Are current antitrust tools fully adequate to cope with the challenges posed by giant online “digital platforms” (such as Google, Amazon, and Facebook)?  Yes.  Should antitrust rules be expanded to address broader social concerns that transcend consumer welfare and economic efficiency, such as income inequality and allegedly excessive big business influence on the political process?  No.  For more details, see my January 23 Heritage Foundation Legal Memorandum entitled Antitrust and the Winner-Take-All Economy.  That Memo concludes:

[T]he U.S. antitrust laws as currently applied, emphasizing sound economics, are fully capable of preventing truly anticompetitive behavior by major Internet platform companies and other large firms. But using antitrust to attack companies based on non-economic, ill-defined concerns about size, fairness, or political clout is unwarranted, and would be a recipe for reduced innovation and economic stagnation. Recent arguments trotted out to use antitrust in such an expansive manner are baseless, and should be rejected by enforcers and by Congress.

On January 23rd, for the fourth consecutive year, The Heritage Foundation will host a one-day antitrust conference that focuses on major thematic developments in domestic and international antitrust policy.  The conference pulls together leaders of the antitrust bar and top current and former Federal Trade Commission (FTC) and Justice Department (DOJ) officials to provide an overarching perspective of antitrust trends that will affect the business community over the next year.

This year’s program, entitled “Trump Antitrust Policy after One Year,” will as usual feature an opening keynote address by former FTC Chairman and scholar extraordinaire Professor Bill Kovacic, followed by three separate panels covering FTC, DOJ, and international developments, respectively.  A light lunch will be served following the FTC panel.  The program will be held in the Allison Auditorium at The Heritage Foundation headquarters in the District of Columbia.

You can find out more about the program, and register to attend, here.  (If you cannot attend in person, you will be able to see it streamed online at

I hope to see you there!

On December 1, 2017, in granting certiorari in Salt River Project Agricultural Improvement and Power District v. SolarCity Corp., the U.S. Supreme Court agreed to consider “whether orders denying antitrust state-action immunity to public entities are immediately appealable under the collateral-order doctrine.”  At first blush, this case might appear to involve little more than a narrow technical question regarding the availability of interlocutory appeals.  But more fundamentally, this matter may afford the Supreme Court yet another opportunity to weigh in on the essential nature of the antitrust state action doctrine (albeit indirectly), in deciding whether the existence of state action immunity should be decided prior to the litigation of substantive antitrust suits.


The Salt River Power District (SRP) is the only supplier of traditional electrical power in Phoenix, and is a subdivision of the State of Arizona.  SRP has lobbied successfully for special governmental status and has used its longstanding ties to government to advance the interests of its private shareholders.  (This sort of tale comes as no surprise to students of public choice.)  Counsel for respondent SolarCity discussed these ties in their brief opposing certiorari:

[SRP] was created in 1903 to take advantage of a federal law that provided interest-free loans for landowners to build reclamation projects to irrigate their lands.  During the Great Depression, SRP successfully lobbied the Arizona legislature for a law denominating it a political subdivision of Arizona so the landowners who ran SRP could avoid income taxes and sell tax-free bonds. . . .  Arizona denominates SRP a public entity, but as th[e] [U.S. Supreme] Court . . . explained [in a 1981 case involving [the right of local non-landowner residents to vote on SRP policy determinations], SRP and organizations like it are “essentially business enterprises, created by and chiefly benefitting a specific group of landowners.” . . . .  Among other things, SRP lacks “the crucial powers of sovereignty typical of a general purpose unit of government” and SRP’s electric business does not implicate any traditional sovereign power. . . . 

SRP’s retail electric business is unregulated. The business answers only to its own self-interested Board, not a public utility commission or any similar independent body. . . .   42 (ER55). SRP is thus free to serve private, not public interests. . . .  SRP takes profits from electricity sales and uses them to subsidize irrigation and canal water so that, for example, certain agricultural interests can farm cheaply by a city in the desert. . . . 

 In short, [as the Supreme Court explained in 1981,] SRP makes money from electric customers and pays out dividends in the form of irrigating “private lands for personal profit.”


SolarCity sells and leases rooftop solar-energy panels in Arizona.  It alleges that SRP used its special government subsidies to drive it out of the market for the supply of those panels to customers in the SRP district area.  Specifically, according to counsel for SolarCity:

As solar generation increased in popularity and efficiency, SRP started to view solar as a long-term competitive threat to its electricity sales and profits. . . .  Facing competition for the first time ever, SRP had a choice between competing in the market or using its monopoly power to exclude competition. . . .  SRP first attempted to compete on the merits by developing its own solar offerings. . . .  However, consumers continued to prefer SRP’s solar competitors. . . .  Then, rather than offer consumers a better product or value, SRP used its unregulated market power to impose terms that lock customers into remaining what SRP calls “requirements” customers—those who satisfy all their electric needs from, and deal exclusively with, SRP. . . .

SRP’s plan [which imposed a large penalty on any customer who obtained power from its own solar system] worked. . . .  The new requirements it mandated for its customers had a drastic anticompetitive effect. . . .  New rooftop solar applications—from customers of any firm, not just SolarCity—dropped by about 96 percent. . . .  SolarCity was forced to stop selling in SRP territory and to relocate employees.

SolarCity sued SRP for Sherman Antitrust Act violations in Arizona federal district court.  SRP moved to dismiss under the antitrust state action doctrine, which (as Professor Herbert Hovenkamp puts it) “exempts qualifying state and local government regulation from federal antitrust [law], even if the regulation at issue compels an otherwise clear violation of the law.”  The district court denied the motion to dismiss, and the Ninth Circuit affirmed.  The Ninth Circuit panel opinion (Judge Michelle Friedland, joined by Judges Alex Kozinski and Ronald Lee Gilman) assessed the applicability of the “collateral order doctrine,” which allows an appeal of a non-final district court decision if it is:  (1) conclusive; (2) addresses a question separate from the merits of the underlying case; and (3) raises “some particular value of a high order” that will evade effective review if not considered immediately.  The Ninth Circuit emphasized the Supreme Court’s teaching that the collateral order doctrine is a “narrow exception” that must be “strictly applied.”  It concluded that, “because the state-action doctrine is a defense to liability and not an immunity from suit, the collateral-order doctrine does not give us jurisdiction here [footnotes omitted].”

In its brief supporting its writ of certiorari, SRP stressed that an interlocutory appeal was justified here because“[a] denial of state-action immunity, like a denial of state sovereign immunity, offends state sovereignty, dignity, and autonomy. . . .  [T]he decision below threatens the dignity and autonomy of the states, as well as the division of regulatory power between the state and federal governments, by allowing a political subdivision of a state to be subjected to prolonged litigation for engaging in conduct that was clearly authorized by the state.”

In short, the Supreme Court has been asked to take fundamental federalism principles into account in weighing the applicability of the collateral order doctrine.


Set aside for the moment the narrow question of the applicability of specific collateral order doctrine criteria in this case.   Assuming the validity of the facts summarized above, this matter highlights the always-present anticompetitive potential of enabling private parties to exercise monopoly power under the mantle of state authority.  Let us briefly examine, then, key state action principles that apply to essentially private conduct that seeks to shelter under a governmental cloak.

Commendably, in Midcal and 324 Liquor, the Supreme Court made it clear that the state action doctrine does not enable state governments to directly authorize purely private actors to violate the Sherman Act, free from state oversight.  But should an entity such as SRP that is in essence an unregulated for-profit private enterprise, acting in an anticompetitive fashion, be free to undermine the competitive process (benefiting from government subsidies to boot) merely because a century-old state law characterized it as a state political subdivision?

The “spirit” of recent Supreme Court jurisprudence suggests that the answer should be no, and that the Court may be willing to look beyond the formality of a legislative designation (in this case, “state political subdivision”) to questions of political accountability.  In 2015, In North Carolina Dental Board, the Court rejected the claim that state action immunity applied to the self-interested actions of a state dental regulatory board stacked with dentists (the board barred competition from non-dentists in tooth whitening).  In so doing, the Court held that entities designated as state agencies are not exempt from active supervision when they are controlled by market participants, because immunizing such entities from federal antitrust challenge would pose the risk of self-dealing that the Court had warned against in prior decisions, such as Midcal.

A legal formalist might respond that a mere state board is of a lesser dignity than a state political subdivision, such as SRP, which directly exercises state sovereign power, and, as such, is not subject to “active supervision” requirements.  Functionally, however, SRP acts in all respects like a private company, except that it benefits from certain special state subsidies that assist it in undermining competition.  Recognizing that reality, the Court might be willing to say that it will look beyond formal legislative designations to the actual role of a state entity in deciding whether it is, or is not, engaging in “sovereign action.”  (State instrumentalities engaging in classic sovereign functions, such as a state supreme court or state treasury department, would not raise this sort of problem.)

More specifically, the Court might wish to consider whether federal antitrust law should be applicable when a state instrumentality that does not have the attributes of a classic private business – such as a state owned-controlled- and operated electric company, for example – engages in business activity and uses its governmental ties to subvert competition.  Such a company might, for instance, predate against competing private companies by pricing below its own cost to drive out and keep out rivals, relying on taxpayer funding to support its activities.  Activity of this sort could be made subject to a “market participant exception” to the state action doctrine (at the very least requiring state active supervision), as recommended by the Federal Trade Commission’s 2004 State Action Task Force Report.  Such an exception, which has not yet been specifically addressed by the Supreme Court, would reduce the returns to anticompetitive business activity engaged in by privileged “state” agents, thereby promoting commercial freedom and vibrant markets.  And, as two learned commentators recently pointed out, it would not offend federalism principles that underlie the antitrust state action doctrine (footnote references deleted):

[T]he state does not act within its sovereign prerogative when engaged in economic conduct.  It cannot be that the government is truly exercising sovereign powers when acting in the same way as its private citizens.  Thus, restricting the prerogative of state and local governments to engage in economic conduct does not abrogate sovereign immunity.  Therefore, the federalism concerns underpinning the . . . [state action] immunity doctrine are not in play when the State acts as an ordinary market-participant on equal-footing with private citizens.

