Read Harold Feld

He is a lawyer for the Public Knowledge, which advocates for, "Policies that serve the public interest."

He lives and breaths this stuff, and he has looked at the merger between AT&T and Time Warner, and the rumored remedies that the US Department of Justice is demanding, and concludes that the remedies demanded by the government, including requiring a divestiture of CNN, have extensive precedent and are reasonable in the context of the industry:

I want to start by applauding Randal Stephenson for coming out quickly and denying the rumors that DoJ asked them to sell CNN as the price of getting the merger done. At the same time, however, he acknowledged that negotiations were “complicated,” and that he and recently confirmed Asst A.G. for Antitrust Makan Delrahim were still “getting to know each other” and “figure out the ask on the other side of the table.” He also made it clear that, if DoJ does challenge, AT&T is prepared to go to court and are confident they will win.

AT&T is generally pretty good at persuading everyone that DoJ doesn’t really have a case against them. As folks may recall, despite the fact that the proposed AT&T/T-Mo transaction violated just about every basic tenant of existing antitrust law, AT&T managed to convince everyone for the longest time that DoJ was just playing hardball with them and didn’t really mean it because DoJ didn’t really have a case. While Stephenson refused to discuss what was negotiated, the rumors suggest it was a demand to divest either DIRECTV or the Turner Broadcasting cable channels (which include CNN, as well as TNT, HBO and a bunch of other real popular programming.) Once again, you have antitrust experts who do not have any particular experience with cable mergers shaking their heads and predicting that DoJ has no case.

In fact, demanding divestiture of either the must have content or the DIRECTV distribution platform is precisely the remedy you would expect if you believe the deal presents significant harm because of the vertical integration issues. That’s been the position of my employer, Public Knowledge, which has opposed the transaction since AT&T announced the deal. (That predates Trump’s election, for those of you wondering.) If you want a more detailed understanding of the theory of the harms, you can find it in my boss Gene Kimmelman’s testimony to Congress here. While generally true that vertical deals are hard to challenge, the cable industry has long been something of an exception, and the remedy here is similar to what the FTC imposed on the AT&T/Turner deal in 1996, where the FTC imposed stock divestitures and restructuring to eliminate the voting interest of John Malone and Liberty Media because of Malone/Liberty’s ownership TCI, which was then the largest cable operator in the United States (25% national market share). Given the massive criticism of “behavioral” remedies and a call to return to “structural” remedies from the right and the left, it’s unsurprising that DoJ would want actual divestiture rather than go the Comcast/NBCU consent decree route.

I would add that consent decrees tend to have limited effect over the long run, and that Public Knowledge has opposed this merger since before Trump's election.

While a lot of people have tried to cast opposition to the deal as political interference by Trump and his Evil Minions^™, it is clear that opposition could be easily justified.

This might be another case of a stopped clock being right twice a day, or it might be a vendetta by Donald Trump. 

Just don't jump to conclusions yet.

Read the rest.

More of This

Tronc, the company formerly known as Tribune Publishing, has failed in its bid to buy the Chicago Sun Times and the Chicago Reader.

Instead, a group of investors, including the Chicago Federation of Labor, purchased the publisher of the two papers, maintaining its independence of one of the largest media conglomerates in the nations:

In the end, one man made all the difference.

Edwin Eisendrath, the former Chicago alderman who ran losing campaigns for governor and congressman earlier in his career, just won the most unlikely challenge he’d ever undertaken: He kept the Chicago Sun-Times independent and out of the clutches of Chicago Tribune owner tronc. “It was bashert,” Eisendrath told me, using the Yiddish word for “destiny.” How else to explain the odds he overcame to make it happen?

On Wednesday, Eisendrath and a coalition of labor unions and individual investors closed on the purchase of the daily Sun-Times and the alternative weekly Chicago Reader from Wrapports Holdings LLC. Terms of the deal were not disclosed, but sources said the key was securing more than $11.2 million in escow to cover projected operating losses over the next two years.

“Today’s deal to buy the Sun-Times preserves two independent newspaper voices in Chicago, a rare thing in America these days,” Eisendrath tweeted. “We wanted to make sure that Chicago had a genuine voice with honest and good reporting that connects with working men and women.”

Eight weeks ago it seemed all but certain tronc would take over the Sun-Times in a move that many believed would have stifled competition and led to the inevitable demise of the city’s No. 2 newspaper. All that stood in the way of the deal was the vigilance of the U.S. Department of Justice Antitrust Division.

Alone in answering the Justice Department’s call for alternative bidders was Eisendrath, backed by the Chicago Federation of Labor and a belief that the Sun-Times was too vital to the life of the city to forfeit its independence.

My guess is that the (probably pre-Trump) DoJ call for bidders had a lot to do with Tronc losing the bid, because it implied a lot of litigation if the two big Chicago papers merged.

I'd like to see more official moves against consolidation.

Quote of the Day

And so, contrary to Hayek’s expectations, financial globalisation has proved that it is market fundamentalism, and not the regulatory state that is leading the world into an era of authoritarianism and totalitarianism – in the US, Eastern Europe, India and China.

—Ann Pettifor

This is not surprising the relentless concentration of power by monopolists has always had this effect. 

As an aside, Hayek in fact loved authoritarianism and totalitarianism, as shown by his full-throated support of the brutal Pinochet regime in Chile, and his only slightly more muted defense of the Apartheid regime in South Africa.

I Know that Correlation is not Causation

Historical patent data


Patents vs economic growth

But it does appear that there is a negative correlation between the number of patents and economic growth:

Recently I discussed a paper by David Autor, David Dorn, Gordon Hanson, Gary P. Pisano and Pian Shu. The paper noted that as competition from China increased, innovation by US firms, measured by patent output, decreased. I believe the result, but started to wonder… are patents a good measure of innovation? Do patents drive economic growth?

