Author: Frank Pasquale

Europe Steps Up to the Challenge of Digital Competition Law

Two years ago U.S. authorities abandoned a critical case in digital antitrust. The EC now appears ready to fill the void:

The European Commission is said to be planning to charge Google with using its dominant position in online search to favor the company’s own services over others, in what would be one of the biggest antitrust cases here since regulators went after Microsoft. . . . If Europe is successful in making its case, the American tech giant could face a huge fine and be forced to alter its business practices to give smaller competitors like Yelp greater prominence in its search queries.

I applaud this move. As I’ve argued in The Black Box Society, antitrust law flirts with irrelevance if it fails to grapple with the dominance of massive digital firms. Europe has no legal or moral obligation to allow global multinationals to control critical information sources. Someone needs to be able to “look under the hood” and understand what is going on when competitors of Google’s many acquired firms plunge in general Google search results.

Google argues that its vast database of information and queries reveals user intentions and thus makes its search services demonstrably better than those of its rivals. But in doing so, it neutralizes the magic charm it has used for years to fend off regulators. “Competition is one click away,” chant the Silicon Valley antitrust lawyers when someone calls out a behemoth firm for unfair or misleading business practices. It’s not so. Alternatives are demonstrably worse, and likely to remain so as long as the dominant firms’ self-reinforcing data advantage grows. If EU authorities address that dynamic, they’ll be doing the entire world a service.

PS: For those interested in further reading about competition online:
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New Podcast: The Week in Health Law (TWIHL)

Nicolas Terry and I are starting a health law podcast, The Week in Health Law, and the first two episodes are posted here. We were honored to have Nicole Huberfeld on as our first guest. Check it out on iTunes, Stitcher, or your favorite podcast app.

Next week we’ll be talking with Abigail Moncrieff the day after King v. Burwell oral arguments. Later guests this month include Lindsay F. Wiley (on wellness programs) and Erin C. Fuse Brown (on health costs).

Taking Human Capital Theory Seriously: Simkovic on “The Knowledge Tax”

Graduate professional education in the US is facing a financing squeeze. Some argue that those learning to become doctors, nurses, engineers, lawyers, and the like should get no help from the federal government, because they tend to earn higher incomes than average. Others question that premise, arguing that past results of grad degrees are no guarantee of future performance. They believe that an impending wave of defaults on federal student loans will raise the cost of federal credit programs.

Nevertheless, each side argues for policy with convergent outcomes. The “grad students will be rich” camp argues for curtailing federal loans, since they believe professionals can handle the higher interest rates on the private market. The “grad students will be poor” camp wants to raise the rates on federal student loans, to build up the already hefty surpluses the government is now making, to prepare for the putative future defaults. In the eyes of both, graduate students are the undeserving recipients of government largesse.

I’m not convinced by either: the “too rich” camp fails to value professional services properly, and the “too poor” camp is relying on controversial accounting techniques. But until I read Mike Simkovic’s recent paper “The Knowledge Tax,” I’d never thought of an even more fundamental distortion at work here: tax policy. Simkovic lays out the problem with characteristic clarity, considering a hypothetical college graduate deciding on (1) attending medical school and practicing medicine; or (2) purchasing a small vacant building and converting it into rental apartments:
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Meet the New Boss…

One of the most persistent self-images of Silicon Valley internet giants is a role as liberators, emancipators, “disintermediators” who’d finally free the creative class from the grips of oligopolistic music labels or duopolistic cable moguls. I chart the rise and fall of the plausibility of that narrative in Chapter 3 of my book. Cory Doctorow strikes another blow at it today:

[T]he competition for Youtube has all but vanished, meaning that they are now essential to any indie artist’s promotion strategy. And now that Youtube doesn’t have to compete with other services for access to artists’ materials, they have stopped offering attractive terms to indies — instead, they’ve become an arm of the big labels, who get to dictate the terms on which their indie competitors will have to do business.

Ah, but don’t worry–antitrust experts assure us that competition is just around the corner, any day now. Some nimble entrepreneur in a garage has the 1 to 3 million servers now deployed by Google, can miraculously access past data on organizing videos, and is just about to get all the current uploaders and viewers to switch to it. The folklore of digital capitalism is a dreamy affair.

