Baer, who is the chair of Arnold and Porter’s Antitrust Practice Group, also previously headed the Federal Trade Commission’s competition division when it stopped a merger between Staples and Office Depot in 1997.

He will replace Sharis Pozen, the acting assistant attorney general for antitrust, who plans to step down at the end of April. Pozen succeeded Christine Varney, who left last August.

Baer’s nomination, which was widely expected, still must be confirmed by the U.S. Senate.

…
Baer is seen as someone who would continue the present policies of the Justice Department’s antitrust office.

The division’s key outstanding cases include the purchase of Nortel’s patent assets by a consortium led by Apple, and Google’s purchase of Motorola Mobility. It also has a number of criminal price-fixing probes.

Mr. Baer is a very well respected figure in the antitrust community and I expect this to be perceived — as it should be — as a very high quality appointment.

The concluding comments of the Fed study are worth repeating here:

The significant tightening in household access to mortgage credit likely reflects not only a correction of the unsound underwriting practices that emerged over the past decade, but also a more substantial shift in lenders’ and the GSEs’ willingness to bear risk. Indeed, if the currently prevailing standards had been in place during the past few decades, a larger portion of the nation’s housing stock probably would have been designed and built for rental, rather than owner occupancy. Thus, the challenge for policymakers is to find ways to help reconcile the existing size and mix of the housing stock and the current environment for housing finance. Fundamentally, such measures involve adapting the existing housing stock to the prevailing tight mortgage lending conditions–for example, devising policies that could help facilitate the conversion of foreclosed properties to rental properties—or supporting a housing finance regime that is less restrictive than today’s, while steering clear of the lax standards that emerged during the last decade. Absent any policies to help bridge this gap, the adjustment process will take longer and incur more deadweight losses, pushing house prices lower and thereby prolonging the downward pressure on the wealth of current homeowners and the resultant drag on the economy at large.

Translation: If we can expedite the transition of our housing stock, we can turn this economy around faster. The study offers several policy prescriptions, including facilitating the conversion of foreclosed properties to rental properties, minimizing unnecessary foreclosures through the use of a broad menu of types of loan modifications, and supporting policies that facilitate deeds-in-lieu of foreclosure or short sales.

On page 14 (of a 26 page report), the study offers yet another approach: land banks, which are described as “public or nonprofit entities created to manage properties that are not dealt with adequately through the private market.” Before the free-market crowd gets worked up, they should recognize that a string of abandoned homes generates a negative externality in a neighborhood, which is precisely the occasion for intervention. Properties acquired by land banks may be rehabilitated as rental units or demolished, as market conditions dictate, which could harness deflationary forces caused by excess supply and neighborhood blight.

My only nit with the section is that the Fed limits the land-bank option to “low-value properties,” which they seem to define as properties below $20,000. This is too timid: If land banks are successful at revitalizing neighborhoods—imagine a park in every neighborhood—then why limit the policy to homes that are effectively worthless? Despite this limitation, the Fed calls for increased funding and technical assistance to existing land banks and for creating a national land bank program.

Kudos to the Fed for taking such a bold stand! If only we could get the debate moderators to ask candidates how to solve the housing mess.

Spirit Airlines says a new federal regulation aimed at protecting consumers is forcing it to charge passengers an additional $2 for a ticket.

The fee, which Spirit calls the “Department of Transportation Unintended Consequences Fee,” has been added to each ticket effective immediately, according to Misty Pinson, a Spirit spokeswoman.

The new DOT regulation allows passengers to change flights within 24 hours of booking without paying a penalty. The airline says the regulation forces them to hold the seat for someone who may or may not want to fly. As a consequence, someone who really does want to fly wouldn’t be able to buy that seat because the airline is holding it for someone who might or might not end up taking it.

In short, DOT is requiring airlines to give consumers a real option to change their flight plans at zero cost within a 24 hour window. Spirit rightly recognizes that options have value. Not only is there a value to consumers in ‘buying’ such an option, there is a cost associated with providing the option; in this case, the opportunity cost of selling seats that may be held for someone that will exercise the option to cancel without a fee.

