Category: Antitrust

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UCLA Law Review Vol. 63, Issue 4

Volume 63, Issue 4 (May 2016)
Articles

Accidents of Federalism: Ratemaking and Policy Innovation in Public Utility Law William Boyd & Ann E. Carlson 810
Protecting Disfavored Minorities: Toward Institutional Realism Joy Milligan 894
Insider Trading and Market Structure Yesha Yadav 968

 

Comments

Defending Criminal(ized) “Aliens” After Padilla: Towards a More Holistic Public Immigration Defense in the Era of Crimmigration Andrés Dae Keun Kwon 1035
Public-Private Divide in Parker State-Action Immunity Sina Safvati 1110
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State Antitrust Law

Here’s a topic that came up in a faculty workshop the other day.  What does state antitrust law do?  The federal antitrust statutes do not preempt state law.  Large mergers are scrutinized by state AGs for compliance with their state statutes.  Yet the state statutes are all virtually identical to the federal ones, and it appears that states in this area do nothing more than seek to extract rent as the price of not seeking to block or delay a corporate transaction.

Could state law being doing more in this respect?  Should one state amend its statute as an experiment?  If so, then how?  Or should Congress conclude that state antitrust law is a fiction and actually preempt those statutes?  Thoughts?

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Exploration and Exploitation – Ideas from Business and Computer Science

One of the key reasons I joined GA Tech and the Scheller College of Business is that I tend to draw on technology and business literature, and GA Tech is a great place for both. My current paper Exploration and Exploitation: An Essay on (Machine) Learning, Algorithms, and Information Provision draws on both these literatures. A key work on the idea of exploration versus exploitation in the business literature is James G. March, Exploration and Exploitation in Organizational Learning, 2 ORG. SCI. 71 (1989) which as far as I can tell has not been picked up in the legal literature. A good follow up to that paper is Anil K. Gupta, Ken Smith, and Christina Shalley, The Interplay Between Exploration and Exploitation, 49 ACAD. MGMT. J. 693 (2006). I had come upon the issue as a computer science question when working on a draft of my paper Constitutional Limits on Surveillance: Associational Freedom in the Age of Data Hoarding. That paper was part of my thoughts on artificial intelligence, algorithms, and the law. In the end, the material did not fit there, but it fits the new work. And as I have started to connect with folks in the machine learning group at GA Tech, I have been able to press on how this idea comes up in technology and computer science. The paper has benefitted from feedback from Danielle Citron, James Grimmelmann, and Peter Swire. I also offer many thanks to the Loyola University Chicago Law Journal. The paper started as a short piece (I think I wanted to stay at about five to eight thousand words), but as it evolved, the editors were most gracious in letting me use an asynchronous editing process to hit the final 18,000 or so total word count.

I think the work speaks to general issues of information provision and also applies to current issues regarding the way news and online competition work. As one specific matter, I take on the idea of serendipity which I think “is a seductive, overstated idea. Serendipity works because of relevancy.” I offer the idea of salient serendipity to clarify what type of serendipity matters. The abstract is below.

Abstract:
Legal and regulatory understandings of information provision miss the importance of the exploration-exploitation dynamic. This Essay argues that is a mistake and seeks to bring this perspective to the debate about information provision and competition. A general, ongoing problem for an individual or an organization is whether to stay with a familiar solution to a problem or try new options that may yield better results. Work in organizational learning describes this problem as the exploration-exploitation dilemma. Understanding and addressing that dilemma has become a key part of an algorithmic approach to computation, machine learning, as it is applied to information provision. In simplest terms, even if one achieves success with one path, failure to try new options means one will be stuck in a local equilibrium while others find paths that yield better results and displace one’s original success. This dynamic indicates that an information provider has to provide new options and information to users, because a provider must learn and adapt to users’ changing interests in both the type of information they desire and how they wish to interact with information.

Put differently, persistent concerns about the way in which news reaches users (the so-called “filter bubble” concern) and the way in which online shopping information is found (a competition concern) can be understood as market failures regarding information provision. The desire seems to be to ensure that new information reaches people, because that increases the potential for new ideas, new choices, and new action. Although these desired outcomes are good, current criticisms and related potential solutions misunderstand the nature of information users and especially information provision, and miss an important point. Both information users and providers sort and filter as a way to enable better learning, and learning is an ongoing process that requires continual changes to succeed. From an exploration- exploitation perspective, a user or an incumbent may remain isolated or offer the same information provision but neither will learn. In that case, whatever short-term success either enjoys is likely to face leapfrogging by those who experiment through exploration and exploitation.

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BEER (and Brands)!! IPA, SOUR, Coors, Miller, STELLA!!!

It seemed quaint several few years ago, when someone wanted a pumpkin brew for Halloween and asked my help in finding it. Pumpkin. How novel. But craft brewing is no longer novel. According to Fortune, “Craft beer volume represented just 1% of the overall beer industry in 1994 but stands at over 11% today.” Nonetheless, the recent merger action in beer makes the craft beer industry a bit nervous.

A key issue seems to be that the merger may cut off access to craft beers, because AB InBev has been buying up distributors. The fear is that at bars and retailers one would only have access to “Bud and Miller.” As Spencer Waller and I wrote, in Brands, Competition, and the Law, branding allows businesses “to move beyond price, product, place, and position and create the idea that a consumer should buy a branded good or service at a higher price than the consumer might otherwise pay.” As Susan Strasser has explained historically, national manufacturers used branding to overcome the “strong loyalties [customers had] to the people with whom they did business, which might surpass their interest in nationally advertised products that they had not yet tried.” At the same time, local retailers knew that national goods cut into their profits and often refused to carry these new goods. Which brings us to today and some questions about beer and brands and the law. Would changing the alcohol system help or hurt?

