Friday, May 30, 2003

The Culture: Reading between the lines of the Jessica Lynch story

I just don't get it. It is a well know fact that US prisoners of war in Iraq prior to Saddam's fall were not treated with kid gloves. Beatings were standard fare. The tenets of the Geneva convention were all but ignored. Yet joining the reflexively leftist BBC, the AP now reports that Army Pfc. Jessica Lynch captors would have been just fine had her rescuers been unarmed and attempted to rescue her in broad daylight.

You know what--warfare is all about overwhelming force. You bring as much force to bear on a target as you can, to insure that victory is academic. Had Pfc. Lynch's rescuers been unprepared for whatever contingency they might have faced, there would be howling over the needless casualties to save one soldier.

Besides, in all the coverage, I never heard any claim that there was significant resistance to the rescue operation. By my military background, the operation was a textbook POW rescue operation. I say the criticism of the Pfc. Lynch rescuers is just "feet of clay," nothing more an attempt to smear a successful mission for the simple fact that it was successful, and the people back home were inspired by it.


Thursday, May 29, 2003

The Culture: Moore Website Hacked

Dumb Celebs reports that big lefty Michael Moore's website was hacked earlier this week by opponents of his so-called documentary "Bowling for Columbine."

I do not condone hacking, but Micheal Moore is as much a fraud as his so-called documentary. What I think Moore really deserves is a documentary on him. Heck, I'd pay money to see that.

Antitrust News: Microsoft, AOL Time Warner Settle Suit

This in from the AP.

Microsoft Corp. will pay AOL Time Warner $750 million and let the media company license its browsing software for seven years in a settlement to resolve an antitrust lawsuit against the software giant, the companies announced Thursday.

The settlement also calls for Microsoft to license its digital media technology to AOL, as well as work with the company to promote digital media initiatives.

Microsoft will provide technical information to AOL to ensure that its products run effectively on the Windows operating system.

The agreement resolves a lawsuit AOL filed against Microsoft in January 2002 on behalf of its subsidiary, Netscape Communications. The complaint was one of several private antitrust lawsuits still pending against Microsoft over anticompetitive behavior.

AOL had alleged in the lawsuit that Microsoft used anticompetitive business practices to ensure the dominance of its Internet Explorer browsing software over Netscape's software. AOL argued that Microsoft made deals with computer manufacturers and others to shut out Netscape and quash competition.
I'm in the wrong business. Defending antitrust victims from unjust attacks is not nearly as lucrative as suing them.

Rights and Reason: Muslim Woman Sues to Wear Veil for License

A Muslim woman has brought suit against the state of Florida for threatening to revoke her drivers license after she refused to remove her veil for her drivers license photo. The question at bar is if Florida has a compelling interest in regulating drivers that overrides the religious protections afforded one of its citizens. Florida's own conduct in issuing drivers licenses would indicate it does not, as it routinely issues drivers licenses without photos. According to the ACLU, which is representing the woman in court:

Florida officials issued more than 800,000 temporary licenses and/or driving permits - without photographs - in the past five years to individuals in a variety of different categories. Convicted drunk drivers with revoked licenses are legally allowed to drive in Florida using only driving permits without photographs, as are foreign nationals, those who failed their eye or written exams and military personnel.
A drivers license may serve as a proxy for an ID, but in fact, it is nothing more than a license to operate a motor vehicle on government highways. Such a license should not demand invading an individual's privacy if they wish to maintain it.

If the question before the court was regarding the woman's passport, for example, I would probably side with the woman having to remove her veil if she wished to be issued a passport on the grounds that a passport serves as a form of identification and demands the means to physically identify the person in question. But then again, perhaps an individual who objected to having their photo taken could simply provide fingerprints or DNA. If it takes forever to process them, that's their own fault, but I think it is at least possible to provide them reasonable accommodations as they act on their convictions.

In my mind, this particular dispute is an open and shut case. We'll see if the court sees it that way.

UPDATE: This jucy tidbit from the Smoking Gun:

Turns out the Florida woman who is suing for the right to wear a Muslim headdress in a driver's license photograph has previously been subjected to an, um, unveiled government portrait. Following her 1997 conversion to Islam, Sultaana Freeman (formerly Sandra Keller) was arrested in Decatur, Illinois for battering a foster child. Freeman, 35, pleaded guilty in 1999 to felony aggravated battery and was sentenced to 18 months probation. As a result of the conviction, state officials removed two foster children from Freeman's care.
And of course, they got pictures.

Wednesday, May 28, 2003

Antitrust News: Baseball Wins Again

Yesterday the U.S. Court of Appeals for the Eleventh Circuit thwarted the Florida attorney general’s effort to prosecute Major League Baseball for supposed antitrust violations arising from the now-aborted plan to contract two franchises. While the Court of Appeals’ ruling was a total vindication of baseball, the judges made little effort to hide their official disdain for Major League Baseball’s antitrust exemption. The opening of Circuit Judge Tjoflat’s opinion states things succinctly:

For better or worse, professional baseball has long enjoyed an exemption from the antitrust laws. The scope of this exemption – a judge-made rule premised upon dubious rationales and labeled an “aberration” by the Supreme Court – has been the subject of extensive litigation over the years. In this case, we are called upon to address two key issues: (1) the effect of the federal rule upon state antitrust law and (2) whether the exemption extends beyond antitrust prosecutions into the realm of mere investigations. With regard to the first issue, we hold that the federal exemption preempts state antitrust law. As for the second issue, we hold that the Florida Attorney General cannot proceed with the investigation in this case. This holding is based upon the Fourth Amendment and state law rather than the antitrust exemption. In this vein, our analysis differs significantly from that of the district court, although we ultimately affirm its decision.

In November 2001, MLB owners voted to contract two franchises. The Miami-based Florida Marlins and the Tampa Bay Devil Rays were among the possible contraction candidates, although the Montreal Expos and Minnesota Twins thought to be the favored choices of MLB management. The Florida attorney general then issued a “civil investigative demand,” essentially a political call for prosecuting baseball to curry favor with voters and the media. The idea was to drown baseball in document production and deposition requests to convince them not to contract the Marlins or Devil Rays. As it turns out, no team would face immediate contraction, as MLB’s 2002 labor agreement with its players union tabled any contraction until the expiration of the five-year pact. Simultaneously, however, MLB filed suit against Florida to prevent the civil investigation from going forward.

Businesses generally don’t have to justify closing down failing operations, and even the Eleventh Circuit acknowledged MLB had perfectly valid business reasons for closing the Marlins or Devil Rays. Thus, Florida’s only legal remedy to stop contraction would be to claim a violation of the antitrust laws. Since baseball already enjoys a federal antitrust exemption, Florida tried to claim that state antitrust law could still be applied to MLB. The theory here is that the federal exemption merely removes baseball from the scrutiny of federal antitrust laws, leaving a gap the states may fill with their own regulation. The Eleventh Circuit correctly rejected this theory, relying on the Constitution’s Supremacy Clause as giving baseball “a universal exemption in the name of uniformity.”

Of course, it’s unclear to me how the antitrust laws would prevent contraction in the first place. The antitrust laws might prevent certain activities, such as a league preventing a team from moving to another city (as was the case with the NFL’s Oakland-L.A.-Oakland Raiders), but outright contraction is hardly an affront to traditional antitrust theory. Think of it this way. As outlined by MLB in 2001, contraction would involve the remaining MLB teams collectively purchasing two franchises and liquidating them. In other business contexts, this is hardly an unusual or illegal practice. For example, if McDonald’s were to close one of its failing stores by buying back its franchise from the local owner, it’s doubtful anyone would claim the antitrust laws were violated. But as I noted above, Florida’s case was more about political populism than enforcing the law.

The one curious thing about the Eleventh Circuit’s opinion is its argument that the baseball antitrust exemption—a Supreme Court ruling later written into law by Congress—is somehow illegitimate as a matter of law. The Court of Appeals seems particularly concerned with judicial activism in antitrust, as seen in this passage discussing legislative intent:

Any discussion of whether Congress meant to immunize the business of Baseball from all antitrust law (as opposed to federal antitrust law) is, of course, fanciful because Congress never conveyed its preference one way or the other. The exemption is entirely judge-made, although some decisions have attempted to cloak this disturbing fact in the language of Congressional intent.

Arguing the baseball exemption lacks legitimacy because its “judge made” is intellectually dishonest. All antitrust law is “judge made.” The two principle rules of antitrust analysis—the per se rule and the rule of reason—are fabrications of the Supreme Court, not the mandate of Congress. For more than 100 years, the courts and unelected federal agencies have been given a blank check to write, amend, and enforce the antitrust laws at will without oversight or restriction. It is the judges who bear a large share of the responsibility for this, by not only refusing to strike down the antitrust laws as facially unconstitutional (which they are), but also by indulging every politicized antitrust theory offered by government prosecutors. The Eleventh Circuit considers the baseball exemption an “aberration,” yet the courts permit the Federal Trade Commission to apply the antitrust laws to such things as “superpremium ice cream” manufacturers and private membership associations. This is hardly consistent reasoning.