Obviously, DOT head Ray LaHood is unimpressed.

“This is just another example of the disrespect with which too many airlines treat their passengers,” Department of Transportation Secretary Ray LaHood said in an e-mailed statement. “Rather than coming up with new and unnecessary fees to charge their customers, airlines should focus on providing fair and transparent service — that’s what our common sense rules are designed to ensure.”

Perhaps Mr. LaHood doesn’t understand the concept of options and option value. The right, but not the obligation, to undertake an activity (particularly under pre-specified terms) is clearly an economic good.  The very notion that DOT’s new regulation is touted as “consumer friendly” recognizes that it creates additional value for consumers. That is, it’s giving something away that is of value…a property right to change one’s mind at zero cost. However, it is disingenuous of Mr. LaHood to object to the idea that giving away value imposes a cost on the one providing the value (and I don’t mean the DOT, but the airlines who must honor the consumer’s exercise of the option).

A better solution might be to require airlines to explicitly offer the option of a no-penalty change within a 24-hour window. Then consumers could choose whether to pay the fee and airlines might discover the true market value of that option. Spirits’ $2 may be too high. More likely, it’s too low. Many airlines already do offer the option of a no-fee cancellation and the fare differential is much higher than $2, but that option typically has a much longer maturity…any time after booking up until departure. A shorter maturity window should command a lower option value.

Spirit Airlines may be the epitome of nickle-and-diming air travel consumers, something many consumers (myself included in some cases) don’t appreciate. However, there is no denying that Spirit understands the nature of options and their value. And there’s also no denying that, based on its stock price over the past year, Spirit is doing at least as well as industry leaders in providing consumers value for the options they choose. Perhaps instead of casting dispersions, Mr LaHood and his staff should invite Spirit to teach them about this fairly fundamental concept of options and option value rather than imposing regulations with so little regard for their true costs.

Joshua Wright, professor of law at George Mason University School of Law, took the position that there is no significant evidence that Google is guilty of antitrust violations. Even if Google, like other search engines, favors its own content when producing the results of a search request, he argued, dissatisfied customers can easily switch search engines. In other words, the competition is just a click away.

On the other side of the debate was Charles F. Rule, head of the antitrust practice at Cadwalader, Wickersham & Taft LLP. Rule, who has defended Microsoft in antitrust litigation, argued that ample anecdotal evidence exists that implicates Google in a mix of practices that have had the cumulative effect of excluding competitors’ content from appearing in a Google search, as well as monopolizing advertisers. He stressed that his opinions were his own.

…

Wright discussed the evolution of search engines in the last ten years. He conceded that the allegation of search bias, in which a search engine favors its own content at the expense of rivals, is a possible violation of Section 2 of the Sherman Antitrust Act. But Wright noted that leading case law indicates that the behavior in question must harm the competitive process and thereby harm consumers, to be dubbed “exclusionary.”

“We demand evidence of real harm to competition before we break out the antitrust hammer,” he said, “and I don’t think there’s significant evidence of that here. It’s not hard to switch to get what you are looking for.”

Rule dismissed the “just-a-click-away” argument at the beginning of his talk.

“It’s not quite that simple,” he said. “The fact is that because of some of Google’s practices, the company has made it difficult for other search engines like Bing to achieve the same level of performance.”

Rule explained that search engines make their money by selling eyeballs to advertisers, and cited statistics that establish Google’s long-time share of the search-engine advertising market at 90 percent and up. He offered detailed descriptions of specific Google practices that have had the alleged effect of excluding competitive search engines—not just by blocking their content, but also by denying them opportunities to reach advertisers.

“With respect to bias, you can see specific anecdotes where it appears that Google has allegedly blacklisted certain companies intentionally and, in a very focused way, degraded their results so they appear lower on the page,” he said. “But also on the advertising side, there are anecdotes that when Google perceived a potential competitive threat, it automatically dramatically increases the price competitors have to pay, sometimes five to ten thousand percent overnight.”

