Category: Antitrust


The Googlization of Advertising

Search engines are indispensable to the quest for helpful information in our data saturated age. Although custom search engines attract small audiences, the big three—Google, Yahoo, and Microsoft—run the lion share of online searches, with Google performing 62% of U.S. Internet searches and with Yahoo next in line running 17.5% of searches. Not surprisingly, Google attracts a disproportionate share of online advertisers, the main source of revenue for search companies. The recent joint venture advertising agreement between Google and Yahoo heralds the further concentration of online advertising in the search market from three to two hands by allowing Google to sell search ads that display next to Yahoo search results.

This Sunday, the Association of National Advertisers announced its opposition to the Google-Yahoo deal on the grounds that the partnership would “diminish competition, increase concentration of market power, limit choices currently available and raise prices to advertisers.” Frank Pasquale presented spirited and compelling testimony on this issue before the House Judiciary Committee’s Task Force on Competition Policy and Antitrust Laws this summer. (I attended the hearing and highly recommend viewing the C-SPAN recording—see here). As Pasquale brought alive at the hearing, the joint venture agreement would cement Google’s dominance over the online advertising market. Benjamin Edelman of Harvard Business School explains that such excessive market share allows Google to control the ads generally available (and unavailable) to consumers. For instance, in August 2004, Google banned an ad critical of President Bush, but, of course, consumers did not know what they were missing. Worth serious consideration is Pasquale’s concern that the opacity of Google’s practices enables it to conceal any abuse of its soon-to-be overwhelming power in the online advertising market.

If You Read One Article on Antitrust This Year. . .

make it Maurice Stucke’s Better Competition Advocacy, 82 St. John’s L. Rev. 951 (2008). In this work, he convincingly argues that “The goals of antitrust law enforcement are subsumed by, but not necessarily co-extensive with, the goals of competition policy.” Stucke’s article not only extends an impressive line of work on competition law, but also offers some insights on the dangers of over-specialization for legal scholars generally. I’ll offer some excerpts now, and try to apply the piece to some current controversies later this week.

Stucke addresses four main questions in his article:

Prevailing competition advocacy glosses over four fundamental questions: First, what is competition? Second, what are the goals of a competition policy? Third, how does one achieve, if one can, the objectives of such desired competition? Fourth, how does one know if the economy is progressing toward these goals?

Stucke argues that conventional competition policy based on the work of the Chicago School answers all these questions in narrow and unsatisfying ways.

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WALL*E and the Theory of the Firm

WALL-Eposter.jpgOver the weekend my son and I saw WALL*E, Pixar’s new story about the adventures of a robot living on a post-environmental apocalypse Earth in which the land has been entirely covered by mountains of trash. As it turns out, more than 700 years before humanity had ditched the planet under the leadership of BnL Corp., the super-retailer that seems to have taken over the world, replacing not only the government but all other economic actors. Despite the apparently heavy-handed plot that I just summarized, WALL*E is a delightful movie, and the obvious jabs at Wall*Mart and other big-box retailers are delivered with such charm and — oddly given the post-apocalyptic setting — understatement that some-time Wall*Mart apologist that I am, I found myself carried effortlessly along by the story. That said, the vision of a world ruled by BnL Corp. got me thinking about the implicit theory of the firm underlying Pixar’s dystopia.

Firms, of course, are an embarrassment to economic theory. If the market is so good at coordinating the production of goods and services, why would you even see firms, which exist as islands of central planning in a sea of unplanned spontaneous order? Since Coase’s ground breaking article in the 1930s, the answer has been “transaction costs.” The central planning of the firm necessarily imposes costs given the informational constraints that managers necessarily labor under. On the other hand, so long as those costs are less than the cost of coordinating the same activity through spot contracts in the market, the firm is more efficient than the alternatives. So what gives with BnL Corp.? Why would one firm get so big as to engulf all others? Here are some thoughts.

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Three on Antitrust

D. Daniel Sokol has been blogging up a storm at the Antitrust & Competition Policy Blog. I thought I’d highlight a few things I’d seen there, plus some other sources.

1) The ABA Antitrust Source is out, with a preview of the upcoming Supreme Court term.

