Law Commons^™

Apple V. Pepper: Rationalizing Antitrust’S Indirect Purchaser Rule, Herbert J. Hovenkamp

All Faculty Scholarship

In Apple v. Pepper the Supreme Court held that consumers who allegedly paid too much for apps sold on Apple’s iStore could sue Apple for antitrust damages because they were “direct purchasers.” The decision reflects some bizarre complexities that have resulted from the Supreme Court’s 1977 decision in Illinois Brick, which held that only direct purchasers could sue for overcharge injuries under the federal antitrust laws. The indirect purchaser rule was problematic from the beginning. First, it was plainly inconsistent with the antitrust damages statute, which gives an action to “any person who shall be injured in his business …

Occupational Licensing And The Limits Of Public Choice Theory, Gabriel Scheffler, Ryan Nunn

All Faculty Scholarship

Public choice theory has long been the dominant lens through which economists and other scholars have viewed occupational licensing. According to the public choice account, practitioners favor licensing because they want to reduce competition and drive up their own wages. This essay argues that the public choice account has been overstated, and that it ironically has served to distract from some of the most important harms of licensing, as well as from potential solutions. We emphasize three specific drawbacks of this account. First, it is more dismissive of legitimate threats to public health and safety than the research warrants. Second, …

The Impact Of The Durbin Amendment On Banks, Merchants, And Consumers, Vladimir Mukharlyamov, Natasha Sarin

All Faculty Scholarship

After the Great Recession, new regulatory interventions were introduced to protect consumers and reduce the costs of financial products. Some voiced concern that direct price regulation was unlikely to help consumers, because banks offset losses in one domain by increasing the prices that they charge consumers for other products. This paper studies this issue using the Durbin Amendment, which decreased the interchange fees that banks are allowed to charge merchants for processing debit transactions. Merchant interchange fees, previously averaging 2 percent of transaction value, were capped at $0.22, decreasing bank revenue by $6.5 billion annually. The objective of Durbin was …

Making Consumer Finance Work, Natasha Sarin

All Faculty Scholarship

The financial crisis exposed major faultlines in banking and financial markets more broadly. Policymakers responded with far-reaching regulation that created a new agency—the CFPB—and changed the structure and function of these markets.

Consumer advocates cheered reforms as welfare-enhancing, while the financial sector declared that consumers would be harmed by interventions. With a decade of data now available, this Article presents the first empirical examination of the successes and failures of the consumer finance reform agenda. Specifically, I marshal data from every zip code and bank in the United States to test the efficacy of three of the most significant post-crisis …

Behavioral Finance, Decumulation, And The Regulatory Strategy For Robo-Advice, Tom Baker, Benedict Dellaert

All Faculty Scholarship

This working paper surveys the decumulation services offered by investment robo-advisors as a case study with which to examine regulatory and market structure issues raised by automated financial advice. We provide a short introduction to decumulation, describing some of the uncertainties involved in identifying optimal decumulation strategies and sketching a few of the ‘rules of thumb’ that financial advisors have developed in this area in the face of this uncertainty. Next we describe behavioral effects that could inhibit consumers from following an optimal decumulation strategy, concluding that, left to their own devices, consumers are likely to make sub-optimal decumulation decisions. …