The upcoming IPO of Facebook, the flak surrounding Twitter’s decision to censor some tweets, and Google’s weaker-than-expected 4th-quarter earnings all point to one of the big events of our times: The crazy, chaotic, idealistic days of the Internet are ending. Once, the Prairies were open and shared by everyone. Then the farmers arrived and fenced them in. The same is happening to the Internet: Apple, Amazon and Facebook are putting up fences — and Google is increasingly being left outside.

The old Internet on which Google has thrived is still there, of course, but like the wilderness it is shrinking. Often these days, we sign up for Facebook or Amazon’s private version of the Internet. At other times, we use a smartphone and download an App instead of using Google search.

…

The danger to Google, in other words, is that as social networking, smartphones and tablets increasingly come to dominate the Internet, Google’s chance to earn advertising revenues from searching will shrink along with its influence.

Yes, Google has the Android and Google+, but these may not be enough to fight the shift to the closed Internet. Google+, of course, has just a tiny fraction of Facebook’s scale and there’s currently little reason to think it can catch up. The Android operating system, also an attempt by Google to build its own internet eco-system, is a more conspicuous success. Most commentators focus on the rapid growth of Android and the fact that it has greater market share than the iPhone.

But this analysis misses the point: The Android may have market share, but more than half of mobile searches come from iPhone users. Google may have developed Android but, unlike Apple’s iPhone, it does not really control it. Licensees like Samsung and HTC are able to adapt Android software to their own ends. And smart companies like Amazon are getting a free ride on Android while sharing little of the spoils with Google.

Don’t get me wrong: Google is still a force, just as Microsoft, Intel and IBM are. But they are no longer at the epicentre of the zeitgeist. Like Microsoft before it, Google can fight the good fight on many different fronts. Whether it can ever find an engine of growth capable of supplanting its core business is another question.

Check out the whole thing.

The Federal Trade Commission has concluded and closed a six-month, nonpublic investigation of Zuffa LLC., the owners of the Ultimate Fighting Championship, and will not take further action at this time, an FTC spokesperson confirmed to SI.com on Tuesday.

According to closing letters to parties involved that were made public Tuesday, the FTC Bureau of Competition investigation focused on Zuffa’s March 2011 acquisition of Explosion Entertainment LLC., which owned the rival Strikeforce promotion, and whether the purchase violated Section 7 of the Clayton Antitrust Act or Section 5 of the Federal Trade Commission Act.

Section 7 of the Clayton Act  “prohibits mergers and acquisitions when the effect may be substantially to lessen competition, or tend to a create a monopoly,” according to FTC guidelines.

Section 5 of the Federal Trade Commission Act prohibits “unfair or deceptive acts or practices in or affecting commerce.’’

“No action has been taken in regards to this part of the investigation,” said the FTC spokesperson, though he said the governmental agency reserves the right to revisit the matter in the public’s interest.

Zuffa purchased Explosion Entertainment, established by Scott Coker and Silicon Valley Sports and Entertainment, a sports franchise company, for a reported $40 million. Coker became the general manager for Strikeforce, which plans to hold six events on Showtime this year.

A remarkable set back for the unilateral effects enforcement agenda at the agencies to be sure.

Shapiro and Hassett credit the nation’s upgrade of wireless broadband infrastructure from second-generation (2G) to third-generation (3G) technology with generating over one million jobs between 2006 and 2011. To demonstrate that adoption of 3G handsets “caused” job creation in an econometric sense, the authors studied the relationship between the change in a state’s employment and the cumulative penetration of cell phone technologies. According to their econometric model, every 10 percentage point increase in the penetration of a new generation of cell phones in a given quarter causes between a 0.05 and 0.07 percentage point increase in employment growth in the following three quarters.