The Second Machine Age & the System of Professions

Why do we have professions? Many economists give a public choice story: guilds of doctors, social workers, etc., monopolize a field by bribing legislators to keep everyone else out of the guild.* Some scholars of legal ethics buy into that story for our field, too.

But there is another, older explanation, based on the need for independent judgment and professional autonomy. Who knows whether a doctor employed by a drug company could resist the firm’s requirement that she prescribe its products off-label as often as possible. With independent doctors, there is at least some chance of pushback. Similarly, I’d be much more confident in the conclusions of a letter written by attorneys assessing the legality of a client’s course of action if that client generated, say, 1%, rather than 100%, of their business.

Andrew Abbott’s book The System of Professions makes those, and many other, critical points about the development of professions. Genuine expertise and independent judgment depend on certain economic arrangements. For Abbott, the professions exist, in part, to shield certain groups from the full force of economic demands that can be made by those with the most money or power. As inequality in the developed world skyrockets, and the superrich at the very top of the economy accumulate vastly more wealth than the vast majority of even the best-paid professionals, such protections become even more urgent.

I was reminded of Abbott’s views while reading Lilly Irani’s excellent review of Erik Brynjolffson & Andrew McAfee’s The Second Machine Age, and Simon Head’s Mindless. Irani, a former Googler, digs into the real conditions of work at leading firms of the digital economy. She observes that much of what we might consider “making” (pursuant to some professional standards) is a form of “managing:”
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Methodological Pluralism in Legal Scholarship

The place of the social science in law is constantly contested. Should more legal scholars retreat to pure doctrinalism, as Judge Harry Edwards suggests? Or is there a place for more engagement with other parts of the university? As we consider these questions, we might do well to take a bit more of a longue duree perspective–helpfully provided by David Bosworth in a recent essay in Raritan:

No society in history has more emphasized the social atom than ours. Yet the very authority we have invested in individualism is now being called into question by both the inner logic of our daily practices and by the recent findings of our social sciences. . . .

Such findings challenge the very core of our political economy’s self-conception. What, after all, do “self-reliance” and “enlightened self-interest” really mean if we are constantly being influenced on a subliminal level by the behavior of those around us? Can private property rights continue to seem right when an ecologically minded, post-modern science keeps discovering new ways in which our private acts transgress our deeded boundaries to harm or help our neighbors? Can our allegiance to the modern notions of ownership, authorship, and originality continue to make sense in an economy whose dominant technologies expose and enhance the collaborative nature of human creativity? And in an era of both idealized and vulgarized “transparency,” can privacy—-the social buffer that cultivates whatever potential for a robust individualism we may actually possess—-retain anything more than a nostalgic value?

These are provocative questions, and I don’t agree with all their implications. But I am very happy to be part of an institution capable of exploring them with the help of computer scientists, philosophers, physicians, social scientists, and humanists.

I suppose Judge Edwards would find it one more symptom of the decadence of the legal academy that I’ll be discussing my book this term at both the Institute for Advanced Studies of Culture at UVA and at MAGIC at the Rochester Institute of Technology. But when I think about who might be qualified to help lawyers bridge the gap between policy and engineering in the technology-intensive fields I work in, few might be better than the experts at MAGIC. The fellows and faculty at IASC have done fascinating work on markets and culture–work that would, ideally, inform a “law & economics” committed to methodological pluralism.
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The Black Box Society: Interviews

My book, The Black Box Society, is finally out! In addition to the interview Lawrence Joseph conducted in the fall, I’ve been fortunate to complete some radio and magazine interviews on the book. They include:

New Books in Law

Stanford Center for Internet & Society: Hearsay Culture

Canadian Broadcasting Corporation: The Spark

Texas Public Radio: The Source

WNYC: Brian Lehrer Show.

Fleishman-Hillard’s True.

I hope to be back to posting soon, on some of the constitutional and politico-economic themes in the book.

