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The Senate confirmed R. Hewitt Pate as the new assistant attorney general for antitrust yesterday by a 77-0 vote. Pate had been the acting head of the Antitrust Division, and there was unfortunately never any serious scrutiny by the Senate of Pate's nomination.
The Department of Justice today reached a settlement with the National Council on Problem Gambling, Inc. (NCPG) that will free NCPG state affiliates to sell problem gambling products or services outside of their home states.
The Department filed a civil antitrust complaint in the U.S. District Court for the District of Columbia alleging that the NCPG violated Section 1 of the Sherman Act by facilitating an unlawful territorial allocation to prevent its state affiliates from selling problem gambling products or services outside of their home states. At the same time, the Department filed a consent decree that, if approved by the court, would resolve the lawsuit.
"Consumers—the governmental and individual entities—purchasing problem gambling services, as well as those who use these services, will benefit from the competition that this decree will restore," said R. Hewitt Pate, Acting Assistant Attorney General in charge of the Antitrust Division.
The NCPG, a national trade association whose membership includes 34 state affiliates, assists compulsive gamblers and their families through education, advocacy, information and referrals to self-help groups and lobbies Congress for funding of problem gambling programs. The NCPG's board of directors is controlled by the state affiliates, which as a group have a majority of the seats. The NCPG does not create the services offered by its affiliates, but rather each of the NCPG state affiliates independently creates and markets problem gambling services, such as training and certification programs workshops and telephone help-lines.
The Department noted that while many associations have legitimate, pro-competitive territorial allocations, in this case, the NCPG was not designing a distribution system to enhance economic efficiency.
According to the Department's complaint, since 1995, the NCPG facilitated a territorial allocation agreement on behalf of its state affiliates to prevent problem gambling service providers from crossing state lines to compete. The Complaint alleges that problem gambling service providers were threatened with sanctions or loss of their NCPG membership for bidding outside of their territory. As a result, competition among the state affiliates was curtailed, and consumers were deprived of the benefits of free and open competition.
Nothing in the Sherman Act requires a private association to "enhance economic efficiency." That's simply a DOJ policy mandate which permits government lawyers to second-guess private business decisions. NCPG enjoyed no cartel or political power—i.e. the power to use force—to compel acceptance of its policies. Like all associations, members are presumed to act together for their mutual self-benefit. If any state affiliate felt their interests weren't being served, they presumably were free to leave. Likewise, the association was free not to associate with individuals not amenable to their policies.
Frankly, I'm getting tired of repeating these arguments, but I'll continue to do so until the government gets it right. Unfortunately the members of the U.S. Senate are under the illusion that capitalism can't exist without antitrust. It makes you wonder how the Founding Fathers drove the English tyrants out. After all, America's revolutionary leaders didn't enjoy the enlightened wisdom of antitrust lawyers to guide them.
::: posted by Skip Oliva
at 11:31 AM | link
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Antitrust News: Black Friday
Friday the 13th proved an unlucky today for opponents of antitrust:
A federal judge approved a settlement agreement Friday in a music antitrust lawsuit that will result in more than 3.5 million consumers receiving nearly $13 each.
Judge D. Brock Hornby issued a 51-page ruling in the case that began in 1996 when attorneys general across the country began investigating whether distributors and retailers had conspired to inflate CD prices.
"This settlement will put cash in the hands of millions of consumers and music CDs in libraries and schools throughout the country, and will ensure that the challenged distributor/retailer practices will not resume," Hornby wrote.
The ruling, however, does not stipulate exactly how much consumers will receive or when the checks will be distributed. More than 3.5 million consumers filed claims, now estimated at $12.63 each.
Hornby asked lawyers to present him with a report by the end of the month on how much it will cost to distribute the checks and how much each check will be.
He also deferred ruling on a plan on how millions of CDs will be distributed to the schools and libraries.
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 discounters 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, and retailers Tower Records, Musicland Stores and Transworld Entertainment - deny any wrongdoing. Attorneys representing the companies declined to testify in court.
Of the total settlement, $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, with roughly $44 million to be distributed to the public. The remaining cash will go toward distribution costs and legal fees.