I don’t know how to measure innovation, but I can look at the relationship between patents and economic growth. We being by looking at patents per capita. I found patent data going back to 1840, and population to 1850. The graph below shows patents per capita beginning in 1850. (All data sources provided at the end of this post.)

………

If it kind of looks to you like patents are not driving economic growth, well, it kind of looks like that to me too. In fact, if anything, the lines seem to be more negatively than positively correlated. In years where there are more patents, the subsequent growth rate in real GDP for capita over a ten year period seems to go down. Conversely, fewer patents in one year seem to be associated with more growth over the next ten years.

This is not a surprise.

Patents are increasingly an instrument for extracting monopoly rents with no meaning productive activity, as such they are increasingly parasitic.

This is the Magic of the Marketplace that New FCC Chair Ajit Pai So Loves

the map is pretty staggering. pink is poor areas, green is areas where AT&T provides decent internet. almost no overlap. pic.twitter.com/ay9Jw7KR0J

— libby watson (@libbycwatson) March 10, 2017

The Wonders of the Market

There is a (soon to be canceled by the Trump administration, no doubt) federal program that requires that low cost internet be provided to poor people where broadband is available.

AT&T's way of dealing with this was to scrupulously ensure that there was no broadband available to the poor so that they could over charge them:

It's no secret that ISPs can make more money from network upgrades in wealthy neighborhoods than low-income ones, and a new analysis of Cleveland, Ohio, by broadband advocacy groups appears to show that AT&T is following that strategy. The National Digital Inclusion Alliance (NDIA) and a Cleveland-based group called Connect Your Community alleged in their report today that "AT&T has systematically discriminated against lower-income Cleveland neighborhoods in its deployment of home Internet and video technologies over the past decade."

Last year, the NDIA brought attention to AT&T's refusal to provide $5-per-month Internet service to poor people in areas where the company hasn't upgraded its network. When the Federal Communications Commission approved AT&T's purchase of DirecTV in 2015, the FCC required AT&T to provide discount broadband to poor people as condition of the merger. But the condition apparently allowed AT&T to charge full price in areas where maximum download speeds were less than 3Mbps. After the NDIA spoke out, AT&T announced it would stop exploiting the loophole and instead provide discount Internet to poor people in all parts of its network.

Today's followup report from the NDIA and Connect Your Community analyzes FCC data on AT&T Internet deployments in Cleveland, where many residents were initially declared ineligible for the discount broadband service.

"Specifically, AT&T has chosen not to extend its 'fiber-to-the-node' VDSL infrastructure—which is now the standard for most Cuyahoga County suburbs and other urban AT&T markets throughout the US—to the majority of Cleveland Census blocks, including the overwhelming majority of blocks with individual poverty rates above 35 percent," the report said.

………

AT&T DSL speeds are often extremely slow when service is delivered entirely over copper telephone wires from central offices that can be nearly three miles from individual homes. Data speeds degrade with distance over copper, so AT&T boosts speeds in many areas by bringing fiber deeper into each neighborhood with its fiber-to-the-node (FTTN) technology. AT&T's fastest speeds of all involve bringing fiber all the way to each home.

"AT&T apparently chose not to install fiber-to-the-node infrastructure anywhere in the areas served by its four Cleveland central offices with the greatest concentration of high-poverty neighborhoods," the advocacy groups wrote. "The absence of FTTN in these lower-income neighborhoods, and the overall disparity in FTTN deployment between Cleveland and the suburbs, can be traced largely to AT&T’s failure to deploy FTTN anywhere in the service areas of four 'central offices'... with large lower-income customer bases: those at 6513 Guthrie, 5400 Prospect, 2130 East 107th, and 12223 St. Clair."

By contrast, "Most of Cuyahoga County’s suburban communities are fully covered" by faster AT&T network technologies, including fiber-to-the-home, the report said.

………

The NDIA shared its findings with Federal Communications Commission member Mignon Clyburn, a Democrat, but it isn't expecting any action from the FCC's Republican leadership.

"The current chair of the FCC [Ajit Pai] is not likely to be interested," Siefer told Ars. "We have shared this research with Commissioner Clyburn's office. We do not see a path in the current climate (federally and in Ohio) to force AT&T to make the upgrades. We do see this research as proof that further deregulation is not going to reduce the digital divide. Our solutions will likely include local, state, and federal policies that encourage equitable build-out. We also need competition to bring down residential broadband costs. If AT&T is not going to serve low-income areas then we need policies and initiatives that actively recruit other broadband providers."

Pai's theory is that if you allow poorly regulated monopolists to gouge and charge monopoly rents, then they will invest in better service.

Reality indicates that all that if you allow poorly regulated monopolists to gouge and charge monopoly rents, they will invest in ensuring that they can maintain those monopoly rents, to the exclusion of customer service and innovation.

AT&T spent its money in Ohio on banning municipal broadband, instead of getting poor people decent internet service.


Tweet with picture

Monopolies Are Always Bad

The only question is whether or not the alternative is worse.

First we have the case study of the results AT&T's 1956 anti-trust consent decree, where it was required to release its patents to the general public:

To answer these questions, we study one of the most important antitrust rulings in US history, namely, the 1956 consent decree against the Bell System. This decree settled a seven-year old antitrust lawsuit that sought to break up the Bell System, the dominant provider of telecommunications services in the US, because it allegedly monopolised “the manufacture, distribution, and sale of telephones, telephone apparatus and equipment” (Antitrust Subcommittee 1958: 1668). Bell was charged with having foreclosed competitors from the market for telecommunications equipment because its operating companies had exclusive supply contracts with its manufacturing subsidiary Western Electric and because it used exclusionary practices such as the refusal to license its patents.

