As a result of the FTC’s “Operation Short Change,” a number of firms and individuals have settled claims that they swindled millions from consumers by making unauthorized charges and debits to their bank accounts.  The FTC press release highlights that, in addition to a $2.08 million fine (judgment suspended due to bankruptcy filing), the FTC barred the principal from engaging in a number of related business activities:

Under the settlement Greenberg is banned from owning, controlling, or consulting for any Internet-related business that handles consumers’ credit card or debit card accounts.  He also is prohibited from making unauthorized charges to consumers’ accounts, making false or misleading statements while selling any goods or services, and using any false or assumed name, including an unregistered, fictitious company name, in his business dealings.

As Douglas Ginsburg and I point out in our piece on Antitrust Sanctions in Competition Policy International, debarment of this sort is common in these FTC enforcement actions, at the SEC for other forms of white collar crime (e.g. debarring a director from sitting on the board of a publicly traded company), and as an antitrust sanction for naked price-fixing in a number of countries, e.g. in the U.K. pursuant to the Company Directors Disqualification Act of 1986.

Debarment, however, is not currently in the mix of antitrust sanctions employed by the DOJ in criminal antitrust enforcement actions.  In the article, we make the case that debarment is desirable from an optimal deterrence perspective:

The U.S. Department of Justice should consider taking a similar approach to sentencing individuals convicted of a criminal violation of § 1 of the Sherman Act. We are aware of no reason for which the Department needs to wait for statutory authority to get started, as did the SEC, by negotiating consent orders providing for debarment.74 Prosecutors might, for example, if the conditions for leniency are met, agree to allow individual defendants to reduce or avoid jail time, in return for debarring them from working as a manager or director of any publicly traded corporation or for any company in a particular industry if it is either located in or sells into the United States.75

Negotiated orders of debarment would allow the Antitrust Division to accrue much of the benefit of a prison sentence—publicizing the offense and keeping the offender from recidivating— without undertaking the risk and cost of a criminal trial. The period of debarment should be calibrated to have the same average deterrent effect as jail.76 Further, as we have pointed out, debarment would bolster currently weak reputational penalties, thereby reducing the need for individual fines, which are less likely to deter efficiently because of individuals’ wealth constraints.

Read the whole thing.

The WSJ reports that the DOJ is getting itself ready to challenge the Google-ITA merger (see earlier TOTM posts here and here):

Justice Department staff lawyers have begun preparing legal documents for use in a possible court challenge to the $700 million deal for ITA Software Inc., but no decision to proceed has been made, one of the people familiar with the matter said.  Google, of Mountain View, Calif., recently told the government it had complied with all requests for information about the ITA deal, this person said. That milestone typically gives the agency 30 days to decide whether to take action, though such deadlines can be extended. The government is expected to make its decision later this month or in early February, this person added.

The potential theory is that Google, post-merger, would exclude rivals from cutting off access to ITA’s software:

Government lawyers have asked executives in the $80 billion online travel market if Google could unfairly disadvantage potential new rivals by cutting off their access to ITA’s software, people familiar with the questioning have said.  The lawyers also inquired about whether Google would direct users of its search engine to the travel-search service it plans to build around ITA’s technology, to the detriment of soon-to-be rivals that currently get traffic from Google’s search engine, these people said. Google currently directs users searching for travel itineraries to Kayak.com and other sites.

Some commentators have discussed the inclusion of Section 2 in the list of statutes enforced by the antitrust agencies through merger policy and the language in the HMGs overview stating that “Enhanced market power may also make it more likely that the merged entity can profitably and effectively engage in exclusionary conduct.”   Section 2.2.3 of the new HMGs also observes that  “rival firms may provide relevant facts, and even their overall views may be instructive, especially in cases where the Agencies are concerned that the merged entity may engage in exclusionary conduct.”   It looks like these new sections of the Guidelines may be tested early on.

