Bound print copies of George Mason School of Law’s working paper series on law and economics are available in the Law Library. The bound set often includes initial drafts of papers. Search Mason’s Catalog to locate a working paper.

Recent Working Papers:


An Unreasonable Solution: Rethinking the FTC's Current Approach to Data Security

7-2020 | James Cooper, Bruce Kobayashi

ABSTRACT:

Since the early 2000s, the FTC creatively employed its capacious statute to target shoddy data practices. Although the FTC’s actions arguably were needed at the time to fill a gap in enforcement, there are reasons to believe that its current approach has outlived its usefulness and is in serious need of updating. In particular, our analysis shows that the FTC’s current approach to data security is unlikely to instill anything close to optimal incentives for data holders. These shortcomings cannot be fixed through changes to the FTC enforcement approach, as they are largely generated by a mismatch between the tools that Congress gave it over a century ago and what it needs to foster firms’ incentives to mimic socially optimal levels of care for the data they hold. Not only does the current framework likely suffer from informational deficiencies attendant to its focus on “reasonable” security that render liability standards uncertain, it also lacks the ability obtain the type of relief that will force firms to internalize the costs of their data security decisions. We examine the problem of data security enforcement through the lens of the economics of optimal precautions and identify several reasons why a strict liability regime administered by the FTC in which firms pay for the expected harm from breaches they cause is likely to be superior to the current framework that revolves around the concept of reasonableness. The benefits from strict liability flow from the likelihood that firms do not fully internalize the costs and benefits of their data security decisions and the relatively large informational burdens associated with measuring actual and optimal care under a negligence regime. We also show why in this informational environment strict liability is better than negligence for developing a vibrant market for cyber insurance, which will allow data security regulation to be de facto outsourced to insurers who will contract with firms for optimal levels of care. Because these private contracts will harness private information on costs and benefits from precautions, they are likely to incentivize more efficient behavior.

The Limit of Law: Factors Influencing the Decision to Make Harmful Acts Illegal

7-2020 | Thomas Miceli, Murat Mungan

ABSTRACT:

This paper examines factors affecting the decision of whether or not to make certain harmful acts illegal. It considers factors related both to the cost of law enforcement and to the crime commission decision. On the enforcement side, illegality is limited by the existence of fixed notice and response costs, which are unrelated to the harm from the act, and also by costs of imposing punishment. In addition, illegality is limited by a finite marginal productivity of detection, one cause of which is legal error. On the commission side, illegality is limited if all offenders have strictly positive benefits from committing the act. The paper concludes by examining how the optimal scope of law is affected by its “expressive function,” the idea that some people are deterred by the mere fact that an act is illegal. We specifically ask how the scope of law changes if more people behave in this way. The answer depends on whether “efficient” violations of the law are possible, which in turn depends on whether offenders’ gains are counted in welfare.

Unleashed and Unbound: Living Textualism in Bostock V. Clayton County

7-2020 | Nelson Lund

ABSTRACT:

In Bostock v. Clayton County, Georgia the Supreme Court held that Title VII of the Civil Rights Act of 1964 prohibits—and has always prohibited—discrimination by employers on the basis of homosexuality or of what the Court called transgender status. How so? The statute forbids employers to intentionally discriminate against any individual “because of such individual’s . . . sex.” The Court asserted that discrimination because of homosexuality or transgenderism violates the unambiguous text of the statute.

This result in this case decision would not have been much of surprise in the period during which Justice Anthony Kennedy held the controlling vote on issues dealing with sex, and especially with homosexuality. But the 6-3 majority opinion in Bostock was written by Justice Neil Gorsuch and joined by Chief Justice John Roberts. The majority opinion has virtually no policy analysis or political rhetoric, and it lacks the kind of inflated pseudo-philosophic pontification that Kennedy favored. Instead, the Bostock opinion presents itself as nothing more than a straightforward application of the legally binding text of the statute. Justice Gorsuch even goes out of his way to cast himself as the legitimate intellectual successor to the man whom he literally succeeded: the high priest of statutory textualism, Justice Antonin Scalia.

Leaving others to speculate about judicial motives, I propose that Bostock is an extension of a theory commonly called “living originalism.” During the last decade, this approach to constitutional interpretation has been gaining steam in the legal academy. Bostock has now effectively extended that approach beyond the academy, beyond the field of constitutional interpretation, and even beyond the limits recognized by its academic adherents.