Of course, one can’t fault the Eleventh Circuit too much for despising the baseball exemption. The Court’s only trying to reconcile the exemption with the theory of morality posited by the antitrust laws, a theory nicely described by the Court as follows: “the antitrust laws form the bedrock of our capitalist system premised upon competition, and that anticompetitive conduct harms consumer welfare.” As CAC has always maintained, this is just plain wrong. Capitalism is a system premised upon individual rights as the bedrock of society. Baseball is entitled to its antitrust exemption, not because it deserves special privilege, but because every business is entitled to the protection of basic economic freedom. Resolving the conflict between the antitrust laws and the baseball exemption should be resolved by repealing the antitrust laws, not by repealing the baseball exemption.

Tuesday, May 27, 2003

Antitrust News: Daily Roundup

The Justice Department is staying out of the latest round of Microsoft appeals, meaning the Solicitor General won't file any briefs in the D.C. Circuit appeal brought by Massachusetts and West Virginia seeking greater sanctions against Microsoft. It's a fairly cowardly act by the federal government, leaving Microsoft to fend for itself in defense of an antitrust settlement the Justice Department is charged with enforcing. I suspect the Justice Department—and by extension, the White House—is implicitly bowing to political criticism from members of Congress, including key Republicans, who felt the Antitrust Division went too easy on Microsoft in the settlement.

In other news, this morning the U.S. Supreme Court granted certiorari in a civil antitrust lawsuit brought against the United States Postal Service. The Ninth Circuit previously held the Post Office could stand trial for antitrust claims, because the agency was not covered by the sovereign immunity granted to government agencies. Solicitor General Ted Olson is arguing the case for the USPS, which the justices will hear next fall. I'll have more to say on this case later after I have a chance to review the file.

Finally, my colleague Arthur Silber takes on William Safire and Glenn Reynolds, who've both recently argued in favor of government control of private media companies. Arthur demolishes the intellectual argument against "Big Media" and also discusses my recent advocacy in the federal antitrust "settlement" with Village Voice Media and New Times Media.

Antitrust News: CAC to FTC: Hands off New Mexico Doctors

Alexandria, VA—Today the Center for the Advancement of Capitalism (CAC) filed public comments on the Federal Trade Commission's (FTC) consent order in the case of Carlsbad Physician Association, Inc. (CPA), a New Mexico corporation formed to allow its members to negotiate on par with health insurance groups. CAC argued that the FTC's antitrust enforcement efforts violate the rights of doctors and will harm the quality of medical care in America.

The FTC’s complaint charged CPA and eight physicians who constitute the company’s members with illegal price fixing for their attempt to collectively bargain with health insurance companies. Under the proposed consent order, the six doctors are effectively prevented from engaging in any collective bargaining activity for a period of 20 years and CPA will be forcibly dissolved.

"CAC has been closely monitoring the FTC's antitrust enforcement efforts against physicians for over a year. Like earlier prosecutions, every aspect of the FTC's case against these doctors is deficient and crumbles upon proper examination,” says Nicholas Provenzo, CAC chairman." "The FTC's antitrust enforcers claim that recognizing a doctor's right to negotiate his fees in concert with other doctors will hurt patients by increasing costs. The FTC should instead observe the effect of its own actions."

"The FTC has made it clear that the only price strategy it would allow doctors to pursue is one that forces them to see more patents for less money," says Provenzo. "This violates the rights of doctors to control the manner in which they work. In addition, reducing the monetary incentive doctors receive for providing care to their patents can hardly be said to be in the patient's best interest."

"Patents already feel like cogs in a vast, uncaring machine," says Provenzo. "The FTC's crusade against doctors will only increase that feeling. It will drive doctors out of medicine and leave patents with a declining standard of care."

“This case represents the government at its worst—prosecuting innocent citizens whose only ‘crime’ is attempting to assert their right to freely negotiate fees paid in exchange for their skills, while claiming that this somehow protects the marketplace,” says CAC Senior Fellow Sean Oliva, who wrote the Center’s comments. "The FTC's mandate is to protect the market—not destroy it, yet the FTC's consent order is confirmed, the marketplace for medicine will be seriously damaged."

A copy of the CAC comment letter in PDF format can be downloaded at:

Saturday, May 24, 2003

Antitrust News: IUPUI's Confession

The over-named Indiana University-Purdue University Indianapolis managed to earn itself a place in antitrust lore by turning itself in for "price-fixing":

IUPUI has agreed to refund about $500,000 to more than 46,000 current and former students to avoid prosecution for alleged price-fixing at its bookstores.

"To learn that such activity might have occurred is unacceptable, and we are implementing a restitution plan immediately," Cheryl Sullivan, vice chancellor of external affairs for the campus in downtown Indianapolis, told the Indianapolis Star for a story Friday.

The alleged price fixing between IUPUI's bookstores and an unidentified bookstore covered an 18-month period that ended in December.

Officials at IUPUI discovered the possible price fixing during a routine audit in November and reported it to the U.S. Justice Department's Antitrust Division later that month, said Susan Rivas, an attorney for the Indianapolis law firm Ice Miller.

The Justice Department granted IUPUI conditional amnesty under a program that allows businesses and organizations that report antitrust activity and cooperate with the government's investigation to avoid fines or prosecution, Rivas said.

The bookstores allegedly eliminated a 10 percent discount on new health sciences textbooks and imposed a 2 percent price increase on all new textbooks.

Under the restitution plan, students enrolled in classes anytime from July 2001 through December 2002 will receive an average of less than $5 in credit or refunds. Some students will get as little as 24 cents; two will get the highest payment, $170.

And I think we call all breath a sigh of relief now that those students are getting their $5 back. Of course, it would have been interesting to see whether the DOJ would have actually pursued the matter, given that it amounted to a $5 per student "injury."

Friday, May 23, 2003

Politics: Addicted to Taxpayer Funds

If you thought campaign finance "reform" was bad, consider an even more appalling concept: Taxpayer-subsidized advertising against candidates and ballot initiatives. And more appallingly, this is being pushed by Republicans:

House Republicans are attempting to lift long-standing restrictions on a $1 billion anti-drug advertising program in a move that would allow the White House to use taxpayer funds to engage in partisan political activities and campaign against candidates or ballot measures favoring the legalization of drugs.

The provision was quietly tucked into a bill reauthorizing the White House Office of National Drug Control Policy and is set for markup today before the House Government Reform Committee.

Currently, the office and its director, who is commonly referred to as the drug czar, are barred by law from using their annual $195 million anti-drug advertising budget for partisan, political purposes.

Under language included in a reauthorization bill authored by Rep. Mark Souder (R-Ind.), the prohibition would be lifted when the ONDCP director is acting to oppose an attempt to legalize the use of any illegal drug. The measure was approved last week by the Government Reform subcommittee on criminal justice, drug policy and human resources.

As written, the provision would allow partisan radio, print and television ads if the purpose were to oppose the legalization of drug use. Critics said that any candidate or political party that adopts a position promoting such reforms as allowing the medical use of marijuana or reducing drug sentencing provisions could face a government-sponsored advertising campaign against them in the electoral battlefield.

Last year, for example, Rep. Barney Frank (D-Mass.) sponsored legislation that would limit federal intervention aimed at states or localities that adopted ballot measures less restrictive than current law in dealing with marijuana use. Under the eased advertising restrictions, the drug-control office could presumably use television ads against Frank, critics of the proposal said.

The impetus for this legislation, H.R. 2086, came from a controversy that developed in last year's elections, when White House Drug Czar John Walters openly used taxpayer funds to campaign against medical marijuana initiatives in Nevada and other states. The Marijuana Policy Project, a group supporting the initiatives, filed a federal ethics complaint against Walters earlier this year, charging him with violating the Hatch Act, which broadly prohibits officeholders from using their position and government resources to campaign in state elections. Last month, Nevada's attorney general formally rebuked Walters, but then held he lacked the authority to prosecute a federal official.

MPP's lobbying managed to postpone a committe vote on H.R. 2086, but that's not the end of the story. The legislation actually re-authorizes the Drug Czar's office itself, so it's likely to pass in some form. hopefully without the advertising provision. Ideally, of course, Congress would not vote to re-authorize the Drug Czar's office and the entire operation would pass into the night. There's simply no legitimate role for a government-funded lobbyist who goes around harassing states and citizens who so much as try to debate the issue of drug decrimininlization.

And if you want to extrapolate a larger theme, consider the Drug Czar's campaigning a warning sign for what will happen if the McCain-Feingold campaign finance bill is ultimately upheld by the Supreme Court. That bill restricts the First Amendment rights of citizens to engage in voluntary campaign activity. If the law survives, it will directly encourage further regulation in the form of taxpayer-financed campaigns. This means views not considered "mainstream" by government regulators will be shut out of the political process entirely.

The Culture: You don't see that picture in the news

Rachel Corrie, the 23-year-old terrorist sympathizer from Olympia, Washington who was killed in an attempt to obstruct an Israeli bulldozer in March has become the new patron saint of Palestine, complete with internet shrines, the publishing of her e-mails to her family about her anti-Israeli activism and other such propaganda. Little Green Footballs reports on how Naomi Klein in the Toronto Globe and Mail has the audacity to compare Corrie with Private Jessica Lynch.

Trouble is, the deification of Corrie fails to account for this little picture.

Somehow, I doubt Jessica Lynch burned American flags while surrounded by children.

Corrie's own words damned her enough, but if this picture is accurate, it reveals an angry woman light-years apart from the sweet little activist her admirers belive her to be.

I take no glee in this story. I am saddened by this. Corrie could have worked for peace. She could have called for an end to terrorist attacks. She could have educated children that one's ethnic heritage does not define them. But instead, she did just the opposite.

