Archives For geoffrey manne

ICLE White Paper: Broad fair use exceptions could discourage innovation worldwide

Geoffrey Manne —  9 March 2015

Today, the International Center for Law & Economics released a white paper, co-authored by Executive Director Geoffrey Manne and Senior Fellow Julian Morris, entitled Dangerous Exception: The detrimental effects of including “fair use” copyright exceptions in free trade agreements.

Dangerous Exception explores the relationship between copyright, creativity and economic development in a networked global marketplace. In particular, it examines the evidence for and against mandating a U.S.-style fair use exception to copyright via free trade agreements like the Trans-Pacific Partnership (TPP), and through “fast-track” trade promotion authority (TPA).

In the context of these ongoing trade negotiations, some organizations have been advocating for the inclusion of dramatically expanded copyright exceptions in place of more limited language requiring that such exceptions conform to the “three-step test” implemented by the 1994 TRIPs Agreement.

The paper argues that if broad fair use exceptions are infused into trade agreements they could increase piracy and discourage artistic creation and innovation — especially in nations without a strong legal tradition implementing such provisions.

The expansion of digital networks across borders, combined with historically weak copyright enforcement in many nations, poses a major challenge to a broadened fair use exception. The modern digital economy calls for appropriate, but limited, copyright exceptions — not their expansion.

The white paper is available here. For some of our previous work on related issues, see:

In Copyright, Intellectual Property, International, International Center for Law & Economics, International Trade, Law & Economics, Patent, Regulation , , , , , , , , , , , , , ,
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“FTC: Technology & Reform” Agenda Available for 12/16 Event with Current/Former FTC Commissioners Wright, Muris & Kovacic

Ben Sperry —  12 December 2013
As it begins its hundredth year, the FTC is increasingly becoming the Federal Technology Commission. The agency’s role in regulating data security, privacy, the Internet of Things, high-tech antitrust and patents, among other things, has once again brought to the forefront the question of the agency’s discretion and the sources of the limits on its power.Please join us this Monday, December 16th, for a half-day conference launching the year-long “FTC: Technology & Reform Project,” which will assess both process and substance at the FTC and recommend concrete reforms to help ensure that the FTC continues to make consumers better off.

FTC Commissioner Josh Wright will give a keynote luncheon address titled, “The Need for Limits on Agency Discretion and the Case for Section 5 UMC Guidelines.” Project members will discuss the themes raised in our inaugural report and how they might inform some of the most pressing issues of FTC process and substance confronting the FTC, Congress and the courts. The afternoon will conclude with a Fireside Chat with former FTC Chairmen Tim Muris and Bill Kovacic, followed by a cocktail reception.

Full Agenda:

  • Lunch and Keynote Address (12:00-1:00)
    • FTC Commissioner Joshua Wright
  • Introduction to the Project and the “Questions & Frameworks” Report (1:00-1:15)
    • Gus Hurwitz, Geoffrey Manne and Berin Szoka
  • Panel 1: Limits on FTC Discretion: Institutional Structure & Economics (1:15-2:30)
    • Jeffrey Eisenach (AEI | Former Economist, BE)
    • Todd Zywicki (GMU Law | Former Director, OPP)
    • Tad Lipsky (Latham & Watkins)
    • Geoffrey Manne (ICLE) (moderator)
  • Panel 2: Section 5 and the Future of the FTC (2:45-4:00)
    • Paul Rubin (Emory University Law and Economics | Former Director of Advertising Economics, BE)
    • James Cooper (GMU Law | Former Acting Director, OPP)
    • Gus Hurwitz (University of Nebraska Law)
    • Berin Szoka (TechFreedom) (moderator)
  • A Fireside Chat with Former FTC Chairmen (4:15-5:30)
    • Tim Muris (Former FTC Chairman | George Mason University) & Bill Kovacic (Former FTC Chairman | George Washington University)
  • Reception (5:30-6:30)
Our conference is a “widely-attended event.” Registration is $75 but free for nonprofit, media and government attendees. Space is limited, so RSVP today!

Working Group Members:
Howard Beales
Terry Calvani
James Cooper
Jeffrey Eisenach
Gus Hurwitz
Thom Lambert
Tad Lipsky
Geoffrey Manne
Timothy Muris
Paul Rubin
Joanna Shepherd-Bailey
Joe Sims
Berin Szoka
Sasha Volokh
Todd Zywicki
In Antitrust & Competition, Federal Trade Commission, Intellectual Property, International Center for Law & Economics, Law & Economics, Patent, Section 5 , , , , , , , , , , , , ,
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TechFreedom Search Engine Regulation Event today

Geoffrey Manne —  14 June 2011

Today at 12:30 at the Capitol Visitor Center, TechFreedom is hosting a discussion on the regulation of search engines:  “Search Engine Regulation: A Solution in Search of a Problem?”

