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Prophylactic Merger Policy, Herbert J. Hovenkamp Dec 2018

Prophylactic Merger Policy, Herbert J. Hovenkamp

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An important purpose of the antitrust merger law is to arrest certain anticompetitive practices or outcomes in their “incipiency.” Many Clayton Act decisions involving both mergers and other practices had recognized the idea as early as the 1920s. In Brown Shoe the Supreme Court doubled down on the idea, attributing to Congress a concern about a “rising tide of economic concentration” that must be halted “at its outset and before it gathered momentum.” The Supreme Court did not explain why an incipiency test was needed to address this particular problem. Once structural thresholds for identifying problematic mergers are identified there …


Whatever Did Happen To The Antitrust Movement?, Herbert J. Hovenkamp Dec 2018

Whatever Did Happen To The Antitrust Movement?, Herbert J. Hovenkamp

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Antitrust in the United States today is caught between its pursuit of technical rules designed to define and implement defensible economic goals, and increasing calls for a new antitrust “movement.” The goals of this movement have been variously defined as combating industrial concentration, limiting the economic or political power of large firms, correcting the maldistribution of wealth, control of high profits, increasing wages, or protection of small business. High output and low consumer prices are typically unmentioned.

In the 1960s the great policy historian Richard Hofstadter lamented the passing of the antitrust “movement” as one of the “faded passions of …


The Salience Theory Of Consumer Financial Regulation, Natasha Sarin Aug 2018

The Salience Theory Of Consumer Financial Regulation, Natasha Sarin

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Prior to the financial crisis, banks’ fee income was their fastest-growing source of revenue. This revenue was often generated through nefarious bank practices (e.g., ordering overdraft transactions for maximal fees). The crisis focused popular attention on the extent to which current regulatory tools failed consumers in these markets, and policymakers responded: A new Consumer Financial Protection Bureau was tasked with monitoring consumer finance products, and some of the earliest post-crisis financial reforms sought to lower consumer costs. This Article is the first to empirically evaluate the success of the consumer finance reform agenda by considering three recent price regulations: a …


Reflections On Two Years Of P.R.O.M.E.S.A., David A. Skeel Jr. Jun 2018

Reflections On Two Years Of P.R.O.M.E.S.A., David A. Skeel Jr.

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This Essay draws both on my scholarly and on my personal experience as a member of Puerto Rico’s oversight board to assess the first two years of the Board’s existence. I begin in a scholarly mode, by exploring the question of where P.R.O.M.E.S.A., the legislation that created the Board, came from. P.R.O.M.E.S.A.’s core provisions are, I will argue, the product of two historical patterns that have emerged in responses to the financial distress of public entities in the United States. The first dates back to the 1970s crisis in New York City, while the second is much more recent. If …


Regulation And The Marginalist Revolution, Herbert J. Hovenkamp May 2018

Regulation And The Marginalist Revolution, Herbert J. Hovenkamp

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The marginalist revolution in economics became the foundation for the modern regulatory State with its “mixed” economy. Marginalism, whose development defines the boundary between classical political economy and neoclassical economics, completely overturned economists’ theory of value. It developed in the late nineteenth century in England, the Continent and the United States. For the classical political economists, value was a function of past averages. One good example is the wage-fund theory, which saw the optimal rate of wages as a function of the firm’s ability to save from previous profits. Another is the theory of corporate finance, which assessed a corporation’s …


The Ethics Of Medicaid’S Work Requirements And Other Personal Responsibility Policies, Harald Schmidt, Allison K. Hoffman May 2018

The Ethics Of Medicaid’S Work Requirements And Other Personal Responsibility Policies, Harald Schmidt, Allison K. Hoffman

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Breaking controversial new ground, the Centers for Medicare & Medicaid Services (CMS) recently invited states to consider establishing work requirements as a condition of receiving Medicaid benefits. Noncompliant beneficiaries may lose some or all benefits, and if they do, will incur higher spending if they have to pay for medical care out of pocket. Current evidence suggests work requirements and related policies, which proponents claim promote personal responsibility, can create considerable risks of health and financial harm in vulnerable populations. Concerns about implementing these policies in Medicaid have been widely expressed, including by major physician organizations, and others have examined …