The consent decree contained two main remedies. The Bell System was obligated to license all its patents royalty free, and it was barred from entering any industry other than telecommunications. As a consequence, 7,820 patents, or 1.3% of all unexpired US patents, in a wide range of fields became freely available in 1956. Most of these patents covered technologies from the Bell Laboratories (Bell Labs), the research subsidiary of the Bell System, arguably the most innovative industrial laboratory in the world at the time. The Bell Labs produced path-breaking innovations in telecommunications such as cellular telephone technology or the first transatlantic telephone cable. But as Figure 1 shows, 58% of Bell's patent portfolio had its main application outside of telecommunications because of Bell's part in the war effort in WWII and its commitment to basic science. Researchers at Bell Labs are credited for the invention of the transistor, the solar cell, and the laser, among other things.

………

Our research shows that compulsory licensing increased follow-on innovation that builds on Bell patents. We measure follow-on innovation by the number of patent citations Bell Labs patents received from other companies that patent in the US. We find that in the first five years, follow-on innovation increased by 17%, or a total of around 1,000 citations. Back-of-the-envelope calculations suggest that the additional patents other companies filed as a direct result of the consent decree had a value of up to $5.7 billion in today's dollars.3

More than two-thirds of the increase in innovation can be attributed to young and small companies and individual inventors unrelated to Bell. This is in line with the hypothesis that patents can act as a barrier to entry for small and young companies who are less able to strike licensing deals than large firms (Lanjouw and Schankerman 2004, Galasso 2012, Galasso and Schankerman 2015). Compulsory licensing removed this barrier in markets outside the telecommunications industry, arguably unintentionally so. This fostered follow-on innovation by young and small companies and contributed to long run technological progress in the US.

Patent exclusivity frequently hinders, rather than helps, progress in the short term.

More generally, consequences of our increasingly monopolistic economy are, explained in detail by Barry C. Lynn:

There are many competing interpretations for why Hillary Clinton lost last fall’s election, but most observers do agree that economics played a big role. Clinton simply didn’t articulate a vision compelling enough to compete with Donald Trump’s rousing, if dubious, message that bad trade deals and illegal immigration explain the downward mobility of so many Americans.

As it happens, Clinton did have the germ of exactly such an idea—if one knew where to look. In an October 2015 op-ed, she wrote that “large corporations are concentrating control over markets” and “using their power to raise prices, limit choices for consumers, lower wages for workers, and hold back competition from startups and small businesses. It’s no wonder Americans feel the deck is stacked for those at the top.” In a speech in Toledo last fall, Clinton assailed “old-fashioned monopolies” and vowed to appoint “tough” enforcers “so the big don’t keep getting bigger and bigger.”

Clinton’s words were in keeping with Bernie Sanders’s attacks on big banks, but went further, tracing how concentration is a problem throughout the economy. It was a message seemingly tailor-made for the wrathful electorate of 2016. Yet after the Ohio speech, Clinton rarely touched again on the issue. Few other Democrats even mentioned the word monopoly.

The pity is that Clinton’s stance wasn’t simple campaign rhetoric. It was based on a substantial and growing body of research that confirms that consolidation is at the root of many of America’s most pressing economic and political problems.

These include the declining fortunes of rural America as farmers struggle against agriculture conglomerates. It includes the fading of heartland cities like Memphis and Minneapolis as corporate giants in coastal cities buy out local banks and businesses. It includes plunging rates of entrepreneurship and innovation as concentrated markets choke off independent businesses and new start-ups. It includes falling real wages, as decades of mergers have reduced the need for employers to compete to attract and retain workers.

Monopoly is a main driver of inequality, as profits concentrate more wealth in the hands of the few. The effects of monopoly enrage voters in their day-to-day lives, as they face the sky-high prices set by drug-company cartels and the abuses of cable providers, health insurers, and airlines. Monopoly provides much of the funds the wealthy use to distort American politics.

It comes as no surprise that when Reagan packed the Supreme Court in the 1980s, he chose Robert Bork and Douglas Ginsburg:  They both cut their teeth on the academic side of anti-trust law, which had been captured, largely through things like endowing chairs, by the right wing actors

They transformed the consensus, and the black letter law, on anti-trust from the idea of protecting a free and open market to a narrow view where regulation can only be justified through the showing of direct harm and immediate harm to consumers.

This has unleashed monopolies, and monopolies unleashed have lots of money to spend on politicians, which leads to more support for monopolies. (Our recent trade deals have been about expanding the reach of pharma and content monopolies, for example.)

Rinse, lather, repeat.

Tweet of the Day

On #BBCBizLive: During the London tube strike Uber prices surged by up to 500% - are companies exploiting consumers or right to cash in? pic.twitter.com/ICo824TLUF

— BBC Business (@BBCBusiness) January 10, 2017

Their business model is to become monopoly providers, and then screw us like a drunk Congressional page.

Food for Thought

I've come across an interesting study from the Council of Economic Advisors.

One of the effects of the increasing concentration in American business is that it creates a labor market monopsony which allows employers to push down wages:(PDF)

An excerpt:

There is also growing concern about an additional cause of inequity—a general reduction in competition among firms, shifting the balance of bargaining power towards employers (Furman and Orszag 2015). Such a shift could explain not only the redistribution of revenues from worker wages to managerial earnings and profits, but also the rising disparity in pay among workers with similar skills. These trends also have broader implications for the economy as a whole: instead of promoting growth, forces that undermine competition tend to reduce efficiency, and can lead to lower output, employment, and social welfare.

A growing literature has documented several indicators of declining competition in the United States, and economists have begun to explore the links between these trends and rising income inequality (Furman and Orzag 2015). While recent discussions have highlighted rising concentration among producers and monopoly pricing in sellers markets (The Economist 2016), reduced competition can also give employers power to dictate wages—so-called “monopsony” power in the labor market. While monopoly in product markets and monopsony in labor markets can be related and share some common causes, the latter has some distinct causes and policy implications.