2) You can catch the Kirkpatrick Antitrust Conference (on Conservative Economic Influence on U.S. Antitrust Policy) on a webcast that Georgetown is generously providing. (It can also be downloaded via iTunes.)

For a taste of the proceedings, check out my colleague Marina Lao’s careful critique of the Supreme Court’s 5-4 decision in Leegin. It will be featured in a forthcoming book, Where the Chicago School Overshot The Mark: Effect of Conservative Economic Analysis on U.S. Antitrust (ed. Robert Pitofsky, Oxford Univ. Press).

3) And for some humor, check out a Rockefeller’s attack on antitrust, reviewed here by Seth Bloom (Senior Counsel on the staff of the Senate Antitrust Subcommittee).

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Global Trends To Mitigate Local Special Interests: India and Antitrust

IndianSchoolofBusiness.jpgIndia has a booming economy and although China gets much of the press regarding new economic power, India is usually mentioned as right behind. Indeed, James Wolfensohn, former head of the world bank, has specifically argued that India and China will return to commanding a large portion of the world’s GDP. Thus when India recently tried to change or update its merger laws, the idea was to improve the law so it would keep pace with the potential for economic growth. The law as intended and the law as passed, however, seem to be quite different. The Deal reports that “The new law requires companies with as little as $126 million of assets in India, even if they are only subsidiary operations, to notify officials there of any acquisition from around the globe. Reporting the merger plans and waiting 210 days before completing the deal would be required even if the target is not located in India and doesn’t do any business there.” As such the ABA and several other attorney groups have contacted the Indian government to urge it to change the law which they see as a anticompetitive.

It is entirely possible that the law was not only went “in a different direction during the give and take in Parliament” but reflects some real concerns any developing country will have about corporate law. Those concerns are not clear in the article and should be taken seriously. But taken at face value this situation offers a view of a potential way to see how government may take advantage of international law or at least how global trade can influence the voices in a debate. In one scenario an administration may bow to local interests and protectionist impulses. It may then engage in international deals or even treaties. When the two conflict, the international treaty may demand that the local laws are harmonized and the previous law could change (There are of course many steps and debates to be had over the conflcits between international and domestic law. Still, intellectual property law offers an example of possibly using international norms to achieve one interest group’s (i.e. the copyright industry’s) objectives). This process is not necessarily laudable as the local interests may be undercut and the democratic aspect of lawmaking comes into question. Nonetheless, it is a way the process may proceed.

Alternatively, it seems that the outside voices may provide more information and perspectives regarding the true ramifications of certain laws. If so, the advantage would be that the government may move slower and have too many compromises based on internal pressures, but international groups indicating how they view the law at least ensures that the government has a better sense of the impact of the law at both the domestic and international levels.

image credit: Indian School of Business from WikiCommons

Can Antitrust Accommodate Privacy Concerns?

The proposed Google/DoubleClick merger has provoked a complaint from EPIC and concern from many privacy advocates. EPIC claims that Google’s standard M.O. amounts to a “deceptive trade practice:”

Upon arriving at the Google homepage, a Google user is not informed of Google’s data collection practices until he or she clicks through four links. Most users will not reach this page. . . . Google collects user search terms in connection with his or her IP address without adequate notice to the user. Therefore, Google’s representations concerning its data retention practices were, and are, deceptive practices.

One key question raised by the proposed merger is whether privacy concerns like these can be folded into traditional antitrust analysis. Peter Swire argues that they can; he believes that “privacy harms reduce consumer welfare [and] lead to a reduction in the quality of a good or service.” I am broadly sympathetic with Swire’s aims, but I worry that contemporary antitrust doctrine is too etiolated to encompass his concerns.