The policy and federalism justifications for denying state action immunity to an unsupervised state agency acting as a commercial operator would apply “in spades” to SRP, which, as has been seen, in all material respects looks like a purely private actor.

Let’s return now to the specific question before the Supreme Court.  While state action doctrinal issues (including, of course, a possible market operator exception) are not directly presented in the SRP v. SolarCity case, they may well flavor the approach the Court takes in determining the availability of interlocutory appeals of state action immunity denials.  The clear and ringing invocation of federalism principles in petitioners’ brief for certiorari suggests a possible doctrinal hook.  In particular, the Court might determine that respect for the dignity and role of states as coordinate sovereigns compels a finding that denials of antitrust state action immunity should be subject to immediate review.

A ruling that state action questions should be decided “up front” might, however, prove a pyrrhic victory for petitioners.  Counsel for respondents have ably pointed out the quintessentially private commercial nature of SRP’s activities, which could amply support a judicial finding of no state action immunity – whether based on the somewhat novel “market participant” exception or because of inadequate state supervision.


The Supreme Court’s decision in SPR v. SolarCity will determine the narrow issue of the availability of interlocutory appeals to an antitrust defendant that is denied a dismissal on antitrust state action grounds.  A holding that authorizes such appeals also would have the incidental salutary effect of furthering efficiency, by eliminating a significant source of costly uncertainty affecting the litigation of cases that fall under the shadow of the “state action” umbrella.

More broadly, the facts in SPR v. SolarCity highlight a potential future clarification of the antitrust state action doctrine – establishment of a clear “market participant” exception to state action immunity.  Such an exception commendably would promote effective market processes without offending federalism.  It would also tend to diminish returns to (and thereby weaken incentives to engage in) rent seeking by those firms that seek to obtain a business advantage through special government privilege, rather than through competition on the merits.

Last week, several major drug makers marked the new year by announcing annual increases on list prices.  In addition to drug maker Allergan—which pledged last year to confine price increases below 10 percent and, true to its word, reported 2018 price increases of 9.5 percent—several other companies also stuck to single-digit increases.   Although list or “sticker” prices generally increased by around 9 percent for most drugs, after discounts negotiated with various health plans, the net prices that consumers and insurers actually pay will see much lower increases. For example, Allergan expects that payors will only see net price increases of 2 to 3 percent in 2018.

However, price increases won’t generate the same returns for brand drug companies that they once did.  As insurers and pharmacy benefit managers consolidate and increase their market share, they have been able to capture an increasing share of the money spent on drugs for themselves. Indeed, a 2017 report found that, of the money spent on prescription drugs by patients and health plans at the point of sale, brand drug makers only realized 39 percent.  Meanwhile, supply-chain participants, such as pharmacy benefit managers, realized 42 percent of these expenditures.  What’s more, year-after-year, brand drug makers have seen their share of these point-of-sale expenditures decrease while supply-chain entities have kept a growing share of expenditures for themselves.

Brand drug makers have also experienced a dramatic decline in the return on their R&D investment.  A recent Deloitte study reports that, for the large drug makers they’ve followed since 2010, R&D returns have dropped from over 10 percent to under 4 percent for the last two years.  The ability of supply-chain entities to capture an increasing share of drug expenditures is responsible for at least part of drug makers’ decreasing R&D returns; the study reports that average peak sales for drugs have slowly dropped over time, mirroring drug maker’s decreasing share of expenditures.  In addition, the decline in R&D returns can be traced to the increasing cost of bringing drugs to market; for the companies Deloitte studied, the cost to bring a drug to market has increased from just over $1.1 billion in 2010 to almost $2 billion in 2017.

Brand drug makers’ decreasing share of drug expenditures and declining R&D returns reduce incentives to innovate.  As the payoff from innovation declines, fewer companies will devote the substantial resources necessary to develop innovative new drugs.  In addition, innovation is threatened as brand companies increasingly face uncertainty about the patent rights of the drugs they do bring to market.  As I’ve discussed in a previous post,  the unbalanced inter partes review (IPR) process created under the Leahy-Smith America Invents Act in 2012 has led to significantly higher patent invalidation rates.  Compared to traditional district-court litigation, several pro-challenger provisions under IPR—including a lower standard of proof, a broader claim construction standard, and the ability of patent challengers to force patent owners into duplicative litigation—have resulted in twice as many patents deemed invalid in IPR proceedings.  Moreover, the lack of a standing requirement in IPR proceedings has given rise to “reverse patent trolling,” in which entities that are not litigation targets, or even participants in the same industry, threaten to file an IPR petition challenging the validity of a patent unless the patent holder agrees to specific settlement demands.  Even supporters of IPR proceedings recognize the flaws with the system; as Senator Orrin Hatch stated in a 2017 speech: “Such manipulation is contrary to the intent of IPR and the very purpose of intellectual property law. . . I think Congress needs to take a look at it.” Although the constitutionality of the IPR process is currently under review by the U.S. Supreme Court, if the unbalanced process remains unchanged, the significant uncertainty it creates for drug makers’ patent rights will lead to less innovation in the pharmaceutical industry.  Drug makers will have little incentive to spend billions of dollars to bring a new drug to market when they cannot be certain if the patents for that drug can withstand IPR proceedings that are clearly stacked against them.

We are likely to see a renewed push for drug pricing reforms in 2018 as access to affordable drugs remains a top policy priority.  Although Congress has yet to come together in support of any specific proposal, several states are experimenting with reforms that aim to lower drug prices by requiring more pricing transparency and notice of price increases.  As lawmakers consider these and other reforms, they should consider the current challenges that drug makers already face as their share of drug expenditures and R&D returns decline and patent rights remain uncertain.  Reforms that further threaten drug makers’ financial incentives to innovate could reduce our access to life-saving and life-improving new drugs.

Introduction and Summary

On December 19, 2017, the U.S. Court of Appeals for the Second Circuit presented Broadcast Music, Inc. (BMI) with an early Christmas present.  Specifically, the Second Circuit commendably affirmed the District Court for the Southern District of New York’s September 2016 ruling rejecting the U.S. Department of Justice’s (DOJ) August 2016 reinterpretation of its longstanding antitrust consent decree with BMI.  Because the DOJ reinterpretation also covered a parallel DOJ consent decree with the American Society of Composers, Authors, and Publishers (ASCAP), the Second Circuit’s decision by necessary implication benefits ASCAP as well, although it was not a party to the suit.

The Second Circuit’s holding is sound as a matter of textual interpretation and wise as a matter of economic policy.  Indeed, DOJ’s current antitrust leadership, which recognizes the importance of vibrant intellectual property licensing in the context of patents (see here), should be pleased that the Second Circuit rescued it from a huge mistake by the Obama Administration DOJ in the context of copyright licensing.


BMI and ASCAP are the two leading U.S. “performing rights organizations” (PROs).  They contract with music copyright holders to act as intermediaries that provide “blanket” licenses to music users (e.g., television and radio stations, bars, and internet music distributors) for use of their full copyrighted musical repertoires, without the need for song-specific licensing negotiations.  This greatly reduces the transactions costs of arranging for the playing of musical works, benefiting music users, the listening public, and copyright owners (all of whom are assured of at least some compensation for their endeavors).  ASCAP and BMI are big businesses, with each PRO holding licenses to over ten million works and accounting for roughly 45 percent of the domestic music licensing market (ninety percent combined).

Because both ASCAP and BMI pool copyrighted songs that could otherwise compete with each other, and both grant users a single-price “blanket license” conveying the rights to play their full set of copyrighted works, the two organizations could be seen as restricting competition among copyrighted works and fixing the prices of copyrighted substitutes – raising serious questions under section 1 of the Sherman Antitrust Act, which condemns contracts that unreasonably restrain trade.  This led the DOJ to bring antitrust suits against ASCAP and BMI over eighty years ago, which were settled by separate judicially-filed consent decrees in 1941.

The decrees imposed a variety of limitations on the two PROs’ licensing practices, aimed at preventing ASCAP and BMI from exercising anticompetitive market power (such as the setting of excessive licensing rates).  The decrees were amended twice over the years, most recently in 2001, to take account of changing market conditions.  The U.S. Supreme Court noted the constraining effect of the decrees in BMI v. CBS (1979), in ruling that the BMI and ASCAP blanket licenses did not constitute per se illegal price fixing.  The Court held, rather, that the licenses should be evaluated on a case-by-case basis under the antitrust “rule of reason,” since the licenses inherently generated great efficiency benefits (“the immediate use of covered compositions, without the delay of prior individual negotiations”) that had to be weighed against potential anticompetitive harms.

The August 4, 2016 DOJ Consent Decree Interpretation

Fast forward to 2014, when DOJ undertook a new review of the ASCAP and BMI decrees, and requested the submission of public comments to aid it in its deliberations.  This review came to an official conclusion two years later, on August 4, 2016, when DOJ decided not to amend the decrees – but announced a decree interpretation that limits ASCAP’s and BMI’s flexibility.  Specifically, DOJ stated that the decrees needed to be “more consistently applied.”  By this, the DOJ meant that BMI and ASCAP should only grant blanket licenses that cover all of the rights to 100 percent of the works in the PROs’ respective catalogs (“full-work licensing”), not licenses that cover only partial interests in those works.  DOJ stated:

Only full-work licensing can yield the substantial procompetitive benefits associated with blanket licenses that distinguish ASCAP’s and BMI’s activities from other agreements among competitors that present serious issues under the antitrust laws.