Bostock is a demonstrably outlandish judicial performance. Outlandish though it is, Bostock might be used by the Court to correct one of its most egregiously mistaken lines of case law. Although Title VII unambiguously forbids employers to discriminate on the basis of race or sex, the Court has upheld quotas and preferences explicitly based on the race or sex of people in favored groups. In 1991, Congress amended Title VII by adding a new provision whose text unambiguously overruled the decisions that upheld these preferences. Even without using the peculiar new form of textualism deployed in Bostock, the Supreme Court should have recognized that the 1991 amendment deprived these precedents of any binding force they may once have had. The Court has not done so, but Bostock now imperatively requires the Court to declare that Title VII forbids, and has always forbidden, these illegal employment practices.

Use and Abuse of Bargaining Models in Antitrust

7-2020 | Joshua Wright, John Yun

ABSTRACT:

Bargaining is all around us. Bargaining is how prices are set across a range of economic activities such as between licensors and licensees of intellectual property, employees and employers, content providers and distributors, health insurers and hospitals, and in many intermediate product markets. Recently, bargaining has played a central role in a number of high-profile antitrust matters. In 2018, the U.S. Department of Justice challenged AT&T’s acquisition of Time Warner — largely on the basis of a bargaining model. Also, in 2018, the U.S. Federal Trade Commission argued that Qualcomm’s market position in cellular chipsets allowed it to leverage higher royalty rates for its standard essential patents (“SEPs”), in violation of its commitment to license its SEPs on fair, reasonable, and non-discriminatory (“FRAND”) terms. In this article, we assess the value of economic bargaining models to predict outcomes for both horizontal and vertical mergers and for unilateral conduct. To that end, we first provide an overview of the economics of bargaining models and their primary features, including the vertical GUPPI variant. We then discuss these models in the context of recent antitrust cases and detail the uneven judicial adoption of bargaining models. Next, we examine whether the current judicial reticence is justified. We review a body of emerging scholarship that suggest some caution on the use of methodologies to predict harm based on bargaining models. This suggests that a healthy degree of judicial skepticism is warranted — whether coherently articulated in opinions or not. In conclusion, we offer some policy recommendations for the use of bargaining models, which we believe will lead to a more balanced approach regarding their use in antitrust matters.

Pension Forfeiture and Police Misconduct

6-2020 | D. Bruce Johnsen, Adam Marcus

ABSTRACT:

This article applies the theory of efficiency wages to public sector pension-covered workers for whom employee misconduct is most troublesome, namely state and local police. No doubt most police are conscientious professionals capable of addressing tense or inflamed situations with the proper amount of restraint, but there is also a large and rising incidence of police excessive use of force and other forms of misconduct that needs to be addressed. At the same time, state and municipal pension systems are frighteningly underfunded owing to unrealistically high rate-of-return assumptions and implausibly high rates at which liabilities are discounted, with several bankruptcies having already occurred or in process. 

This paper examines how the rules regarding police pension forfeiture for misconduct vary across states and whether stricter forfeiture might help avoid fiscal crisis. The positive questions we ask are whether stricter pension forfeiture rules can realistically reduce either (1) pension liabilities owing to the increased prospect of for-cause termination or (2) state and municipal governments’ legal liability under respondeat superior for officer misconduct. If the answer is yes to either question, the normative question is whether states can and, if so, should impose stricter pension forfeiture rules to directly or indirectly avert the looming public pension crisis. If not, the conclusion is that the use of public pensions to provide efficiency wages is severely limited, and that serious thought should be given to abandoning defined benefit (DB) plans going forward in favor of defined contribution (DC) plans, which are far less costly to administer.

Our initial and admittedly casual evidence suggests that states with stronger pension forfeiture laws experience lower rates of police misconduct. Even if stricter police pension forfeiture is found to materially reduce the incidence of misconduct, the compelling conclusion is that it is unlikely to materially mitigate the looming public pension crisis because the amount of money at stake is so small. It is plausible, however, that the indirect fiscal effect of stricter police pension forfeiture for misconduct could be substantial because municipalities across the country currently pay out hundreds of millions of dollars annually on citizen suits for excessive use of force. With police pensions contingent on good faith performance in the line of duty, it is uncontroversial that misconduct will decline as the expected losses from misbehavior increase.