If consumers could buy directly from alcohol makers, would that blunt the force of a beer mega-merger? For that matter, what are the main markets for craft beers? Do distributors sell say a Georgia beer only within Georgia or a radius of the brewery? Would a craft beer maker even want a world without the three tier system? Wine seems to do OK with direct sales and distribution, so I am thinking beer and even craft spirits may like that option. But I don’t know.

Also it seems that the issue is not just about price. People may want to pay more for the craft beer but can’t get it. That seems to be an incorrect outcome. I am not a deregulate everything and wonders will flow person, but I think that this industry may be heading to much more flat organization and less regulation.

Those who know about alcohol making and selling, I am all ears. Until then I may have a beer and think on this one.

From Territorial to Functional Governance

Susan Crawford is one of the leading global thinkers on digital infrastructure. Her brilliant book Captive Audience spearheaded a national debate on net neutrality. She helped convince the Federal Communications Commission to better regulate big internet service providers. And her latest intervention–on Uber–is a must-read. Crawford worries that Uber will rapidly monopolize urban ride services. It’s repeatedly tried to avoid regulation and taxes. And while it may offer a good deal to drivers and riders now, there is no guarantee it will in the future.

A noted critic of the sharing economy, Tom Slee, has backed up Crawford’s concerns, from an international perspective. “For a smallish city in Canada, what happens to accountability when faced with a massive American company with little interest in Canadian employment law or Canadian traditions?”, Slee asks, raising a very deep point about the nature of governance. What happens to a city when its government’s responsibilities are slowly disaggregated, functionally? Some citizens may want to see the effective governance of paid rides via Uber, of spare rooms via AirBnB, and so on. A full privatization of city governance awaits, from water to sidewalks.

If you’re concerned about that, you may find my recent piece on the sharing economy of interest. We’ll also be discussing this and similar issues at Northeastern’s conference “Tackling the Urban Core Puzzle.” Transitions from territorial to functional governance will be critical topics of legal scholarship in the coming decade.

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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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.

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I Am Thankful for Antitrust? Yep.

So you are settling in thinking about food, those who have it, those who don’t, and of course a distraction, antitrust, pops into your head. OK that is unlikely unless you are a nerdy professor, which I am. In all seriousness, I am thankful that friends and colleagues indulge my ideas as I develop them, and that they read work other than what I read. It allows me to pose odd questions, hear what I may be missing, share views that my friends may not have seen, and all are better for it.

The specific, recent example happens to be in antitrust. I was catching up with Spencer Waller and mentioned that I had dusted off early Bork. The man writes quite well. Whether one agrees or disagrees with him, his style and clarity is to be admired. That also poses a danger that Peter Swire alluded to and Spencer helped me overcome. Bork, of course, has critics and some of that criticism is about substance. That is some argue Bork was inaccurate about history and more. So if one wishes to cite Bork, it helps to know where that may lead. Thankfully, Spencer pointed me to an excellent symposium on Bork.

So I am also grateful to the Antitrust Law Journal and Barak Orbach, George Priest, Danny Sokol, and Adam J. Di Vincenzo for organizing and editing the Symposium on Robert Bork and Antitrust Policy. (Volume 79, Issue 3). The range of views and explanations are exceptional. Each essay explores specific ideas or contentions. The authors I have read so far provide a view of Bork and antitrust in general that educates and excites. I look forward to reading the rest.

Interview on The Black Box Society

BBSBalkinization just published an interview on my forthcoming book, The Black Box Society. Law profs may be interested in our dialogue on methodology—particularly, what the unique role of the legal scholar is in the midst of increasing academic specialization. I’ve tried to surface several strands of inspiration for the book.

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Search Engine Objectivity

(This is a guest post from Professor Mark R. Patterson of Fordham Law School. As someone who has participated in panels on antitrust with Prof. Patterson, I thought our readers would be interested in his perspective. –Frank Pasquale.)

pattersonM“Search is inherently subjective: it always involves guessing the diverse and unknown intentions of users. Regulators, however, need an objective standard to judge search engines against.”

The two claims above, from an essay by James Grimmelmann, are at the center of the conflict over regulation of search engines. Some argue that Google is a powerful gatekeeper for competing firms’ access to customers, so that it must operate in an objective or neutral manner to preserve a level competitive playing field. Those who make this argument necessarily assume that we can assess objectivity or neutrality in this context. Others, like Grimmelmann, support the first statement above, arguing that there is no objective, neutral means of assessing search results, so that there is no way to regulate search engines.

The European Commission (EC), having investigated Google’s practices and concluded that there are “competition concerns,” is apparently on the pro-regulation side, because it is entertaining proposed commitments from Google to address those concerns. (The U.S. F.T.C. conducted its own investigation and closed it without action, concluding that there was insufficient evidence to support the claim that Google’s practices lacked a legitimate business justification.) Google proposed a first set of commitments to the EC in April, but the Commission received “very negative” feedback from a market test of those commitments, so it asked Google for an improved proposal. Last month, Google proposed a second set of commitments. This new proposal was not put to a market test. Instead, the EC sent private inquiries to the complainants in the case and other market participants. Nevertheless, the proposal was leaked, and it offers much food for thought.

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