The New DOJ Interpretation Was Bad as a Matter of Policy

DOJ’s August 4 interpretation rejected industry practice.  Under it, ASCAP and BMI were only allowed to offer a license covering all of the copyright interests in a musical competition, even if the license covers a joint work.

For example, consider a band of five composer-musicians, each of whom has a fractional interest in the copyright covering the band’s new album which is a joint work.  Prior to the DOJ’s new interpretation, each musician was able to offer a partial interest in the joint work to a performance rights organization, reflecting the relative shares of the total copyright interest covering the work.  The organization could offer a partial license, and a user could aggregate different partial licenses in order to cover the whole joint work.  Following the new interpretation, however, BMI and ASCAP could not offer partial licenses to that work to users.  This denied the band’s individual members the opportunity to deal profitably with BMI and ASCAP, thereby undermining their ability to receive fair compensation.

As the two PROs warned, this approach, if upheld, would “cause unnecessary chaos in the marketplace and place unfair financial burdens and creative constraints on songwriters and composers.”  According to ASCAP President Paul Williams, “It is as if the DOJ saw songwriters struggling to stay afloat in a sea of outdated regulations and decided to hand us an anchor, in the form of 100 percent licensing, instead of a life preserver.”  Furthermore, the president and CEO of BMI, Mike O’Neill, stated:  “We believe the DOJ’s interpretation benefits no one – not BMI or ASCAP, not the music publishers, and not the music users – but we are most sensitive to the impact this could have on you, our songwriters and composers.”

The PROs’ views were bolstered by a January 2016 U.S. Copyright Office report, which concluded that “an interpretation of the consent decrees that would require 100-percent licensing or removal of a work from the ASCAP or BMI repertoire would appear to be fraught with legal and logistical problems, and might well result in a sharp decrease in repertoire available through these [performance rights organizations’] blanket licenses.”  Regrettably, during the decree review period, DOJ ignored the expert opinion of the Copyright Office, as well as the public record comments of numerous publishers and artists (see here, for example) indicating that a 100 percent licensing requirement would depress returns to copyright owners and undermine the creative music industry.

Most fundamentally, DOJ’s new interpretation of the BMI and ASCAP consent decrees involved an abridgment of economic freedom.  It further limited the flexibility of copyright music holders and music users to contract with intermediaries to promote the efficient distribution of music performance rights, in a manner that benefits the listening public while allowing creative artists sufficient compensation for their efforts.  DOJ made no compelling showing that a new consent decree constraint was needed to promote competition (100 percent licensing only).  Far from promoting competition, DOJ’s new interpretation undermined it.  DOJ micromanagement of copyright licensing by consent decree reinterpretation was a costly new regulatory initiative that reflected a lack of appreciation for intellectual property rights, which incentivize innovation.  In short, DOJ’s latest interpretation of the ASCAP and BMI decrees was terrible policy.

The New DOJ Interpretation Ran Counter to International Norms

The new DOJ interpretation had unfortunate international policy implications as well.  According to Gadi Oron, Director General of the International Confederation of Societies of Authors and Composers (CISAC), a Paris-based organization that regroups 239 rights societies from 123 countries, including ASCAP, BMI, and SESAC, the new interpretation departed from international norms in the music licensing industry and have disruptive international effects:

It is clear that the DoJ’s decisions have been made without taking the interests of creators, neither American nor international, into account. It is also clear that they were made with total disregard for the international framework, where fractional licensing is practiced, even if it’s less of a factor because many countries only have one performance rights organization representing songwriters in their territory. International copyright laws grant songwriters exclusive rights, giving them the power to decide who will license their rights in each territory and it is these rights that underpin the landscape in which authors’ societies operate. The international system of collective management of rights, which is based on reciprocal representation agreements and founded on the freedom of choice of the rights holder, would be negatively affected by such level of government intervention, at a time when it needs support more than ever.

The New DOJ Interpretation Was Defective as a Matter of Law, and the District Court and the Second Circuit So Held

As I explained in a November 2016 Heritage Foundation commentary (citing arguments made by counsel for BMI), DOJ’s new interpretation not only was bad domestic and international policy, it was inconsistent with sound textual construction of the decrees themselves.  The BMI decree (and therefore the analogous ASCAP decree as well) did not expressly require 100 percent licensing and did not unambiguously prohibit fractional licensing.  Accordingly, since a consent decree is an injunction, and any activity not expressly required or prohibited thereunder is permitted, fractional shares licensing should be authorized.  DOJ’s new interpretation ignored this principle.  It also was at odds with a report of the U.S. Copyright Office that concluded the BMI consent decree “must be understood to include partial interests in musical works.”  Furthermore, the new interpretation was belied by the fact that the PRO licensing market has developed and functioned efficiently for decades by pricing, collecting, and distributing fees for royalties on a fractional basis.  Courts view such evidence of trade practice and custom as relevant in determining the meaning of a consent decree.

The district court for the Southern District of New York accepted these textual arguments in its September 2016 ruling, granting BMI’s request for a declaratory judgment that the BMI decree did not require Decree did not require 100% (“full-work”) licensing.  The court explained:

Nothing in the Consent Decree gives support to the Division’s views. If a fractionally-licensed composition is disqualified from inclusion in BMI’s repertory, it is not for violation of any provision of the Consent Decree. While the Consent Decree requires BMI to license performances of those compositions “the right of public performances of which [BMI] has or hereafter shall have the right to license or sublicense” (Art. II(C)), it contains no provision regarding the source, extent, or nature of that right. It does not address the possibilities that BMI might license performances of a composition without sufficient legal right to do so, or under a worthless or invalid copyright, or users might perform a music composition licensed by fewer than all of its creators. . . .

The Consent Decree does not regulate the elements of the right to perform compositions. Performance of a composition under an ineffective license may infringe an author’s rights under copyright, contract or other law, but it does not infringe the Consent Decree, which does not extend to matters such as the invalidity or value of copyrights of any of the compositions in BMI’s repertory. Questions of the validity, scope and limits of the right to perform compositions are left to the congruent and competing interests in the music copyright market, and to copyright, property and other laws, to continue to resolve and enforce. Infringements (and fractional infringements) and remedies are not part of the Consent Decree’s subject-matter.

The Second Circuit affirmed, agreeing with the district court’s reading of the decree:

The decree does not address the issue of fractional versus full work licensing, and the parties agree that the issue did not arise at the time of the . . . [subsequent] amendments [to the decree]. . . .

This appeal begins and ends with the language of the consent decree. It is a “well-established principle that the language of a consent decree must dictate what a party is required to do and what it must refrain from doing.” Perez v. Danbury Hosp., 347 F.3d 419, 424 (2d Cir. 2003); United States v. Armour & Co., 402 U.S. 673, 682 (1971) (“[T]he scope of a consent decree must be discerned within its four corners…”). “[C]ourts must abide by the express terms of a consent decree and may not impose additional requirements or supplementary obligations on the parties even to fulfill the purposes of the decree more effectively.” Perez, 347 F.3d at 424; see also Barcia v. Sitkin, 367 F.3d 87, 106 (2d Cir. 2004) (internal citations omitted) (The district court may not “impose obligations on a party that are not unambiguously mandated by the decree itself.”). Accordingly, since the decree is silent on fractional licensing, BMI may (and perhaps must) offer them unless a clear and unambiguous command of the decree would thereby be violated. See United States v. Int’l Bhd. Of Teamsters, Chauffeurs, Warehousemen & Helpers of Am., AFLCIO, 998 F.2d 1101, 1107 (2d Cir. 1993); see also Armour, 402 U.S. at 681-82.


The federal courts wisely have put to rest an ill-considered effort by the Obama Antitrust Division to displace longstanding industry practices that allowed efficient flexibility in the licensing of copyright interests by PROs.  Let us hope that the Trump Antitrust Division will not just accept the Second Circuit’s decision, but will positively embrace it as a manifestation of enlightened antitrust-IP policy – one in harmony with broader efforts by the Division to restore sound thinking to the antitrust treatment of patent licensing and intellectual property in general.

The terms of the United Kingdom’s (UK) exit from the European Union (EU) – “Brexit” – are of great significance not just to UK and EU citizens, but for those in the United States and around the world who value economic liberty (see my Heritage Foundation memorandum giving the reasons why, here).

If Brexit is to promote economic freedom and enhanced economic welfare, Brexit negotiations between the UK and the EU must not limit the ability of the United Kingdom to pursue (1) efficiency-enhancing regulatory reform and (2) trade liberalizing agreements with non-EU nations.  These points are expounded upon in a recent economic study (The Brexit Inflection Point) by the non-profit UK think tank the Legatum Institute, which has produced an impressive body of research on the benefits of Brexit, if implemented in a procompetitive, economically desirable fashion.  (As a matter of full disclosure, I am a member of Legatum’s “Special Trade Commission,” which “seeks to re-focus the public discussion on Brexit to a positive conversation on opportunities, rather than challenges, while presenting empirical evidence of the dangers of not following an expansive trade negotiating path.”  Members of the Special Trade Commission are unpaid – they serve on a voluntary pro bono basis.)