Gender Mistrust as a Public Health Crisis: A Preliminary Proposal

6-2020 | Helen Alvaré

ABSTRACT:

There is an increasingly well-documented phenomenon in the United States of gender mistrust between men and women, especially among the socioeconomically vulnerable. It is one of the factors that prevents and breaks down stable, long-term relationships like marriage and the parenting of mutual, marital children. Gender mistrust has negative personal and social effects upon women’s well-being. Of course, it also has negative effects upon the well-being of men, children, and wider society. Each deserves attention. But the subject of this Symposium invites a focus upon women.

Gender mistrust (sometimes called “gender distrust”) is the tendency of one sex to negatively characterize the other sex based upon generalized and derogatory stereotypes and biases. I propose that gender mistrust between men and women is a public health crisis and as such, a fit subject for the attention of lawmakers and policymakers. A great deal has been written about gender mistrust from a sociological and psychological perspective, but nothing has treated it under the heading of “public health.”

Introduction, Free to Move: Foot Voting, Migration, and Political Freedom

6-2020 | Ilya Somin

ABSTRACT:

Ballot box voting is often considered the essence of political freedom. But it has two major shortcomings: individual voters have little chance of making a difference, and they also face strong incentives to remain ignorant about the issues at stake. "Voting with your feet," however, avoids both of these pitfalls and offers a wider range of choices. In Free to Move, Ilya Somin explains how broadening opportunities for foot voting can greatly enhance political liberty for millions of people around the world.

People can vote with their feet through international migration, by choosing where to live within a federal system, and by making decisions in the private sector. These three types of foot voting are rarely considered together, but Somin explains how they have important common virtues and can be mutually reinforcing. He contends that all forms of foot voting should be expanded and shows how both domestic constitutions and international law can be structured to increase opportunities for foot voting while mitigating possible downsides.

Free to Move addresses a variety of common objections to expanded migration rights, including claims that the "self-determination" of natives requires giving them the power to exclude migrants, and arguments that migration is likely to have harmful side effects, such as undermining political institutions, overburdening the welfare state, increasing crime and terrorism, and spreading undesirable cultural values. While these objections are usually directed at international migration, Somin shows how a consistent commitment to such theories would also justify severe restrictions on domestic freedom of movement. That implication is an additional reason to be skeptical of these rationales for exclusion. By making a systematic case for a more open world, Free to Move challenges conventional wisdom on both the left and the right.

The Introduction summarizes the core argument of the book and provides an outline of the chapters that follow.

Response to the Subcommittee on Antitrust, Commercial, and Administrative Law Committee on the Judiciary, U.S. House of Representatives

6-2020 | Timothy Muris

ABSTRACT:

To assist in its investigation of competition in the digital marketplace, the Judiciary Committee invited comments on topics relevant to that investigation. This response contains four sections. The first briefly describes my background and explains that I support aggressive antitrust enforcement when it will in fact benefit consumers. My experience in antitrust spans nearly five decades as a student, professor, scholar, enforcer, expert, consultant, and practitioner. I have served in multiple government positions, including at the Federal Trade Commission as Director of both enforcement bureaus — the only person ever to hold both jobs — as well as Chairman from 2001 to 2004. This section rebuts recent claims that applying the methodology underlying modern law, known as the consumer welfare standard, prevents an aggressive, pro-consumer Antitrust policy, particularly under Republicans. The two periods when I was most responsible for FTC antitrust enforcement — the mid-1980s and the beginning of this century — were the most active in the last 40 years using the FTC’s administrative procedures to attack a wide variety of anticompetitive practices ranging from those in healthcare and in professional associations, to the misuse of the machinery of government to harm competition, to preventing anticompetitive increases in energy prices. With respect to a topic of particular current interest, while Chairman the FTC filed four cases alleging single-firm monopolization over three years — an unusually high rate of activity in this very resource-intensive area of the law. For example, in one case, against the oil company Unocal, we successfully lowered the gas price at the pump for all California consumers.

The next section addresses the adequacy of existing laws regarding monopolization and anticompetitive transactions, questions that implicate the heart of the current debate on how antitrust law has been interpreted and enforced for decades using the consumer welfare standard. That standard, based in sound economic analysis, and its companion holding by American courts that the purpose of antitrust law is to protect consumers, not competitors, has been crucial to avoiding the many mistakes of antitrust’s past — especially a “big is bad” animus that too often lead the law and agencies astray. Because today’s critics ignore the mistakes of that past, I discuss them here, especially how the protection of competitors and not competition, as reflected in the Robinson-Patman Act (“RPA”), not only was one of antitrust’s worst mistakes, but also how RPA and the Justice Department's long war against the then largest retailer in America, the Great Atlantic and Pacific Tea Company (A&P), poisoned antitrust for decades to the great detriment of American consumers. Sensible application of the consumer welfare standard would have avoided those catastrophes.

