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Business Rights Watch
“The absurdity of its premise — that Dow could escape liability for an illegal antitrust conspiracy because plaintiffs alleged a longer conspiracy than found by the jury — convinces the court that it should not [let Dow off the hook.]”
So said U.S. District Judge John W. Lungstrum, in the only quote on the issue in this Bloomberg report, and at first read it sounds obviously right. Whatever one may think of antitrust law, surely a $1.2 billion illegal conspiracy doesn’t become legal just because the plaintiffs who sued over it were off on the dates. (The plaintiffs said the conspiracy ran from 1999 through 2003; the jury apparently put the start date in 2000.) If you’re accused of killing your wife on a Friday, you shouldn’t get off just because the jury said you did it that Saturday instead.
Or should you? Suppose your defense was based on rock-solid evidence about where you were on Friday, and you never thought to provide an alibi for Saturday, because the prosecution never suggested you did anything wrong on Saturday. And when the jury said you committed the murder Saturday, that might have been because it accepted your evidence that you were elsewhere on Friday—and had you presented evidence about the whole period from the last time your wife was seen alive until you came home and discovered her corpse, the jury might have said you couldn't have done it. In such a case, which is absurd: to convict you of murder, to set you free, or to give you a new trial?
The antitrust case is more complicated: Dow Chemical is accused of setting the prices of certain products in collaboration with competitors—what antitrust law calls a “conspiracy” to “fix prices”—over a period of several years. But Dow argues that it’s essentially similar to the murder scenario: that the case each side presented to the jury was shaped by the time period involved, and that the defense didn’t argue against a shorter conspiracy because the plaintiffs never argued for one. If the timing was as critical in this real, $1.2 billion civil antitrust case as in my hypothetical murder case, that means Dow never made the case it needed to make, because it never realized what case it needed to answer. And that is not an absurd concern. If you don’t know what case you need to answer, it is very difficult to defend yourself.
- Alexander R. Cohen, How Antitrust Competes Against Freedom
- Alexander R. Cohen, Prison Sentences in Antitrust Case
- Alexander R. Cohen, Was Anything Scandalous Said at This Antitrust Hearing?
May 15, 2013
North Carolina Republicans wouldn't recognize free enterprise even if it ran them over—say, with an electric car!
Tesla Motors, maker of the Model S, voted Car of Year by Motor Trend and best car in years by Consumer Reports, sells its cars directly. They sell over the internet, and, where permitted, they set up their own stores and sell the cars through them. This threatens the cozy middle-man system that U.S. car dealers enjoy. So the car dealers are fighting back—not in the capitalist way, but in the crony-capitalist way!
May 07, 2013
May 6, 2013 -- At Farragut Park and other locations in Washington, D.C., food vendors have their trucks parked as usual at lunch time today but they are not serving the throngs of hungry customers. They are on strike against proposed D.C. regulations that would drive many of them out of business and limit consumer choice. Atlas is shrugging and The Atlas Society’s Edward Hudgins reports!
For further reading:
*Alexander R. Cohen, “Town's Food Truck Law May Be Confusing, But the Principle Is Clear.” October 2, 2012.
*Alexander R. Cohen, “Vinnie Shrugs.” September 21, 2012.
*Alexander R. Cohon, “Cronyists Shut Business, Sunder Family, Put Teen Entrepreneur In Homeless Shelter.” August 10, 2012.
The history of white-collar crime is a history dominated by prosecutorial misconduct.
- Roger Donway, Rich-Hunt: The Backdated Options Frenzy and the Ordeal of Greg Reyes
- Roger Donway, Ruehle Tells Story Of Backdated Options, Prosecutorial Misconduct
- Alexander R. Cohen, Holding Prosecutors Accountable
- Alexander R. Cohen, Aaron Swartz Had A Reasonable Option: Plead Guilty, Holder Says
In an effort to avoid fines, Google has proposed concessions to its rivals and European antitrust authorities.
