Law and Economics Commons^™

Plus Factors And Agreement In Antitrust Law, William E. Kovacic, Robert C. Marshall, Leslie M. Marx, Halbert L. White

Michigan Law Review

Plus factors are economic actions and outcomes, above and beyond parallel conduct by oligopolistic firms, that are largely inconsistent with unilateral conduct but largely consistent with explicitly coordinated action. Possible plus factors are typically enumerated without any attempt to distinguish them in terms of a meaningful economic categorization or in terms of their probative strength for inferring collusion. In this Article, we provide a taxonomy for plus factors as well as a methodology for ranking plus factors in terms of their strength for inferring explicit collusion, the strongest of which are referred to as "super plus factors."

Is Free Trade "Free?" Is It Even "Trade?" Oppression And Consent In Hemispheric Trade Agreements, Frank J. Garcia

Frank J. Garcia

In order for free trade as a policy to deliver fully on its social promise, it must be both “free” and “trade.” In fact, it must be free, in the sense of voluntary, to be trade at all. In other words, for normative and practical reasons, free trade requires that global economic relations be structured through agreements which reflect the consent of those subject to them. The neoliberal trading system today only imperfectly lives up to this obligation. In this essay, I will examine the role of consent in trade agreements, drawing on examples from CAFTA as representative of important …

The Moral Hazard Problem In Global Economic Regulation, Frank J. Garcia

Frank J. Garcia

Global regulation of international business transactions presents a particular form of the moral hazard problem. Global firms use economic and political power to manipulate state and state-controlled multilateral regulation to preserve their opportunity to externalize the social costs of global economic activity with impunity. Unless other actors can effectively counter this at the national and global regulatory levels, globalization re-creates the conditions for under-regulated or “robber baron” capitalism at the global level. This model of economic activity has been rejected at the national level by the same modern democratic capitalist states which currently dominate globalization, creating a crisis of legitimacy …

Trade And Justice: Linking The Trade Linkage Debates, Frank J. Garcia

Frank J. Garcia

No abstract provided.

Antitrust Review Of The At&T/T-Mobile Transaction, Maurice E. Stucke, Allen Grunes

College of Law Faculty Scholarship

In this Essay, we review AT&T Inc.’s proposed $39 billion acquisition of T-Mobile USA, Inc., under federal merger law, under the U.S. Department of Justice and Federal Trade Commission’s 2010 Horizontal Merger Guidelines, and with a focus on possible remedies. We find, under a rule of law approach, that the proposed acquisition is presumptively anticompetitive, and the merging parties in their public disclosures have failed to overcome this presumption. Next we find that under the Merger Guidelines, there is reason to believe that the transaction may result in higher prices to consumers under several different plausible theories. Finally, we turn …

Introduction To Creation Without Restraint: Promoting Liberty And Rivalry In Innovation, Christina Bohannan, Herbert J. Hovenkamp

All Faculty Scholarship

This document contains the table of contents, introduction, and a brief description of Christina Bohannan & Herbert Hovenkamp, Creation without Restraint: Promoting Liberty and Rivalry in Innovation (Oxford 2011).

Promoting rivalry in innovation requires a fusion of legal policies drawn from patent, copyright, and antitrust law, as well as economics and other disciplines. Creation Without Restraint looks first at the relationship between markets and innovation, noting that innovation occurs most in moderately competitive markets and that small actors are more likely to be truly creative innovators. Then we examine the problem of connected and complementary relationships, a dominant feature of …

The Law And Economics Of Monopolization Standards, Keith N. Hylton

Faculty Scholarship

Monopolization, the restriction of competition by a dominant firm, is regulated in roughly half of the world’s nations. The two most famous laws regulating monopolization are Section 2 of the Sherman Act, in the United States, and Article 82 of the European Community Treaty. Both laws have been understood as prohibiting ‘abuses’ of monopoly power.