The basics:

Allegations of “search bias” have led to increased scrutiny of Google, including active investigations in the European Union and Texas, a possible FTC investigation, and sharply-worded inquiries from members of Congress. But what does “search bias” really mean? Does it demand preemptive “search neutrality” regulation, requiring government oversight of how search results are ranked? Is antitrust intervention required to protect competition? Or can market forces deal with these concerns?

A panel of leading thinkers on Internet law will explore these questions at a luncheon hosted by TechFreedom, a new digital policy think tank. The event will take place at the Capitol Visitor Center room SVC-210/212 onTuesday, June 14 from 12:30 to 2:30pm, and include a complimentary lunch. CNET’s Declan McCullagh, a veteran tech policy journalist, will moderate a panel of four legal experts:

More details are here, and the event will be streaming live from that link as well.  If all goes well, it will also be accessible right here:

http://www.ustream.tv/flash/viewer.swf

Live Broadcasting by Ustream

In Administrative, Announcements, European Union, Google, International, International Center for Law & Economics, Law & Economics, Monopolization, Platforms, Regulation , , , , , , ,
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David Balto (and the FTC) gets it woefully wrong on Intel

Geoffrey Manne —  14 April 2010

David Balto has penned a short apologia of the FTC’s Intel case (HT: Danny Sokol).  Unfortunately his defense (and, unfortunately, the FTC’s case) is woefully misguided.

Balto writes:

Intel has been clearly dominant in the market for central processing units (CPUs) with between 80 percent and 98 percent of the market. The practices at issue in the FTC litigation have been condemned by the Japan Fair Trade Commission in March 2005, by the Korean Fair Trade Commission in June 2008 and by the European Commission in May 2009. In the United States, Advanced Micro Devices Inc. (AMD), Intel’s sole significant rival, sued Intel for a broad range of exclusionary practices in 2005. The New York attorney general brought its own action in November 2009.

Intel has had its day in court in proceedings before the three foreign commissions—and lost. Each of those tribunals found that Intel engaged in severely anti-competitive practices that protected its central processing unit monopoly and excluded its only real CPU rival, AMD.

This is misleading.  First of all “day in court” is not the same as “proceedings before the three foreign commissions,” and it is well-accepted that conviction by a party acting as judge, jury and prosecutor is less than decisive.

Second, Intel has had judgments rendered against it by agencies–not by courts–without any adversarial process to support those judgments.  It has appealed its European Commission judgment to the European General Court (the court formerly known as the Court of First Instance), and it has appealed the claimed human rights violations inherent in the imposition of a $1.5 billion fine without due process to the European Court of Justice.  It has appealed its KFTC ruling to the Seoul High Court.  It acceded to the JFTC’s recommendations, while contesting its findings of fact.  Intel is, in fact, still awaiting its day in court.

Moreover, the practices at issue in the FTC litigation were either NOT before these other tribunals (more on this in a second), or they were evaluated under laws and jurisprudence that differ substantially from US law and jurisprudence–and in ways that many of us believe lead to outcomes that condemn practices that are not, in fact, anticompetitive. (In Europe, for example, the Commission’s decision, citing to EU case law (its Hoffmann-La Roche line of cases), essentially refused to acknowledge that there could be any pro-competitive justifications for Intel’s discounts.  We beg to differ.)

Balto continues:

As each enforcer concluded, Intel—through its exclusive rebate scheme—paid computer manufacturers to buy Intel’s more expensive, less technologically advanced CPUs, resulting in turn in consumers paying higher prices for computers.

Actually, this is not what even these other enforcers concluded.  While some translations of the Korean decision do seem to suggest that, as something of an aside, the KFTC did assert that consumer paid higher prices, the European decision says no such thing, and I doubt that the Japanese recommendation included such a conclusion, either–certainly its English press release indicates no such finding.

Of course this is not surprising.  The theory of the case is that Intel, by offering conditional discounts, induced OEMs to purchase such a large share of their chips from Intel that AMD was unable to reach the minimum sufficient scale required to compete effectively.  But this effect arises, if it does at all, by Intel offering lower, not higher, prices.  While the claim that consumers had “less choice” might follow from this argument, the claim that consumers paid higher prices does not (unless and until AMD is forced out of business and Intel is finally able to reap the rewards of its predatory strategy.  As I have noted, Intel’s shareholders sure must have a long time horizon). Continue Reading…

In Antitrust & Competition, European Union, Exclusionary Conduct, Federal Trade Commission, Google, International, Justice Department, Law & Economics, Platforms, Section 5 , , , , , , ,
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Assessing the claims that the Google-AdMob merger will "leverage Google's dominance" and also kill kittens

Geoffrey Manne —  7 April 2010

News items continue to pile up suggesting that the FTC is likely to challenge Google’s acquisition of mobile application and website advertising provider, AdMob.  See this recent article from the Wall Street Journal.  News reports today contain this quote from an anonymous source:

“The staff (at the U.S. Federal Trade Commission) believes there is a significant competitive problem and they are prepared to make a recommendation to sue,” the person said, speaking on condition of anonymity.