What a waste.

Health Care: Physicians Obtain Big Settlement

Score one for the doctors:

Aetna Inc. Thursday broke ranks with other major health insurers, announcing a $470-million settlement of a suit filed by 700,000 doctors.

The physicians said the settlement would allow them greater flexibility in offering comprehensive care and make it easier to refer patients to specialists. They had charged Aetna with unfairly reducing payments and denying patients' coverage.

The eight other giant health insurers, however, said they would continue to fight the suit, filed in U.S. District Court in Miami by the doctors who joined together as a class last September.

Representatives for the doctors and Hartford, Conn.-based Aetna, the nation's third-largest health insurer, said physicians and patients covered by the insurer would soon have wider rights to appeal the company's decisions regarding payments and coverage. Doctors involved in the suit said the settlement must be signed by U.S. District Judge Federico Moreno in Miami before it becomes effective.

Now, some parts of this settlement rub me the wrong way, particularly the $20 million Aetna will pay to create a "foundation to focus on eliminating racial and ethnic disparities in health care." I mean, I can tell you how to do that for free—restore capitalism to the health care market. But overall, it's a good thing the physicians were able to get one major insurer to break ranks and settle. When you think about it, this settlement—which deals most with conduct rather than damages—amounts to a collective bargaining effort by the nation's physicians. This lawsuit probably would not even be necessary if the FTC and Justice Department would simply get out of the way and allow physicians to collectively negotiate with insurers in the first place. After all, it's a lot harder for an insurance company to screw physicians out of their contractual rights when they're able to respond with a group boycott. But under the almighty antitrust laws, the doctors' needs are secondary to the FTC's policy preference for maintaining the monospony power of insurance companies.

Still, the only long-term solution to the physicians' grievances is to put the government-sponsored HMO cartels out of business for good. This settlement is a good first step, but the doctors need to follow up, not just by maintaining their lawsuit against the remaining insurance companies, but by getting behind CAC's effort to exempt physicians from the antitrust laws.

Rights & Reason: The Gender Wars Continue

The Associated Press reports on a curious new Wisconsin law:

Wisconsin fitness centers can bar men or women from joining their clubs under a bill Gov. Jim Doyle signed Monday that exempts the gyms from the state's anti-discrimination laws.

Doyle said he hoped the legislation would encourage more people to exercise regularly, pointing out women lobbied for the bill because they said they felt more comfortable working out at a fitness center that caters only to them.

"Government should do everything we can to encourage physical fitness and if this bill can help encourage women to exercise by offering a supportive environment, then it deserves our support," Doyle said.

Wisconsin law prohibits discrimination in public accommodations based on sex, race, color, creed, disability, sexual orientation, national origin or ancestry.

The law creates a narrow exception for fitness centers.

It defines a fitness center as a place "that provides as its primary purpose services or facilities that are purported to assist patrons in physical exercise, in weight control, or in figure development."

Sen. Judy Robson, D-Beloit, opposed the bill, fearing someone could use the definition to justify a men-only golf course or similar venture.

She said the legislation opens the door to discrimination and creates the possibility it will spread to other public accommodations.

"Women have fought for years to end gender discrimination, especially in athletics," Robson said. "Now that we have arrived at almost full equality, this could set us back."

I'm not sure what's worse: Robson using a specious sex discrimination claim to argue against a bill women asked for, or Governor Doyle tying the constitutional right of free association to some government-approved cause like promoting "physical fitness."

Antitrust News: CD Settlement

The infamous compact disc price-fixing settlement nears final approval:

PORTLAND, Maine - A federal judge plans to rule next week on the proposed settlement of a music antitrust lawsuit that would put roughly $12.60 in the pockets of 3.5 million consumers.

Judge D. Brock Hornby heard testimony for more than three hours Thursday on the fairness of the agreement that calls for music distributors and retailers to pay $143 million in cash and compact disks.

Terms of the settlement call for checks to be mailed to 3.5 million people who filed claims under the class-action lawsuit. The actual amount depends on how much money goes to lawyers and distribution fees.

The payout would culminate an antitrust suit that was started by prosecutors in several states in 1996.

The lawsuit, signed by the attorneys general of 43 states and territories and consolidated in Portland in October 2000, accused major record labels and large music retailers facing competition from discount retailers like Target and Wal-Mart of conspiring to set minimum music prices.

The defendants — Sony Music Entertainment, EMI Music Distribution, Warner-Elektra-Atlantic Corp., Universal Music Group and Bertelsmann Music Group, as well as retailers Tower Records, Musicland Stores and Transworld Entertainment — deny any wrongdoing. Attorneys representing the companies declined to testify in court.

Of the total settlement amount, $75.7 million would be distributed in the form of 5.6 million music CDs sent to libraries and schools throughout the nation.

The proposed cash settlement in the case totals $67.3 million.The actual cash distributed to the public is expected to be around $44 million. Payments should be mailed out within weeks of the settlement's approval. The remaining cash will be eaten up by distribution costs and attorney fees.

This case is first and foremost about enriching attorneys. No serious person would argue consumers suffered a legal injury because they chose to buy a CD at a given price. Whether or not the record companies agreed to set minimum prices is irrelevant, since it's their product to sell in the first place. This settlement effectively grants consumers a government-coerced rebate.

The state attorneys general behind this case win on every front: they enrich their trial lawyer buddies, who in turn will support their future election campaigns; consumers get a warm fuzzy over the $12 and change they get for doing absolutely nothing; and a group of major companies lose a chunk of their hard-earned wealth, thus further eroding America's belief in capitalism as the proper basis of society. All in all, not a bad day's work if you're a parasitic state attorney general.

Thursday, May 22, 2003

Rights & Reason: Servicing Kerry

John Kerry must be desperate if he's already playing the "public service" card:

The United States would be strengthened at home and abroad by a fresh emphasis on public service, Senator John F. Kerry said yesterday, as he outlined a citizenship program whose hallmark would be a free public-college education for anyone who spends two years as a volunteer.

The Democratic presidential contender, speaking first at an American Legion post and later at the prep school he attended, also proposed a federally mandated -- but locally designed -- requirement for public service by high schoolers; a ''Retired but not Tired'' work program for senior citizens; a ''Summer of Service'' program for teenagers not yet old enough to work; almost a quadrupling of the Peace Corps from 6,700 to 25,000 volunteers; and a recruitment drive led by the commander in chief to expand the ranks of the US military.

The Massachusetts senator accused President Bush of failing to quench a public thirst for service in the aftermath of the terrorist attacks of Sept. 11, 2001, and of not fulfilling his campaign promise to ''rally the armies of compassion.'' Kerry's program would cost an estimated $3.2 billion annually, which he said could be paid by closing more than $60 billion in corporate tax loopholes.

Taking money from corporations that earn it to subsidize volunteers who are leeching off the government. Sounds like a fine way to instill a sense of perpetual dependency in our young. As blogger Joanne Jacobs opined about Kerry's proposal: "I envision eager youths and cheerful seniors marching off to their work assignments, singing patriotic songs. Only they're singing in Russian, for some reason."

Antitrust News: Pate Aces Confirmation Test

I'll have more to say later today on the confirmation hearing of R. Hewitt Pate, the soon-to-be permanent head of the DOJ's Antitrust Division. For now, here's the Washington Post's take:

R. Hewitt Pate yesterday moved closer to becoming the permanent chief of the Justice Department's antitrust division when he breezed through a Senate confirmation hearing.

Pate, 40, has been acting assistant attorney general for antitrust since November, when Charles A. James left the job. Pate is less of a lightning rod than James, whose handling of the government's settlement with Microsoft Corp. was criticized by some technology companies and members of Congress.

Pate was asked few controversial questions at yesterday's two-hour Judiciary Committee hearing. Senators repeatedly implored Pate to guard against a spate of media mergers and acquisitions after the Federal Communications Commission relaxes ownership rules in the industry, as it is expected to do next month.

"The antitrust division will stand as our last line of defense against excessive media concentration," said Sen. Herb Kohl (D-Wis.).

Pate stressed that the Justice Department, under the Sherman Antitrust Act, would narrowly review such deals for their potential economic impact on local markets, rather than for their effect on television and radio programming.

"I can certainly assure you we will be in place and if there are transactions that present anticompetitive problems we will stop them," Pate said. "When we step in, that may, as a byproduct, also preserve a diversity of voices and that's all for the good."

Sen. Arlen Specter (R-Pa.) pressed Pate to speed up an investigation of Orbitz LLC, which runs a discount travel Web site controlled by five major airlines. Three years ago, the antitrust division opened an investigation of Orbitz, citing a guarantee that airlines would offer their lowest fares on the site.

"Sounds to me on its face like a restraint of trade," Specter said.

Pate said upheaval in the airline industry and "the post-September 11 environment" complicated the antitrust review. "I can assure you we're not sitting on it," he said. "It's just as important to get the right result as to move quickly in those investigations."

Pate said the division will "continue to be vigilant" in making sure that Microsoft lives up to the terms of its settlement. He declined to discuss about other pending cases, including a review of a $6 billion deal that would give News Corp., one of the world's largest owners of television networks, control of Hughes Electronics Corp.'s DirecTV, the biggest U.S. satellite television service.