The Law Of Vertical Integration And The Business Firm: 1880-1960, Herbert J. Hovenkamp

All Faculty Scholarship

Vertical integration occurs when a firm does something for itself that it could otherwise procure on the market. For example, a manufacturer that opens its own stores is said to be vertically integrated into distribution. One irony of history is that both classical political economy and neoclassicism saw vertical integration and vertical contractual arrangements as much less threatening to competition than cartels or other horizontal arrangements. Nevertheless, vertical integration has produced by far the greater amount of legislation at both federal and state levels and has motivated many more political action groups. Two things explain this phenomenon. First, while economists …

Governing Gambling In The United States, Maria E. Garcia

CMC Senior Theses

The role risk taking has played in American history has helped shape current legislation concerning gambling. This thesis attempts to explain the discrepancies in legislation regarding distinct forms of gambling. While casinos are heavily regulated by state and federal laws, most statutes dealing with lotteries strive to regulate the activities of other parties instead of those of the lottery institutions. Incidentally, lotteries are the only form of gambling completely managed by the government. It can be inferred that the United States government is more concerned with people exploiting gambling than with the actual practice of wagering.

In an effort to …

Preserving A Political Bargain: The Political Economy Of The Non-Interventionist Challenge To Monopolization Enforcement, Jonathan Baker

Articles in Law Reviews & Other Academic Journals

The antitrust rules governing exclusionary conduct by dominant firms are among the most controversial in U.S. competition policy. During the first decade of the twenty-first century, they were debated in three arenas, involving legal policy, economic policy, and politics. In each arena, the dispute mainly arose as criticism of traditional standards by advocates of less intervention. Viewed through a political economy lens, the controversy can be understood as a potential challenge to an informal political bargain reached during the 1940s by which competition was adopted as national economic policy in preference to regulation or laissez-faire. From this perspective, and applying …

International Disparities Panel, Sean Flynn

Articles in Law Reviews & Other Academic Journals

No abstract provided.

Federalism, Variation, And State Regulation Of Franchise Termination, Jonathan Klick, Bruce Kobayashi, Larry Ribstein

All Faculty Scholarship

This article discusses and expands on our recent work examining the effects of franchise-termination laws. In a prior article, we examined empirically the effect of franchise-termination laws on the level of franchise activity. Our analysis improved upon the prior literature in two major ways. First, our work exploited two new sources of panel data to provide new empirical evidence on the effect of franchise termination laws. Second, our analysis examined variation in states’ restrictions on the ability of franchisors and franchisees to contract around a particular state’s regulation. We found that the effects of termination laws on the overall level …

United States Competition Policy In Crisis: 1890-1955, Herbert J. Hovenkamp

All Faculty Scholarship

The development of marginalist, or neoclassical, economics led to a fifty-year long crisis in competition theory. Given an industrial structure with sufficient fixed costs, competition always became "ruinous," forcing firms to cut prices to marginal cost without sufficient revenue remaining to pay off investment. Early neoclassicists such as Alfred Marshall were not able to solve this problem, and as a result many economists were hostile toward the antitrust laws in the early decades of the twentieth century. The ruinous competition debate came to an abrupt end in the early 1930's, when Joan Robinson and particularly Edward Chamberlin developed models that …

Opportunism, Uncertainty, And Relational Contracting - Antitrust Rules In The Film Industry, Ryan M. Riegg

Ryan M. Riegg

The Legal Periphery Of Dominant Firm Conduct, Herbert J. Hovenkamp

All Faculty Scholarship

This essay explores two different but related problems and how U.S. antitrust law and EU competition law approach them. The first is the offense of attempt to monopolize, which concerns the acts that a firm that is not yet dominant might undertake in order to become dominant. The second is the offense of monopoly or dominant firm leveraging, which occurs when a firm uses its dominant position in one market to cause some kind of harm in a different market where it also does business.

The language of EU and U.S. provisions concerning dominant firms provokes one to think that …

When Second Comes First: Correcting Patent’S Poor Secondary Incentives Through An Optional Patent Purchase System, Jordan Barry

ExpressO

As research has advanced, technologies have become more closely knit, and the relationships between them—both complementary and competitive—have become increasingly important. Unfortunately, the patent system’s use of monopoly power to reward innovators creates inefficient results by overly encouraging the development of substitute technologies and discouraging the development of complementary technologies. This paper explains how an optional patent purchase system could help ameliorate such problems and discusses the implications of such a system.