This issue brief explains how monopsony, or wage-setting power, in the labor market can reduce wages, employment, and overall welfare, and describes various sources of monopsony power.1 It then reviews evidence suggesting that firms may have wage-setting power in a broad range of settings and describes several trends in recent decades consistent with a growing role for monopsony power in wage determination. It concludes with a discussion of several policy actions taken by the Obama Administration to help promote labor-market competition and ensure a level playing field for all workers.

Monopoly is when you have a single supplier. Monopsony is when you have a single buyer.

This is yet another case where the right wing monopoly theory fails: The damage from monopolies and economic concentration is not limited to higher consumer prices.

In fact this interpretation of modern antitrust law has been wrong from the very beginning.

Even a cursory examination of the creation of anti-monopoly laws clearly shows that the legislative intent was largely directed toward barriers to competitors entry into markets.

Of course, history, or truth, or public benefit, or basic integrity never mattered to Robert Bork and Evil Minions^™.

They developed the theory starting with the goal of increasing the power of the elites, and worked backwards.

The EpiPen Price Gouging is a Family Affair

It turns out that Gayle Manchin, Senator Joe Manchin's wife and mother of Mylan CEO Heather Bresch, was appointed chair of the National Association of State Boards of Education , where she relentlessly pushed to increase EpiPen sales:

After Gayle Manchin took over the National Association of State Boards of Education in 2012, she spearheaded an unprecedented effort that encouraged states to require schools to purchase medical devices that fight life-threatening allergic reactions.

The association's move helped pave the way for Mylan Specialty, maker of EpiPens, to develop a near monopoly in school nurses' offices. Eleven states drafted laws requiring epinephrine auto-injectors. Nearly every other state recommended schools stock them after what the White House called the "EpiPen Law" in 2013 gave funding preference to those that did.

The CEO of Mylan then, and now, was Heather Bresch. Gayle Manchin is Heather Bresch's mother.

The whole Manchin clan is in on this bit of looting.

On the bright side, both New York (first link) and West Virginia are looking at antitrust and Medicate fraud allegations against the firm:

On the eve of a Congressional hearing on the soaring price and lack of competition for the EpiPen emergency allergy treatment, the attorney general for West Virginia has confirmed his office is investigating EpiPen maker Mylan for allegations of antitrust violations and Medicaid fraud.

WV Attorney General Patrick Morrisey confirmed the investigation today, revealing that he’d issued a subpoena to Mylan back in August, seeking documents and other information related to EpiPen, but that the company failed to meet the Sept. 7 deadline.

In response, Morrisey’s office has petitioned [PDF] a state circuit court to enforce that subpoena.

The state believes that EpiPen has been short-changing the West Virginia Department of Health and Human Services Bureau for Medical Services (BMS) by paying smaller rebates than it should have.

Drug companies pay different levels of rebates to BMS depending on whether a medication is considered an “innovator” or a “non-innovator.” The lower, non-innovator distinction, is usually reserved for generics, but Morrisey says that Mylan was paying that rate for EpiPen, even though it’s a brand-name drug.

This may constitute Medicaid fraud under state law, according to the petition.

The state also believes that Mylan may have violated state antitrust laws by filing an intellectual property suit against Teva Pharmaceuticals in 2012 over an in-development generic version of EpiPen.

Joe Manchin will lose his bid for reelection in 2018.

If the Democratic base does not aggressively primary him, they are idiots.

And He Would Have Gotten Away with It Too, If It Weren't for That Meddling Journalist

David Sirota has been all over the conflicts of interest and corruption at the heart of the proposed merger between the health insurers Anthem and Cigna:

Late last week, there was some notable news in the arcane world of insurance regulation: Connecticut’s state comptroller, Kevin Lembo, called on Insurance Department Commissioner Katharine Wade to recuse herself from a review of the proposed merger of the nation’s second- and fourth-largest insurers, Anthem and Cigna, in which the state has a lead role. “The revelations and repeated reports about your financial, personal and professional ties to Cigna,” Lembo wrote to Wade, “will make it challenging for the Connecticut public to view the review process of the Anthem-Cigna merger as fair and transparent.”

Lembo’s letter marked the latest turn in a controversy that, while building for more than a year, has come to a head over the past month—driven in substantial part by the ongoing reporting of David Sirota, the Denver-based senior investigations editor for the International Business Times. On June 1, Sirota published a lengthy piece weaving together previously-known and new concerns over conflicts of interest surrounding the merger review: Wade, appointed to her role in 2015 by Connecticut Gov. Dannel Malloy, is a former longtime Cigna lobbyist, her husband is a top Cigna lawyer, her father-in-law works for a law firm that lobbies for Cigna, and her mother worked for Cigna as recently as 2013. Wade’s brother, Sirota reported, also “previously worked as a counsel” for Cigna. Further, after reviewing more than a decade’s worth of campaign finance data, Sirota showed that Anthem, Cigna, and Cigna’s lobbying firm gave more than $2 million to groups linked to Gov. Malloy, with much of that money coming since 2015.

Since then, Sirota has produced more than a dozen follow-ups on the topic—tracking, for example, grassroots groups and state legislators calling on Malloy to remove Wade from the merger review—as what he initially envisioned as a “good little blog item” turned into an investigative series.

 Unfortunately, IBT is suffering financial difficulties, so go to their Political Capital page, and clock on their ads.

Seriously though, this coverage is kicking some major ass.