Today’s critics base much of their hostility to the consumer welfare standard, and to the long-standing antitrust consensus that they seek to overthrow, on the claim that those associated with the University of Chicago seized control of antitrust law and remade it in their image. The next section shows that such arguments are bogus: many of the scholars who first helped antitrust escape the fallacies of the RPA and the associated crusade against A&P, although dedicated to the same pro-consumer use of economics that the consumer welfare standard demands, were not members of the so-called “Chicago school.” On the contrary, numerous scholars associated with Harvard, most notably Professor Phillip Areeda — an original author of the leading Antitrust treatise — and Supreme Court Justice Stephen Breyer have been at least as influential as those affiliated with Chicago in the development of modern antitrust law under the consumer welfare standard.

Finally, the last section addresses the continual need to address business practices as they evolve. Ever a UCLA Bruin, I remain devoted to legendary coach John Wooden‘s maxim that “when you are through learning, you are through.” The section offers multiple examples of successful, bipartisan FTC efforts to improve enforcement to the benefit of consumers. In the key healthcare sector, American consumers continue to benefit from the FTC’s hard work. After the government lost seven hospital merger challenges in the 1990s, upon my direction the FTC worked to devise a new enforcement plan by incorporating fresh economic thinking and issuing retrospective case studies showing that several hospital mergers had indeed harmed consumers. This plan resulted in a successful challenge to a consummated hospital merger that served as a template for future enforcement, leading to Obama administration victories in three separate courts of appeal endorsing the FTC’s approach. Such success did not require abandonment of the consumer welfare standard, nor a dramatic increase in agency resources. Indeed, my predecessor as FTC chairman, Bob Pitofsky, did much more for American consumers using the consumer welfare standard with just 1,000 staff than did the agency in the 1970s when it had far greater resources (1,800 staff by the turn of the decade), but was motivated by an antitrust policy that was, instead, at war with itself.

Early Customs Laws and Delegation

6-2020 | Jennifer Mascott

ABSTRACT:

This past Term the Supreme Court reexamined the nondelegation doctrine, with several justices concluding that in the proper case, the Court should consider significantly strengthening the doctrine in its contemporary form. Adherents to the doctrine question whether Congress has developed a practice of improperly delegating to administrative agencies the legislative power that Congress alone must exercise under the Vesting Clause of Article I of the Constitution. Many scholars have debated the extent of the historical or textual basis for the doctrine. Instead, this Article examines interactions between executive and legislative actors during the first congressional debates on the Impost, Tonnage, Registration, and Collection of Duties Acts. In addition to revealing Congress’s central role early on, this story shows the relevance of state and congressional district interests to the legislative agreements concerning customs laws. The rich depth of these varied interests suggests that nondelegation limitations might not be inherent in the Vesting Clause alone, but may be innate to the federal government’s tripartite and federalist structural design itself.

The Constitution carefully provided significant protection for state interests through diverse representation schemes in the House and the Senate. Beyond the textual limitation of exclusive vesting of the legislative power in Congress, separation of powers principles help ensure all people’s interests are represented in a way that would not be possible via a singular, centralized administrative entity. The acts of such administrative entities are accountable, if at all, to just one centralized elected official, not to multiple elected decisionmakers representing states and regional interests. Consequently, enforcement of relatively strict nondelegation principles may be critical to preserving the structural constitutional principle that the federal government must reflect the interests of both individual members of the electorate as well as the states and regional electoral districts.

The Exclusionary Rule Revisited

5-2020 | Nuno Garoupa, Murat Mungan

ABSTRACT:

We revisit the economic theory of exclusionary rules. First, we show that more exclusion may induce enforcers to conduct more searches, contrary to the standard notion that more exclusion leads to fewer searches. Second, we identify and investigate the complexities that arise when enforcers may harass suspects (imposing significant costs without legal proceedings) instead of conducting legal searches. If one attempts to choose the optimal exclusionary rule naïvely (for example, by ignoring the possibility of harassment by enforcers), the chosen rule will exclude evidence more often than is optimal. We explore social welfare considerations and discuss policy implications based on our formal results.