Beyond Schumpeter Vs. Arrow: How Antitrust Fosters Innovation, Jonathan Baker

Articles in Law Reviews & Other Academic Journals

The relationship between competition and innovation is the subject of a familiar controversy in economics, between the Schumpeterian view that monopolies favor innovation and the opposite view, often associated with Kenneth Arrow, that competition favors innovation. Taking their cue from this debate, some commentators reserve judgment as to whether antitrust enforcement is good for innovation. Such misgivings are unnecessary. The modern economic learning about the connection between competition and innovation helps clarify the types of firm conduct and industry settings where antitrust interventions are most likely to foster innovation. Measured against this standard, contemporary competition policy holds up well. Today's …

Market Definition: An Analytical Overview, Jonathan Baker

Articles in Law Reviews & Other Academic Journals

This essay surveys important issues in antitrust market definition. It identifies settings in which market definition is useful, and evaluates methods of defining markets. It considers whether markets should be defined with respect to demand substitution only or whether supply substitution also should count. It addresses practical issues in defining markets, including the probative value of various types of evidence, how much buyer substitution is too much, application of the market definition algorithm of the Horizontal Merger Guidelines, the Cellophane fallacy, and the advantages and disadvantages of defining submarkets. It also evaluates several controversial approaches to market definition, including price …

A Complete Property Right Amendment, John H. Ryskamp

ExpressO

The trend of the eminent domain reform and "Kelo plus" initiatives is toward a comprehensive Constitutional property right incorporating the elements of level of review, nature of government action, and extent of compensation. This article contains a draft amendment which reflects these concerns.

Price Discrimination With Contract Terms: The Lost Volume Problem, Barry E. Adler, Alan Schwartz

ExpressO

In a common commercial pattern, the seller of a standard product contracts with one buyer and then sells to another at the contract price after the initial buyer breaches. Sellers argue, and courts largely agree, that the seller could have served the contract buyer as well as the later buyer; hence, the seller is entitled to retain a down payment to the extent of, or sue to recover, the profit – price less cost – that it would have realized on the initial sale had that sale been completed. Some courts and many scholars disagree, arguing that resale of the …

The Death Of The Doha Round. What Next For Services Trade?, Rafael Leal-Arcas

ExpressO

With the indefinite suspension of the WTO multilateral trade negotiations in July 2006 by WTO Director-General Pascal Lamy, the world trading system must now find ways and means to unblock what is perceived as a danger to the world order. This article analyzes the legal and policy implications of the currently fatal Doha Round for the two main developed WTO Members, i.e., the U.S. and the EC, and the most relevant developing countries of the WTO. The specific focus of attention will be mainly on services trade. Thoughts on alternative ways to move forward in the multilateral trading system are …

Re-Thinking Securities Regulation: A Comparative Study Of Asx, Nyse, And Sgx , Benedict Sheehy

ExpressO

This article approaches the issue of securities regulation starting with an examination of the nature and role of markets and financial markets. It next outlines the various arguments for and against regulation, and then looks at approaches taken by markets and their regulators. The approaches are government regulation, self-regulation and co-regulation, and the structural changes via demutualization and corporate governance. With this background, it turns to examine how these approaches have played out in the markets themselves. The article surveys the regulatory aspects of the ASX, NYSE and the SGX, and reviews the regulatory and financial performance of the markets. …

Corporations And Social Costs: The Wal-Mart Case Study, Benedict Sheehy

ExpressO

This article examines the role of the corporate vehicle in the creation of social costs. The article identifies some of the political commitments and philosophies behind the differing notions of corporations. Social costs are those activities which result from business activity and cause uncompensated harm to society. The founding contribution to the law and economics discussion by Ronald Coase is given a thorough treatment. The paper next, turns to the dominant explanation of corporate structure, namely the law and economics model developed expounded by Easterbrook and Fischel. It then applies the theoretical discussion in a case study of the world’s …