College Costs: It Ain't Climbing Walls

In response to a particularly egregious post by an overpaid (aren’t they all?) sales weasel about marketing to the “4 Ps”^*, Paul Campos of LGM notes the remuneration of the 15 highest paid staff at the school, and the size of the school (less than 200 faculty), and draws obvious conclusions.

First, let me say, read the comments on his post.  They are a wealth of information as well.

Second, as is my wont, let me run the numbers:

The top 15 luminaries at this institution earn a total of $3,928,000.00, with the 15^th most highly paid getting $145,000.00 a year.

There are 200 teaching staff, none of whom make $145,000.00 a year, or their names would be on the tax records used at LGM.

Assuming that they each average $100,000.00 a year, this means $20,000,000.00 spent on teaching staff, which means that 14% of the teaching budget is spent on such notables as the , "Vice President of Campus Environment ," "Associate Assistant Vice President/Dean", "Vice President of Institutional Advancement, " and "Associate Vice President and Chief of Staff".

According to the comments, almost all the teacher are adjuncts, so that number is probably less than $60K, it's primarily a liberal arts institution, which would mean that of these people have get the ⅓ of what is spent on instructors.

When you further consider that it is likely that each of these bits of administrative deadwood have 5 flunkies working directly for them on average (and my guess would be that there are at least 10 working for both the marketing and alumni development chiefs) , and that each of them earn $30K a year, and this goes up to more than 50% of the teacher budget.

Note from the comments also, "It is telling that she refers to customers rather than students."

A major problem with higher education, and higher education costs, is the explosion of overpaid and under-worked administrators.

Another one is that, particularly at the top schools, there is monopolistic collusion as to prices and aid awards, allowing prices to skyrocket.

Instead, we have people talking about climbing walls for students, and those palatial some new dorms.^†

College is a microcosm of society, where an unproductive and parasitic managerial class suck the marrow out of business, the economy, society, and the "customer".

^*Product – What product or products should we offer? Price – How should our products be priced? Place – Where should we offer our products for sale? Promotion – What’s the compelling story we tell about our product and where do we tell the story to get people to buy our product?
^†In fact, the high end student amenities are predicted by monopoly theory. Once monopolists stop competing on price, they jack up prices and compete on bling.

WTF, Ohio?

Worst mascot ever!

Only in Ohio could an initiative to legalize recreational marijuana be opposed by legalization activists because it's purpose designed to benefit 10 politically connected entities seeking monopoly rents:

As a member of the International Cannabinoid Research Society, a collector of antique marijuana apothecary jars, the founder of an industrial hemp business and “a pot smoker consistently for 47 years,” Don Wirtshafter, an Ohio lawyer, has fought for decades to make marijuana legal, calling it “my life’s work.”

But when Ohio voters go to the polls Tuesday to consider a constitutional amendment to allow marijuana for both medical and personal use, Mr. Wirtshafter will vote against it.

Issue 3, as the proposed amendment is known, is bankrolled by wealthy investors spending nearly $25 million to put it on the ballot and sell it to voters. If it passes, they will have exclusive rights to growing commercial marijuana in Ohio. The proposal has a strange bedfellows coalition of opponents: law enforcement officers worried about crime, doctors worried about children’s health, state lawmakers and others who warn that it would enshrine a monopoly in the Ohio Constitution.

The result has been one of the nation’s oddest legalization campaigns. It pits a new generation of corporate investors against grass-roots advocates like Mr. Wirtshafter, who deplores “opportunists seeking monopolistic gains” and laments that America would have been much better off “if they would have just let the hippies have their weed.”

A recent poll by the University of Akron shows voters evenly split, but if the proposal passes, Ohio will be the first state to approve marijuana for personal use without first legalizing medical marijuana. That would put Ohio, a swing state, at the forefront of the national movement to overhaul marijuana laws — just in time for the 2016 presidential campaign. Gov. John R. Kasich of Ohio, a Republican candidate for president, opposes Issue 3.

………

To complicate matters, the Ohio General Assembly has put a competing initiative, Issue 2, on the ballot; known as the antimonopoly amendment, it would block Issue 3 by prohibiting the granting of special rights through the State Constitution. There is certain to be a protracted legal battle if both measures pass.

There is also the matter that the granting of monopolies in the production of Marijuana might be unconstitutional.

We see state monopolies, and state granted monopolies and oligopolies, in alcohol because section 2 of the 21^st amendment has been interpreted by the courts of giving states near absolute control over the alcohol trade within their borders.

This does not apply to weed.

The story is twisted:

The story of how Issue 3 got onto the ballot begins here in Columbus, the capital, with Ian James, a political consultant whose company, the Strategy Network, specializes in gathering signatures for ballot initiatives. In 2009, his firm helped legalize casino gambling in Ohio through a measure that amended the State Constitution and specified where casinos could be located.

………

Mr. James said he had “taken that premise and applied it to marijuana.” In early 2014, he said, he began meeting with lawyers and a potential investor, James Gould, a Cincinnati sports agent, to talk about a “tightly regulated system” to make marijuana available in Ohio. An organization called the Ohio Rights Group, then represented by Mr. Wirtshafter, was already gathering signatures for an initiative to make medical marijuana legal.

But Mr. James had a more ambitious plan.

With help from Mr. Gould, he found 10 investment groups willing to put up a minimum of $2 million each to finance a campaign to pass an amendment that would legalize marijuana for medical use and personal use in small amounts; set up a commission to regulate it; and designate 10 parcels of land — each owned or optioned by funders of the initiative — where marijuana could be legally grown and cultivated for commercial use.

………

The backers call themselves ResponsibleOhio. Among the investors: the former professional basketball player Oscar Robertson, the fashion designer Nanette Lepore, Mr. Gould and two great-great-grand-nephews of President William Howard Taft. Each investment group has committed as much as $40 million to build facilities if Issue 3 passes.