Reuters describes the concessions in a way that seems natural—but it’s worth considering what these concessions actually mean. I’ve commented on two of them; I invite you to consider the others.
The EU competition authority said on Thursday Google's proposals included marking out its services from rival products in Internet search results and providing links to at least three competing search engines.
This one’s pretty clear: Google would be forced to advertise its competitors. That means Google would have to use its resources and the relationships it’s developed with its European users to steer those users away from Google. But a business’s existence, like a human life, is a process of working to keep itself in existence; this is bleeding Google's efforts to support its rivals at its own expense.
Or at least that’s what it would do if it actually helps the rivals. But lest we forget, Google is a search engine, and it does link to its rivals, voluntarily—this will only make those links more prominent, and perhaps give sites that closely compete with Google’s specialized services more prominence as compared to those that don’t. Users already stick with Google because Google is good, and they would remain free to do so.
Specialized websites will be able to opt out from the use of all their content in Google's own specialized search services and will also be able to mark out specific categories of information to prevent its use by Google.
As is well known, Google already honors requests to exclude sites or directories from its databases. What this evidently means is that specialized websites will be able to fine-tune what they allow Google to do with their content. So, for example, a site offering restaurant reviews would apparently be able to prohibit Google from including its reviews on a page listing reviews of a given restaurant from around the Web, while still having that its own page about that restaurant come up when you run a Google search on the restaurant’s name.
Now, copyright implies that websites should be able to exclude their content from Google. But that’s addressed by letting them opt out of Google altogether.
The notion that sites are entitled to be included in the main Google Web search without letting Google use their information elsewhere implies that sites have a right to appear in that search database—a right that’s violated if they can’t stay in that database while excluding themselves from other Google services. They have no such right. Inclusion in that database is a service Google offers—one most websites are eager to receive. To claim a right to be included on any terms other than those Google willingly sets, is to claim a right to be served by Google and the people who work for it, run it, and invest in it—even if they don’t want to serve you.
Here’s the Reuters article. What do you make of the other concessions?
The U.S. Department of Justice has agreed to stop trying to prevent beer makers AB InBev and Grupo Modelo from merging. The settlement is largely as described in my recent column: on the theory that an independently priced Corona limits the price of InBev products such as Bud Light, DOJ is requiring the merged companies to give up control of Corona in the U.S. market. As part of that arrangement, a brewery just south of the border will be sold to Corona’s new maker, Constellation.
But the settlement also includes one surprising requirement: Constellation must not only buy the brewery, it must expand it, in order to be able to meet the market demand DOJ expects will exist for Corona. Rather than relying on the market to drive any expansion of the brewery’s capacity—which would be in keeping with antitrust’s usual approach of decentralized planning—in this case, DOJ has used its power to interfere with mergers to dictate a specific increase in production capacity. Admittedly, the company that will have to increase capacity is a company that’s probably only able to buy the Corona business because of DOJ’s intervention: if Constellation’s regulatory windfall comes with an extra regulatory requirement, it’s hard to feel sorry for Constellation—especially considering that if the requirement were too costly, Constellation could have abandoned the “transformational” windfall and gone back about its own business. Nevertheless, for the government to dictate a plant’s production capacity is an act of central planning, strikingly inconsistent with the oft-repeated claim that antitrust law protects free enterprise.
- Alexander R. Cohen, How Antitrust Competes against Freedom
- Alexander R. Cohen, The InBev Merger, the Price of Corona, and the Cost of Antitrust
Unlike last time I went to a Senate antitrust hearing, I heard nothing scandalous at today’s. Nothing, except everything.
Is it not scandalous to hear a law antithetical to the moral meaning of free enterprise called the “Magna Carta of free enterprise”? To hear a law created to empower the federal government to violate individual rights compared to the Bill of Rights, which was created to restrain the federal government and protect individual rights?
Is it not scandalous to hear legislators celebrate a law that coercively controls the terms of voluntary trades to favor a certain side? Even if that side is that of "the consumer"?