With all the recent antitrust settlement money going towards schools, one wonders if antitrust isn't simply some elaborate scheme cooked up by the teacher unions.
Second, the vitamin wars took a nasty turn, as a jury in Washington yesterday awarded $147 million in damages against a number of producers of B-4:
The 11-member jury ruled in favor of plaintiffs who accused Mitsui and a subsidiary, along with two smaller companies, of taking part in a broad cartel that inflated the price of vitamin B-4 between 1988 and 1998, a spokeswoman for the presiding judge said.
Mitsui sells vitamin B-4 and owns an Ohio-based subsidiary called Bioproducts that manufactures the supplement used in animal and pet feeds, among other things.
The defendants will also be responsible for expenses and attorneys fees.
Mitsui has denied it had any role in the vitamin conspiracy and refused to be part of a billion-dollar, industry settlement of class-action charges against vitamin manufacturers in 1999.
Mitsui's attorney, Sutton Keany, said he will ask the judge to set aside the verdict based on the argument that the case never should have gone before a jury because it was too complex and the evidence was insufficient.
Now, while I'm obviously sympathetic to Mitsui on the merits, arguing this shouldn't have gone before the jury is a cop-out. True, many civil juries act irrationally, but arguing that the case was too "complex" for them is patronizing. Antitrust laws aren't complex, just recklessly and unconstitutionally vague. A rational juror would have seen that and vindicated Mitsui appropriately. That the jury chose to award the plaintiffs damages they were not legally or morally entitled to is simply a reflection of our corrupt legal culture, not the intellectual capacity of the jurors.
Finally, the U.S. Court of Appeals for the Sixth Circuit yesterday affirmed a summary judgment in an antitrust proceeding against various drug manufacturers over a non-compete agreement between the two companies. District Judge Louis Oberdorfer, sitting by designation and writing for the Sixth Circuit, states the case as follows:
This antitrust case arises out of an agreement entered into by the defendants, Hoescht Marion Roussel, Inc., the manufacturer of the prescription drug Cardizem CD, and Andrx Pharmaceuticals, Inc., then a potential manufacturer of a generic version of that drug. The agreement provided, in essence, that Andrx, in exchange for quarterly payments of $10 million, would refrain from marketing its generic version of Cardizem CD even after it had received FDA approval. The plaintiffs are direct and indirect purchasers of Cardizem CD who filed complaints challenging the Agreement as a violation of federal and state antitrust laws. After denying the defendants' motions to dismiss, and granting the plaintiffs' motions for partial summary judgment, the district court certified [the following question] for interlocutory appeal: * * * In determining whether Plaintiffs' motions for partial judgment were properly granted, whether the Defendants' September 24, 1997 Agreement constitutes a restraint of trade that is illegal per se under section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, and under the corresponding state antitrust laws at issue in this litigation.
[Answer]: Yes. The Agreement whereby HMR paid Andrx $40 million per year not to enter the United States market for Cardizem CD and its generic equivalents is a horizontal market allocation agreement and, as such, is per se illegal under the Sherman Act and under the corresponding state antitrust laws. Accordingly, the district court properly granted summary judgment for the plaintiffs on the issue of whether the Agreement was per se illegal.
It's a testament to just how little the judicial culture cares about individual rights today that a company could be found in violation of the law without a full trial on the merits. I understand why summary judgment is used in some circumstances, but here the company was entitled to at least present a defense at trial. But such is the power of the antitrust laws, where judges and lawyers are permitted to second-guess business decisions without the niceties of due process. Granted, due process would have mattered little in the end, despite the fact Andrx had every right to enter into a voluntary agreement with a competitor.
If you read the caption of the Sixth Circuit opinion, you'll see numerous state attorneys general and interests groups as plaintiffs or supporting amici. Like most antitrust cases, Andrx was taregeted for purely political reasons—people wanted the drugs Andrx and HMR rightfully owned, and thus any action to deny the people their entitlement must be an antitrust violation.