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Questionable Advice On Net Neutrality

The DOJ Antitrust Division’s just-released public comment on net neutrality (available here) has been getting a lot of press. Unfortunately, it appears that the shoddy analysis that Jack Goldsmith saw in the DOJ’s torture memos may also be infecting its approach to net neutrality. I just want to raise three worries apparent on a quick read of the document:

1) Pollyanna Prevails: The DOJ document presumes that a laissez-faire approach has done wonders for US broadband access. But just as visitors from Japan and Europe find our cell phones crippled, so too our internet access is lagging. As the WaPo notes, “In sharp contrast to the Bush administration over the same time period, regulators [in Japan] compelled big phone companies to open up wires to upstart Internet providers”–and saw extraordinary results. But (again, on a quick read), I did not see a single reference in the DOJ document on how other countries handle the policy issues the FCC is facing, except for the Canadian Telus dispute (which it called “irrelevant”).

2) Shunning the Scholars: From a quick text-search of the document’s footnotes, it appears that DOJ fails to reckon with the work of a single one of the following prominent pro-net-neutrality scholars: van Schewick, Economides, Frischmann & Waller, Crawford, or Wu.

van Schewick’s work provides an interesting contrast to many of the citations in the DOJ filing:

Barbara van Schewick [argues that there is a] severe threat of discrimination without network neutrality regulation, and that discrimination will reduce application-level innovation. van Schewick’s work is not funded by any of the special interests involved in this issue — nor is it sponsored by the “independent” think tanks that are funded by the special interests involved in this issue.

Even more surprisingly, the DOJ fails to cite the leading legal academic voice against net neutrality, Christopher Yoo.

3) Errant Economism: Economic analysis has its place, and DOJ does cite several economists who claim that network neutrality rules would “skew investment, delay innovation, and diminish consumer welfare.” Even if I were to cede that very questionable claim, is that the end of the issue? Economic analysis is one tool among many for evaluating the normative desirability of a policy proposal. Would the DOJ think FCC Commissioner Deborah Taylor Tate out of line for being concerned about sex and violence as she helps craft these rules? A narrow focus on economics does not help us achieve what the DOJ itself admits is the clear “public policy objective here. . . .: a thriving and dynamic Internet capable of meeting the demands of consumers for fast and reliable access to a rich variety of content and applications.”


Pomegranate Juice and the War on Terror

purely juice.jpgThe blogs are abuzz this morning talking about the Times’ profile of Stephen Abraham, an Army reserve officer who filed a crucial affidavit in the latest Guantanamo litigation. The article explains Abraham’s unique role:

As an intelligence officer responsible for running the central computer depository of evidence for the hearings, he said, he saw many of the documents in hundreds of the 558 cases. He also worked as a liaison with intelligence agencies and served on one three-member hearing panel.

All of which has left Colonel Abraham, 46, a civilian business lawyer who has lately been busy with a lawsuit between makers of pomegranate juice, with a central role in the public debate over Guantánamo. His account has been widely discussed in Congress, the administration and the press. On Friday, a federal appeals court judge took note of it in describing what she said were problems with the Pentagon’s hearing process.

I thought I’d do some digging into that aspect of this story that will interest our non-constitutional readers: why are pomegranate juice sellers suing each other?

PACER searches disposed of the mystery quickly. POM Wonderful LLC v. Purely Juice, Inc. et al., CV 07-2633 (C.D. Ca.) was filed on April 20, 2007. POM lawsuit against Purely Juice alleges that Purely Juice violated the federal Lanham Act (and its state analogue) by falsely marketing its product as “all natural, consist[ing] of 100% pomegranate juice” with “NO added sugar or sweeteners.”

Abraham represents Purely Juice. Just a few days ago, his client won an important victory in the case. On July 11, 2007, Judge Christina Snyder denied POM’s TRO. The order itself (download the PDF here) is notable for its length and careful attention to the law. POM had independently tested Purely Juice’s product, and allegedly found that “it is clear that consumers of ‘Purely Juice . . .’ are not receiving the nutrients and antioxidant polyphenol health benefits that one would expect from 100% authentic pomegranate juice.” [Editorial comment: anytime you are asking a judge to make a claim about “antioxidant polyphenol health benefits” on a TRO, you seem likely to be in for a tough fight.] But, Abraham argued that, basically, the FDA hasn’t yet made clear what constitutes 100% pomegranate juice, and it was otherwise compliant with 21 CFR 101.30, regulating percent juice claims. The Court agreed with Abraham. As for the plaintiff’s claim that the “NO added sugar” was misleading, the Court found that there was insufficient evidence to find that defendant had added sugar, accepting Abraham’s defense that “the laboratory results could have been caused by the natural variation in the pomegranate fruit, growing conditions, harvesting, storage conditions or processing conditions.” (Notably, this seems like a non-denial denial to me.)