………

But perhaps the group’s most contentious marketing effort has been Buddie, an anthropomorphic marijuana bud who looks a bit like a spear of asparagus wearing green cowboy boots and a blue cape, and who has been turning up on college campuses around the state. Critics liken him to Joe Camel, the cartoon character accused of marketing Camel cigarettes to children.

To say that I have mixed emotions about this is an understatement.

My win-win scenario is for Issue 3 to pass, and for the federal courts to strip the monopoly provisions from the statute, but my second best alternative is for the corporate ratf%$#s to lose.

I have no clue as to how I would vote on this if I lived there.

Good News Everyone!!!

Good news everyone!

---

I invented a device that makes you read this in your head using my voice!

It appears that the DoJ's antitrust division will oppose the Comcast-Time Warner Merger:

Staff attorneys at the U.S. Justice Department’s antitrust division are nearing a recommendation to block Comcast Corp.’s bid to buy Time Warner Cable Inc., according to people familiar with the matter.

Attorneys who are investigating Comcast’s $45.2 billion proposal to create a nationwide cable giant are leaning against the merger out of concern that consumers would be harmed and could submit their review as soon as next week, said the people. The division’s senior officials will then decide whether to file a federal lawsuit seeking to block the tie-up.

Even better, it appears that this opposition could have the effect of preventing other mergers in the industry:

………

A rejection would be a blow to Comcast, which would have to give up on valuable cable and broadband assets in major U.S. cities including New York and Los Angeles. The $45.2 billion merger proposal is also a way for Philadelphia-based Comcast to fend off competition from phone companies, satellite providers and Web services like Netflix Inc. that have taken hundreds of thousands of its TV subscribers in recent years.

Another company has a lot at stake: Charter Communications Inc., the No. 4 in the industry. Charter, which counts billionaire John Malone as its largest investor, has agreed to take control of 3.9 million Comcast cable-TV customers to ease approval for the Comcast-Time Warner Cable merger. If that fails, Charter won’t get those customers. Another Charter deal, the recent agreement to purchase of Bright House Networks, would also be in jeopardy.

The most amazing thing about this is that the push-back seems to come primarily from consumers, driven largely by both Comcast and TW Cable, and the belief that if they are allowed to merge, the suckitude will get only worse.

Remarkably, this is the second time that adverse regulation against cable companies has resulted in a consumer backlash.

The Cable Television Consumer Protection and Competition Act of 1992 was vociferously opposed by the cable companies, and they plastered their programming with advertising against it.

Once alerted, cable users bombarded Congress with calls and letters supporting the bill, because they figured that if their cable company was against the 1992 Cable Act, they were for it.

Supreme Court Rules that Industry Dominated Regulatory Panels Can Be Sued for Antitrust Violations

In North Carolina, the State Board of Dental Examiners is pretty much run by and for dentists.

When non-dentists started offering cheaper tooth whitening services, the board shut them down.

The Supreme Court has allowed state governments to engage in anti-competitive actions for over 70 years, and the question here was whether a something like the North Carolina State Board of Dental Examiners, where the inmates were running the asylum, deserved deserved immunity from antitrust enforcement.

The Supreme Court, and the answer was no:

State licensing boards composed of market participants do not enjoy automatic immunity from antitrust laws, the Supreme Court ruled on Wednesday. The decision in North Carolina Board of Dental Examiners v. Federal Trade Commission affirms the Fourth Circuit and deals a setback to an increasingly common form of regulation.

State action antitrust immunity

Since 1943, certain forms of state action have been immune from the antitrust laws. Accordingly, state legislatures may pass laws with anticompetitive effects. Several important Supreme Court cases since then have addressed the doctrine of state action immunity and helped to define its contours, particularly as it applies to actions outside state legislatures.

Antitrust immunity generally covers non-state actors only if the state both (1) clearly articulates the anticompetitive policy, and (2) actively supervises the policy. This case deals with the second requirement. If a professional licensing board is a state agency, must another state actor supervise the agency in order for the agency to be immune from the antitrust laws?

The dental board

In North Carolina, the legislature delegated regulation of dentists to a dental board. By state law, practicing dentists must fill a majority of the seats on the dental board.

This type of “self-regulation” is common among state licensing boards. But it has the natural tendency to become anticompetitive. Members of a guild frequently want to keep insiders in, keep outsiders out, and prop up the profession. A broad range of modern professions fall under professional licensing boards, including not just doctors, lawyers, and dentists, but also interior designers, real estate agents, floral designers, and hair braiders.

In this case, the dental board tried to exclude non-dentists from the market for teeth-whitening services after dentists complained about the low prices non-dentists charged for teeth whitening. It sent threatening letters to non-dentists who offered teeth-whitening services and even encouraged mall operators to kick out kiosks used for teeth whitening.

The dental board’s actions were not supervised by any state officials from North Carolina other than the members of the dental board itself. On these facts, the FTC took action against the dental board. The FTC and the Fourth Circuit both rejected the dental board’s attempt to invoke the defense of state action immunity.

No immunity for the dental board controlled by dentists

In a six-to-three opinion written by Justice Anthony Kennedy, today the Supreme Court affirmed the Fourth Circuit, holding that the dental board is not immune from the antitrust laws.

The Court’s opinion explains that even though the dental board is an agency of the state, its actions must still be supervised by the state in order to enjoy antitrust immunity. The “formal designation given by the States” does not itself create immunity. Here, the board is controlled by market participants in the same occupation that the board regulates. “When a State empowers a group of active market participants to decide who can participate in its market, and on what terms, the need for supervision is manifest.”

Where this might be most significant is in boards for doctors and state bars.

I am reminded of the case of Closings, Inc. in Massachusetts, which attempted to offer low cost closings for house sales in the commonwealth.

