Law Commons^™

Personalizing Prices To Redistribute Wealth In Antitrust And Public Utility Rate Regulation, Ramsi A. Woodcock

Law Faculty Scholarly Articles

The information age is enabling firms with even small amounts of market power to personalize the prices they charge to each consumer in the market. Left to their own devices, firms will use this new power to increase profits by charging prices personalized to the maximum that each consumer is willing to pay. But government can also use the new power to personalize prices to equalize wealth—by insisting that firms personalize high prices to the rich and low prices to the poor—and most of the legal rules needed to do so are already in place. Both the antitrust laws and …

Hidden Rules Of A Modest Antitrust, Ramsi Woodcock

Law Faculty Scholarly Articles

Reforming antitust’s rule of reason by shifting burdens of proof to defendants will not solve antitrust’s enforcement drought. For the drought is due in part to the cost to enforcers of identifying rule of reason cases to bring and not just to the cost of winning the cases that enforcers do bring. Enforcement costs matter because enforcers’ budgets are limited—they have failed for a long time to keep up with GDP—and the rule of reason’s emphasis on case-specific effects makes it costly for enforcers to identify good cases to bring. The Supreme Court’s adoption of the rule of reason approach …

Toward A Per Se Rule Against Price Gouging, Ramsi Woodcock

Law Faculty Scholarly Articles

Price gouging is the use of high prices to ration access to a good in unexpectedly short supply. Because sellers can always recoup their costs by choosing not to ration with price and instead allowing the good to sell out, price gouging harms consumers: it transfers wealth from consumers to firms unnecessarily. This harm to consumers could violate the antitrust laws in two ways. First, it could serve as the basis for a per se rule against algorithmic price gouging — surge pricing — because the superhuman speeds with which surge pricing algorithms respond to shortages effectively shorten the period …

The Antitrust Case For Consumer Primacy In Corporate Governance, Ramsi Woodcock

Law Faculty Scholarly Articles

Consumers have been left out of the great debate over the mission of the firm, in which advocates of shareholder value maximization face off against advocates of corporate social responsibility, who would allow management leeway to allocate profits to workers and other non-shareholder insiders of the firm. The consumer welfare standard adopted by antitrust law in the 1970s requires that the firm allocate its profits neither to shareholders nor to workers or other firm insiders. Instead, the standard requires that firms strive to have no profits at all, by charging the lowest possible prices for the best quality products. Such …

The Efficient Queue And The Case Against Dynamic Pricing, Ramsi Woodcock

Law Faculty Scholarly Articles

Surge pricing—using data and algorithms to raise prices in response to unexpected increases in demand—has spread across the economy in recent years, from Amazon, to Disney World, to commuter highways, not to mention Uber, which is infamous for surge pricing rides. Companies claim that surge pricing equilibrates supply and demand, but that is impossible, at least in the short run when demand unexpectedly outstrips supply. What surge pricing really does is to ration existing supplies based on ability to pay. That is both distributively unjust and potentially inefficient. It is also anticompetitive in the sense that it reduces the power …

Digital Monopoly Without Regret, Ramsi Woodcock

Law Faculty Scholarly Articles

Attacks on Amazon, Google, and Facebook have tended to ignore a key lesson of the theory of monopolistic competition: that big is not always bad. A monopolist grows large because consumers prefer the firm’s products. The only question for the antitrust laws is whether consumers prefer the monopolist’s products because the monopolist has improved its products relative to those of competitors, or because the monopolist has degraded the products of competitors without improving its own. Only product-degrading conduct is socially harmful and violative of the antitrust laws. Although a complete accounting of conduct by Amazon, Google or Facebook is not …

Advertising As Monopolization In The Information Age, Ramsi Woodcock

Law Faculty Scholarly Articles

Economists have long recognized that advertising has two main functions: to inform and to persuade. In the information age, the information function is obsolete, because consumers can get all the product information they want from a quick Google search. That makes virtually all advertising today purely persuasive in function. The courts have long recognized that purely persuasive advertising is anticompetitive, because it induces consumers to buy products that they do not really prefer, harming consumers and placing sellers of consumers’ preferred products at a competitive disadvantage. Antitrust enforcers must respond to the obsolescence of the information function of advertising by …