The Judiciary Committee could vote today on Pate's nomination. Sen. Orrin G. Hatch (R-Utah), the committee chairman, signaled that confirmation was not in question. "I'm totally in support of your nomination," Hatch said. "It's one of the best nominations we could possibly have."

Wednesday, May 21, 2003

The Culture: Danny Glover's Lethal Weapon

Maybe it's just me, but it seems that despite general approval of MCI's release of actor Danny Glover as their pitchman, more than one commentator I've read does not approve of the use of boycott to oppose an ideological foe. It's as if hitting a guy in his livelyhood is seen as just too much of a stab.

I don't think so. When we make public statements, our worlds often have an impact beyond ourselves. While every individual has a right to speak their mind free from government coercion, they do not have a right to public support for their statements. Glover, a long-time leftist and political activist, signed a statement in support of Cuba's communist dictatorship. For the victims of that dictatorship and those who sympathize with them, Glover's stance and his omnipresence as an MCI pitchman became intolerable. So they called on MCI to release him.

Where is the coercion? MCI could have stood firm, but instead decided that Glover's private statements offended the very people MCI sought to reach and diluted his effectiveness as a pitchman. Glover is still free to speak his mind, but now he has to recognize that his words come with a price.

Yet leave it to a leftist to demand the unearned as a matter of right.

Tuesday, May 20, 2003

Rights & Reason: Doing Time

Here's a happy thought from our favorite assistant attorney general-to-be:

Hewitt Pate, acting head of the Justice Department's antitrust division, says the new white-collar sentencing law means a price fixer previously eligible for a three-year sentence could now get 23 years if he is also convicted of obstructing justice. Pate says this should get the attention of potential corporate offenders: "Even very large fines imposed on corporations may be seen as a cost of doing business. Prison sentences are the single most effective deterrent."

Prison sentences will do nothing to deter antitrust violations, since no businessman actually knows what conduct will run afoul of the law. Under Mr. Pate's watch, the antitrust laws are violated if two businessmen in the same field merely exchange price information. Few Americans think such behavior warants one day in jail, much less 23 years.

But to be fair, Pate is not responsible for the new sentencing rules. You can thank a panicky post-Enron Congress for that.

Antirust News: Verizon Wins a Round

In the fall, the U.S. Supreme Court will hear an antitrust appeal brought by telephone giant Verizon over a Second Circuit decision forcing the company to stand trial over antitrust charges brought by a competitor’s disgruntled customers. Today, >another antitrust case against Verizon went better for the company:

A divided federal appeals court on Tuesday upheld a judge's dismissal of Cavalier Telephone's $635 million antitrust lawsuit against Verizon Virginia.

Cavalier, a Richmond-based company that sells local telephone service in competition with Verizon, alleged that Verizon had engaged in anticompetitive conduct aimed at reducing or eliminating Cavalier's ability to reach customers and raising its costs of competing with Verizon.

U.S. District Judge James R. Spencer dismissed the lawsuit in March 2002, ruling that the conduct cited by Cavalier amounted to federal Telecommunications Act violations "dressed up in antitrust garb." The 1996 Telecommunications Act laid the groundwork for competition for local telephone service.

In a 2-1 ruling, a panel of the 4th U.S. Circuit Court of Appeals agreed with Spencer. Judge Paul V. Niemeyer wrote in the majority opinion that "Cavalier's recourse is to the procedures and remedies afforded by the Telecommunications Act, not to those afforded by the antitrust laws."

Judge Morton I. Greenberg, a member of the 3rd U.S. Circuit Court of Appeals who was called in to hear the case, dissented. He wrote that while he agreed with much of the majority's opinion, Cavalier stated a claim that warranted further court proceedings.

Cavalier had alleged that Verizon was violating various federal anti-monopoly laws and telecommunications regulations and had breached an interconnection agreement. The lawsuit also claimed violations of the state's Uniform Trade Secrets Act, interference with contracts and economic advantage, and intentional misrepresentation.

There is an underlying conflict between the 1996 Telecommunications Act and the antitrust laws, the result of Congress’ deliberate decision not to incorporate an antitrust exemption into the 1996 law. This has led to significant confusion among the federal courts on whether violating the 1996 law—which imposes a number of burdens on the “Baby Bells” to open their networks to competitors—can justify an antitrust claim. In 2000, the Seventh Circuit in Chicago dismissed an antitrust complaint against Ameritech, holding that the antitrust allegations were inseparable from the Telecommunications Act allegations, and that alone could not sustain the antitrust claim. This ruling was something of a judicial standard until the Second Circuit’s contradictory decision in the Verizon case now before the Supreme Court.

In one sense, it would actually be better if Verizon loses its Supreme Court case, because then Congress would be forced to deal with the mess it created. The antitrust establishment already recognizes the potential disaster that would result if telecommunications companies were subject to antitrust suits for alleged violations of the 1996 Act. The Federal Trade Commission, in fact, filed an amicus brief with the Supreme Court calling for the Second Circuit’s decision to be reversed, citing concern that the lower court’s precedent would “improperly trivialize the antitrust laws” by encouraging parties to “seek antitrust remedies for ordinary commercial and regulatory disputes.” This is an odd charge coming from an agency that routinely pursues trivial matters, such as the ethics codes of private honorary societies.

Of course, what the FTC really means to say is that only they should engage in such trivial pursuits; letting everyone in on the fun would simply paralyze our court system, and by extension our economy.

The Courts: Eleven for Nine

Conservatives want to break up the U.S. Court of Appeals for the Ninth Circuit because they consider the judges too liberal as a group. But the real reason the Ninth Circuit should be split in two was demonstrated Monday when eleven judges of that court voted to rehear a case en banc and yet failed to produce a majority. They needed 12 judges to grant rehearing. Given the 9th Circuit's large size—28 active judges at full strength—and the accompanying caseload, it's simply bad jurisprudence to keep the entire court intact, because even in cases where there's significant momentum for rehearing en banc, the sheer number of judges required makes such a task impossible in all but the most obvious of matters (i.e., those where there's an unavoidable conflict between the circuit's opinions.)

At the same time, though, I also wonder whether it might be time to scrap the rule requiring a majority vote for rehearing en banc. After all, the U.S. Supreme Court only requires four justices out of nine to vote in favor of granting a petition for certiorari. Rehearing en banc, like certiorari, is a discretionary review process. The idea behind the Supreme Court's "Rule of Four" is that a substantial minority which questions the pervious decision should have the right to place cases on the Court's calendar with the intent of persuading at least one more justice to join them. An absolute rule of five would perclude much of the useful appellate review now provided by the Supreme Court. The same could be said of rehearing en banc petitions. If eleven judges in the Ninth Circuit thought the case was worth another look, chances are it was. You would rarely (if ever) get that many judges on the record in support of a wholly meritless appeal.

Turning to the case denied rehearing, Suzuki Motor Corporation v. Consumers Union, the eleven-judge dissent produced an opinion authored by Circuit Judge Alex Kozinski, whom CAC lauded last week for his excellent dissent from rehearing en banc in support of the Second Amendment. Kozinski goes 2-for-2 with today's dissent, which correctly seeks to dismiss a meritless—and potentially dangerous—product disparagement lawsuit brought against Consumer Reports by an unhappy auto manufacturer. The trial court granted summary judgment to Consumer Reports, finding no evidence of "actual malice," a key element to sustain a product disparagement claim. A 9th Circuit panel reversed the trial court last June and ordered the case tried. Judge Kozinski's Monday opinion dissents from the panel's decision:

KOZINSKI, Circuit Judge, with whom PREGERSON, REINHARDT, T.G. NELSON, HAWKINS, THOMAS, McKEOWN, WARDLAW, W. FLETCHER, FISHER and BERZON, Circuit Judges, join, dissenting from denial of rehearing en banc:

For over half a century, Consumers Union has been testing and rating consumer products and publishing the results in its magazine, Consumer Reports. A significant portion of the American public relies on CU’s ratings on a regular basis, and almost everyone consults Consumer Reports now and then before making a significant purchase—whether a sound system, a dishwasher or a car. What makes CU’s ratings particularly useful is the thorough explanation of the testing procedures employed, which lets consumers judge whether the ratings fairly represent the product.

The Suzuki Samurai article, the subject of this lawsuit, is no exception. Running some 6500 words, it tells readers precisely how CU came to conclude that “The Suzuki rolls over too easily,” starting with an incident during the vehicle’s break-in period where the Samurai “flopped over on its side” during a low-speed maneuver. The explanation is not written for morons; like other CU reviews, it is geared to an intelligent, informed consumer. Yet the careful reader will not fail to understand the central facts that undergird Suzuki’s claim in this lawsuit, namely, that the Samurai did well on CU’s standard course, that CU then modified the course to make it more challenging and, as a result, the Samurai did far worse than its competitors.

I find it incomprehensible that a review truthfully disclosing all this information could be deemed malicious under New York Times Co. v. Sullivan, 376 U.S. 254 (1964). If CU can be forced to go to trial after this thorough and candid disclosure of its methods, this is the death of consumer ratings: It will be impossible to issue a meaningful consumer review that a band of determined lawyers can’t pick apart in front of a jury. The ultimate losers will be American consumers denied access to independent information about the safety and usefulness of products they buy with their hard-earned dollars. The majority sets a dangerous precedent, and the full court errs
grievously by failing to take the case en banc to correct the error.