Abraham’s good lawyering saved his client a significant chunk of change. According to a declaration filed in the case, Purely Juice has 800,000 bottles in its inventory, each of which retails for $3.79. ($3.79! For juice!)

So what’s the moral here? You can be a busy commercial lawyer and a participant in the great issues of constitutional moment at the same time? Or, perhaps, as various players seek to control the last lucrative, non-commodity, juice market, the great Pomegranate Wars have begun.

Can Lawyers Afford Not to Play the Rankings Game?

In an article in National Jurist, rankings expert Brian Leiter was quoted as saying that “The more info and the more competing measures there are out there, the less concerned law schools will be about pleasing their U.S. News master.” In a different setting, I too have been enamored of a diversity of rankings. I’ve also hoped that law schools would more formally recognize, say, their top 10% of brief-writers, researchers, or oral advocates, elevating the visibility of those with exceptional skills in areas outside of exam-taking.

However, Leigh Jones reports that there are some costs associated with a diversity of rankings:

By some estimates, law firms have about 200 chances each year to participate in rankings, awards programs or so-called “league table” publications that they hope will distinguish them from the competition. Not only are firms finding their marketing resources stretched thin by the onslaught, but they also say it is getting tougher to wade through the rubbish. “Not a day goes by that I don’t come across another one from someone I’ve just never heard of,” said Lloyd Pearson at White & Case.

Pearson is the “communications manager at the 1,907-attorney firm,” and “was brought aboard last year to handle the flood of surveys, questionnaires, phone calls and research related to awards and rankings that the firm pursues each year.” What happens to firms who can’t hire someone to manage the information overload?

Unfortunately, avoiding the rat race may not be much of an option. As law schools learned to their chagrin, an “echo chamber” effect can cause early ratings to become self-reinforcing. This dynamic sheds new light on lawsuits against websites that purport to rank or score lawyers. Plaintiffs may rightly worry that a low initial rating will become a self-fulfilling prophecy, handicapping their chances at getting good cases and thereby pushing them further down the pecking order.

Hat Tip: Eric Goldman.

RIAA’s Turn to Be a Defendant

Matthew Sag has convincingly argued that RIAA’s litigation war against downloaders is rational for the industry: it’s basically self-financing, as just about every defendant is too terrified of massive statutory damages to put up a fight. But the record industry’s declining fortunes may make its court victories Pyrrhic.

Moreover, a scorched earth litigation strategy against infringers is getting less viable as a few defendants fight back. For example, one litigant has found a creative way of subjecting RIAA’s tactics to public scrutiny:

Former RIAA defendant Tanya Andersen is now suing the major record labels and the RIAA for negligent and illegal investigation and prosecution. In a thirteen count civil suit filed in Oregon District Court, she alleges that record labels didn’t use properly licensed investigators and violated her privacy.

I’m still waiting for someone to bring the antitrust lawsuit that was forestalled by Bertelsmann’s purchase of Napster a few years ago. As Napster-slaying Judge Patel said of the RIAA’s distribution strategy then, “These ventures look bad, smell bad and sound bad” from an antitrust perspective.

Of course, given the lassitude of federal authorities, the antitrust case will be hard to make. But I look forward to more privacy challenges. As Sonia Katyal has argued,

recent developments in copyright law. . . have invited intellectual property owners to create extrajudicial systems of monitoring and enforcement that detect, deter, and control acts of consumer infringement. As a result, . . . intellectual property rights have been fundamentally altered—from a defensive shield into an offensively oriented type of weapon that can be used by intellectual property creators to record the activities of their consumers, and also to enforce particular standards of use and expression. . . .

If agencies fail to police these tactics, perhaps only individuals can fight for themselves. But as Bruce Scheier asks, why doesn’t the US have a privacy commissioner?

Hat Tip: BoingBoing.