::: posted by Skip Oliva
at 11:12 AM | link
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Friday, June 13, 2003 :::
The Courts: Pragmatism Run Amok
Yale law professor Jack Balkin has endorsed Seventh Circuit Judge Richard Posner as a possible successor to Chief Justice William Rehnquist (who, as of this moment at least, isn't retiring). Balkin makes a superficially compelling case:
For those of you who are unfamiliar with contemporary legal scholarship, Posner, who joined the 7th circuit in the early 1980's, is one of the most important legal scholars of his generation, and has written an endless supply of articles and books on virtually every legal subject imaginable, all the while continuing to produce a steady stream of extremely well written appellate opinions, which have made him perhaps the most influential lower court judge living today. He is a man of supreme intelligence, boundless energy and enormous learning. It is impossible for me to list the number of contributions he has made to legal scholarship. The quality of his accomplishments is such that he would grace the Court, and not the other way around. It would be fitting too, for him to be able to finally take a seat on the same court as his acknowledged idol and role model, Oliver Wendell Holmes, Jr.
I don't dispute any of this. Posner is indeed a formidable mind and extremely influential, both with other judges and the overall community. But there's one big problem: Posner's intellectualism is a mere cover for his anti-individual rights ideology. At his core, Posner believes the principal mission of government is not to protect individual rights, but to balance the whims and desires of competing interest groups. He is a pragmatist in the purest (and least flattering) sense of the term. It's not that many of his rulings aren't good, it's just that he often employs an unsound intellectual approach to reach his result.
Of course, I could make the same criticism about dozens, if not hundreds, of federal judges. And therein lies much of the problem with the debate over who to put on the Supreme Court. Seven of the current nine justices are themselves former court of appeals judges like Posner. Intermediate appellate judges are not always the greatest legal minds, and that makes them more susceptible to the hard-core pragmatism of a Richard Posner. Look at the last four Supreme Court justices appointed: David Souter, Clarence Thomas, Stephen Breyer, and Ruth Bader Ginsburg. Three of these justices form the core of the Court's current pragmatist elite, while the fourth, Clarence Thomas, was appointed principally because of his race, and although he's emerged as a fine justice overall, he places some scary limits on the protection of individual rights, such as last Term's case where Thomas opined an opinion essentially permitting unlimited drug testing of students in government schools. All four, of course, were also intermediate appellate judges before being promoted.
One of the criticisms I've had of the makeup of agencies like the Federal Trade Commission is that the membership is monopolized by a self-appointed elite from within the legal community. A similar criticism may be justified of the Supreme Court. Appellate judges are not inclined towards issuing principle-based decisions; instead, they seek pragmatic remedies limited to isolated facts of the case. What's needed to lead the Court in the post-Rehnquist age is not some cloistered academic or pragmatist appellate judge, but an individual with both solid legal experience and an understanding of how principles operate in the real world, by which I mean the economic marketplace. Especially given the law's increasing hostility towards individual rights in the economic sphere, the next chief justice in particular must possess a solid working knowledge of the business world and how it needs to interact with the law.
Several months ago, I half-jokingly suggested the next chief justice should be Paul Tagliabue, the commissioner of the National Football League. Before being elected to his present post in 1989, Tagliabue was the NFL's chief counsel on antitrust and other matters. He was among the chief lawyers who defended the league from a number of unfounded antitrust actions in the 1980s. Now, I have no idea if Tagliabue would want the job, or even if his judicial ideology is fully compatible with an individual rights theory of government. What I am suggesting, however, is that the White House needs to think outside the box for its next Supreme Court appoinment, and consider the ideological consequences beyond mere short-term political strategy. Nominating someone like Tagliabue—a lawyer who became a successful CEO in a hostile legal climate—would serve as a major shock to the self-appointed appellate elite who believe only they are capable of telling the rest of us what the law should be.
Another reason to back Chief Justice Tagliabue: The Supreme Court in recent years has become more fractured and divided, at times unable to produce a unified opinion in key cases. Given Tagliabue's track record getting 32 NFL owners to work together—no small feat, given they're all wealthy individuals with competing agendas—I would think getting eight Supreme Court colleagues to work together better would be a walk in the park.