The state bar banned them, even though they employed lawyers to do the work, nominally because they were a corporation, rather than a partnership, and the state courts agreed.

What is was really about was that they were offering services for less than half what the law firms were charging, and as a result, they had achieved a 40% market share, and the lawyers did not want to lose what was easy money for what was a routine operation that should never have required a law degree.

These days, with a plethora of services that offer assistance for routine legal services online, I hope that we see a number of complaints filed against state bars.

Seriously? Chattanooga has the Best Internet in the Nation?

Actually, yes.

You see,  Chattanooga has a municiplally owned fiber optic network:

For thousands of years, Native Americans used the river banks here to cross a gap in the Appalachian Mountains, and trains sped through during the Civil War to connect the eastern and western parts of the Confederacy. In the 21st century, it is the Internet that passes through Chattanooga, and at lightning speed.

“Gig City,” as Chattanooga is sometimes called, has what city officials and analysts say was the first and fastest — and now one of the least expensive — high-speed Internet services in the United States. For less than $70 a month, consumers enjoy an ultrahigh-speed fiber-optic connection that transfers data at one gigabit per second. That is 50 times the average speed for homes in the rest of the country, and just as rapid as service in Hong Kong, which has the fastest Internet in the world.

………

Since the fiber-optic network switched on four years ago, the signs of growth in Chattanooga are unmistakable. ………

………

EPB, the city-owned utility formerly named Electric Power Board of Chattanooga, said that only about 3,640 residences, or 7.5 percent of its Internet-service subscribers, are signed up for the Gigabit service offered over the fiber-optic network. Roughly 55 businesses also subscribe. The rest of EPB’s customers subscribe to a (relatively) slower service offered on the network of 100 megabits per second, which is still faster than many other places in the country.

Gee.  The private sector, largely unregulated, cable and phone companies deliver what is among the slowest and most expensive internet service in the developed world, and publicly owned providers outperform them.

Maybe it's because the for-profit companies see preserving, and leveraging, their near monopoly status as more ……… well ……… profitable than improving the quality and price service.

Hoocoodanode?

It Sucks to be Tom Wheeler

It turns out that the Telco Lobbyist turned FCC Chairman is experiencing a lot of push-back regarding his proposal to gut net neutrality, not individuals, but also from internet giants like Google and other Democratic FCC commissioners:

FCC Chairman Tom Wheeler's proposal to let ISPs charge Web services for an Internet fast lane drew condemnation from many net neutrality advocates, and now two members of the commission have expressed doubts about the plan as well.

Jessica Rosenworcel and Mignon Clyburn, the two Democratic members of the commission other than Wheeler, spoke about the chairman's proposal yesterday. In a speech at a gathering of state library agencies, Rosenworcel called for delaying a vote on the proposal:

Network neutrality is the principle that consumers can go where they want and do what they want on the Internet, without interference from their broadband provider. The American Library Association and the library community have long been champions of network neutrality and an open Internet. Libraries, of course, know that an open Internet is important for free speech, access to information, and economic growth. I also support an open Internet. So I have real concerns about FCC Chairman Wheeler’s proposal on network neutrality—which is before the agency right now.

To his credit, he has acknowledged that all options are on the table. This includes discussion about what a “commercially reasonable” Internet fast lane looks like. While I do not know now where this conversation will head on a substantive basis, I can tell you right now I have real concerns about process.

His proposal has unleashed a torrent of public response. Tens of thousands of e-mails, hundreds of calls, commentary all across the Internet. We need to respect that input and we need time for that input. So while I recognize the urgency to move ahead and develop rules with dispatch, I think the greater urgency comes in giving the American public opportunity to speak right now, before we head down this road.

For this reason, I think we should delay our consideration of his rules by a least a month. I believe that rushing headlong into a rulemaking next week fails to respect the public response to his proposal.

The FCC is scheduled to vote on a notice of proposed rulemaking (NPRM) on May 15. This would open a new public comment process, but Rosenworcel explained that it would also end the so-called "Sunshine Period," another good opportunity for debate.

………

Also yesterday, dozens of tech companies including Amazon, Dropbox, Facebook, Google, Microsoft, Netflix, reddit, Tumblr, Twitter, and Yahoo sent a letter to the FCC (PDF) asking the commission to halt any plan allowing payments from Web services to ISPs in exchange for speeding up traffic.

"Instead of permitting individualized bargaining and discrimination, the Commission’s rules should protect users and Internet companies on both fixed and mobile platforms against blocking, discrimination, and paid prioritization, and should make the market for Internet services more transparent," the letter said. "The rules should provide certainty to all market participants and keep the costs of regulation low."

It's still on the agenda for May 15, but I think that it likely that it will be delayed.

There is a groundswell of opposition to this, and if they delay this, I don't think that it will go forward, much in the way that the SOPA/PIPA protests first delayed, then shut down those bills. (For that year anyway)

I do think that this will come back though.

I will say that Wheeler may be the point man, but the only way that this happened is with approval from the White House.

The Cossacks work for the Czar.

Why We Need Unions, Aggressive Anti-Trust Enforcement, and Former CEOs Behind Bars

Because without all of these, those in power conspire to impoverish and humiliate the rest of us:

Back in January, I wrote about “The Techtopus” — an illegal agreement between seven tech giants, including Apple, Google, and Intel, to suppress wages for tens of thousands of tech employees. The agreement prompted a Department of Justice investigation, resulting in a settlement in which the companies agreed to curb their restricting hiring deals. The same companies were then hit with a civil suit by employees affected by the agreements.

This week, as the final summary judgement for the resulting class action suit looms, and several of the companies mentioned (Intuit, Pixar and Lucasfilm) scramble to settle out of court, Pando has obtained court documents (embedded below) which show shocking evidence of a much larger conspiracy, reaching far beyond Silicon Valley.