Personhood: Law, Common Sense, and Humane Opportunities

5-2020 | Helen Alvaré

ABSTRACT:

This article is in response to If a Fetus Is a Person, It Should Get Child Support, Due Process, and Citizenship, by Carliss N. Chatman.

It is pointless to approach Professor Chatman’s argument on its own terms (to wit, “tak[ing] our laws seriously,” or equal application across myriad legal categories of “full personhood” rights) because these terms are neither seriously intended nor legally comprehensible. Instead, her essay is intended to create the impression that legally protecting unborn human lives against abortion opens up a Pandora’s box of legal complications so “ridiculous” and “far-fetched” that we should rather just leave things where they are under the federal Constitution post-Roe v. Wade and Planned Parenthood v. Casey. This impression, in turn, is a tool to forward Professor Chatman’s personal preference for legal abortion — which she gives away by calling legal abortion by its political name: “the right to choose.”

But her arguments, sounding in law, about the alleged chaos to flow from a law protecting unborn human lives from abortion are false on the grounds of basic legal principles concerning federal constitutional and immigration law, as well as the legal principles underlying state legislation and statutory interpretation. I will set these legal principles out below before turning to the more interesting and legally plausible matter of whether or not lawmakers should choose to take into account both the needs of pregnant women and the humanity of unborn life when crafting laws affecting both, whether the situation involves immigration, incarceration, or women’s need for financial support.

The Wavering “Wall” Between Intelligence and Law Enforcement: A Longer View

5-2020 | Jeffrey Parker

ABSTRACT:

This article is a commentary on Bernard Horowitz’ paper entitled FISA and the “Wall” (to be published contemporaneously), which focuses on the revelations of irregularities in the FISA surveillance process targeted on Carter Page. This commentary pulls back from that narrow topic, to place these particular problems in a longer and broader context of larger forces at work that may make addressing the current problems more problematical.

The commentary identifies four larger forces at work that played at role at producing these current abuses.

First, Americans have long suffered from a mistaken self-perception of discomfort or ineptitude with their own security arrangements, particularly with respect to intelligence and counter-intelligence. Using the example of the Pearl Harbor attack in 1941, the commentary shows that, in fact, America was well-served by its pre-war preparations and the performance of its intelligence services. Nevertheless, a mythology arose that Pearl Harbor was an “intelligence failure,” and that mythology has affected America’s security and intelligence arrangements ever since, influencing the provisions of the National Security Act of 1947, which still today serves as the foundation on which our current national security institutions are built. This same pattern of perception of an “intelligence failure” and a legislative response to re-structure intelligence arrangements was echoed in the national response to the attacks of September 11, 2001. But these are not isolated events. In between Pearl Harbor and 9/11, Americans continued to wring their hands about America’s “intelligence failures” in a wide variety of otherwise dissimilar historical events, through which walked the specter of Pearl Harbor mythology, which evokes Americans’ self-doubts about intelligence capabilities.

Second, the development of intelligence and surveillance methods has led to their improper use against American citizens, as was revealed during the Church Committee hearings in the 1970's. Part of the aftermath of those hearings was the creation of FISA, which seeks to distinguish between “domestic” intelligence surveillance, which is a crime without an order under Title III, and “foreign” intelligence surveillance, which can be authorized under the more permissive standards of FISA. Because both types are conducted by the same Bureau of the same Department, this arrangement introduces a duality and moral relativism into both agents and prosecutors of the Department of Justice, leading to a temptations to shift law enforcement efforts into the inherently criminal nature of intelligence and counter-intelligence activities.

Third, there has been an increasing use of secretive and deceptive methods in all forms of law enforcement, which has been accompanied over the last 30 years with a decline in the state of prosecutorial ethics. These factors have exacerbated the problems introduced both by FISA and by the Classified Information Procedures Act of 1980. A classified information bureaucracy has arisen largely without accountability or legal control, which in turn has produced the misuse of the classification system to further attenuate the accountability of prosecutors. During this same period, the judiciary’s willingness to police the prosecutors has become more lax, and the Justice Department itself has developed a clubbish atmosphere that fails to police itself, and to some extent even rewards prosecutorial overreaching.