::: posted by Skip Oliva
at 11:25 AM | link
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Best Buy Co. is suing Visa and Mastercard for allegedly violating antitrust and unfair business practices laws regarding plastic card payments.
Best Buy contends Visa and MasterCard's rules unfairly force it to accept their check cards and prepaid cards if it also chooses to accept their credit cards. The company claims that system forces it to pay high prices for taking check and prepaid cards and harms competition.
Visa and MasterCard have agreed to pay $3 billion to thousands of retailers to settle a 1996 lawsuit that accused the credit card companies of abusing their market power in charging high merchant fees. But Best Buy and a handful of other retailers opted out of that class-action lawsuit to pursue their own claims.
The Visa-Master Card cases is a textbook example of the flaw in antitrust thinking. Prior to the rise of Visa and Master Card, there was no such thing as nationally-accepted credit cards. Credit itself was originally a concept where individual store owners would allow customers to purchase goods now and pay later. Department stores became the initial issuer of plastic credit cards in the mid-20th century. Visa and Master Card came along later as an alliance of banks that formed a national network to process credit orders. Individual banks issue the cards, while Visa and Master Card maintain the infrastructure necessary to ensure compatibility from merchant-to-merchant.
Without Visa and Master Card—and their allegedly "monopolistic" fee practices—many of today's large retailers would not exist. Imagine running Wal-Mart, a lead plaintiff in the class-action settlement, without any bank-financed credit cards. The stores may complain about high credit-processing fees, but the price they would pay without Visa and Master Card are far higher, both in terms of sales and administration.
The problem however, as it always seems to be in antitrust, is that success breeds a sense of entitlement among the consumer base. Because Visa and Master Card have created incredibly effective networks, the retailers now seem to view credit card processing as a form of public utility—something that they're entitled to use regardless of ability or desire to pay. The Justice Department, in continuing their own antitrust case against Visa and Master Card, wholeheartedly subscribe to this theory as well. The potential fear, then, is that government regulators will seek to increase their direct control over credit card processing to the point where it does become a quasi-public utility, a la the telephone companies.
I'm not sure Visa and Master Card have quite figured that out yet. They appear to be writing off these antitrust suits as a cost of doing business, a common attitude among large corporations. But at some point they may come to understand their survival is at stake. Hopefully that realization won't come too late.
::: posted by Skip Oliva
at 10:53 AM | link
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The Telecommunications Act of 1996 is a more subtle type of antitrust law, which claims to promote competition and eliminate the possibility of an emerging monopoly through government intervention. A common misconception is that the government has to protect its citizens from big business through the prevention of monopolies. This is completely unnecessary in a capitalist economy. Any company that manages to drive away competition cannot set prices as high as it likes. Were a company foolish enough to raise prices excessively, a free society allows for the emergence of new competition that is encouraged to charge a fair price, meeting immediate success by providing a cheaper alternative to the abusive monopoly.
Even if such a built-in safeguard did not exist, one must ask about the cost of enacting anti-monopoly legislation. Would it be moral to let the government intervene on a situation in fear that a company that has sole reign in a market will act oppressively? In his essay, "Antitrust," Alan Greenspan writes, "The effective purpose, the hidden intent, and the actual practice of the antitrust laws in the United States have led to the condemnation of the productive and efficient members of our society because they are productive and efficient."
Greenspan, of course, wrote those words more than 30 years ago, and he's long since exchanged genuine free market principles for the power of the Federal Reserve Board. In any case, Walters gets it exactly right. He not only identifies the practical failures of antitrust, but its moral ones as well:
America boasts the fact that it is a country in which its citizens are free to work hard to achieve their goals, dreams and happiness. Is there some sort of "fine print" on the Declaration of Independence that says the pursuit of liberty and happiness exists for everybody but a successful businesses? Instead, it says only a few lines afterward "That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it."
Evil is not to be tolerated in a just society, and if our government allows economic success to be a punishable offense, it is the public's privilege and obligation to alter the government by pushing for the abolishment of such legislation.