Was The Amt Effectively Repealed?, Reed Shuldiner Apr 2018

Was The Amt Effectively Repealed?, Reed Shuldiner

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The individual alternative minimum tax (AMT) was a much disliked feature of the tax law prior to the Tax Cuts and Jobs Act (TCJA). Yet, despite repeated promises to repeal the AMT as part of tax reform, the TCJA dropped AMT repeal in favor of increasing the AMT exemption and its phaseout threshold. The question raised by this development is whether the AMT changes should be viewed as yet another stop-gap tweak of the AMT or whether the changes should be viewed as returning the AMT to its roots as a tax on high-income taxpayers using excessive loopholes. In this …


Hipster Antitrust: New Bottles, Same Old W(H)Ine?, Christopher S. Yoo Apr 2018

Hipster Antitrust: New Bottles, Same Old W(H)Ine?, Christopher S. Yoo

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Although the debate over hipster antitrust is often portrayed as something new, experienced observers recognize it as a replay of an old argument that was resolved by the global consensus that antitrust should focus on consumer welfare rather than on the size of firms, the levels of industry concentration, and other considerations. Moreover, the history of the Federal Trade Commission’s Section 5 authority to prevent unfair methods of competition stands as a reminder of the dangers of allowing enforcement policy to be guided by vague and uncertain standards.


Dual Residents: A Sur-Reply To Zelinsky, Michael S. Knoll, Ruth Mason Jan 2018

Dual Residents: A Sur-Reply To Zelinsky, Michael S. Knoll, Ruth Mason

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In this article, we respond to Professor Zelinsky’s criticism of our arguments regarding the constitutionality of New York’s tax residence rule. We argue that the Supreme Court’s decision in Wynne requires reconsideration of the New York Court of Appeal’s decision in Tamagni.


The Future Encyclopedia Of Luddism, Miriam A. Cherry Jan 2018

The Future Encyclopedia Of Luddism, Miriam A. Cherry

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In common parlance, the term “Luddite” means someone who is anti-technology, or maybe, just not adept at using technology. Historically, however, the Luddite movement was a reaction born of industrial accidents and dangerous machines, poor working conditions, and the fact that there were no unions to represent worker interests during England’s initial period of industrialization. The Luddites did not hate technology; they only channeled their anger toward machine-breaking because it had nowhere else to go. The attached book chapter is an alternate history (written circa 2500) that depends on the critical assumption that the Luddites succeeded in their industrial campaign …


The Modigliani-Miller Theorem At 60: The Long-Overlooked Legal Applications Of Finance’S Foundational Theorem, Michael S. Knoll Jan 2018

The Modigliani-Miller Theorem At 60: The Long-Overlooked Legal Applications Of Finance’S Foundational Theorem, Michael S. Knoll

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2018 marks the 60th anniversary of the publication of Franco Modigliani and Merton Miller’s The Cost of Capital, Corporation Finance, and the Theory of Investment. Widely hailed as the foundation of modern finance, their article, which purports to demonstrate that a firm’s value is independent of its capital structure, is little known by lawyers, including legal academics. That is unfortunate because the Modigliani-Miller capital structure irrelevancy proposition (when inverted) provides a framework that can be extremely useful to legal academics, practicing attorneys and judges.


The Economics Of Immigration Reform, Howard F. Chang Jan 2018

The Economics Of Immigration Reform, Howard F. Chang

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In this article, I draw upon economic theory and recent empirical work on the economic and fiscal effects of immigration to evaluate some recent proposals for immigration reform in terms of their effects on the economic welfare of natives in the United States. In particular, I consider the Reforming American Immigration for a Strong Economy (RAISE) Act, a bill that would cut immigration to half of its current level. President Donald Trump has endorsed the RAISE Act and has insisted that many of its provisions be part of any legislation legalizing the status of unauthorized immigrants granted relief under the …


On The Disparate Treatment Of Business And Personal Salt Payments, Michael S. Knoll Jan 2018

On The Disparate Treatment Of Business And Personal Salt Payments, Michael S. Knoll

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The Tax Cuts and Jobs Act, H.R. 1, would eliminate the federal income tax deduction for nonbusiness state and local taxes while maintaining the deduction for business state and local taxes. That disparate treatment has generated a storm of negative commentary. In this short essay, I consider whether the federal tax law should allow a deduction for business state and local taxes assuming that there is no deduction for nonbusiness state and local taxes. I argue that investors and businesses, including pass-through businesses, should be allowed to deduct state and local property and sales taxes, but not general income taxes.