Unfortunately, however, leading UK press commentators have urged the UK Government to accede to a full harmonization of UK domestic regulations and trade policy with the EU.  Such a deal would be disastrous.  It would prevent the UK from entering into mutually beneficial trade liberalization pacts with other nations or groups of nations (e.g., with the U.S. and with the members of the Transpacific Partnership (TPP) trade agreement), because such arrangements by necessity would lead to a divergence with EU trade strictures.  It would also preclude the UK from unilaterally reducing harmful regulatory burdens that are a byproduct of economically inefficient and excessive EU rules.  In short, it would be antithetical to economic freedom and economic welfare.

Notably, in a November 30 article (Six Impossible Notions About “Global Britain”), a well-known business journalist, Martin Wolf of the Financial Times, sharply criticized The Brexit Inflection Point’s recommendation that the UK should pursue trade and regulatory policies that would diverge from EU standards.  Notably, Wolf characterized as an “impossible thing” Legatum’s point that the UK should not “’allow itself to be bound by the EU’s negotiating mandate.’  We all now know this is infeasible.  The EU holds the cards and it knows it holds the cards. The Legatum authors still do not.”

Shanker Singham, Director of Economic Policy and Prosperity Studies at Legatum, brilliantly responded to Wolf’s critique in a December 4 article (published online by CAPX) entitled A Narrow-Minded Brexit Is Doomed to Fail.  Singham’s trenchant analysis merits being set forth in its entirety (by permission of the author):

“Last week, the Financial Times’s chief economics commentator, Martin Wolf, dedicated his column to criticising The Brexit Inflection Point, a report for the Legatum Institute in which Victoria Hewson, Radomir Tylecote and I discuss what would constitute a good end state for the UK as it seeks to exercise an independent trade and regulatory policy post Brexit, and how we get from here to there.

We write these reports to advance ideas that we think will help policymakers as they tackle the single biggest challenge this country has faced since the Second World War. We believe in a market place of ideas, and we welcome challenge. . . .

[W]e are thankful that Martin Wolf, an eminent economist, has chosen to engage with the substance of our arguments. However, his article misunderstands the nature of modern international trade negotiations, as well as the reality of the European Union’s regulatory system – and so his claim that, like the White Queen, we “believe in impossible things” simply doesn’t stack up.

Mr Wolf claims there are six impossible things that we argue. We will address his rebuttals in turn.

But first, in discussions about the UK’s trade policy, it is important to bear in mind that the British government is currently discussing the manner in which it will retake its independent WTO membership. This includes agricultural import quotas, and its WTO rectification processes with other WTO members.

If other countries believe that the UK will adopt the position of maintaining regulatory alignment with the EU, as advocated by Mr Wolf and others, the UK’s negotiating strategy would be substantially weaker. It would quite wrongly suggest that the UK will be unable to lower trade barriers and offer the kind of liberalisation that our trading partners seek and that would work best for the UK economy. This could negatively impact both the UK and the EU’s ongoing discussions in the WTO.

Has the EU’s trading system constrained growth in the World?

The first impossible thing Mr Wolf claims we argue is that the EU system of protectionism and harmonised regulation has constrained economic growth for Britain and the world. He is right to point out that the volume of world trade has increased, and the UK has, of course, experienced GDP growth while a member of the EU.

However, as our report points out, the EU’s prescriptive approach to regulation, especially in the recent past (for example, its approach on data protection, audio-visual regulation, the restrictive application of the precautionary principle, REACH chemicals regulation, and financial services regulations to name just a few) has led to an increase in anti-competitive regulation and market distortions that are wealth destructive.

As the OECD notes in various reports on regulatory reform, regulation can act as a behind-the-border barrier to trade and impede market openness for trade and investment. Inefficient regulation imposes unnecessary burdens on firms, increases barriers to entry, impacts on competition and incentives for innovation, and ultimately hurts productivity. The General Data Protection Regulation (GDPR) is an example of regulation that is disproportionate to its objectives; it is highly prescriptive and imposes substantial compliance costs for business that want to use data to innovate.

Rapid growth during the post-war period is in part thanks to the progressive elimination of border trade barriers. But, in terms of wealth creation, we are no longer growing at that rate. Since before the financial crisis, measures of actual wealth creation (not GDP which includes consumer and government spending) such as industrial output have stalled, and the number of behind-the-border regulatory barriers has been increasing.

The global trading system is in difficulty. The lack of negotiation of a global trade round since the Uruguay Round, the lack of serious services liberalisation in either the built-in agenda of the WTO or sectorally following on from the Basic Telecoms Agreement and its Reference Paper on Competition Safeguards in 1997 has led to an increase in behind-the-border barriers and anti-competitive distortions and regulation all over the world. This stasis in international trade negotiations is an important contributory factor to what many economists have talked about as a “new normal” of limited growth, and a global decline in innovation.

Meanwhile the EU has sought to force its regulatory system on the rest of the world (the GDPR is an example of this). If it succeeds, the result would be the kind of wealth destruction that pushes more people into poverty. It is against this backdrop that the UK is negotiating with both the EU and the rest of the world.

The question is whether an independent UK, the world’s sixth biggest economy and second biggest exporter of services, is able to contribute to improving the dynamics of the global economic architecture, which means further trade liberalisation. The EU is protectionist against outside countries, which is antithetical to the overall objectives of the WTO. This is true in agriculture and beyond. For example, the EU imposes tariffs on cars at four times the rate applied by the US, while another large auto manufacturing country, Japan, has unilaterally removed its auto tariffs.

In addition, the EU27 represents a declining share of UK exports, which is rather counter-intuitive for a Customs Union and single market. In 1999, the EU represented 55 per cent of UK exports, and by 2016, this was 43 per cent. That said, the EU will remain an important, albeit declining, market for the UK, which is why we advocate a comprehensive free trade agreement with it.

Can the UK secure meaningful regulatory recognition from the EU without being identical to it?

Second, Mr Wolf suggests that regulatory recognition between the UK and EU is possible only if there is harmonisation or identical regulation between the UK and EU.

This is at odds with WTO practice, stretching back to its rules on domestic laws and regulation as encapsulated in Article III of the GATT and Article VI of the GATS, and as expressed in the Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary (SPS) agreements.

This is the critical issue. The direction of travel of international trade thinking is towards countries recognising each other’s regulatory systems if they achieve the same ultimate goal of regulation, even if the underlying regulation differs, and to regulate in ways that are least distortive to international trade and competition. There will be areas where this level of recognition will not be possible, in which case UK exports into the EU will of course have to satisfy the standards of the EU. But even here we can mitigate the trade costs to some extent by Mutual Recognition Agreements on conformity assessment and market surveillance.

Had the US taken the view that it would not receive regulatory recognition unless their regulatory systems were the same, the recent agreement on prudential measures in insurance and reinsurance services between the EU and US would not exist. In fact this point highlights the crucial issue which the UK must successfully negotiate, and one in which its interests are aligned with other countries and with the direction of travel of the WTO itself. The TBT and SPS agreements broadly provide that mutual recognition should not be denied where regulatory goals are aligned but technical regulation differs.

Global trade and regulatory policy increasingly looks for regulation that promotes competition. The EU is on a different track, as the GDPR demonstrates. This is the reason that both the Canada-EU agreement (CETA) and the EU offer in the Trade in Services agreement (TiSA) does not include new services. If GDPR were to become the global standard, trade in data would be severely constrained, slowing the development of big data solutions, the fourth industrial revolution, and new services trade generally.

As many firms recognise, this would be extremely damaging to global prosperity. In arguing that regulatory recognition is only available if the UK is fully harmonised with the EU, Mr Wolf may be in harmony with the EU approach to regulation. But that is exactly the approach that is damaging the global trading environment.

Can the UK exercise trade policy leadership?

Third, Mr Wolf suggests that other countries do not, and will not, look to the UK for trade leadership. He cites the US’s withdrawal from the trade negotiating space as an example. But surely the absence of the world’s biggest services exporter means that the world’s second biggest exporter of services will be expected to advocate for its own interests, and argue for greater services liberalisation.

Mr Wolf believes that the UK is a second-rank power in decline. We take a different view of the world’s sixth biggest economy, the financial capital of the world and the second biggest exporter of services. As former New Zealand High Commissioner, Sir Lockwood Smith, has said, the rest of the world does not see the UK as the UK too often seems to see itself.

The global companies that have their headquarters in the UK do not see things the same way as Mr Wolf. In fact, the lack of trade leadership since 1997 means that a country with significant services exports would be expected to show some leadership.

Mr Wolf’s point is that far from seeking to grandiosely lead global trade negotiations, the UK should stick to its current knitting, which consists of its WTO rectification, and includes the negotiation of its agricultural import quotas and production subsidies in agriculture. This is perhaps the most concerning part of his argument. Yes, the UK must rectify its tariff schedules, but for that process to be successful, especially on agricultural import quotas, it must be able to demonstrate to its partners that it will be able to grant further liberalisation in the near term future. If it can’t, then its trading partners will have no choice but to demand as much liberalisation as they can secure right now in the rectification process.

This will complicate that process, and cause damage to the UK as it takes up its independent WTO membership. Those WTO partners who see the UK as vulnerable on this point will no doubt see validation in Mr Wolf’s article and assume it means that no real liberalisation will be possible from the UK. The EU should note that complicating this process for the UK will not help the EU in its own WTO processes, where it is vulnerable.

Trade negotiations are dynamic not static and the UK must act quickly

Fourth, Mr Wolf suggests that the UK is not under time pressure to “escape from the EU”.  This statement does not account for how international trade negotiations work in practice. In order for countries to cooperate with the UK on its WTO rectification, and its TRQ negotiations, as well to seriously negotiate with it, they have to believe that the UK will have control over tariff schedules and regulatory autonomy from day one of Brexit (even if we may choose not to make changes to it for an implementation period).