European Parliament Resolution on Google

The European Parliament voted 384 – 174 today in favor of a “resolution on Supporting Consumer Rights in the Digital Single Market.” The text of the resolution:

Stresses that all internet traffic should be treated equally, without discrimination, restriction or interference, independently of its sender, receiver, type, content, device, service or application;

Notes that the online search market is of particular importance in ensuring competitive conditions within the Digital Single Market, given the potential development of search engines into gatekeepers and their possibility of commercialising secondary exploitation of obtained information; therefore calls on the Commission to enforce EU competition rules decisively, based on input from all relevant stakeholders and taking into account the entire structure of the Digital Single Market in order to ensure remedies that truly benefit consumers, internet users and online businesses; furthermore calls on the Commission to consider proposals with the aim of unbundling search engines from other commercial services as one potential long-term solution to achieve the previously mentioned aims;

Stresses that when using search engines, the search process and results should be unbiased in order to keep internet search non-discriminatory, to ensure more competition and choice for users and consumers and to maintain the diversity of sources of information; therefore notes that indexation, evaluation, presentation and ranking by search engines must be unbiased and transparent, while for interlinked services, search engines must guarantee full transparency when showing search results; calls on Commission to prevent any abuse in the marketing of interlinked services by operators of search engines;

Some in the US tech press has played this up as an incipient effort to “break up” Google, with predictable derision at “technopanic.” (Few tend to reflect on whether the 173 former firms listed here really need to be part of one big company.) But the resolution’s linking of net and search neutrality suggests other regulatory approaches (prefigured in my 2008 paper Internet Nondiscrimination Principles: Commercial Ethics for Carriers and Search Engines). I’ve developed these ideas over the years, and I hope my recently released book‘s chapters on search and digital regulation will be of some use to policymakers. Without some regulatory oversight and supervision, our black box society will only get more opaque.

Reining in the Data Brokers

I’ve been alarmed by data brokers’ ever-expanding troves of personal information for some time. My book outlines the problem, explaining how misuse of data undermines equal opportunity. I think extant legal approaches–focusing on notice and consent–put too much of a burden on consumers. This NYT opinion piece sketches an alternate approach:

[D]ata miners, brokers and resellers have now taken creepy classification to a whole new level. They have created lists of victims of sexual assault, and lists of people with sexually transmitted diseases. Lists of people who have Alzheimer’s, dementia and AIDS. Lists of the impotent and the depressed.

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Privacy protections in other areas of the law can and should be extended to cover consumer data. The Health Insurance Portability and Accountability Act, or Hipaa, obliges doctors and hospitals to give patients access to their records. The Fair Credit Reporting Act gives loan and job applicants, among others, a right to access, correct and annotate files maintained by credit reporting agencies.

It is time to modernize these laws by applying them to all companies that peddle sensitive personal information. If the laws cover only a narrow range of entities, they may as well be dead letters. For example, protections in Hipaa don’t govern the “health profiles” that are compiled and traded by data brokers, which can learn a great deal about our health even without access to medical records.

There’s more online, but given the space constraints, I couldn’t go into all the details that the book discloses. I hope everyone enjoys the opinion piece, and that it whets appetites for the book!

Improving Lawyers’ Efficiency, the Guantanamo Way

John Patrick Leary has a great series of posts called “Keywords for an Age of Austerity.” While he hasn’t yet taken on the term “efficiency,” it’s something we hear a lot from “Legal Rebels” nowadays. I found the following passage from an interview with philosopher Johanna Oksala very insightful on one intersection between law and efficiency:

In [my book Foucault, Politics, and Violence] I [discuss] new interrogation techniques – including waterboarding – that were introduced at Guantanamo Bay detainee camp in 2002. Philip Sand shows in his book Torture Team that what made these new, considerably more aggressive interrogation techniques possible was not the suspension of international law, but an interpretation of it that made it consistent with pregiven policy aims: the effective gathering of intelligence for national security. The law was respected by the state, but it was used strategically: the policy should have been drawn up around the law, but instead the legal advice was fitted around the policy. Legality was subsumed under efficiency and professionalism.

What’s said here of government as a client applies as well in many recent situations where firms’ corner-cutting policies were taken to lawyers, who appeared far more interested in “efficient” outcomes for their employers or clients than in bounding their actions by law. They also appeared willing to fit their ideal of “professionalism” to that overriding pursuit of efficiency. So we should be a bit cautious when we hear, bandied about, terms like “efficiency,” “innovation,” “putting the client first,” et al. in discussions of the future of the profession. Scratch the surface, and you’ll often find a definition of each that is partial, self-serving, or even Orwellian.