Confidential internal Google and Apple memos, buried within piles of court dockets and reviewed by PandoDaily, clearly show that what began as a secret cartel agreement between Apple’s Steve Jobs and Google’s Eric Schmidt to illegally fix the labor market for hi-tech workers, expanded within a few years to include companies ranging from Dell, IBM, eBay and Microsoft, to Comcast, Clear Channel, Dreamworks, and London-based public relations behemoth WPP. All told, the combined workforces of the companies involved totals well over a million employees.

According to multiple sources familiar with the case, several of these newly named companies were also subpoenaed by the DOJ for their investigation. A spokesperson for Ask.com confirmed that in 2009-10 the company was investigated by the DOJ, and agreed to cooperate fully with that investigation. Other companies confirmed off the record that they too had been subpoenaed around the same time.

Although the Department ultimately decided to focus its attention on just Adobe, Apple, Google, Intel, Intuit, Lucasfilm and Pixar, the emails and memos clearly name dozens more companies which, at least as far as Google and Apple executives were concerned, formed part of their wage-fixing cartel.

Heads, I win, tails, you lose, klepto-capitalism at its finest.

The fact that the victims of this organized wage-theft conspiracy are well paid does not make it better, neither does the fact that many of the people involved are techno-libertarians, which does not make it just that they are a victim of their own laissez-faire philosophy.

The DoJ has secured a settlement, slap on the wrist fines, and no one will go to jail.

At the most, there will be a court judgement, and penalties, but the executives in question won't pay that, they are indemnified by their corporations, so it's shareholders, pension funds and the like, end up paying for this.

This is contemptible.

On the Other Hand, This Decision is a Good One

The Supreme Court upheld the right of the FTC to sue to prevent brand name drug manufacturers to bribe generic drug manufactures to keep them out of the market:

This case is an antitrust challenge to an increasingly common practice in the pharmaceutical industry. Brand-name companies faced with generic competition pay the would-be competitor an amount of money to stay out of the market. The payment comes in the form of settling a dispute over the validity or infringement of the brand-name company’s patent. Because generic entry reduces drug prices, these “pay for delay” or “reverse payment” agreements are alleged to reduce competition and increase drug costs. The Federal Trade Commission sued drug companies over one such deal. The court of appeals rejected that claim, explaining that the brand name’s patent includes the right to exclude competitors.

Today, by a vote of five to three, the Supreme Court reversed and held that the claim can go forward. Justice Breyer wrote the Court’s opinion, joined by Justices Kennedy, Ginsburg, Sotomayor, and Kagan. Chief Justice Roberts dissented, joined by Justices Scalia and Thomas. Justice Alito was recused from the case.

While they did not rule that the payments were presumptively illegal, it does make such payments far more unlikely, since the right of review has been affirmed.

Telco Breakup Has Hit the Mainstream

Because it's hit the New York Times:

Since 1974, when the Justice Department sued to break up the Ma Bell phone monopoly, Americans have been told that competition in telecommunications would produce innovation, better service and lower prices.

What we’ve witnessed instead is low-quality service and prices that are higher than a truly competitive market would bring.

After a brief fling with competition, ownership has reconcentrated into a stodgy duopoly of Bell Twins — AT&T and Verizon. Now, thanks to new government rules, each in effect has become the leader of its own cartel.

The AT&T-DirectTV and Verizon-Bright House-Cox-Comcast-TimeWarner behemoths market what are known as “quad plays”: the phone companies sell mobile services jointly with the “triple play” of Internet, telephone and television connections, which are often provided by supposedly competing cable and satellite companies. And because AT&T’s and Verizon’s own land-based services operate mostly in discrete geographic markets, each cartel rules its domain as a near monopoly.

The result of having such sweeping control of the communications terrain, naturally, is that there is little incentive for either player to lower prices, make improvements to service or significantly invest in new technologies and infrastructure. And that, in turn, leaves American consumers with a major disadvantage compared with their counterparts in the rest of the world.

On average, for instance, a triple-play package that bundles Internet, telephone and television sells for $160 a month with taxes. In France the equivalent costs just $38. For that low price the French also get long distance to 70 foreign countries, not merely one; worldwide television, not just domestic; and an Internet that’s 20 times faster uploading data and 10 times faster downloading it.

It's not from their editorial board, it's from former Times correspondent David Cay Johnston, whose beat is consumer protection and tax loopholes, but the fact that anyone gets space in the "Gray Lady" to suggest that deregulation will not create a telecommunications utopia is worth noting.

This Ain't About the Free Market

The news that BAE and EADS are in merger discussions has very little to do with the market or market efficiencies.

It's about EADS purchasing an entry in the the US market, one which BAE purchased when it bought United Defense,  Tracor,  LMCS, LMAES, etc.

Ironically, BAE sold its 20% share in EADS about 6 years ago.

The reality is that the defense market is essentially a monopsony, with governments in general, and the US government in particular serving as a single buyer, though with this merger the other end of the dynamic is heading more towards monopoly as well.

Thus, I find the protestations by BAE management that the French and German governments must not have the ability to exert realistic shareholder rights, together they own about 45% of EADS, to ring a bit hollow:

BAE Systems has insisted it will walk away from talks with EADS unless the combined European champion in aerospace and defence was allowed to operate as a normal company without political interference.

BAE is also insisting that the combined entity’s defence business would have to be based in the UK if the plan, news of which was leaked on Wednesday before the structure was finalised, is to go ahead.

Gee, a defense contractor must be kept free of political influence?

This deal is all about creating an entity that can manipulate the politics to its own advantage.

The insistence that the French and German governments sell out, if they didn't they would have about a 27% stake in the merged firm, is all about the company being able to whipsaw governments with  promises, or threats, about defense jobs.