If non-EU countries think that the UK will not be able to exercise its freedom for several years, they will simply demand their pound of flesh in the negotiations now, and get on with the rest of their trade policy agenda. Trade negotiations are not static. The US executive could lose trade-negotiating authority in the summer of next year if the NAFTA renegotiation is not going well. Other countries will seek to accede to the Trans Pacific Partnership (TPP). China is moving forward with its Regional Cooperation and Economic Partnership, which does not meaningfully touch on domestic regulatory barriers. Much as we might criticise Donald Trump, his administration has expressed strong political will for a UK-US agreement, and in that regard has broken with traditional US trade policy thinking. The UK has an opportunity to strike and must take it.

The UK should prevail on the EU to allow Customs Agencies to be inter-operable from day one

Fifth, with respect to the challenges raised on customs agencies working together, our report argued that UK customs and the customs agencies of the EU member states should discuss customs arrangements at a practical and technical level now. What stands in the way of this is the EU’s stubbornness. Customs agencies are in regular contact on a business-as-usual basis, so the inability of UK and member-state customs agencies to talk to each other about the critical issue of new arrangements would seem to border on negligence. Of course, the EU should allow member states to have these critical conversations now.  Given the importance of customs agencies interoperating smoothly from day one, the UK Government must press its case with the European Commission to allow such conversations to start happening as a matter of urgency.

Does the EU hold all the cards?

Sixth, Mr Wolf argues that the EU holds all the cards and knows it holds all the cards, and therefore disagrees with our claim that the the UK should “not allow itself to be bound by the EU’s negotiating mandate”. As with his other claims, Mr Wolf finds himself agreeing with the EU’s negotiators. But that does not make him right.

While absence of a trade deal will of course damage UK industries, the cost to EU industries is also very significant. Beef and dairy in Ireland, cars and dairy in Bavaria, cars in Catalonia, textiles and dairy in Northern Italy – all over Europe (and in politically sensitive areas), industries stands to lose billions of Euros and thousands of jobs. This is without considering the impact of no financial services deal, which would increase the cost of capital in the EU, aborting corporate transactions and raising the cost of the supply chain. The EU has chosen a mandate that risks neither party getting what it wants.

The notion that the EU is a masterful negotiator, while the UK’s negotiators are hopeless is not the global view of the EU and the UK. Far from it. The EU in international trade negotiations has a reputation for being slow moving, lacking in creative vision, and unable to conclude agreements. Indeed, others have generally gone to the UK when they have been met with intransigence in Brussels.

What do we do now?

Mr Wolf’s argument amounts to a claim that the UK is not capable of the kind of further and deeper liberalisation that its economy would suggest is both possible and highly desirable both for the UK and the rest of the world. According to Mr Wolf, the UK can only consign itself to a highly aligned regulatory orbit around the EU, unable to realise any other agreements, and unable to influence the regulatory system around which it revolves, even as that system becomes ever more prescriptive and anti-competitive. Such a position is at odds with the facts and would guarantee a poor result for the UK and also cause opportunities to be lost for the rest of the world.

In all of our [Legatum Brexit-related] papers, we have started from the assumption that the British people have voted to leave the EU, and the government is implementing that outcome. We have then sought to produce policy recommendations based on what would constitute a good outcome as a result of that decision. This can be achieved only if we maximise the opportunities and minimise the disruptions.

We all recognise that the UK has embarked on a very difficult process. But there is a difference between difficult and impossible. There is also a difference between tasks that must be done and take time, and genuine negotiation points. We welcome the debate that comes from constructive challenge of our proposals; and we ask in turn that those who criticise us suggest alternative plans that might achieve positive outcomes. We look forward to the opportunity of a broader debate so that collectively the country can find the best path forward.”


This week the FCC will vote on Chairman Ajit Pai’s Restoring Internet Freedom Order. Once implemented, the Order will rescind the 2015 Open Internet Order and return antitrust and consumer protection enforcement to primacy in Internet access regulation in the U.S.

In anticipation of that, earlier this week the FCC and FTC entered into a Memorandum of Understanding delineating how the agencies will work together to police ISPs. Under the MOU, the FCC will review informal complaints regarding ISPs’ disclosures about their blocking, throttling, paid prioritization, and congestion management practices. Where an ISP fails to make the proper disclosures, the FCC will take enforcement action. The FTC, for its part, will investigate and, where warranted, take enforcement action against ISPs for unfair, deceptive, or otherwise unlawful acts.

Critics of Chairman Pai’s plan contend (among other things) that the reversion to antitrust-agency oversight of competition and consumer protection in telecom markets (and the Internet access market particularly) would be an aberration — that the US will become the only place in the world to move backward away from net neutrality rules and toward antitrust law.

But this characterization has it exactly wrong. In fact, much of the world has been moving toward an antitrust-based approach to telecom regulation. The aberration was the telecom-specific, common-carrier regulation of the 2015 Open Internet Order.

The longstanding, global transition from telecom regulation to antitrust enforcement

The decade-old discussion around net neutrality has morphed, perhaps inevitably, to join the larger conversation about competition in the telecom sector and the proper role of antitrust law in addressing telecom-related competition issues. Today, with the latest net neutrality rules in the US on the chopping block, the discussion has grown more fervent (and even sometimes inordinately violent).

On the one hand, opponents of the 2015 rules express strong dissatisfaction with traditional, utility-style telecom regulation of innovative services, and view the 2015 rules as a meritless usurpation of antitrust principles in guiding the regulation of the Internet access market. On the other hand, proponents of the 2015 rules voice skepticism that antitrust can actually provide a way to control competitive harms in the tech and telecom sectors, and see the heavy hand of Title II, common-carrier regulation as a necessary corrective.

While the evidence seems clear that an early-20th-century approach to telecom regulation is indeed inappropriate for the modern Internet (see our lengthy discussions on this point, e.g., here and here, as well as Thom Lambert’s recent post), it is perhaps less clear whether antitrust, with its constantly evolving, common-law foundation, is up to the task.

To answer that question, it is important to understand that for decades, the arc of telecom regulation globally has been sweeping in the direction of ex post competition enforcement, and away from ex ante, sector-specific regulation.

Howard Shelanski, who served as President Obama’s OIRA Administrator from 2013-17, Director of the Bureau of Economics at the FTC from 2012-2013, and Chief Economist at the FCC from 1999-2000, noted in 2002, for instance, that

[i]n many countries, the first transition has been from a government monopoly to a privatizing entity controlled by an independent regulator. The next transformation on the horizon is away from the independent regulator and towards regulation through general competition law.

Globally, nowhere perhaps has this transition been more clearly stated than in the EU’s telecom regulatory framework which asserts:

The aim is to progressively reduce ex ante sector-specific regulation progressively as competition in markets develops and, ultimately, for electronic communications [i.e., telecommunications] to be governed by competition law only. (Emphasis added.)

To facilitate the transition and quash regulatory inconsistencies among member states, the EC identified certain markets for national regulators to decide, consistent with EC guidelines on market analysis, whether ex ante obligations were necessary in their respective countries due to an operator holding “significant market power.” In 2003 the EC identified 18 such markets. After observing technological and market changes over the next four years, the EC reduced that number to seven in 2007 and, in 2014, the number was further reduced to four markets, all wholesale markets, that could potentially require ex ante regulation.

It is important to highlight that this framework is not uniquely achievable in Europe because of some special trait in its markets, regulatory structure, or antitrust framework. Determining the right balance of regulatory rules and competition law, whether enforced by a telecom regulator, antitrust regulator, or multi-purpose authority (i.e., with authority over both competition and telecom) means choosing from a menu of options that should be periodically assessed to move toward better performance and practice. There is nothing jurisdiction-specific about this; it is simply a matter of good governance.

And since the early 2000s, scholars have highlighted that the US is in an intriguing position to transition to a merged regulator because, for example, it has both a “highly liberalized telecommunications sector and a well-established body of antitrust law.” For Shelanski, among others, the US has been ready to make the transition since 2007.

Far from being an aberrant move away from sound telecom regulation, the FCC’s Restoring Internet Freedom Order is actually a step in the direction of sensible, antitrust-based telecom regulation — one that many parts of the world have long since undertaken.

How antitrust oversight of telecom markets has been implemented around the globe

In implementing the EU’s shift toward antitrust oversight of the telecom sector since 2003, agencies have adopted a number of different organizational reforms.

Some telecom regulators assumed new duties over competition — e.g., Ofcom in the UK. Other non-European countries, including, e.g., Mexico have also followed this model.

Other European Member States have eliminated their telecom regulator altogether. In a useful case study, Roslyn Layton and Joe Kane outline Denmark’s approach, which includes disbanding its telecom regulator and passing the regulation of the sector to various executive agencies.

Meanwhile, the Netherlands and Spain each elected to merge its telecom regulator into its competition authority. New Zealand has similarly adopted this framework.

A few brief case studies will illuminate these and other reforms:

The Netherlands

In 2013, the Netherlands merged its telecom, consumer protection, and competition regulators to form the Netherlands Authority for Consumers and Markets (ACM). The ACM’s structure streamlines decision-making on pending industry mergers and acquisitions at the managerial level, eliminating the challenges arising from overlapping agency reviews and cross-agency coordination. The reform also unified key regulatory methodologies, such as creating a consistent calculation method for the weighted average cost of capital (WACC).