The Obsolescence Of Advertising In The Information Age, Ramsi Woodcock

Law Faculty Scholarly Articles

The vast amount of product information available to consumers through online search renders most advertising obsolete as a tool for conveying product information. Advertising remains useful to firms only as a tool for persuading consumers to purchase advertised products. In the mid-twentieth century, courts applying the antitrust laws held that such persuasive advertising is anticompetitive and harmful to consumers, but the Federal Trade Commission (FTC) was unable to pursue an antitrust campaign against persuasive advertising for fear of depriving consumers of advertising’s information value. Now that the information function of most advertising is obsolete, the FTC should renew its campaign …

The Antitrust Duty To Charge Low Prices, Ramsi Woodcock

Law Faculty Scholarly Articles

Over the past forty years, antitrust has come to embrace a goal of consumer welfare maximization that cannot be achieved solely through condemnation of collusive or exclusionary conduct. To address cases in which firms achieve the power to raise prices and harm consumers without engaging in collusive or exclusionary conduct, antitrust should impose a general duty on businesses to charge a price no higher than economic cost. Courts would not need to set prices to enforce this duty, because violations would be punishable only by nominal damages, and shame, rather than by an injunction setting a reasonable price. Although the …

Big Data, Price Discrimination, And Antitrust, Ramsi Woodcock

Law Faculty Scholarly Articles

Antitrust law today guarantees a particular distribution of wealth between consumers and firms by promoting competition in some markets, but allowing firms to retain pricing power in other markets, such as those in which a firm has achieved power through oligopoly or by fielding a superior product. By giving firms the power to identify individual consumers at the point of sale and determine the maximum price that each consumer can be made to pay for a product, big data will soon allow firms with pricing power to charge each consumer the highest price that the consumer is able to pay, …

The Bargaining Robot, Ramsi Woodcock

Law Faculty Scholarly Articles

The primary threat of the rise of the machines is not to competition itself, but to the bargaining power of consumers, given any level of competition in the market. By enabling firms to interact with each consumer on an individual basis, technology will permit firms to tailor price to the highest level each individual consumer is willing to pay and to use tailored marketing to break each consumer’s will to hold out for a better deal, reducing consumer welfare for any given level of competition. By giving consumers more outside options, the promotion of competition can limit the effects of …

Innovation And Reverse Payments, Ramsi Woodcock

Law Faculty Scholarly Articles

Settlements of patent litigation between branded and generic drug makers that include a promise by the generic maker to stay out of the market, sometimes in exchange for a ‘reverse’ payment, increase the profits of drug makers at the expense of consumers. Some commentators argue that drug makers will invest these profits in innovation, ultimately making consumers better off. Drug market data suggest, however, that the resulting gains to consumers may still be insufficient to offset consumer losses from delayed access to generics. Even when innovation is taken into account, antitrust can most efficiently eliminate the risk of consumer harm …

Uncertainty And Reverse Payments, Ramsi Woodcock

Law Faculty Scholarly Articles

The current approach to “reverse payment” settlements of drug patent litigation seeks to preclude only those settlements guaranteed to harm consumers, rather than all that could harm them. Antitrust tolerates the possibility of harm in order to give firms the freedom to make settlements that might benefit consumers, relative to what courts would achieve under patent law. Antitrust’s mission is not, however, to improve upon outcomes under patent law, but rather to prevent harm to consumers. Accordingly, antitrust must minimize the possibility of harm, even if that precludes the chance of gain. I show that a ban on all settlements …

Inconsistency In Antitrust, Ramsi Woodcock

Law Faculty Scholarly Articles

When the price of a good is too high, consumers who can afford to pay cost, including enough profit to make production worth the manufacturer's while, but cannot pay enough to meet the high price, are forced to do without. Economics teaches that efficiency would increase if price were to fall to cost because at cost the manufacturer would still be glad to produce and consumers could now afford to purchase more of the good. Efficiency requires that where more for less is possible, more must be had for less.

Intracorporate Plurality In Criminal Conspiracy Law, Sarah N. Welling

Law Faculty Scholarly Articles

The concept of conspiracy currently plays a significant role in three areas of substantive law: antitrust, civil rights, and criminal law. Although the role of conspiracy in these substantive areas of law differs in many ways, all three require that the conspiracy consist of a plurality of actors. Determining what constitutes a plurality of actors when all the alleged conspirators are agents of a single corporation poses a continuing problem.

This problem raises two distinct questions. The first is whether, when one agent acts alone within the scope of corporate business, the agent and the corporation constitute a plurality. The …