Un-Fair Trade As Friendly Fire: The Australia-Usa Free Trade Agreement, Benedict Sheehy

ExpressO

Trade, economists and trade theorists advise, is a mutually beneficial exercise. Among this group, a particular set of advocates, claim that “Free Trade” is in the interest of all parties. As will be demonstrated, Free Trade is not truly “free” but an exercise of foreign policy and the implementation of policies favouring wealthy corporate interest groups. Free Trade is controlled by wealthy nations who have stacked the rules in favour of themselves, and in particular their corporate interests, and against the poor producers in poor nations. This control is used contrary to fairness, economic and ecological logic. Fair trade, by …

Predatory Structured Finance, Christopher L. Peterson

ExpressO

Predatory lending is a real, pervasive, and destructive problem as demonstrated by record settlements, jury awards, media exposes, and a large body of empirical scholarship. Currently the national debate over predatory mortgage lending is shifting to the controversial question of who should bear liability for predatory lending practices. In today’s subprime mortgage market, originators and brokers quickly assign home loans through a complex and opaque series of transactions involving as many as a dozen different strategically organized companies. Loans are typically transferred into large pools, and then income from those loans is “structured” to appeal to different types of investors. …

Unwarranted Fears Mask The Benefits Of Network Diversity: An Argument Against Mandating Network Neutrality, Elvis Stumbergs

ExpressO

The rapid development of the Internet has necessitated an update to Federal telecommunications laws. Recent Congressional efforts to enact such an update, however, have spawned a fiery debate over a somewhat nebulous concept: network neutrality. The debate concerns the way that Internet access providers handle the data traffic being sent over their networks. These providers would like the option to offer some of their customers, web site hosting companies and similar entities, additional services that would essentially result in these customers’ content loading faster, more reliably, or more securely than others not receiving such priority treatment. Yet, this proposed “diversity” …

Bond Repudiation, Tax Codes, The Appropriations Process And Restitution Post-Eminent Domain Reform, John H. Ryskamp

ExpressO

This brief comment suggests where the anti-eminent domain movement might be heading next.

Should Internet Protocol-Enabled Video Service Provided Over A Telephone Network Be Regulated As A Cable Service?, Hal J. Singer, J Gregory Sidak, Robert W. Crandall

ExpressO

We examine whether, on legal or policy grounds, Internet protocol-enabled video services provided over a telephone network should be regulated as a cable service. We evaluate the history of cable regulation and the services that Congress envisioned to be regulated when it first drafted legislation establishing a regulatory framework for cable television services in 1984. We then examine numerous differences between the IP-enabled video services delivered over a telephone network and those that Congress envisioned when regulating cable television service in 1984 and in subsequent years when it revised the Cable Act of 1984. Finally, we find that municipal franchise …

Antitrust Governance, Yane Svetiev

ExpressO

In this article, the author argues that antitrust law has entered a new phase of its controversial existence. The role of antitrust in moderating inter-firm relationships depends both on the problems of the underlying market regime and the institutional capacity of antitrust decision-makers to respond to those challenges. For much of the 20th century, the model firm was hierarchical: vertical integration within the business organization was a way of achieving transaction cost efficiencies and delivering higher levels of output at lower prices. Recognition of this fact transformed antitrust from its traditional focus on concentrated power, to a policy focused on …

The Efficiencies Defense In Mergers: The Baby-Food Case Reconsidered , Daniel J. Richards, Richard B. Dagen

ExpressO

The Federal Trade Commission’s successful challenge to the proposed merger of Heinz and Beech-Nut baby food operations in 2001 remains a controversial case that raises concern over the role of cost efficiencies in merger analysis. Although the FTC argued that the merger would result in an increased likelihood of coordinated effects, we develop an alternative explanation for why the merger was likely to harm consumers even in the absence of such cooperation. We show that a conventional model of vertical product differentiation is able to replicate the premerger market data. Vertical product differentiation assumes that consumers agree on the relative …