The Netherlands also claims that the ACM’s ex post approach is better able to adapt to “technological developments, dynamic markets, and market trends”:

The combination of strength and flexibility allows for a problem-based approach where the authority first engages in a dialogue with a particular market player in order to discuss market behaviour and ensure the well-functioning of the market.

The Netherlands also cited a significant reduction in the risk of regulatory capture as staff no longer remain in positions for long tenures but rather rotate on a project-by-project basis from a regulatory to a competition department or vice versa. Moving staff from team to team has also added value in terms of knowledge transfer among the staff. Finally, while combining the cultures of each regulator was less difficult than expected, the government reported that the largest cause of consternation in the process was agreeing on a single IT system for the ACM.


In 2013, Spain created the National Authority for Markets and Competition (CNMC), merging the National Competition Authority with several sectoral regulators, including the telecom regulator, to “guarantee cohesion between competition rulings and sectoral regulation.” In a report to the OECD, Spain stated that moving to the new model was necessary because of increasing competition and technological convergence in the sector (i.e., the ability for different technologies to offer the substitute services (like fixed and wireless Internet access)). It added that integrating its telecom regulator with its competition regulator ensures

a predictable business environment and legal certainty [i.e., removing “any threat of arbitrariness”] for the firms. These two conditions are indispensable for network industries — where huge investments are required — but also for the rest of the business community if investment and innovation are to be promoted.

Like in the Netherlands, additional benefits include significantly lowering the risk of regulatory capture by “preventing the alignment of the authority’s performance with sectoral interests.”


In 2011, the Danish government unexpectedly dismantled the National IT and Telecom Agency and split its duties between four regulators. While the move came as a surprise, it did not engender national debate — vitriolic or otherwise — nor did it receive much attention in the press.

Since the dismantlement scholars have observed less politicization of telecom regulation. And even though the competition authority didn’t take over telecom regulatory duties, the Ministry of Business and Growth implemented a light touch regime, which, as Layton and Kane note, has helped to turn Denmark into one of the “top digital nations” according to the International Telecommunication Union’s Measuring the Information Society Report.

New Zealand

The New Zealand Commerce Commission (NZCC) is responsible for antitrust enforcement, economic regulation, consumer protection, and certain sectoral regulations, including telecommunications. By combining functions into a single regulator New Zealand asserts that it can more cost-effectively administer government operations. Combining regulatory functions also created spillover benefits as, for example, competition analysis is a prerequisite for sectoral regulation, and merger analysis in regulated sectors (like telecom) can leverage staff with detailed and valuable knowledge. Similar to the other countries, New Zealand also noted that the possibility of regulatory capture “by the industries they regulate is reduced in an agency that regulates multiple sectors or also has competition and consumer law functions.”

Advantages identified by other organizations

The GSMA, a mobile industry association, notes in its 2016 report, Resetting Competition Policy Frameworks for the Digital Ecosystem, that merging the sector regulator into the competition regulator also mitigates regulatory creep by eliminating the prodding required to induce a sector regulator to roll back regulation as technological evolution requires it, as well as by curbing the sector regulator’s temptation to expand its authority. After all, regulators exist to regulate.

At the same time, it’s worth noting that eliminating the telecom regulator has not gone off without a hitch in every case (most notably, in Spain). It’s important to understand, however, that the difficulties that have arisen in specific contexts aren’t endemic to the nature of competition versus telecom regulation. Nothing about these cases suggests that economic-based telecom regulations are inherently essential, or that replacing sector-specific oversight with antitrust oversight can’t work.

Contrasting approaches to net neutrality in the EU and New Zealand

Unfortunately, adopting a proper framework and implementing sweeping organizational reform is no guarantee of consistent decisionmaking in its implementation. Thus, in 2015, the European Parliament and Council of the EU went against two decades of telecommunications best practices by implementing ex ante net neutrality regulations without hard evidence of widespread harm and absent any competition analysis to justify its decision. The EU placed net neutrality under the universal service and user’s rights prong of the regulatory framework, and the resulting rules lack coherence and economic rigor.

BEREC’s net neutrality guidelines, meant to clarify the EU regulations, offered an ambiguous, multi-factored standard to evaluate ISP practices like free data programs. And, as mentioned in a previous TOTM post, whether or not they allow the practice, regulators (e.g., Norway’s Nkom and the UK’s Ofcom) have lamented the lack of regulatory certainty surrounding free data programs.

Notably, while BEREC has not provided clear guidance, a 2017 report commissioned by the EU’s Directorate-General for Competition weighing competitive benefits and harms of zero rating concluded “there appears to be little reason to believe that zero-rating gives rise to competition concerns.”

The report also provides an ex post framework for analyzing such deals in the context of a two-sided market by assessing a deal’s impact on competition between ISPs and between content and application providers.

The EU example demonstrates that where a telecom regulator perceives a novel problem, competition law, grounded in economic principles, brings a clear framework to bear.

In New Zealand, if a net neutrality issue were to arise, the ISP’s behavior would be examined under the context of existing antitrust law, including a determination of whether the ISP is exercising market power, and by the Telecommunications Commissioner, who monitors competition and the development of telecom markets for the NZCC.

Currently, there is broad consensus among stakeholders, including a local content providers and networking equipment manufacturers, that there is no need for ex ante regulation of net neutrality. Wholesale ISP, Chorus, states, for example, that “in any event, the United States’ transparency and non-interference requirements [from the 2015 OIO] are arguably covered by the TCF Code disclosure rules and the provisions of the Commerce Act.”

The TCF Code is a mandatory code of practice establishing requirements concerning the information ISPs are required to disclose to consumers about their services. For example, ISPs must disclose any arrangements that prioritize certain traffic. Regarding traffic management, complaints of unfair contract terms — when not resolved by a process administered by an independent industry group — may be referred to the NZCC for an investigation in accordance with the Fair Trading Act. Under the Commerce Act, the NZCC can prohibit anticompetitive mergers, or practices that substantially lessen competition or that constitute price fixing or abuse of market power.

In addition, the NZCC has been active in patrolling vertical agreements between ISPs and content providers — precisely the types of agreements bemoaned by Title II net neutrality proponents.

In February 2017, the NZCC blocked Vodafone New Zealand’s proposed merger with Sky Network (combining Sky’s content and pay TV business with Vodafone’s broadband and mobile services) because the Commission concluded that the deal would substantially lessen competition in relevant broadband and mobile services markets. The NZCC was

unable to exclude the real chance that the merged entity would use its market power over premium live sports rights to effectively foreclose a substantial share of telecommunications customers from rival telecommunications services providers (TSPs), resulting in a substantial lessening of competition in broadband and mobile services markets.

Such foreclosure would result, the NZCC argued, from exclusive content and integrated bundles with features such as “zero rated Sky Sport viewing over mobile.” In addition, Vodafone would have the ability to prevent rivals from creating bundles using Sky Sport.

The substance of the Vodafone/Sky decision notwithstanding, the NZCC’s intervention is further evidence that antitrust isn’t a mere smokescreen for regulators to do nothing, and that regulators don’t need to design novel tools (such as the Internet conduct rule in the 2015 OIO) to regulate something neither they nor anyone else knows very much about: “not just the sprawling Internet of today, but also the unknowable Internet of tomorrow.” Instead, with ex post competition enforcement, regulators can allow dynamic innovation and competition to develop, and are perfectly capable of intervening — when and if identifiable harm emerges.


Unfortunately for Title II proponents — who have spent a decade at the FCC lobbying for net neutrality rules despite a lack of actionable evidence — the FCC is not acting without precedent by enabling the FTC’s antitrust and consumer protection enforcement to police conduct in Internet access markets. For two decades, the object of telecommunications regulation globally has been to transition away from sector-specific ex ante regulation to ex post competition review and enforcement. It’s high time the U.S. got on board.

Just in time for tomorrow’s FCC vote on repeal of its order classifying Internet Service Providers as common carriers, the St. Louis Post-Dispatch has published my op-ed entitled The FCC Should Abandon Title II and Return to Antitrust.

Here’s the full text:

The Federal Communications Commission (FCC) will soon vote on whether to repeal an Obama-era rule classifying Internet Service Providers (ISPs) as “common carriers.” That rule was put in place to achieve net neutrality, an attractive-sounding goal that many Americans—millennials especially—reflexively support.

In Missouri, voices as diverse as the St. Louis Post-Dispatch, the Joplin Globe, and the Archdiocese of St. Louis have opposed repeal of the Obama-era rule.

Unfortunately, few people who express support for net neutrality understand all it entails. Even fewer recognize the significant dangers of pursuing net neutrality using the means the Obama-era FCC selected. All many know is that they like neutrality generally and that smart-sounding celebrities like John Oliver support the Obama-era rule. They really need to know more.

First, it’s important to understand what a policy of net neutrality entails. In essence, it prevents ISPs from providing faster or better transmission of some Internet content, even where the favored content provider is willing to pay for prioritization.

That sounds benign—laudable, even—until one considers all that such a policy prevents. Under strict net neutrality, an ISP couldn’t prioritize content transmission in which congestion delays ruin the user experience (say, an Internet videoconference between a telemedicine system operated by the University of Missouri hospital and a rural resident of Dent County) over transmissions in which delays are less detrimental (say, downloads from a photo-sharing site).
Strict net neutrality would also preclude a mobile broadband provider from exempting popular content providers from data caps. Indeed, T-Mobile was hauled before the FCC to justify its popular “Binge On” service, which offered cost-conscious subscribers unlimited access to Netflix, ESPN, and HBO.