Taking Judge Kozinski's warning a step further, just imagine the potential lawsuits for reviewers and critics of all types if they were subject to "disparagement" lawsuits: an angry film executive sues Roger Ebert for giving her film a "thumbs down"; a restaurant owner files a defemation claim against a magazine reviewer who didn't like the fish; or, to take a real life example, a talk show host gets sued for doing a show on the potential dangers of tainted beef. The reason the law requires "actual malice" is to separate basic acts of free speech from actual torts. The courts must vigorously defend objective standards against efforts to water them down, rather than simply letting things proceed to trial in the hopes the jury will figure it out.

Eugene Volokh, a former clerk for Judge Kozinski, discusses the substance of this case and Kozinski's dissent in this excellent post

Monday, May 19, 2003

Antitrust News: Restraining Technology

The Justice Department's Antitrust Division isn't opposed to technology, so long as it doesn't help producers exchange price information:

The Department of Justice today said that it cleared a proposal by Texas-based BroChem Marketing Inc. (BroChem) to establish a computer database aimed at giving chemical distributors efficient access to the information they need when marketing chemicals sold to them by chemical producers. The Department approved the proposal after BroChem agreed to make substantial modifications to address the Department's competitive concerns.

"The database could produce procompetitive efficiencies by making it easier for chemical distributors to access information and eliminating a large percentage of time-consuming, costly telephonic communications between chemical producers and distributors," said R. Hewitt Pate, Acting Assistant Attorney General for the Antitrust Division.

The Department's position was stated in a business review letter from Pate to counsel for BroChem.

According to the Department's business review letter, BroChem modified its original proposal by agreeing to establish computer safeguards to ensure that price-sensitive information is not accessible to competitors or others who should not have access to it. In addition, BroChem modified its proposal to ensure that the database will not include information added by BroChem that could facilitate price coordination.

In other words, it's okay to have a database so customers can access price information, so long as producers can't learn the prices their competitors are charging. Now in the real world, exchanging information is not a crime. But in the world of antitrust, anything that could be used as a "restraint of trade" is presumed illegal.

Here's another way to look at it: If I download information off the Internet on how to build a bomb, that's legal so long as I don't act upon that information and actually build a bomb. But if I'm a chemical manufacturer, I'm banned from even asking my competitor what he charges for his product, even if I never act upon that information. In the DOJ's mind, there's no divorcing thought from action, and mere acts of speech are considered overt acts for purposes of labelling behavior legal or illegal.

The other interesting thing about this story is that the DOJ actually reviews business practices in advance. According to the DOJ: "Under the Department's business review procedure, an organization may submit a proposed action to the Antitrust Division and receive a statement as to whether the Division would challenge the action under the antitrust laws." Well isn't that a wonderful policy? Again, in the real world, prior restraints of this kind are frowned upon, if not outright forbidden. But in the antitrust world, businessmen may act only by government permission.

Incidentally, "Acting" Assistant Attorney General Pate has been nominated to take over the Antitrust Division permanently. The Senate Judiciary Committee is holding a prefunctory confirmation hearing this Wednesday morning. at 10 a.m. I plan on attending, so if you're in the neighborhood of the Dirksen Senate Office Building, stop by and say hello.

Foreign Policy: A Coalition of the (Constitutionally) Unwilling

The Bush administration is now backing an international anti-tobacco treaty:

The announcement represented an about-face for the administration, which said in March it could not accept several key provisions of the draft accord related to packaging, labeling, advertising and sales, among other things.

Formally called the Framework Convention on Tobacco Control, the world's first treaty on health seeks to tackle the consequences of tobacco use with measures ranging from a halt in advertising to a crackdown on smuggling and a ban on cigarette sales to minors.

The United States, along with Germany, had opposed a clause to ban advertising, saying it would violate constitutional guarantees to free speech.

Asked whether he would push for any changes to the pact, [HHS Secretary Tommy] Thompson said, "No, we're not going to seek any changes or any reservations."

Interestingly, Secretary Thompson never said his initial constitutional reservations were unjustified, only that the U.S. wouldn't press the issue for the sake of preserving the treaty. The message I take from that is that the Bush administration is putting international popularity ahead of constitutional principle. That's an interesting reversal from the administration's war policy.

Ironically, this also sounds like the peer pressure argument that teenagers use to get their friends to smoke: You know it's wrong, but everyone else is doing it, so why don't you give it a try?

Foreign Policy: Zionism and Racism

Yesterday in Washington, a group of self-proclaimed Jewish and Christian Zionists held a "leadership summit" to discuss the state of the Israeli-Palestinian situation. Several speakers commented on the source of Israel's legitimacy:

Gary Bauer, president of American Values and a Republican presidential contender in 2000, declared, "The land of Israel was originally owned by God. Since He was the owner, only He could give it away. And He gave it to the Jewish people."

And the last thing God wants is Muslims on His chosen people's land:

Calling the peace proposal "a Satanic road map," Earl Cox, executive producer and host of Front Page Jerusalem, a radio program, asked, "Do any of you believe [Palestinian leader] Yasser Arafat will embrace traditional family values? There will be a mosque on all the holy sites. How can anyone who's a Jew or a Christian support such a proposal?"

The sad thing about this is Israel doesn't need to resort to mysticism to defend its right to exist. It certainly can do without the overt bigotry. The Israelis have done a remarkable job over the sixty-plus years taking a barren wasteland and converting it into a modern state that lives according to quasi-Western values (there is still that slight problem separating synagogue and state.) Folks like Bauer do an enormous disservice by, in effect, dismissing Israel's right to exist as nothing more than shifty prophecy. The Bible is certainly a great and important cultural work of mankind, but it is not a land deed. And if mainstream Israeli society chooses to defends its right to exist on grounds of "God says it's ours," then the Palestinians will have been given an opening, however unearned, to seize the moral high ground.

Antitrust News: SBC Appeal Denied

From the San Antonio Business Journal:

The U.S. Supreme Court has rejected an appeal by SBC Communications Inc. involving a $20 million judgment for violation of Oklahoma's antitrust laws, according to a Dow Jones news report.

SBC subsidiary Southwestern Bell Telephone Co. was sued by several smaller pay phone companies under Oklahoma's antitrust laws. The companies alleged that SBC had locked up the local pay phone market by reaching restrictive contracts with the owners of the pay phone locations.

SBC spokesman Walt Sharp says the telecommunications giant continues to believe that it did nothing wrong.

"SBC continues to believe that we have acted properly in all matters related to payphone competition in Oklahoma and everywhere else in our region of coverage," Sharp says. "We have complied with the terms of the judgment (in January) and it has been settled."

The 10th U.S. Circuit Court of Appeals in Denver denied SBC's appeal of the judgment last year.

You have to love the fake horror at the core of antitrust cases like this one. What I mean is this: Were SBC's competitors legitimately surprised that their opponent would actually seek contracts to restrict their entry into the market? If they were in SBC's position, they would have done precisely the same thing.

Rights & Reason: Kentucky Bar Rewrites Ad Rules reports on new regulations the Kentucky Bar seeks to impose on attorney advertising.

Since the Supreme Court ruled in 1977 that outright bans on lawyer advertising are unconstitutional, every state has grappled with what lawyers may say about themselves.

The high court allows restraint on ads that are false, deceptive or misleading. Bates v. State Bar of Arizona, 433 U.S. 350 (1977).

The proposed regulations "attempt to implement the Kentucky Supreme Court's rules by defining 'false, misleading and deceptive,'" said Benjamin Cowgill, chief counsel for the Kentucky Bar Association.

One regulation, for example, says that if an ad speaks to monetary recovery it "must include an appropriate explanation of the legal requirements" to win and must say "that recovery may be dependent on the ability to collect from the responsible party."

The dispute, however, is not just about what kinds of commercial speech can be proscribed under the First Amendment. The real flap is about an 11-year-old rule that some attorneys say amounts to an illegal prior restraint of commercial speech.

Since 1992, the Kentucky Supreme Court has required lawyers to submit certain kinds of advertising for pre-approval to the Bar's Attorney Advertising Commission.

"That's prior restraint," said Lucian Pera, an attorney who represents Louisville, Ky.'s Becker Law Office. "And that's unconstitutional."
I think the Kentucky Bar is committing more then just prior restraint. It is placing attorney advertising in the same regulatory ghetto that the commercial speech doctrine places regular commercial advertising. Why is it that speech that advances one's political interests is protected by the First Amendment, but speech that advances one's economic interests is not?

I think the real question ought to be, "where is the victim and how was he harmed." Fraud statues alone provide actual victims with protection and redress from false or exaggerated claims. Rather than create paternalistic regulations that assume idiocy on the part of common man, bar associations ought to instead acknowledge that the courts are more than able to protect the people from errant lawyers. Instead of acting like advertising czars, bar associations would be better off instilling in their members an appreciation for the principle of individual rights.

Rights & Reason: Virginia's Latest Threat to Reproductive Rights

George Mason University student and GMU Objectivist Club member Jim Woods dissects the latest attack on reproductive rights to come out of Virginia at Initium.

Sunday, May 18, 2003

Foreign Policy: Race and Iraq

Muhammad Al-Shibani, in his May 16th article "Iraq War: The Agenda Is No Longer Hidden", writes that "Arab governments and peoples are united in their abilities to forget. They have forgotten and abandoned a major Arab country which has now fallen under foreign occupation."