Governance By Contract: The Implications For Corporate Bylaws, Jill E. Fisch Jan 2018

Governance By Contract: The Implications For Corporate Bylaws, Jill E. Fisch

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Boards and shareholders are increasing using charter and bylaw provisions to customize their corporate governance. Recent examples include forum selection bylaws, majority voting bylaws and advance notice bylaws. Relying on the contractual conception of the corporation, Delaware courts have accorded substantial deference to board-adopted bylaw provisions, even those that limit shareholder rights.

This Article challenges the rationale for deference under the contractual approach. With respect to corporate bylaws, the Article demonstrates that shareholder power to adopt and amend the bylaws is, under Delaware law, more limited than the board’s power to do so. As a result, shareholders cannot effectively constrain …


The Logic And Limits Of Event Studies In Securities Fraud Litigation, Jill E. Fisch, Jonah B. Gelbach, Jonathan Klick Jan 2018

The Logic And Limits Of Event Studies In Securities Fraud Litigation, Jill E. Fisch, Jonah B. Gelbach, Jonathan Klick

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Event studies have become increasingly important in securities fraud litigation after the Supreme Court’s decision in Halliburton II. Litigants have used event study methodology, which empirically analyzes the relationship between the disclosure of corporate information and the issuer’s stock price, to provide evidence in the evaluation of key elements of federal securities fraud, including materiality, reliance, causation, and damages. As the use of event studies grows and they increasingly serve a gatekeeping function in determining whether litigation will proceed beyond a preliminary stage, it will be critical for courts to use them correctly.

This Article explores an array of …


The Rule Of Reason, Herbert J. Hovenkamp Jan 2018

The Rule Of Reason, Herbert J. Hovenkamp

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Antitrust’s rule of reason was born out of a thirty-year (1897-1927) division among Supreme Court Justices about the proper way to assess multi-firm restraints on competition. By the late 1920s the basic contours of the rule for restraints among competitors was roughly established. Antitrust policy toward vertical restraints remained much more unstable, however, largely because their effects were so poorly understood.

This article provides a litigation field guide for antitrust claims under the rule of reason – or more precisely, for situations when application of the rule of reason is likely. At the time pleadings are drafted and even up …


The Future Encyclopedia Of Luddism, Miriam A. Cherry Jan 2018

The Future Encyclopedia Of Luddism, Miriam A. Cherry

All Faculty Scholarship

In common parlance, the term “Luddite” means someone who is anti-technology, or maybe, just not adept at using technology. Historically, however, the Luddite movement was a reaction born of industrial accidents and dangerous machines, poor working conditions, and the fact that there were no unions to represent worker interests during England’s initial period of industrialization. The Luddites did not hate technology; they only channeled their anger toward machine-breaking because it had nowhere else to go. The attached book chapter is an alternate history (written circa 2500) that depends on the critical assumption that the Luddites succeeded in their industrial campaign …


Horizontal Mergers, Market Structure, And Burdens Of Proof, Herbert J. Hovenkamp, Carl Shapiro Jan 2018

Horizontal Mergers, Market Structure, And Burdens Of Proof, Herbert J. Hovenkamp, Carl Shapiro

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Since the Supreme Court’s landmark 1963 decision in Philadelphia National Bank, antitrust challengers have mounted prima facie cases against horizontal mergers that rested on the level and increase in market concentration caused by the merger, with proponents of the merger then permitted to rebut by providing evidence that the merger will not have the feared anticompetitive effects. Although the way that concentration is measured and the triggering levels have changed over the last half century, the basic approach has remained intact. This longstanding structural presumption, which is well supported by economic theory and evidence, has been critical to effective …


Horizontal Shareholding And Antitrust Policy, Fiona M. Scott Morton, Herbert J. Hovenkamp Jan 2018

Horizontal Shareholding And Antitrust Policy, Fiona M. Scott Morton, Herbert J. Hovenkamp

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“Horizontal shareholding” occurs when one or more equity funds own shares of competitors operating in a concentrated product market. For example, the four largest mutual fund companies might be large shareholders of all the major United States air carriers. A growing body of empirical literature concludes that under these conditions market output in the product market is lower and prices higher than they would otherwise be.