The fact is, ISPs have an incentive to manage their traffic in whatever way most pleases subscribers. The vast majority of Americans have a choice of ISPs, so managing content in any manner that adversely affects the consumer experience would hurt business. ISPs are also motivated to design subscription packages that consumers most desire. They shouldn’t have to seek government approval of innovative offerings.

For evidence that competition protects consumers from harmful instances of non-neutral network management, consider the record. The commercial Internet was born, thrived, and became the brightest spot in the American economy without formal net neutrality rules. History provides little reason to believe that the parade of horribles net neutrality advocates imagine will ever materialize.

Indeed, in seeking to justify its net neutrality policies, the Obama era FCC could come up with only four instances of harmful non-neutral network management over the entire history of the commercial Internet. That should come as no surprise. Background antitrust rules, in place long before the Internet was born, forbid the speculative harms net neutrality advocates envision.

Even if net neutrality regulation were desirable as a policy matter, the means by which the FCC secured it was entirely inappropriate. Before it adopted the current approach, which reclassified ISPs as common carriers subject to Title II of the 1934 Communications Act, the FCC was crafting a narrower approach using authority granted by the 1996 Telecommunications Act.

It abruptly changed course after President Obama, reeling from a shellacking in the 2014 midterm elections, sought to shore up his base by posting a video calling for “the strongest possible rules” on net neutrality, including Title II reclassification. Prodded by the President, the supposedly independent commissioners abandoned their consensus that Title II was too extreme and voted along party lines to treat the Internet as a utility.

Title II reclassification has resulted in the sort of “Mother, may I?” regulatory approach that impedes innovation and investment. In the first half of 2015, as the Commission was formulating its new Title II approach, spending by ISPs on capital equipment fell by an average of 8%. That was only the third time in the history of the commercial Internet that infrastructure investment fell from the previous year. The other two times were in 2001, following the bust, and 2009, after the 2008 financial crash and ensuing recession. For those remote communities in Missouri still looking for broadband to reach their doorsteps, government policies need to incentivize more investment, not restrict it.

To enhance innovation and encourage broadband deployment, the FCC should reverse its damaging Title II order and leave concerns about non-neutral network management to antitrust law. It was doing just fine.

As the Federal Communications (FCC) prepares to revoke its economically harmful “net neutrality” order and replace it with a free market-oriented “Restoring Internet Freedom Order,” the FCC and the Federal Trade Commission (FTC) commendably have announced a joint policy for cooperation on online consumer protection.  According to a December 11 FTC press release:

The Federal Trade Commission and Federal Communications Commission (FCC) announced their intent to enter into a Memorandum of Understanding (MOU) under which the two agencies would coordinate online consumer protection efforts following the adoption of the Restoring Internet Freedom Order.

“The Memorandum of Understanding will be a critical benefit for online consumers because it outlines the robust process by which the FCC and FTC will safeguard the public interest,” said FCC Chairman Ajit Pai. “Instead of saddling the Internet with heavy-handed regulations, we will work together to take targeted action against bad actors. This approach protected a free and open Internet for many years prior to the FCC’s 2015 Title II Order and it will once again following the adoption of the Restoring Internet Freedom Order.”

“The FTC is committed to ensuring that Internet service providers live up to the promises they make to consumers,” said Acting FTC Chairman Maureen K. Ohlhausen. “The MOU we are developing with the FCC, in addition to the decades of FTC law enforcement experience in this area, will help us carry out this important work.”

The draft MOU, which is being released today, outlines a number of ways in which the FCC and FTC will work together to protect consumers, including:

The FCC will review informal complaints concerning the compliance of Internet service providers (ISPs) with the disclosure obligations set forth in the new transparency rule. Those obligations include publicly providing information concerning an ISP’s practices with respect to blocking, throttling, paid prioritization, and congestion management. Should an ISP fail to make the required disclosures—either in whole or in part—the FCC will take enforcement action.

The FTC will investigate and take enforcement action as appropriate against ISPs concerning the accuracy of those disclosures, as well as other deceptive or unfair acts or practices involving their broadband services.

The FCC and the FTC will broadly share legal and technical expertise, including the secure sharing of informal complaints regarding the subject matter of the Restoring Internet Freedom Order. The two agencies also will collaborate on consumer and industry outreach and education.

The FCC’s proposed Restoring Internet Freedom Order, which the agency is expected to vote on at its December 14 meeting, would reverse a 2015 agency decision to reclassify broadband Internet access service as a Title II common carrier service. This previous decision stripped the FTC of its authority to protect consumers and promote competition with respect to Internet service providers because the FTC does not have jurisdiction over common carrier activities.

The FCC’s Restoring Internet Freedom Order would return jurisdiction to the FTC to police the conduct of ISPs, including with respect to their privacy practices. Once adopted, the order will also require broadband Internet access service providers to disclose their network management practices, performance, and commercial terms of service. As the nation’s top consumer protection agency, the FTC will be responsible for holding these providers to the promises they make to consumers.

Particularly noteworthy is the suggestion that the FCC and FTC will work to curb regulatory duplication and competitive empire building – a boon to Internet-related businesses that would be harmed by regulatory excess and uncertainty.  Stay tuned for future developments.

The populists are on the march, and as the 2018 campaign season gets rolling we’re witnessing more examples of political opportunism bolstered by economic illiteracy aimed at increasingly unpopular big tech firms.

The latest example comes in the form of a new investigation of Google opened by Missouri’s Attorney General, Josh Hawley. Mr. Hawley — a Republican who, not coincidentally, is running for Senate in 2018alleges various consumer protection violations and unfair competition practices.

But while Hawley’s investigation may jump start his campaign and help a few vocal Google rivals intent on mobilizing the machinery of the state against the company, it is unlikely to enhance consumer welfare — in Missouri or anywhere else.  

According to the press release issued by the AG’s office:

[T]he investigation will seek to determine if Google has violated the Missouri Merchandising Practices Act—Missouri’s principal consumer-protection statute—and Missouri’s antitrust laws.  

The business practices in question are Google’s collection, use, and disclosure of information about Google users and their online activities; Google’s alleged misappropriation of online content from the websites of its competitors; and Google’s alleged manipulation of search results to preference websites owned by Google and to demote websites that compete with Google.

Mr. Hawley’s justification for his investigation is a flourish of populist rhetoric:

We should not just accept the word of these corporate giants that they have our best interests at heart. We need to make sure that they are actually following the law, we need to make sure that consumers are protected, and we need to hold them accountable.

But Hawley’s “strong” concern is based on tired retreads of the same faulty arguments that Google’s competitors (Yelp chief among them), have been plying for the better part of a decade. In fact, all of his apparent grievances against Google were exhaustively scrutinized by the FTC and ultimately rejected or settled in separate federal investigations in 2012 and 2013.

The antitrust issues

To begin with, AG Hawley references the EU antitrust investigation as evidence that

this is not the first-time Google’s business practices have come into question. In June, the European Union issued Google a record $2.7 billion antitrust fine.

True enough — and yet, misleadingly incomplete. Missing from Hawley’s recitation of Google’s antitrust rap sheet are the following investigations, which were closed without any finding of liability related to Google Search, Android, Google’s advertising practices, etc.:

  • United States FTC, 2013. The FTC found no basis to pursue a case after a two-year investigation: “Challenging Google’s product design decisions in this case would require the Commission — or a court — to second-guess a firm’s product design decisions where plausible procompetitive justifications have been offered, and where those justifications are supported by ample evidence.” The investigation did result in a consent order regarding patent licensing unrelated in any way to search and a voluntary commitment by Google not to engage in certain search-advertising-related conduct.
  • South Korea FTC, 2013. The KFTC cleared Google after a two-year investigation. It opened a new investigation in 2016, but, as I have discussed, “[i]f anything, the economic conditions supporting [the KFTC’s 2013] conclusion have only gotten stronger since.”
  • Canada Competition Bureau, 2016. The CCB closed a three-year long investigation into Google’s search practices without taking any action.

Similar investigations have been closed without findings of liability (or simply lie fallow) in a handful of other countries (e.g., Taiwan and Brazil) and even several states (e.g., Ohio and Texas). In fact, of all the jurisdictions that have investigated Google, only the EU and Russia have actually assessed liability.

As Beth Wilkinson, outside counsel to the FTC during the Google antitrust investigation, noted upon closing the case:

Undoubtedly, Google took aggressive actions to gain advantage over rival search providers. However, the FTC’s mission is to protect competition, and not individual competitors. The evidence did not demonstrate that Google’s actions in this area stifled competition in violation of U.S. law.

The CCB was similarly unequivocal in its dismissal of the very same antitrust claims Missouri’s AG seems intent on pursuing against Google:

The Bureau sought evidence of the harm allegedly caused to market participants in Canada as a result of any alleged preferential treatment of Google’s services. The Bureau did not find adequate evidence to support the conclusion that this conduct has had an exclusionary effect on rivals, or that it has resulted in a substantial lessening or prevention of competition in a market.

Unfortunately, rather than follow the lead of these agencies, Missouri’s investigation appears to have more in common with Russia’s effort to prop up a favored competitor (Yandex) at the expense of consumer welfare.

The Yelp Claim

Take Mr. Hawley’s focus on “Google’s alleged misappropriation of online content from the websites of its competitors,” for example, which cleaves closely to what should become known henceforth as “The Yelp Claim.”

While the sordid history of Yelp’s regulatory crusade against Google is too long to canvas in its entirety here, the primary elements are these:

Once upon a time (in 2005), Google licensed Yelp’s content for inclusion in its local search results. In 2007 Yelp ended the deal. By 2010, and without a license from Yelp (asserting fair use), Google displayed small snippets of Yelp’s reviews that, if clicked on, led to Yelp’s site. Even though Yelp received more user traffic from those links as a result, Yelp complained, and Google removed Yelp snippets from its local results.