Fourth, given the protracted nature of the decline in prosecutorial ethics, effective internal reform seems less likely than ever, and the problem is further exacerbated by the rise of careerism within federal prosecutors, which is a sharp change from previous decades.

The article concludes that these larger forces indicate that the problems within the Department of Justice go far deeper than the Carter Page/FISA episode. A free people will not long endure a Justice Department that does not pursue justice rather than litigating advantage. It is time to restore the traditional ethics of federal prosecution, and observe fairness to all, including the prosecuted defendant.

As for “Crossfire Hurricane” itself, though its codename was sophomoric, the execution was infantile. The unprofessional aspects are baffling, but there are still a number of loose ends, which may need to be tied up before a final judgment may be made.

The Effect of Evidentiary Rules on Conviction Rates

5-2020 | Alex Lundberg, Murat Mungan

ABSTRACT:

In a criminal trial, a jury may observe characteristics about the defendant (or victim) and use them to form a belief on the likelihood of guilt. Many evidentiary rules attempt to limit this inference. If jury beliefs are rational, such rules may be counterproductive. Any prohibition on the use of defendant characteristics as a form of evidence will never simultaneously reduce conviction rates for the innocent and increase conviction rates for the guilty. In fact, the opposite will occur under plausible conditions. However, if juries are sufficiently biased in their beliefs about guilt rates within groups of defendants, an evidentiary rule may simultaneously reduce wrongful convictions and increase rightful convictions.

Does Antitrust Have Digital Blind Spots?

5-2020 | John Yun

ABSTRACT:

Antitrust law is at a crossroad. Over the past forty years, following the consumer welfare standard as its guiding principle, it has evolved into a coherent and evidence-based approach to adjudication of individual disputes and the shaping of antitrust institutions. While calls to reform or reshape the antitrust enterprise are not new, the rise and influence of digital markets and “multisided platforms” have spawned new calls for antitrust reformation from academia and politicians across the political divide. The premise shared by antitrust reformers in both chambers of Congress and academia is that reformation is needed to cure “blind spots” in antitrust’s ability to identify and remedy anticompetitive conduct in digital markets. The embodiment of these concerns is found in high-profile digital reports produced by think tanks and competition agencies, which target a number of economic features and practices of digital platforms to illustrate how current antitrust jurisprudence has failed to properly constrain monopolistic behavior. Central to the reformers’ claim that antitrust suffers from blind spots in digital markets are a number of key presumptions. First, that digital platforms are characterized by impenetrable network effects which lead to and preserve “winner takes all” or “winner takes most” outcomes. These effects allegedly prevent competitors with better products and technology from competing. Second, that self-preferencing, such as with private label products, and setting defaults on digital devices are harmful to consumers when used by platforms with large market shares. The idea is that users are improperly steered away from rival products to those of dominant platforms. Relatedly, there is a view that the recent Supreme Court decision in Ohio v. American Express is indicative of the inability of U.S. courts to properly assess the intricacies of network effects and platform conduct within the current framework. The stakes are high. The costs of getting it wrong can lead to considerable economic harm, as platforms represent an increasingly important part of the global economy and improper antitrust condemnation of potentially procompetitive behavior will stifle innovation and deprive consumers of features and products that they enjoy. To date, there has been no systematic response to these key presumptions driving the conclusions in the influential digital reports. I examine each of these presumptions and explain why they are not well-grounded. I examine how network effects can differ in nature and scope depending on the context and type of platform. Further, I explicitly develop a framework to assess platform defaults to guide reform discussions. Finally, I explain the Supreme Court’s decision in American Express as properly melding the rule of reason approach with economic learning on multisided platforms. I conclude with what appears to be the most radical proposal in the current debate: that current antitrust law and enforcement actually are sufficient to properly assess and adjudicate conduct involving digital platforms, with unclouded vision.

Tailoring Critical Loss to the Competitive Process

5-2020 | Malcolm Coate, Shawn Ulrick, John Yun

ABSTRACT:

In 1989, Barry Harris & Joseph Simons developed a quantitative method to implement the Horizontal Merger Guidelines' hypothetical monopolist test with a market-level "critical loss" analysis. The appeal of Harris & Simons' framework is that it created a simple, intuitive approach to delineating markets — with relatively parsimonious data requirements. After over a decade of use, however, economists began to propose alternative approaches to the classic critical loss analysis — using theory to impose structure on firm-level demand. This allowed researchers to reformulate the critical loss test in terms of diversion ratios. The purpose of this paper is to discuss when the classic, market-level approach to critical loss is more appropriate and when firm-level critical loss offers an important refinement. We illustrate, with a detailed example, that under certain plausible demand scenarios, a diversion-based firm-level analysis could easily reach the wrong answer on market definition. Thus, the analyst needs to carefully study the competitive environment before deciding on the appropriate analysis. As a bottom line, the choice between market-level and firm-level analysis depends on the specific factual situation.

