, WSJ, Tronc (Chicago Tribune, LA Times)), in a July 9, 2017 Wall Street Journal op-ed and . . .
David Chavern (News Media Alliance, whose members include NYT, WSJ, Tronc (Chicago Tribune, LA Times)), in a July 9, 2017 Wall Street Journal op-ed and subsequent press release, called for an antitrust exemption from Congress that would allow newspapers to negotiate collectively with Facebook and Google for stronger intellectual property protections, better support for subscription models, and a “fair share” of revenue and data.
From his Op Ed, “How Antitrust Undermines Press Freedom: Facebook and Google dominate online ads, and news companies can’t join forces to compete”:
…[E]xisting laws are having the unintended consequence of preventing news organizations from working together to negotiate better deals that will sustain local, enterprise journalism that is critical to a vibrant democracy. News organizations are limited with disaggregated negotiating power against a de facto duopoly that is vacuuming up all but an ever-decreasing segment of advertising revenue.
As part of the argument, the long decline in newspaper advertising revenues are compared to the relatively large control that Facebook and Google have over the online portion of the advertising market as part of an effort to paint online platforms as the sole, or a primary, driver for the decline in the fortunes of newspapers.
Geoffrey Manne joined the ABA Teleconference forum to discuss these issues and their broad antitrust implications. In particular, Mr. Manne noted that:
The full call is embedded below.
Presentations & Interviews WATCH: Video
Geoffrey Manne joined CNBC to discuss the removal of the border-adjustment tax from Republicans’ tax-reform proposal.
Written Testimonies & Filings Written Statement of Geoffrey A. Manne on “Antitrust Concerns and the FDA Approval Process” U.S. House of Representatives Committee on the Judiciary, Subcommittee on Regulatory Reform, Commercial, and Antitrust Law.
Written Statement of Geoffrey A. Manne on
U.S. House of Representatives Committee on the Judiciary, Subcommittee on Regulatory Reform, Commercial, and Antitrust Law
Poorly drafted regulations, especially in heavily regulated industries, can create opportunities for anticompetitive abuse. Established companies know how to navigate regulatory mazes, and the complexities of such regimes create innumerable opportunities for nominal compliance at the expense of competition, innovation, and new entry.
The legislative and regulatory impulse when faced with deeply entrenched regulations and their competitive manipulations is often to pile on, either with even more-complex regulatory amendments or else antitrust enforcement that side-steps the root problem, focusing on “fixing” allegedly anticompetitive conduct rather than reforming the underlying laws that facilitate it.
But the government has a questionable track record in promoting competition, not infrequently adopting policies seemingly tailor-made to perpetuate, rather than constrain, harmful conduct.
The FDA Act and the regulations promulgated under it by the agency stand as Exhibit A in this regard. Last year’s controversy over Mylan Pharmaceuticals’ price hike on the EpiPen, for example, is symptomatic of the problem. The market for pharmaceuticals is complicated, but one thing seems clear in the pricing controversy: the FDA has been an effective ally for Mylan in keeping out competitive producers of generic epinephrine auto-injectors. Drug safety is important, of course, but since 1962 the FDA has also reviewed drugs for “efficacy,” which introduced massive delay and uncertainty, arguably without concomitant benefit. And the FDA’s approval and oversight processes for generics and biosimilars, although improved since 1962, continue to impede effective entry. Thus, with the field clear of competitors, it is no surprise that Mylan was able to raise prices. Only following the angry public outcry did the FDA finally accelerate its review process and approve a competing product last month.
But efficacy review is not the FDA’s only regulatory cul de sac through which pharmaceutical manufacturers can employ regulatory policies to keep unwanted competitors off the block. In particular, one aspect of the FDA’s drug safety oversight regime has emerged as a device for some manufacturers to delay generic entry: the Risk Evaluation and Mitigation Strategies, or “REMS,” program.