I’m tentatively skeptical about the value of embedding this exclusion analysis so prominently within the Guidelines, and more specifically, bringing merger challenges on the grounds of the likelihood of future exclusion.  In my view, we know so little about the relevant inputs to designing such a policy (how often do exclusion problems arise, how large are the anticompetitive effects, can we identify these cases ex ante?) that it seems unwise.  As antitrust analysts well know, there is much more disagreement over issues surrounding exclusion than purely horizontal mergers (see, e.g., the Section 2 Report episode).  Predicting the effects of horizontal mergers can be difficult enough in its own right.  But this raises the issue of why the DOJ would make a challenge under Section 7 of the Clayton Act rather than waiting.  It appears that the DOJ is quite willing to use Section 2 of the Sherman Act.  If there is some uncertainty over whether Google’s post-merger incentives will lead to increased efficiencies (as Google claims) or conduct that excludes rivals and makes consumers worse off — and as with most monopolization cases there appears to be significant debate on this issue — why not wait and see?  If Google’s conduct is anticompetitive, surely the DOJ or FTC can bring suit under Section 2 or even Section 5 of the FTC Act.    The conventional argument in merger cases is that a post-consummation remedy requires “unscrambling the eggs.”  Is that true here?  Wouldn’t the remedy that would be imposed here some non-discriminatory licensing requirement?  There are other costs of inserting a pre-emptive exclusionary conduct review into merger analysis.  Nearly any merger that might increase a firm’s market power could potentially increase incentives to discriminate against or foreclose rivals.  However, the same merger also can lead to greater efficiencies.  It is hard to imagine a horizontal merger where one could not imagine some form of exclusion theory with all sorts of forward-looking statements from the agencies about the likelihood of exclusion post-merger.  Embedding the Section 2 mess into merger analysis hardly seems a step toward certainty and providing guidance to firms.

The treatment of these theories in Google-ITA will be watched very closely.

The titular question is posed by Louis Kaplow (Harvard) in a recent piece in the Harvard Law Review that I suspect will attract a fair amount of attention.   I may have more to say about this later, but for now, here is the abstract:

Competition law is dominated by the market definition / market share paradigm, under which a relevant market is defined and pertinent market shares therein are examined in order to make inferences about market power. This Article advances the immodest claim that the market definition process is incoherent as a matter of basic economic principles and hence should be abandoned entirely. This conclusion rests on four arguments. First, meaningful inferences of market power in redefined markets cannot be made. Second, the paradigm relies on an unarticulated notion of a standard reference market whose necessity and prior omission signal a serious gap. Third and most important, determining what market definition is best is impossible without first formulating a best estimate of market power, rendering further analysis pointless and possibly leading to erroneous outcomes. Finally, the need to define markets engenders a mistaken focus on cross-elasticities of demand for particular substitutes rather than on the market elasticity of demand, which further reduces the quality of resulting market power inferences. Although the inquiry is conceptual, brief remarks on legal doctrine suggest that creating conformity may not be unduly difficult.

Check out the whole thing.

The AP Reports:

The Justice Department is investigating claims of anticompetitive behavior by shipping companies FedEx Corp. and UPS Inc.

Los Angeles antitrust attorney Maxwell Blecher said in a sworn court document filed last month that on Nov. 22 a trial attorney in the Justice Department’s antitrust division called him and said they had begun a formal investigation of UPS and FedEx.

The Justice Department declined to confirm the investigation on Friday. FedEx and UPS say they are aware of the investigation.

Blecher represents a firm called AFMS Logistics Management Group that helps companies negotiate lower rates from UPS and FedEx. The company’s federal lawsuit accuses UPS and FedEx of announcing on the same day that they would no longer deal with such consultants. Blecher said on Friday that the moves were “devastating” for AFMS’s business.

The underlying private civil case is AFMS LLC v. United Parcel Service Co., (10-cv-5830, U.S. District Court, Central District of California (Los Angeles)).  I do not have a copy of the complaint in that case which references the DOJ investigation, but will post if I do.

UPDATE: Here is a copy of the complaint (HT: Dale Collins).  Briefs are also available here.

The “consumer choice” approach to antitrust is increasingly discussed in a variety of settings, and endorsed by regulators and in scholarship, especially but not exclusively in the Section 5 context.  The fundamental idea is that the “conventional” efficiency approach embedded in the total and/or consumer welfare standards is too cramped and does not measure the “right” things. The consumer choice is a standard focusing on the options available to consumers and is proposed as an alternative to efficiency-based standards.  Preliminary, I do not think the approach as I understand it is an improvement for modern antitrust methods, nor do I think that its adoption would be a good development for the coherence of antitrust jurisprudence or consumers.

Read the full piece here.

Steven Pearlstein at the Washington Post asks if it’s “Time to loosen Google’s grip.”  The article is an analytical mess.  Pearlstein is often a decent business reporter–I’m not sure what went wrong here, but this is a pretty shoddy piece of antitrust journalism.

Read the full piece here. 

There’s been much teeth-gnashing following yesterday’s ruling by a Virginia judge that the “individual mandate” portion of Obamacare is unconstitutional.  Among many other places, see the ongoing discussion at The Volokh Conspiracy.  I have a quick, non-constitutional response.

Read the full piece here.