Never mind the ambiguity left in the rest of the article as to how exactly "they" have forgotten and abandoned Iraq (didn't Arab News run a number of articles before on aid such as medical assistance to Iraqis that the Saudi government was implementing?) Instead Al-Shibani automatically disapproves of American troops just for being "foreign" and makes an implicit call for loyalty along racial lines. Is race primary criteria to judge an occupying force? Is a ruthless tyrant of one's own race better than a freedom-promoting foreign army? Al-Shibani seems to think so.

The proper criteria to judge an occupying force or permanent government structure is not by the pigment of their skin, but by how fully and consistently the rulers respect and protect individual rights. Perhaps Al-Shibani and others who entertain similar racist thinking might want to compare the US-led coalition occupation with the growing body of knowledge of the horrors that their Iraqi "Arab brethren" in power committed against their other "Arab brethren" in subjugation.

To be fair though, thinking along racial lines is nothing peculiar to Arabs in the Middle East, but instead is a problem of global proportions and includes the thinking of many Americans. Where race continues to trump merit in hiring practices and university admission as mandated by the government, then individual rights are violated.

Perhaps both Arabs and Americans should abandon racial favoritism, and instead recognize the universal applicability of individual rights, regardless of the racial composition of those who first formulated or now implement these rights.

Saturday, May 17, 2003

Rights & Reason: Sullivan puts pragmatism over principle

Andrew Sullivan is a fine writer, but sometimes he says things that are just plain stupid:

The president may not want to endorse gay marriage; but there are concrete measures he could take to strike a centrist position. The most obvious would be to endorse the Employment Non-Discrimination Act, which would give gays the same workplace protections as other minorities. 88 percent of the country endorses this. It's a simple case of workplace fairness. It doesn't involve any approval of homosexual sex, since this is about public workplaces. It could and should exempt religious groups. And it would be a huge sign to the center of the country that Bush is actually an inclusive and compassionate president. I've had my libertarian doubts about such laws in the past; but I cannot see any reason why they should apply to every other group - including religious denominations - but not to gays.

Violating the rights of business owners to choose their own employees is not a “libertarian” issue, but a basic question of individual rights. And if such “non-discrimination” laws are justified for certain businesses, then why are they not okay for religious groups? Contrary to Sullvan’s definition, private businesses are not “public workplaces.” This is the same language used by those who would justify smoking bans in restaurants and oppressive zoning laws. It is not the kind of thing that should be advanced in the name of protecting the rights of gays or any other self-proclaimed group within society.

Statements like Sullivan’s do nothing more than play into the hands of irrational bigots like Rick Santorum by turning the issue away from protecting individual rights to using the government as a means of shoving “tolerance” down people’s throats. Let me be clear: The government has no right to legislate the private sexual behavior of consenting adults. But at the same time, the government also has no right to legislate the private business practices of employers, no matter how distasteful they seem to 88% of the electorate.

Friday, May 16, 2003

FTC news: the Institute of Store Planners

Today I filed public comments in the FTC's latest settlement, this time against that well-known cartel (*cough*), the Institute of Store Planners. I began my comments by outlining the facts of the case:

On Thursday, April 17, 2003, the Federal Trade Commission (FTC) announced a proposed consent order (proposed order) with the Institute of Store Planners (ISP), a New York-based association composed of approximately 860 members. ISP’s members include various professionals who design and construct retail store interiors. ISP maintains a voluntary ethics code which is the subject of the FTC’s complaint and proposed order.

The complaint alleges three provisions of the ISP ethics code violate Section 5 of the FTC Act, which generally prohibit “unfair methods of competition.” The challenged provisions, according to the complaint, are as follows:

  1. “a member shall not render professional services without compensation.”

  2. “a member shall not knowingly compete with another member on the basis of professional charges, or use donations as a device for obtaining professional advantage.”

  3. “a member shall not offer his services in a competition except as provided by such competition codes as the Institute may establish.”

The FTC claims these statements, taken alone and without context, injured the legal rights of consumers by “discouraging and restricting price competition,” thus depriving consumers of “the benefit of free and open competition among store planners.”

The proposed order addresses the FTC’s concerns by forcing ISP to amend its ethics code and other governing documents to reflect FTC viewpoints. Specifically, the order prohibits ISP from “[r]egulating, restricting, impeding, declaring unethical or unprofessional, interfering with or advising against price competition by its members, including, but not limited to, the provision of free or discounted services or restricting members from offering their services in a competition unless they conform to rules or regulations established by ISP.”

My first objection dealt with the FTC's failure to establish any consumer injury:

The FTC alleges the mere existence of certain provisions of ISP’s ethics code constitutes a legal harm to consumers. The Commission’s complaint states ISP engaged in “unfair competition” under the FTC Act by “discouraging and restricting price competition among store planners,” and by denying consumers “the benefit of free and open competition among store planners.” Both of these statements are false. ISP never restricted legitimate competition among its members, and consumers suffered no demonstrable injury.

Since the FTC refuses to provide any context for ISP’s ethics code (or even a complete copy of the code itself), the public is left with little useful information to assess the Commission’s claims of anticompetitive behavior. Nevertheless, CVT’s independent investigation into ISP’s affairs turned up some useful information. CVT has determined that ISP’s ethics code was never intended, or applied, as an agreement to restrict competition in any manner. Rather, ISP adopted its current ethics code in the 1960’s as a means to advise members on how to avoid potentially illegal activities. The code is purely advisory in nature, and has never been enforced with respect to the provisions now challenged by the FTC. Any suggestion by the Commission to the contrary is simply untrue.

But even if the FTC had established some consumer injury—which in antitrust-speak means that prices went up—the punishment imposed on ISP in this case could not overcome an inconvenient constitutional barrier:

In case the FTC needs reminding, the First Amendment forbids the federal government from “abridging the freedom of speech, or of the press; or the right of the people to peaceably to assemble.” The amendment applies to all agencies and instruments of the government, including the FTC, and no affirmative grant of power under the Constitution can be interpreted so as to override, restrict, or impede the First Amendment’s protections. This includes Congress’s power to regulate interstate commerce under Article I, Section 8, which power Congress created the FTC under. Thus, the FTC cannot suspend the First Amendment simply be alleging ISP engaged in “unfair competition” or acted to injure consumers. The antitrust laws are not a license to censor private acts of speech.

Yet censorship is the explicit function of the proposed consent order. ISP is forbidden from so much as “declaring unethical or unprofessional” certain acts the FTC considers sacrosanct. The effect of this is to criminalize the opinions of those who disagree with the FTC, since the Commission is essentially restricting the fundamental liberty rights of ISP and its members. Such acts go far beyond the government’s constitutional power, and they even exceed the intent and scope of the FTC Act. ISP’s members did not commit fraud or engage in false advertising, actions which might justly incur the FTC’s wrath. Instead, ISP is being targeted for forming an opinion on ethical matters, and having the nerve to actually say it out loud. In this sense, the FTC is not just assaulting First Amendment liberties, but the basic ability of individuals to think and act upon their mind’s judgment. Such vicious assaults may have had a place in Saddam Hussein’s Iraq or the Torquemada’s Inquisition, but not in 21st Century America.

Next, I discussed other recent cases where the FTC forcibly rewrote the ethics codes of private association. Obviously there's a pattern at work here, and it's not "protecting consumers" from these codes. The FTC's actual agenda was something far more pedestrian—protecting their own budget:

In the FTC’s recent annual review, the Commission tried to spin their attack on private ethics codes as a noble cause:

The FTC pursued significant investigations involving the rules of conduct for various professional associations. Agreements among professionals that limit competition among themselves, often under the guise of professional association by-laws or codes of conduct, harm consumers much like “smoke-filled room” conspiracies.

This paragraph is utter nonsense. All three of the recent professional association cases involved ethics codes that were publicly known for years, if not decades. The FTC never presented any evidence which shows these organizations did anything behind closed doors in an underhanded manner. If anything, it is the FTC which operates as a “smoke-filled room” conspiracy by routinely coercing defendants into signing consent orders, then presenting the public with an inaccurate view of the persecuted groups. Beyond that, the FTC takes every precaution to avoid having to explain their actions. For example, the FTC has never responded to CVT’s comments opposing the NAA and AICHAW settlements. Nor has the Commission, in this case or the two previous ones, provided even basic evidence to establish any consumer was harmed by the respondents’ allegedly illegal conduct.

It seems that this case, and the other “smoke-filled room” cases, is nothing more than a smoke-screen for the FTC’s real agenda, which is protecting the agency’s budget from congressional scrutiny. According to the FTC’s own “Performance Review,” the Commission has a quota of “45 to 70 nonmerger investigations” per year. This means the FTC is tying their own success rate to the number of businesses successfully prosecuted for antitrust violations. Meeting this quota allows the FTC to justify current funding levels to congressional appropriators, and allows the Commission to claim a substantial record of accomplishment to the public at-large.

But as demonstrated in this case, the FTC’s “accomplishment” reflects little more than the Commission’s ability to coerce respondents into signing a consent order. As the FTC itself admits: “A law enforcement agency that prevails in every litigated matter may do so because it pursue only the cases that are easiest to win.” Here, the FTC pursued a small professional society in an industry of limited scope and influence, and effectively bullied said group into renouncing their First Amendment rights. This is not the proper mission of a law enforcement agency, and it certainly is not the actions of a government that is supposed to uphold individual rights as society’s basic organizing principle.