Senator Herb Kohl also opined on the deal this week (having conducted his own thorough economic analysis, of course) and offered his assessment in a letter to the FTC:

Critics of this transaction worry that this deal will allow Google to merge with one of its biggest rival mobile advertising competitors, and leverage its dominance of PC-based search advertising market into the emerging mobile advertising market, particularly with respect to advertising embedded in smart phone applications.  The parties to this transaction argue, on the other hand, that there are ample competitors in the smart phone search and application-based advertising market, and also contend that the market for advertising on mobile devices is too nascent to determine that any transaction will lead to dominance by any one company.

* * *

Without reaching any conclusion as to whether the Google/AdMob transaction would create such dominance or would cause any substantial harm to competition, I believe it is essential that the FTC scrutinize this deal very closely to carefully examine this question.

* * *

The FTC should also pay close attention to the privacy interests implicated by this transaction, as the combined firm will gain access to a treasure trove of data on millions of consumers’ behavior, search and product preferences.    The FTC should assure itself that the deal, if approved, will have sufficient safeguards to protect consumers’ privacy

* * *

Thus the incipiency of the smart phone advertising market is not in itself a reason for the FTC to desist from taking any necessary action to enforce the antitrust laws or protect competition should it determine such action is necessary.

Because the acquisition has already received a second request, and is certainly being carefully assessed by the FTC (and Kohl would never suggest otherwise), I take Kohl’s urging that the FTC “scrutinize this deal very closely” to be the closest he wants to come to publicly telling the FTC to challenge the merger.  Kohl can perhaps be excused for imprecise and antitrust-irrelevant thinking, being a politician and all (even though one in charge of the Senate’s antitrust subcommittee).  But the basic content of Kohl’s letter is perfectly aligned with the claims of the deal’s critics to which he refers.  Unfortunately, there is just no support for the claims being made against the deal, and there is a substantial likelihood that intervention would be in error.

The “Leveraged Dominance” Claim

First of all, neither Kohl’s letter nor the “critics of this transaction” explain what it would mean for Google to “leverage its dominance of [the] PC-based search advertising market into the emerging mobile advertising market, particularly with respect to advertising embedded in smart phone applications,” but it sure sounds scary.  Leveraged dominance. Very bad.  Whatever it means.

If mobile application advertising competes with other forms of advertising offered by Google, then it represents a small fraction of a larger market and this transaction is competitively insignificant.  Moreover, acknowledging that mobile advertising competes with online search advertising does more to expand the size of the relevant market beyond the narrow boundaries it is usually claimed to occupy than it does to increase Google’s share of the combined market (although critics would doubtless argue that the relevant market is still “too concentrated”).  If it is a different market, on the other hand, then critics need to make clear how Google’s “dominance” in the “PC-based search advertising market” actually affects the prospects for competition in this one.  Merely using the words “leverage” and “dominance” to describe the transaction is hardly sufficient.  To the extent that this is just a breathless way of saying Google wants to build its business in a growing market that offers economies of scale and/or scope with its existing business, it’s identifying a feature and not a bug.  If instead it’s meant to refer to some sort of anticompetitive tying or “cross-subsidy” (see below), the claim is speculative and unsupported. Continue Reading…

In Antitrust & Competition, Apple, Error Costs, Federal Trade Commission, Google, Intellectual Property, Justice Department, Law & Economics, Market Definition, Mergers & Acquisitions, Patent, Platforms, Telecommunications, Tying, Wireless , , , , , , ,
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The Case Against the Antitrust Case Against Google

Geoffrey Manne —  24 March 2010

We have just uploaded to SSRN a draft of our article assessing the economics and the law of the antitrust case directed at the core of Google’s business:  Its search and search advertising platform.  The article is Google and the Limits of Antitrust: The Case Against the Antitrust Case Against Google.  This is really the first systematic attempt to address both the amorphous and the concrete (as in the TradeComet complaint) claims about Google’s business and its legal and economic importance in its primary market.  It’s giving nothing away to say we’re skeptical of the claims, and, moreover, that an approach to the issues appropriately sensitive to the potential error costs would be extremely deferential.  As we discuss, the economics of search and search advertising are indeterminate and subtle, and the risk of error is high (claims of network effects, for example, are greatly exaggerated, and the pro-competitive justifications for Google’s use of a quality score are legion, despite frequent claims to the contrary).  We welcome comments on the article, and we look forward to the debate.  The abstract is here:

The antitrust landscape has changed dramatically in the last decade.  Within the last two years alone, the United States Department of Justice has held hearings on the appropriate scope of Section 2, issued a comprehensive Report, and then repudiated it; and the European Commission has risen as an aggressive leader in single firm conduct enforcement by bringing abuse of dominance actions and assessing heavy fines against firms including Qualcomm, Intel, and Microsoft.  In the United States, two of the most significant characteristics of the “new” antitrust approach have been a more intense focus on innovative companies in high-tech industries and a weakening of longstanding concerns that erroneous antitrust interventions will hinder economic growth.  But this focus is dangerous, and these concerns should not be dismissed so lightly.  In this article we offer a comprehensive cautionary tale in the context of a detailed factual, legal and economic analysis of the next Microsoft: the theoretical, but perhaps imminent, enforcement action against Google.  Close scrutiny of the complex economics of Google’s technology, market and business practices reveals a range of real but subtle, pro-competitive explanations for features that have been held out instead as anticompetitive.  Application of the relevant case law then reveals a set of concerns where economic complexity and ambiguity, coupled with an insufficiently-deferential approach to innovative technology and pricing practices in the most relevant precedent (the D.C. Circuit’s decision in Microsoft), portend a potentially erroneous—and costly—result.  Our analysis, by contrast, embraces the cautious and evidence-based approach to uncertainty, complexity and dynamic innovation contained within the well-established “error cost framework.”  As we demonstrate, while there is an abundance of error-cost concern in the Supreme Court precedent, there is a real risk that the current, aggressive approach to antitrust error, coupled with the uncertain economics of Google’s innovative conduct, will nevertheless yield a costly intervention.  The point is not that we know that Google’s conduct is procompetitive, but rather that the very uncertainty surrounding it counsels caution, not aggression.

In Antitrust & Competition, Error Costs, European Union, Google, International, Law & Economics, Platforms , , , , , , , , ,
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Politically-Mandated Credit Card Interchange Fees Won’t Create Jobs (But They Will Hurt Consumers and the Economy)

Geoffrey Manne —  20 March 2010

by Geoffrey A. Manne, Joshua D. Wright and Todd J. Zywicki

Cross-posted at Business in the Beltway (at Forbes.com) and The Volokh Conspiracy.

In a recent commentary at Forbes.com, former Clinton administration economist Robert Shapiro argues that some 250,000 jobs would be created, and consumers would save $27 billion annually, by reducing the interchange fee charged to merchants for transactions made by consumers using credit and debit cards.  If true, these are some incredible numbers.

But incredible is indeed the correct characterization for his calculations.  Shapiro’s claims, based on a recent study he co-authored, rest on tendentious accounting, questionable assumptions, and—most crucially—a misunderstanding of the economics of interchange fees.  Political price caps on interchange fees won’t help the economy or create jobs—but they will make consumers poorer.

First, Shapiro estimates the employment impact of a redistribution of fees using the same stimulus multiplier that the Obama administration uses to tout the effect of its stimulus package.  But it is completely inappropriate to simply “plug in” the multiplier for government stimulus to calculate the effect of a reduction of interchange fees —unless the interchange fees currently paid to banks somehow simply disappear from the economy, contributing nothing to job creation, lowering the cost of capital, or increasing access to credit.  Even assuming that some portion of the fees are pure profit for card issuers, those profits must be paid out to shareholders or employees, invested, or used to bolster bank balance sheets (which provides capital for lending).  So, unlike the stimulus, this is at best merely a politically-mandated wealth (and employment) redistribution from card issuers to merchants, and any calculation of apparent economic gain must be offset by a similar calculation of loss on the other side.  Having ignored this offset, Shapiro’s conclusions are completely untenable.

But Shapiro also misunderstands the economics of payment card networks and the role of the interchange fee within them.  For example, Shapiro estimates that 70% of merchant savings from reduced interchange fees would be passed on to consumers in the form of lower retail prices.  But that is pure speculation.  In Australia, where regulators imposed price controls on interchange in 2003, fees paid by merchants have fallen but consumers have seen no reduction in the prices that they pay.  And where merchants have been permitted to impose surcharges on credit users, the surcharge can, and often does, substantially exceed the interchange fee cost.  It is not for nothing that merchants have spent millions trying to push interchange fee regulation through Congress.

In addition, Shapiro suggests that interchange fees are excessive in light of the “transaction and processing costs of using credit and debit cards.”  But his estimation of these costs is dramatically off-base.  Not only does he appear to exclude the cost of the delay between the time merchants receive payment (almost immediately) and when consumers pay their bills (at the end of a billing cycle), he ignores what may be the most significant single cost of consumer credit operations (and corresponding benefit to merchants): the cost of credit loss. Continue Reading…

In Credit Cards, Federal Trade Commission, Financial Regulation, International Center for Law & Economics, Law & Economics , , , , , , , , ,
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