Is it not scandalous to hear an official, Antitrust Division Assistant Attorney General Bill Baer, brag that he has thrown away more than 90 years of productive people’s lives because they have done business with other willing traders on their own terms and for their own goals?
Is it not scandalous to hear an official charged with preventing private enterprises from making profits “anticompetitively” attempt to show the value of his agency in terms of what would be called profits if the revenue involved weren’t criminal fines?
Those are some of the things I heard today, and they reflect the premises of the whole hearing, and indeed, of antitrust law. And if these are not scandalous things to hear, they ought to be.
- How Antitrust Competes Against Freedom
- The InBev Merger, The Price Of Corona, And The Cost Of Antitrust
- The Godsenator
Apr 11, 2013
Regulators have restricted so much finance-related speech that people in the industry now have to lobby for the freedom to use Facebook, Twitter and LinkedIn like the rest of us. Or almost like the rest of us.
Speech regulation can make social networks dangerous for executives in other fields, too. Reed Hastings came under threat for boasting that Netflix had streamed a billion hours of video in one month.
Businesspeople are people. Business speech is speech. What part of “no law” does the government not understand?
If you think antitrust is about fair competition, take a look at this: Delta and Virgin Atlantic are asking the U.S. Department of Transportation for a free pass to coordinate their U.S.-U.K. flight schedules. It seems such coordination might normally violate antitrust law, but the DOT can waive antitrust law to help certain companies.
Delta president Ed Bastian argues that the waiver “would allow travelers to take full advantage of all the aspects of the Delta-Virgin joint venture and enjoy the benefits of increased competition, particularly on flights to and from London Heathrow Airport.”
What does that have to do with fairness to other airlines? Nothing. If there’s some reason American Airlines and British Airways have a right not to have Delta and Virgin team up against them (and there isn’t), what travelers get out of the deal is irrelevant. When your competitor has a right, service to the customer doesn’t justify violating it. Delta can’t steal American’s planes in order to provide better service.
But if antitrust is just a way the government manages the economy to benefit customers, then it does make sense that the government can override the normal rules when an exception would benefit customers more than the normal rule does. That, of course, leaves the key question: Should the government manage the economy, or should it be limited to upholding rights?
James J. Treacy may have helped you find a job, but years after he left Monster.com, he was sent to prison over paperwork there. Treacy, the former chief operating officer of Monster Worldwide, served the longest prison sentence in the backdated-options frenzy: two years. Now he’s out—though he’s still banned from running public corporations—and last week, he shared some of his experience with Fox Business.
When initially contacted about backdating, Treacy says, he “didn’t even bother to call a lawyer.” He’s learned from that mistake. Now, he says executives should start getting to know lawyers even before they’re charged with anything—even before they have any specific concerns:
When you hit a certain level in the white-collar world, you should be out cultivating a relationship with a white-collar defense lawyer that you’re comfortable with, and you go to … him or her once or twice a year, just like you go to the dentist or the doctor, your tax accountant [or] your financial advisor: What’s going on in the world? What are the issues I have to watch for? How is this game really played? Hopefully it never happens to you, but it’s worth spending the money, and then if an issue ever comes up, you’ve got somebody you trust, somebody who knows you, somebody who’s advised you, and you go right to it.
This ought to sound absurd: Why should executives go around preparing themselves to be prosecuted? But, sadly, it is sensible. As the backdated-options frenzy shows, the fact that you have never heard of a regulation does not mean that you will not find yourself facing prison for violating it. And there’s so much criminal law in the business world now, and so much regulation that might one day be treated as criminal law, that executives need to be prepared to deal with it. They need lawyers they can trust—lawyers whose loyalty is to them, not to their corporations.
But as troubling as it is that knowing a criminal lawyer should be a good idea, there’s something scarier: There is so much criminal law out there that even lawyers can’t keep track.
For more on the backdated-options frenzy, read Roger Donway's book Rich-Hunt: The Backdated-Options Frenzy and the Ordeal of Greg Reyes, and his continuing series of articles.