Today was the final day for filing comments, and the FTC will likely issue a final order in the next two weeks. But that won't be the last we hear of this issue; I've already heard that several other professional associations are under investigation by the FTC over provisions in their ethics codes.

FTC news: Continuing to dodge responsibility

After filing a number of comment letters with the FTC, I became curious about just how much the Commission was spending on these various settlements. In January, I filed a Freedom of Information Act (FOIA) request with the FTC asking for some budget information. Specifically, I wanted to know how much of the FTC’s annual budget (about $140 million) goes directly to the Bureau of Competition, the Commission’s antitrust enforcement arm. In addition, I asked how much the Bureau spent on seven specific cases that I filed comments in. I thought this was a fairly routine request, given that budget information is considered a legitimate public record.

Apparently that’s just too much accountability for the FTC. While the Commission did give me budget information for the Bureau of Competition (about $31.7 million annually) and five of the cases I requested, FTC staff decided to withhold disclosing the spending on two cases, those involving the National Academy of Arbitrators (NAA) and MSC Software Corporation. The FTC said both figures were exempt from FOIA disclosure because it constituted “information compiled for law enforcement purposes the release of which could reasonably be expected to interfere with enforcement proceedings.”

This explanation, known as FOIA exemption 7(A), is intended to prevent individuals from using FOIA to get around normal discovery rules in contested proceedings. For example, a company under investigation by a federal agency cannot use FOIA to obtain records related to their investigation. Such requests could reasonably interfere with the agency. But that has nothing to do with my FOIA request, which simply asked for an aggregate spending level on two cases that have already been deemed closed by the commission. Even if the cases are still pending, releasing budget information for previous fiscal years would not prejudice any current activities.

On these grounds, I appealed the denial of the NAA and MSC budget figures to the FTC general counsel, William Kovacic. Earlier this week, Kovacic partially granted my appeal:

Dear Mr. Oliva:

This responds to your recent Freedom of Information Act ("FOIA") appeal, which was received in this office on April 14, 2003. By letter dated January 31, 2003, you had requested access to: 1) line-item budgets for the Bureau of Competition for fiscal years 2000, 2001, and 2002; and 2) records detailing the Bureau of Competition's expenditures in relation to seven specific matters during this same time frame. By letter dated March 27, 2003, Ms. Joan Fina granted your request in part, providing you with a one-page table reflecting the "dollars used" in FY 2000, FY 2001, and FY 2002, on five of the seven matters you specified. Citing FOIA Exemption 7(A), 5 U.S.C. § 552(b)(7)(A), she redacted from this chart the figures reflecting dollars spent on the other two specified matters. You have appealed this determination. Because I agree that the material that Ms. Fina withheld was protected by Exemption 7(A), I am denying your appeal.

The information that you requested about the MSC Software Corporation matter, Docket No. 9299, was, and continues to be, protected by FOIA Exemption 7(A), which protects information compiled for law enforcement purposes the release of which could reasonably be expected to interfere with enforcement proceedings. See Robbins Tire & Rubber Co. v. NLRB, 437 U.S. 214 (1978). With respect to the National Academy of Arbitrators matter, File No. 0110242, however, I am exercising my discretion to release the redacted figures because, according to the attorneys assigned to that matter, very recent developments have made it less likely that releasing this information could reasonably be expected to interfere with the case. Thus, while it is clear that this material was exempt at the time of Ms. Fina's determination on your FOIA request, it appears to no longer be exempt.

It’s not clear what the “very recent developments” were in the NAA case, though I heard that FTC staff was looking into prosecuting a sister group of NAA’s. As for MSC, it’s completely unclear to me why this is still considered a pending matter. That aside, the Kovacic’s letter denying my access to MSC’s budget figure has no basis in law, at least none that Kovacic provided in his letter. The FTC cites one case, Robbins Tire v. NLRB, but this decision has nothing to do with my request. Robbins Tire involved the subject of a National Labor Relations Board investigation trying to obtain witness statements in a pending case. The NLRB had a justifiable interest in withholding information that could be used to undermine their case—they were probably concerned that Robbins Tire would try and intimidate or interfere with witnesses.

Budget figures are a completely different animal. The cornerstone of government power is the ability to tax the people and spend their money on public affairs. Congress is granted the exclusive power of appropriations for this very reason. Every agency of the Executive Branch has an obligation to maintain open, honest books, and to make financial records available for public inspection. Even in national security matters, the people are aware of the aggregate amount being spent, even if specific line-items are classified. But nothing the FTC touches even remotely deals with national security. Indeed, the FTC acts a civil law enforcement agency most of the time, as they were in the NAA and MSC cases. Thus, the FTC has no excuse for not turning over the numbers I requested.

(Incidentally, the NAA case—which involved forcing a group to delete three sentences from their ethics code—cost the FTC (and the taxpayers) $24,319. And that was one of the cheaper settlements.)

On Monday, I will send Mr. Kovacic a letter giving him one last chance to release the MSC budget figures. If he fails to do so, I will file a lawsuit to compel the FTC to turn this information over. The FTC’s days of evading public scrutiny are over.

And by the way, lawsuits aren't free, so if any of you want to help me stick it to the FTC, consider becoming a CAC contributor.

Food for thought: The Internet is a bathroom wall

Eugene Volokh notes Eric Zorn's view that the Internet is basically a bathroom wall:

Consider: Anyone can write anything on a bathroom wall. There's little accountability on a bathroom wall. It's hard to tell who wrote what on a bathroom wall. Truth looks just like rumor on a bathroom wall. Great stuff is interspersed with awful, stupid stuff on a bathroom wall.

Most people know instinctively not to offer as verification or a point of information the phrase "Well, you know, I read on the bathroom wall that. . ." Yet far too many seem willing to lace their discourse and communications with "facts" gleaned from bulletin boards, e-mail and Web sites.

The sad fact, which I've noted in many posts over the past year (and even setting aside egregious examples like the Jayson Blair affair), is that most media turn out to be a bathroom wall, too. An exaggeration, but less of an exaggeration that I'd like it to be.
One's credibility does not depend on the medium in which one communicates, it depends on their objectivity. One's association with others who have already established their credibility lends an imprimatur that one might not have otherwise, but the process of objectivity is the primary process, and its understanding its workings is oft neglected, if not outright ignored. To focus on mediums to the exclusion of how objectivity makes a person credible in the first place is not far removed from focusing on trees to the exclusion of the forest. The real question I ask is why aren't there more truthful people out there?

For example, for all the brouhaha over the Jayson Blair scandal at the New York Times, I haven't seen any one effectively take on what led a bright young reporter to think for even an instant that he could be utterly non-objective (i.e. make s&$% up) and not destroy his career. I know what it's like to blind myself to facts, but to engage in outright fakery, I can't comprehend it. The truth is out there. Reporting on it is not that hard. Other then time, how difficult is it to follow your subjects? To come to understand what is relevant and irrelevant for your audience? To focus on the primaries of a story?

In my job, I try to convince people that certain principles are better and truer than others. If I lied once, I'd be dead. On the contrary, I have to be able to make ever more complex identifications and intergrations, or I fail in my mission. And every time I come up short, it hurts me, and often in the worst way. The process of objectivity is a life-saver, whatever one's field.

I don't care where I hear an idea or a fact. If I decide it's relevant to me, all I can ask myself is, "Is it true?" The better I am able to answer that question, the better off I am. It's that simple, and that complex.

Rights & Reason: Bill Clinton's interns never had this problem...

The Washington Times' John McCaslin reports on a new form of housing discrimination:

"Greetings from Snellville, Georgia!" Chuck and Linda Moseley write to Washington landlord Peter Kelley, whose name is listed in a directory of apartments on Capitol Hill.

"Our son is a rising senior at the University of Georgia. He has been chosen as a full-time Intern for [Georgia Republican] Congressman John Linder beginning Sept. 1, 2003, and ending Dec. 12, 2003. Please advise availability and any additional information you require. We will not be able to visit D.C. until after June 5, 2003 due to his classes. Thank you for your time."

Nice enough letter from the proud parents.

"Hello Moseleys," Mr. Kelley writes back. "Thank you for contacting us about your son staying at the Loj during his internship. I'm usually very encouraging of young people doing congressional internships and staying here while they do them.

"However, I do have to say that as a full-time employee of an environmental group, and as someone personally quite alarmed about the direction that Congress and the president are taking with the environment, I have concerns about Rep. Linder's record.

"He has a 5 percent score on the League of Conservation Voters environmental scorecard, and his Web site lists the following votes, all of which I deeply disagree with: Voted NO on raising CAFE standards, incentives for alternative fuels (Aug 2001); Voted NO on prohibiting oil drilling & development in ANWR (Aug 2001); Voted NO on starting implementation of Kyoto Protocol (Jun 2000).

"I am torn," concludes Mr. Kelley, "because I hope that your son will have a wonderful experience in Washington and I know that working for any congressman, even one with Rep. Linder's views, will be an invaluable experience that he will treasure his entire career.

"However, I would not feel right about having someone stay at our place who was working to advance views such as these, which I believe amount to abandoning our responsibility to future generations. And so I must decline your request for a room here."