The most difficult aspect of education people about the antitrust laws is getting them to understand that the core supporters of antitrust—regulators, lawyers, academics, et al.—are not simply misguided individuals, but proponents of an evil, anti-human philosophy that will ultimately reinstitute feudal serfdom in this country. Nice to see some folks, like Mr. Walters, are still able to recognize their enemies for what they are.
::: posted by Skip Oliva
at 9:54 AM | link
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Rights & Reason: Persecuting Martha
Corey Smith, a lawyer at the Justice Department's tax division, penned a remarkable letter to the Washington Times, which appears in today's edition. In his letter, Smith, apparently acting on his own accord, manages to confirm several suspicious many of us have had about the Martha Stewart case. This was not his intent, as his letter clearly is meant to rally support for the prosecution and challenge its critics.
Smith asserts that Stewart was not guilty of insider trading, but of lying to investigators. Nothing insidious about that statement alone. But what Smith says next proves highly troubling:
After weathering the 1998 Clinton-Lewinsky debacle, where it was proven beyond any doubt that our country's chief law enforcement official, President Clinton, lied repeatedly under oath, I do not think we should tolerate lying and obstruction of justice by those in the public eye. What better way to mend the wounds of 1998 by instituting a zero tolerance policy for obstruction of justice by public figures?
There are two implications of this statement. First, Smith essentially refutes his own colleague—the U.S. attorney prosecuting Stewart—who said this wasn't about who Stewart was, but what she did. Smith, in contrast, says Martha was rightly targeted for special treatment, i.e. "zero tolerance", because she is a public figure. The second implication is that the DOJ may be targeting Martha because she's a Democrat, and Republican DOJ officials may be extracting a measure of revenge aganist a high-profile Democratic Party donor like Stewart. Granted, I'm inferring quite a bit, but Smith opened the door.
Smith also makes an interesting admission. He says: "[i]nsider trading is a complicated area of criminal law, and it is not always clear who can be charged with it." That's a heck of a thing to say if you represent the Justice Department, which is trying to enforce this law. Smith's concluding paragraph, however, makes it clear that he thinks non-objectivity is no barrier to successful law enforcement:
Our system of justice is largely a voluntary one. Investigators and prosecutors depend on witness compunction, or fear, to tell the truth, especially under oath. The resources do not exist to punish everyone who intentionally misleads every criminal investigator. If a healthy respect for the truth does not permeate our society, the administration of justice becomes impossible. Setting an example through the use of a public persona such as Martha Stewart is a good idea. Her prevarications should be punished, no matter how innocuous the underlying crime.
Once agani, Smith all but says Martha Stewart was targeted for political reasons. "Setting an example" is what political tyrants do to their opponents; it is not the official policy of a government charged with protecting individual rights. Obviously the DOJ has limited resources and sometimes must prioritize certain investigations and cases. But then why is Martha Stewart such a priority? If her underlying offense was "innocous," and there's no direct evidence her actions violated the individual rights of others, then why spend the money to try this case, especially given the fact Stewart is willing to fight the DOJ all the way?
Oh, right. This isn't about Martha Stewart. It's about the nation atoning for Bill Clinton. I guess putting Martha Stewart in jail will heal the nation's political wounds.
::: posted by Skip Oliva
at 9:35 AM | link
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The Culture: Conceding Premises
Richard Rahn of Cato is a fine columnist, but he slipped up in an otherwise fine op-ed this morning on European efforts to eliminate "tax competition":
Most people understand that when businessmen get together to limit competition, the public interest is rarely served, and the same is true of government bureaucrats. EU officials convinced their bureaucratic lackeys at the Organization for Economic Cooperation and Development (OECD) to develop the concept of "harmful tax competition" to justify trying to force all of the world's countries to jack up their tax rates to French-like levels.
Um, Richard, there is a difference. Private businessmen, in general, cannot force individuals to purchase their products and services as a matter of law. Furthermore, a business' products are its private property until a buyer voluntarily negotiates for their purchase. Governments do not negotiate—they simply confiscate.