Here we consider how the antitrust laws might be applied to this practice, identifying the issues that courts are likely to encounter and attempting to anticipate litigation problems. We assume that neither the mutual …


Common Carriage’S Domain, Christopher S. Yoo Jan 2018

Common Carriage’S Domain, Christopher S. Yoo

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The judicial decision invalidating the Federal Communications Commission's first Open Internet Order has led advocates to embrace common carriage as the legal basis for network neutrality. In so doing, network neutrality proponents have overlooked the academic literature on common carriage as well as lessons from its implementation history. This Essay distills these learnings into five factors that play a key role in promoting common carriage's success: (1) commodity products, (2) simple interfaces, (3) stability and uniformity in the transmission technology, (4) full deployment of the transmission network, and (5) stable demand and market shares. Applying this framework to the Internet …


Insolvency Law As Credit Enhancement And Enforcement Mechanism: A Closer Look At Global Modernization Of Secured Transactions Law, Charles W. Mooney Jr. Jan 2018

Insolvency Law As Credit Enhancement And Enforcement Mechanism: A Closer Look At Global Modernization Of Secured Transactions Law, Charles W. Mooney Jr.

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This essay revisits earlier work on the relationship between insolvency law and secured credit, the role of secured transactions law reforms, and the benefits of secured credit. These complex relationships require a holistic approach toward reforms of secured transactions law and insolvency law. Merely enacting sensible secured transactions laws and insolvency laws may be insufficient to produce the intended benefits from either set of laws.

The essay is informed by an ongoing qualitative empirical study of business credit in Japan—the Japanese Business Credit Project. The JBCP involves interviews of representatives of Japanese financial institutions and governmental bodies and legal practitioners …


The Behavioral Economics Of Multilevel Marketing, Heidi H. Liu Jan 2018

The Behavioral Economics Of Multilevel Marketing, Heidi H. Liu

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Multilevel marketing companies (MLMs) - sales organizations that compensate independent consultants based on the sales and recruitment of other consultants - form a significant part of the American economy. Yet, MLMs provide little information to regulators and potential participants regarding potentially material information. Although MLMs are often compared to pyramid schemes, consultants argue that participation in a MLM allows them to make money outside of the traditional full-time labor force. This paper examines the law, economics, and psychology of MLMs, suggesting that MLMs may draw on prospective consultants' cognitive biases in persuading consultants to join and continue a MLM. Consultants …


Antitrust And The Design Of Production, Herbert J. Hovenkamp Jan 2018

Antitrust And The Design Of Production, Herbert J. Hovenkamp

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Both economics and antitrust policy have traditionally distinguished “production” from “distribution.” The former is concerned with how products are designed and built, the latter with how they are placed into the hands of consumers. Nothing in the language of the antitrust laws suggests much concern with production as such. Although courts do not view it that way, even per se unlawful naked price fixing among rivals is a restraint on distribution rather than production. Naked price fixing assumes a product that has already been designed and built, and the important cartel decision is what should be each firm’s output, or …


Progressive Antitrust, Herbert J. Hovenkamp Jan 2018

Progressive Antitrust, Herbert J. Hovenkamp

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Several American political candidates and administrations have both run and served under the “progressive” banner for more than a century, right through the 2016 election season. For the most part these have pursued interventionist antitrust policies, reflecting a belief that markets are fragile and in need of repair, that certain interest groups require greater protection, or in some cases that antitrust policy is an extended arm of regulation. This paper argues that most of this progressive antitrust policy was misconceived, including that reflected in the 2016 antitrust plank of the Democratic Party. The progressive state is best served by a …