McCaslin reports several lawyers have offered to file a lawsuit on the Moseleys over Kelley's "housing discrimination." Now, one can berate Kelley for his tying a housing rental to the occupant's political views, but in the end it's his property and his mistake to make. I wonder if Rep. Linder, a good conservative Republican, will rise to the defense of property rights, or whether he'll explout his intern's ploy for political purposes. Sadly, my money would have to go on the latter.

Politics: The foul smell of jock taxes

As part of the District of Columbia's desperate plea for the Montreal Expos, D.C. Delegate Eleanor Holmes Norton has introduced legislation which would permit the District government to impose a special tax on any income "derived from services rendered within the District as a member of a professional baseball team." In other words, anyone who plays Major League Baseball within D.C.'s borders will get a special income tax surcharge—perhaps as high as 20%—for each day they spend in the city. The District will then presumably use this money to help defray the costs of publicly financing a new baseball stadium.

Major League Baseball is not happy about this idea, nor obviously is the players union. I sympathize with the union on this, but the baseball owners have no standing to complain here. After all, these same owners are demanding D.C. foot the entire bill for a new stadium via taxpayer funding. If it's not okay to tax their players, why is it any more acceptable to have all city residents—most of whom have no use for baseball—pay extra sales taxes?

Of course, once you take the D.C. government's position that private property rights are subservient to the interests of city leaders, it becomes a race to the bottom to see whose rights get more violated. In the end, everybody loses under that system.

Rights & Reason: VMI shall rise again...

Virginia Attorney General Jerry Kilgore has asked the full U.S. Court of Appeals for the 4th Circuit to review a panel's decision declaring the Virginia Military Institute's "supper prayer" unconstitutional. I discussed the panel's opinion earlier at this post, and nothing in General Kilgore's statement announcing the petition for rehearing changes my opposition to VMI's practice:

"By arguably treating the mere hearing of prayer as tantamount to participating in it, the decision jeopardizes prayer in any governmental setting," Kilgore wrote in the petition to the Court. "For example, in this Court -- as in the Supreme Court -- each session begins with a brief invocation. No one is required to close his eyes or bow her head. If hearing -- or standing -- is the same as participating, it is difficult to explain how these invocations could be constitutional."

Kilgore pointed out that the U.S. Supreme Court never has addressed the constitutionality of prayer in university or military college settings -- only the question of school-sponsored prayer in kindergarten through 12th grade.

"It is not just the military colleges that will be affected," Kilgore wrote. "By implicitly equating institutions of higher education with grades K-through-12, the panel opinion is written in terms so sweeping as to jeopardize the ability of any public college to include an invocation or benediction at any ceremony -- including graduation ceremonies."
The Supreme Court's "invocation" is nothing more than a brief proclamation that "God save the United States and this Honorable Court." It is not a participatory prayer or an attempt at proselytization. The VMI supper prayer was both of those things, and it took place within the inherently coercive environment of a state-run military college. That the prayer is unconstitutional as practiced by VMI should not even be a topic of serious debate. I understand Kilgore has political reasons for pursuing this matter—such as boosting his support among conservatives for his 2005 gubernatorial campaign—but even he realizes the 4th Circuit will likely not rehear this case.

Stuff we love: 'Court Gives Bryco/Jennings the (Index) Finger'

Capitalism Magazine eviscerates a recent anti-gun lawsuit in California. Which makes me ask, who is Carter Laren and how did he get to be so cool? I never even thought to have include my pistol in my Capitalism Magazine head shot.

Antitrust News: Microsoft II

When is an antitrust settlement not worth the paper it is printed on. When you're Microsoft.

Six months after a federal settlement was ordered to remedy Microsoft Corp.'s anti-competitive conduct, two states, several business rivals and some users still say the software company wields too much power in the marketplace.

Attorneys General Thomas Reilly of Massachusetts and Darrell McGraw of West Virginia are continuing the battle for tough antitrust remedies after the U.S. District Court for the District of Columbia approved the settlement last year. In a brief filed with the U.S. Court of Appeals for the D.C. Circuit last week, the states argued that the remedies do not stop Microsoft's illegal conduct, restore competitive conditions or deny the Redmond, Wash., software company the fruits of its anti-competitive behavior.

A key sticking point for critics is that the remedy does not require Microsoft to unbundle middleware code from the Windows operating system but allows only users and PC manufacturers to remove the middleware icon from the desktop. Critics also said the API and protocol disclosure leave too much discretion to Microsoft to define terms.
Microsoft settled with the government, but it has never seen the benefit of that settlement. It's still being hauled to court as a matter of course, be it by the ravenous state AG's, class action litigants, or whatever other form of parasite with a law degree and a nose for the unearned.

Antitrust News: Microsoft

The EU is after Microsoft yet again, this time for competing head-to-head with Linux:

The European Commission is considering whether to order Microsoft to hand over internal memos revealed in the International Herald Tribune and New York Times newspapers that describe sales practices the European regulator suspects may break its antitrust rules, people close to the Commission said Thursday.

The sister newspapers reported that Microsoft's top salesman, Orlando Ayala, last July circulated a confidential memo to senior executives of the company around the world laying out a strategy to offer big discounts to governments and institutions, and in some cases to offer the company's software for free.

Ayala is reported to have told colleagues that the aim of the strategy is to dissuade clients from switching to rival PC operating system providers -- and especially to Linux, the open source software platform which is starting to steal market share from Microsoft in the server software market.

"Under NO circumstances lose to Linux," Ayala is reported to have written in the memo dated July 16, 2002.

Most discounting is viewed as normal competitive business behavior, but European Union antitrust law prohibits companies that dominate their markets from offering big discounts if their main aim is to exclude rivals, or if the discounts are only offered to certain clients. [InfoWorld]
Gee, and I though antitrust encouraged competition.

Thursday, May 15, 2003

Antitrust news: copper

Beware Big Copper:

Manipulation in the copper market may be as old as the market itself, but traders and analysts say the antitrust probe launched this week into a possible cartel in concentrates might lead nowhere and ultimately just reflect market dynamics.

Even though copper has a colorful history of scandal, the red metal is no more ripe for trading shenanigans than other commodities, nor does it hold any intrinsic quality lending itself to price-doctoring, they said.

Canadian, U.S. and European competition regulators are investigating allegations of price fixing of copper concentrate, the mined product refined into metal.

European regulators have recently conducted "raids" on numerous copper companies. I'm a little unclear as to how such a raid operates. Are there restraint-of-trade-sniffing dogs who can located price-fixing agreements?

Antitrust news: jet fuel

Antitrust law isn't just for airlines. Airports can now join in on the fun as well:

Development of the last 15 acres at Boca Raton Airport continues to taxi, its takeoff hampered by years of litigation, political snafus - and now charges of antitrust violations.

It's the latest strike in the air assault between Premier Aviation of Boca Raton, which in 2000 signed a 35-year lease with the Boca Raton Airport Authority to develop a fixed-base operator, and Boca Aviation, currently the only FBO at the airport.

On April 23, Premier lawyer Gerald Richman filed two antitrust lawsuits against Boca Aviation in the U.S. District Court for the Southern District of Florida. Premier Aviation, the plaintiff for one of the complaints, claims Boca Aviation "currently enjoys and is illegally seeking to protect a longstanding and unbridled monopoly over the sale of jet fuel, aviation gas and related aviation services at Boca Raton Airport, and has instituted sham litigation to maintain its practices."

In the second complaint, the plaintiffs are David S. Blue and S. Brent Blue, who claim that Boca Aviation "has enjoyed inflated profits that result directly from being the sole fixed-base operator at the airport since 1984."

Richman said he is seeking a class status and plans to file a motion for certification within 90 days. He deferred a request for further detail about the plaintiffs or their business to an associate who was not available.

"An anticompetitive environment is against public policy," said Richman, a partner in the West Palm Beach-based law firm Richman Greer Weil Brumbaugh Mirabito & Christensen. "Boca Aviation wants to maintain its monopoly. Period."

Mark Wantshouse, president of Boca Aviation, views the lawsuits as a gambit to sway public opinion. In 30 percent to 40 percent of U.S. airports, there is only one fixed-base operator, he said. "These are frivolous lawsuits only made as defamations of Boca Aviation for public relations reasons," he said.

If his company has been practicing monopolistic pricing, Wantshouse reasoned, then pilots and other airport users would have repeatedly logged complaints with airport manager Ken Day. But Day has never contacted Boca Aviation about such complaints, Wantshouse said.

I particularly love the statement "[a]n anticompetitive environment is against public policy." Lots of monopolies exist under public policy: the Postal Service, Amtrak, and, well, government-run airports.

China Threatens to Execute SARS Spreaders

From the AP:

The SARS emergency worsened in Taiwan, which had its biggest one-day jump in cases Thursday, while China threatened possible execution for people who cause death or injury by deliberately spreading the disease.

The warning by China's Supreme Court, reported by the official Xinhua News Agency, appeared to be an effort to force compliance with quarantines and other restrictions. It cited existing laws with tough penalties, including a possible death penalty for even nonviolent offenses.
So this is how a dictatorship deals with a public health crisis.

China may not be the Maoist state it once was, but when push comes to shove, it is still all too willing to engage in bloodletting to preserve myth that the Communist Party provides stability for the Chinese people.

UPDATE: But then again, perhaps I am too harsh on our Chinese friends. After all, the FTC is willing to prosecute doctors under antitrust to preserve the myth that the goverment provides low prices and innovation for Americans.

Sure, it ain't the death penalty, but then again, the US ain't China.