Challenging Consummated Mergers Under Section 2

5-2020 | Douglas Ginsburg, Koren Wong-Ervin

ABSTRACT:

In the last year, officials at the U.S. Antitrust Agencies have taken a number of troubling positions with respect to what is required to challenge consummated mergers under Section 2 of the Sherman Act. These include: (1) the contention that Section 2 presents a "lower bar" than Section 7 of the Clayton Act in that Section 2 requires mere proof that the merger was "reasonably capable of" contributing significantly to the acquisition or maintenance of monopoly power; (2) suggestions that evidence of intent may be used as a proxy for probable harm; and (3) the idea that Section 2 can be used to challenge a series of acquisitions no one of which by itself was problematic but which together form an anticompetitive course of conduct. In this article we explain why these contentions are unfounded.

The Modern American Law of Race

5-2020 | David Bernstein

ABSTRACT:

This article explores the modern American law of race.

Part I of this Article addresses the origins and development of modern racial categorizations -- African American, Asian, Hispanic, Native American, White -- in the United States. These categories arose from categories used for federal anti-discrimination enforcement and affirmative action policies. There has never been a coherent or comprehensive explanation from any federal source as to why some minorities are deemed to be "official" minority groups and others are not, or why groups have the precise, and often seemingly arbitrary, boundaries they do.

As documented in Part I of this Article, the scope and contours of official minority status have come about from a combination of which groups were deemed analogous to African Americans, bureaucratic inertia, lobbying campaigns, political calculations by government officials, a failure to anticipate future immigration patterns, and happenstance.

Part II discusses state variations on the scope of the standard ethnic categories, in particular in the states' Minority Business Enterprise (MBE) programs.

Having discussed the origin and scope of official minority categories at the federal and state level, this Article next turns to a second issue -- what evidence individuals must provide to demonstrate membership in these categories. Conventional wisdom is that these categories are purely a matter of self-definition based on informal norms. However, various states require a wide range of proof of minority status to participate in MBD programs, ranging from providing an official document such as a birth certificate listing one's race, to providing letters of support from ethnic organizations, to relying on certification by the National Minority Suppliers Development Corporation.

Perhaps surprisingly, challenges to the under- or over-inclusiveness of a government's definition of the scope of racial or ethnic categories are rare. Part IV of this Article discusses the only three such cases this author found.

Part V of this Article reviews cases in which a denial of minority status to a petitioner seeking Minority Business Enterprise status has been adjudicated and resulted in a published opinion. Most of the cases discussed in Part V involve the question of Hispanic status, the boundaries of which have proved especially vexing to administrators and courts.

The next section of this Article, Part VI, turns from racial categorization in the Minority Business Enterprise context to adjudication of claims of minority status by individuals seeking to benefit from affirmative action in employment.

Part VII of this Article discusses two other contexts in which courts have had occasion to determine racial or ethnic identity; first, cases in which a plaintiff has needed to show he is a member of a protected class under anti-discrimination laws, and second, cases involving "Indian" status under the Major Crimes Act.

This Article concludes by noting that laws dictating ethnic and racial categories were designed primarily to assist African Americans overcome the legacy of slavery, Jim Crow, and discrimination. As the United States has become more demographically diverse, however, African Americans are now a shrinking minority of non-whites protected from ethnic and racial discrimination, and of those eligible for affirmative action programs. Given high rates of interracial marriage among other minority groups and the reality that mixed-race and mixed-ethnicity individuals can check whichever box most benefits them, the percentage of non-African-American individuals eligible for minority status for affirmative action purposes will continue to grow, putting increasing strains on the current method of categorization.

Class Legislation, Fundamental Rights, and the Origins of Lochner and Liberty of Contract

5-2020 | David Bernstein

ABSTRACT:

While legal scholars and historians have criticized many judicial doctrines from the pre-New Deal period, critics have been especially scathing in their attacks on the "liberty of contract" doctrine enforced most famously in Lochner v. New York. Until recently, academics routinely asserted that the Lochner Court's Justices simply made up the doctrine based on a combination of belief in laissez-faire economics and hostility to workers' rights.