What I will refer to collectively as the FDA Act’s REMS program comprises two elements that are relevant here: First, it requires branded drug manufacturers to make samples of their drugs available to would-be generic entrants so that they can use them in the lengthy safety and efficacy testing process required to secure FDA approval. Second, it requires brand drug companies to adopt a concerted set of practices and policies aimed at mitigating the risks inherent in the use of most drugs, and additional, more restrictive practices to ensure the safe use of particularly dangerous or addictive drugs — the so-called “REMS with ETASU” (“Elements to Assure Safe Use”). The program also requires that brand manufacturers allow generic entrants to share in these enhanced mitigation processes in order, presumably, to streamline the process and economize on compliance costs.
By forcing collaboration between competitors, the REMS program is practically tailor-made for problems. Although the FDA Act specifically prohibits the use of these regulatory elements to block lower-cost, generic alternatives from entering the market (of course), almost immediately following the law’s enactment, a small handful of branded pharmaceutical companies began using REMS for just that purpose (also, of course).
Some (now-former) FTC commissioners, among others, have raised concerns that brand drug manufacturers can (and do) take advantage of these provisions by adopting tough negotiating positions that, they allege, amount to anticompetitive exclusion requiring agency enforcement. I believe that that would be decidedly the wrong approach to dealing with the issue. These are not properly antitrust problems; they are problems of poor regulatory design.
But it is also true that the program itself exists to implement an underlying policy that may be even worse, and it is likely that reforming a few key elements of the program would help prevent such abuses — but Congress should adopt more fundamental policy changes, as well.
The first part — sharing samples — cannot easily be fixed by removing the required collaboration, at least not without completely revamping (or removing) the FDA’s drug safety and efficacy oversight function (however desirable reform of these functions would be). But the second — sharing REMS programs — can be.
Read the full statement here.
Presentations & Interviews ICLE Associate Director for Innovation recently debated Sasha Moss of the R Street Institution on the nature of copyright law, its constitutional foundations, and the . . .
ICLE Associate Director for Innovation recently debated Sasha Moss of the R Street Institution on the nature of copyright law, its constitutional foundations, and the proper contours of its function in the modern economy. Video of the event is embedded below
Regulatory Comments "Federal administrative agencies are required to engage in “reasoned decisionmaking” based on a thorough review and accurate characterization of the record. Their analysis must be based on facts and reasoned predictions; it must be rooted in sound economic reasoning: it must be logically coherent..."
“Federal administrative agencies are required to engage in “reasoned decisionmaking” based on a thorough review and accurate characterization of the record. Their analysis must be based on facts and reasoned predictions; it must be rooted in sound economic reasoning; it must be logically coherent; it must not entail subterfuge or misleading statements. On even these most basic grounds the 2015 OIO falls short.
The entire open Internet rulemaking enterprise is an exercise in post hoc rationalization — the formulation of policy, not statutory interpretation. Net neutrality was determined by certain activists to be “necessary;” proponents were unable to get it from Congress; the FCC was willing; and it tried at least three times to cobble together some statutory basis to justify its preference for open Internet rules, as opposed to determining that such rules were necessary to enforcing a particular statutory provision.
The post hoc/ultra vires problem with the 2015 OIO is disturbingly similar to the one at issue in State Farm, which sets the standard by which the sufficiency of the Commission’s analysis is judged. In that case, the Court held that an agency’s (NHTSA’s) decisionmaking did not follow from the anal- ysis it undertook, nor the statutory purpose it purported to further. The same is true here. If deployment really were the aim of the 2015 OIO, the FCC could have directly encouraged it through any number of more direct (and almost certainly more effective) means. Instead, the Commission concocted a regulatory Rube Goldberg apparatus to do so only, at best, indirectly — and in a way that happened also to further a different, arguably ultra vires objective. Perhaps most tellingly, the
Commission was forced to undertake a series of actions, superficially independent of the 2015 OIO, in order to engineer several of the factual predicates necessary to enable it to justify its rule under the statute. An agency properly acting within the scope of its au- thority would not have to work so hard to fit the round peg of its chosen policy into the square hole of its statute.”