In its 2013 agreement with the FTC, Google guaranteed that Yelp could opt-out of having even snippets displayed in local search results by committing Google to:

make available a web-based notice form that provides website owners with the option to opt out from display on Google’s Covered Webpages of content from their website that has been crawled by Google. When a website owner exercises this option, Google will cease displaying crawled content from the domain name designated by the website owner….

The commitments also ensured that websites (like Yelp) that opt out would nevertheless remain in Google’s general index.

Ironically, Yelp now claims in a recent study that Google should show not only snippets of Yelp reviews, but even more of Yelp’s content. (For those interested, my colleagues and I have a paper explaining why the study’s claims are spurious).

The key bit here, of course, is that Google stopped pulling content from Yelp’s pages to use in its local search results, and that it implemented a simple mechanism for any other site wishing to opt out of the practice to do so.

It’s difficult to imagine why Missouri’s citizens might require more than this to redress alleged anticompetitive harms arising from the practice.

Perhaps AG Hawley thinks consumers would be better served by an opt-in mechanism? Of course, this is absurd, particularly if any of Missouri’s citizens — and their businesses — have websites. Most websites want at least some of their content to appear on Google’s search results pages as prominently as possible — see this and this, for example — and making this information more accessible to users is why Google exists.

To be sure, some websites may take issue with how much of their content Google features and where it places that content. But the easy opt out enables them to prevent Google from showing their content in a manner they disapprove of. Yelp is an outlier in this regard because it views Google as a direct competitor, especially to the extent it enables users to read some of Yelp’s reviews without visiting Yelp’s pages.

For Yelp and a few similarly situated companies the opt out suffices. But for almost everyone else the opt out is presumably rarely exercised, and any more-burdensome requirement would just impose unnecessary costs, harming instead of helping their websites.

The privacy issues

The Missouri investigation also applies to “Google’s collection, use, and disclosure of information about Google users and their online activities.” More pointedly, Hawley claims that “Google may be collecting more information from users than the company was telling consumers….”

Presumably this would come as news to the FTC, which, with a much larger staff and far greater expertise, currently has Google under a 20 year consent order (with some 15 years left to go) governing its privacy disclosures and information-sharing practices, thus ensuring that the agency engages in continual — and well-informed — oversight of precisely these issues.

The FTC’s consent order with Google (the result of an investigation into conduct involving Google’s short-lived Buzz social network, allegedly in violation of Google’s privacy policies), requires the company to:

  • “[N]ot misrepresent in any manner, expressly or by implication… the extent to which respondent maintains and protects the privacy and confidentiality of any [user] information…”;
  • “Obtain express affirmative consent from” users “prior to any new or additional sharing… of the Google user’s identified information with any third party” if doing so would in any way deviate from previously disclosed practices;
  • “[E]stablish and implement, and thereafter maintain, a comprehensive privacy program that is reasonably designed to [] address privacy risks related to the development and management of new and existing products and services for consumers, and (2) protect the privacy and confidentiality of [users’] information”; and
  • Along with a laundry list of other reporting requirements, “[submit] biennial assessments and reports [] from a qualified, objective, independent third-party professional…, approved by the [FTC] Associate Director for Enforcement, Bureau of Consumer Protection… in his or her sole discretion.”

What, beyond the incredibly broad scope of the FTC’s consent order, could the Missouri AG’s office possibly hope to obtain from an investigation?

Google is already expressly required to provide privacy reports to the FTC every two years. It must provide several of the items Hawley demands in his CID to the FTC; others are required to be made available to the FTC upon demand. What materials could the Missouri AG collect beyond those the FTC already receives, or has the authority to demand, under its consent order?

And what manpower and expertise could Hawley apply to those materials that would even begin to equal, let alone exceed, those of the FTC?

Lest anyone think the FTC is falling down on the job, a year after it issued that original consent order the Commission fined Google $22.5 million for violating the order in a questionable decision that was signed on to by all of the FTC’s Commissioners (both Republican and Democrat) — except the one who thought it didn’t go far enough.

That penalty is of undeniable import, not only for its amount (at the time it was the largest in FTC history) and for stemming from alleged problems completely unrelated to the issue underlying the initial action, but also because it was so easy to obtain. Having put Google under a 20-year consent order, the FTC need only prove (or threaten to prove) contempt of the consent order, rather than the specific elements of a new violation of the FTC Act, to bring the company to heel. The former is far easier to prove, and comes with the ability to impose (significant) damages.

So what’s really going on in Jefferson City?

While states are, of course, free to enforce their own consumer protection laws to protect their citizens, there is little to be gained — other than cold hard cash, perhaps — from pursuing cases that, at best, duplicate enforcement efforts already undertaken by the federal government (to say nothing of innumerable other jurisdictions).

To take just one relevant example, in 2013 — almost a year to the day following the court’s approval of the settlement in the FTC’s case alleging Google’s violation of the Buzz consent order — 37 states plus DC (not including Missouri) settled their own, follow-on litigation against Google on the same facts. Significantly, the terms of the settlement did not impose upon Google any obligation not already a part of the Buzz consent order or the subsequent FTC settlement — but it did require Google to fork over an additional $17 million.  

Not only is there little to be gained from yet another ill-conceived antitrust campaign, there is much to be lost. Such massive investigations require substantial resources to conduct, and the opportunity cost of doing so may mean real consumer issues go unaddressed. The Consumer Protection Section of the Missouri AG’s office says it receives some 100,000 consumer complaints a year. How many of those will have to be put on the back burner to accommodate an investigation like this one?

Even when not politically motivated, state enforcement of CPAs is not an unalloyed good. In fact, empirical studies of state consumer protection actions like the one contemplated by Mr. Hawley have shown that such actions tend toward overreach — good for lawyers, perhaps, but expensive for taxpayers and often detrimental to consumers. According to a recent study by economists James Cooper and Joanna Shepherd:

[I]n recent decades, this thoughtful balance [between protecting consumers and preventing the proliferation of lawsuits that harm both consumers and businesses] has yielded to damaging legislative and judicial overcorrections at the state level with a common theoretical mistake: the assumption that more CPA litigation automatically yields more consumer protection…. [C]ourts and legislatures gradually have abolished many of the procedural and remedial protections designed to cabin state CPAs to their original purpose: providing consumers with redress for actual harm in instances where tort and contract law may provide insufficient remedies. The result has been an explosion in consumer protection litigation, which serves no social function and for which consumers pay indirectly through higher prices and reduced innovation.

AG Hawley’s investigation seems almost tailored to duplicate the FTC’s extensive efforts — and to score political points. Or perhaps Mr. Hawley is just perturbed that Missouri missed out its share of the $17 million multistate settlement in 2013.

Which raises the spectre of a further problem with the Missouri case: “rent extraction.”

It’s no coincidence that Mr. Hawley’s investigation follows closely on the heels of Yelp’s recent letter to the FTC and every state AG (as well as four members of Congress and the EU’s chief competition enforcer, for good measure) alleging that Google had re-started scraping Yelp’s content, thus violating the terms of its voluntary commitments to the FTC.

It’s also no coincidence that Yelp “notified” Google of the problem only by lodging a complaint with every regulator who might listen rather than by actually notifying Google. But an action like the one Missouri is undertaking — not resolution of the issue — is almost certainly exactly what Yelp intended, and AG Hawley is playing right into Yelp’s hands.  

Google, for its part, strongly disputes Yelp’s allegation, and, indeed, has — even according to Yelp — complied fully with Yelp’s request to keep its content off Google Local and other “vertical” search pages since 18 months before Google entered into its commitments with the FTC. Google claims that the recent scraping was inadvertent, and that it would happily have rectified the problem if only Yelp had actually bothered to inform Google.

Indeed, Yelp’s allegations don’t really pass the smell test: That Google would suddenly change its practices now, in violation of its commitments to the FTC and at a time of extraordinarily heightened scrutiny by the media, politicians of all stripes, competitors like Yelp, the FTC, the EU, and a host of other antitrust or consumer protection authorities, strains belief.

But, again, identifying and resolving an actual commercial dispute was likely never the goal. As a recent, fawning New York Times article on “Yelp’s Six-Year Grudge Against Google” highlights (focusing in particular on Luther Lowe, now Yelp’s VP of Public Policy and the author of the letter):

Yelp elevated Mr. Lowe to the new position of director of government affairs, a job that more or less entails flying around the world trying to sic antitrust regulators on Google. Over the next few years, Yelp hired its first lobbyist and started a political action committee. Recently, it has started filing complaints in Brazil.

Missouri, in other words, may just be carrying Yelp’s water.

The one clear lesson of the decades-long Microsoft antitrust saga is that companies that struggle to compete in the market can profitably tax their rivals by instigating antitrust actions against them. As Milton Friedman admonished, decrying “the business community’s suicidal impulse” to invite regulation:

As a believer in the pursuit of self-interest in a competitive capitalist system, I can’t blame a businessman who goes to Washington [or is it Jefferson City?] and tries to get special privileges for his company.… Blame the rest of us for being so foolish as to let him get away with it.

Taking a tough line on Silicon Valley firms in the midst of today’s anti-tech-company populist resurgence may help with the electioneering in Mr. Hawley’s upcoming bid for a US Senate seat and serve Yelp, but it doesn’t offer any clear, actual benefits to Missourians. As I’ve wondered before: “Exactly when will regulators be a little more skeptical of competitors trying to game the antitrust laws for their own advantage?”