Contemporary scholars, by contrast, have reconstructed the period's due-process jurisprudence, finding in it a principled commitment to a conception of justice with philosophical and jurisprudential roots dating back to the Founding and beyond. There are two primary lines of this revisionist literature. One emphasizes traditional Anglo-American hostility to "class legislation" — legislation that arbitrarily favors or disfavors particular factions. The other emphasizes the influence of the natural rights tradition, tempered by precedent and historicism, on the Court's due-process decisions. Part I of this Article reviews the debate that emerged in the 1990s and early 2000s between partisans of these interpretations.

Part II of this Article discusses subsequent developments in the class legislation vs. fundamental rights debate through the present time, noting an increasing convergence between the two sides; both sides acknowledge that both class legislaton and fundamental rights played significant roles in the development of the Supreme Court's due process jurisprudence, with the remaining debate primarily over which doctrine deserves more emphasis in histortical recountings.

This Article concludes by noting that as this debate has progressed, certain areas of historical consensus have emerged. First, both sides agree that the Court did not attempt to enforce anything approaching a night watchman-type laissez-faire policy on government. Second, both sides agree that the Supreme Court's fundamental-rights jurisprudence, often traced to the 1930s, in fact began to emerge in the pre–New Deal period. Finally, they agree that the Supreme Court Justices who adopted and applied the liberty of contract doctrine did not have the cartoonish reactionary motives attributed to them by Progressive and New Deal critics. Rather, the Justices, faced with constitutional challenges to novel assertions of government power, sincerely tried to protect liberty as they understood it, consistent with longstanding constitutional doctrines that reflected the notion that governmental authority had limits enforceable via the Due Process Clause.

“Administrative Constitutionalism:” Considering the Role of Agency Decisionmaking in American Constitutional Development

5-2020 | David Bernstein

ABSTRACT:

The last decade or so has seen an explosion of scholarship by American law professors on what has become known as administrative constitutionalism. Administrative constitutionalism is a catchphrase for the role of administrative agencies in influencing, creating, and establishing constitutional rules and norms, and governing based on those rules and norms. Though courts traditionally get far more attention in the scholarly literature and the popular imagination, administrative constitutionalism scholars show that administrative agencies have been extremely important participants in American constitutional development.

Part I of this article identifies three different versions of administrative constitutionalism — (1) Engagement with Existing Constitutional Doctrine; (2) Resolving Questions of Statutory Meaning that Implicate Constitutional Questions; and (3) Shadow Administrative Constitutionalism--and provides examples from the scholarly literature to illustrate these distinct manifestations of administrative constitutionalism.

Part II of this article discusses the normative turn in administrative constitutionalism scholarship. Much of this normative literature is implicitly or explicitly premised on the notion that agencies are more likely to pursue progressive goals than are other government actors.

Part III of this article disputes the notions that agency constitutional decisionmaking is "democratic" and that agencies are naturally inclined to serve progressive goals.

Finally, Part IV of this article notes that scholars who support broad agency autonomy to work out and enforce their own constitutional visions have failed to consider how their work fits in with the economic and political science literature on agency behavior. One can predict based on that literature that agencies given broad autonomy under the guise of administrative constitutionalism will primarily be inclined to expand their scope and authority at the expense of countervailing considerations.

Distinguishing Different Kinds of Property in Patents and Copyrights

4-2020 | Sean O'Connor

ABSTRACT:

Academic debates over intellectual property as “property” seem to assume only one kind of property. Based on original historical research, this Article shows that different kinds of property have accredited over time in at least patents and copyrights. A fundamental right to keep ideas, expressions, and inventions private established a natural law property-type right from Greco-Roman times. Statutory regimes akin to regulatory property designed to encourage creators and inventors to make their works available to the public emerged during the medieval and Renaissance periods. Copies embodying copyrighted expression or patented invention were considered part of those exclusive rights during much of the Enlightenment before being deemed to have their own individual chattel property title. And finally, contracts conveying copyright or patent rights have their own property attributes. This Article argues that understanding the different kinds of natural and regulatory property in intellectual property will help IP skeptics and proponents bridge the acrimonious gap between them.



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