How reasonable are these results? In 2010, Bob Crandall and I estimated that investment in second-generation broadband infrastructure of roughly $30 billion per year, including wireless infrastructure, sustained roughly 500,000 jobs between 2006 and 2009. We further estimated that spillover effects in other industries that exploit broadband technology could sustain another 500,000, bringing the total job effect close to one million jobs per year. Although Shapiro’s and Hassett’s estimates (based on wireless deployment only) significantly exceed ours (based on all broadband deployment), their estimate is not outside the realm of the possibility.

Crandall, Lehr, and Litan (2007) also conducted a regression analysis using state-level broadband penetration data from 2003-2005 to estimate job effects. They projected that for every one percentage point increase in broadband penetration in a state, employment increases by 0.2 to 0.3 percent per year. On a national level, their results imply an increase of approximately 300,000 jobs per year per one-percentage-point increase in broadband penetration. Once again, Shapiro’s and Hassett’s estimates are consistent with this prior work.

Scholars may differ on the precise way to measure the employment effects, but that debate misses the more important policy point—namely, that broadband technologies generally and wireless broadband in particular have become a vital engine of job creation. The observed correlation between wireless adoption and employment is not accidental: To induce customers to adopt the coolest handset, firms must continuously invest in the next generation of network and device technologies. And these costly investments sustain jobs.

Moreover, contrary to the FCC’s opinion in its 15^th annual wireless competition report, private industry’s sustained and widespread investment in new wireless broadband technologies is consistent with the sector being intensely competitive. Industry critics have decried such evidence, arguing instead that the industry is in the death grip of monopolists. Although a monopolist may have an incentive to innovate to protect against a future threat, firms in a competitive industry have incentives to invest and innovate as a way to protect against losing market share today.

Policymakers should ask themselves this question: Why would wireless carriers continually invest billions of dollars on next-generation technologies if they could sit back and exploit their alleged monopoly rents? Experience and common sense tell us that in fact, companies in this space are not behaving like monopolists. Rather, wireless providers of all stripes are desperately trying to distinguish themselves from their rivals. Wireless tablets and phones are driving demand for more and faster wireless broadband, while spectrum-devouring apps like Siri have captured the imagination of millions. The wireless arms race is on, and the U.S. economy stands to benefit directly as wireless companies try to outmaneuver one another with the fastest networks, coolest devices, and deepest array of killer apps.

The Federal Trade Commission will host a workshop on April 26, 2012, to examine the use of mobile payments in the marketplace and how this emerging technology impacts consumers. This event will bring together consumer advocates, industry representatives, government regulators, technologists, and academics to examine a wide range of issues, including the technology and business models used in mobile payments, the consumer protection issues raised, and the experiences of other nations where mobile payments are more common. The workshop will be free and open to the public.

Topics may include:

• What different technologies are used to make mobile payments and how are the technologies funded (e.g., credit card, debit card, phone bill, prepaid card, gift card, etc.)?
• Which technologies are being used currently in the United States, and which are likely to be used in the future?
• What are the risks of financial losses related to mobile payments as compared to other forms of payment? What recourse do consumers have if they receive fraudulent, unauthorized, and inaccurate charges? Do consumers understand these risks? Do consumers receive disclosures about these risks and any legal protections they might have?
• When a consumer uses a mobile payment service, what information is collected, by whom, and for what purpose? Are these data collection practices disclosed to consumers? Is the data protected?
• How have mobile payment technologies been implemented in other countries, and with what success? What, if any, consumer protection issues have they faced, and how have they dealt with them?
• What steps should government and industry members take to protect consumers who use mobile payment services?

To aid in preparation for the workshop, FTC staff welcomes comments from the public, including original research, surveys and academic papers. Electronic comments can be made at https://ftcpublic.commentworks.com/ftc/mobilepayments. Paper comments should be mailed or delivered to: 600 Pennsylvania Avenue N.W., Room H-113 (Annex B), Washington, DC 20580.

The workshop is free and open to the public; it will be held at the FTC’s Satellite Building Conference Center, 601 New Jersey Avenue, N.W., Washington, D.C.