::: posted by Skip Oliva
at 9:23 AM | link
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Wednesday, June 11, 2003 :::
Antitrust News: Nestle Shakedown Nears Completion
FTC staff attorneys have apparently reached a final agreement with Nestle over the company's acquisition of Dreyer's ice cream. I first discussed this case on March 5, just after the FTC's five commissioners voted to block the deal unless concessions were made. Those concessions now appear to include divesting several ice cream brands to CoolBrands International, a Canadian ice cream producer, and several distribution assets.
Obviously the FTC's actions here were outrageous. FTC staff invented an artificial market—"superpremium ice cream"—as a pretext for fulfilling FTC Chairman Tim Muris' existing vendetta against Nestle, which he simply thinks is too big and successful a company. But a share of the blame must also be assigned to CoolBrands, which is playing the part of a war profiteer here. CoolBrands is acquiring a number of product lines it did not earn in the market, but rather received as a gift from government regulators. How the FTC can claim this is "protecting the free market" is beyond my comprehension.
::: posted by Skip Oliva
at 5:34 PM | link
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FTC News: Oversight Day
The House Commerce Committee is holding an FTC oversight hearing today entitled "positioning the Commission for the twenty-first century." If that's the committee's goal, perhaps we could start by requiring the FTC to abandon its 19th-century German philosophy and try considering some pro-capitalist theories for once. Then there's the option of recognizing the FTC is an unnecessary and destructive entity, and abolishing the thing altogether.
On a more contextual note, four of the five FTC commissioners are testifying today. The fifth, Sheila Foster Anthony (sister of the late Vince Foster) is presumably absent because her term expired last September, although she continues to serve until President Bush nominates her replacement. Since the FTC is required to have at least two members from each party, and Anthony is a Democratic appointment, the White House is supposed to consult with Senate Minority Leader Tom Daschle on the new commissioner.
Daschle did his job, sort of. Last October, he recommended Bush name Pamela Jones Harbour, a career antitrust lawyer (big shock), to succeed Anthony. More than eight months later, there is still no word from the White House on whether they'll nominate Harbour or pick someone else. Add to that there's a second FTC vacancy looming this fall. Perhaps the administration will actually consider putting someone other than an antitrust lawyer in one or both positions. After all, if the FTC is regulating business, shouldn't at least one businessman be on the Commission? Why should antitrust lawyers enjoy a, ahem, monopoly on FTC positions.
::: posted by Skip Oliva
at 10:24 AM | link
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The Culture: Educational Monopolists Rally
If the FTC is looking for something useful to do with its antitrust machinery, perhaps they could consider taking action against David Imig, president of the American Association of Colleges of Teachers of Education, who deliberately sabotaged a government program designed to break his group's stranglehold on teacher certification:
The head of a national teacher-college association circulated a copy of a confidential teacher-certification exam, undermining a Bush administration initiative to certify professionals without education degrees as teachers.
Education leaders said David G. Imig, president of the American Association of Colleges of Teacher Education, distributed the exam at a March 17 meeting hosted by the Carnegie Foundation for the Advancement of Teaching in Palo Alto, Calif.
The exam was being confidentially field-tested for the American Board for Certification of Teacher Excellence, also known simply as the American Board.
Mr. Imig declined to tell The Times how he obtained the exam.
Suzanne M. Wilson, a Carnegie senior scholar and education professor at Michigan State University who attended the meeting, said Mr. Imig circulated the exam to rally criticism.
"It wasn't good. ... The test for [the American Board] had running through its bones the ideology of traditionalists ... the framework of direct instruction," she said.
AACTE, you see, supports only "progressive" education methods, the same methods that have failed for more than 30 years to educate an increasingly larger number of government-school students. Imig and his colleagues oppose education based on rational methods, and the only way such nonsense can continue to be the norm is if they prevent any genuine competition from taking hold. Hence Imig's decision to sabotage the alternative-certification test.
Mr. Imig's use of the stolen American Board field-test, developed by ACT Inc. of Iowa City, forced the American Board to scuttle the test and sever its relationship with the ACT, which lost $1.2 million because the test was compromised.
Unfortunately, ACT will not pursue legal action against Imig, nor will the other groups and agencies injured take any action. That's simply an outrage. This nation will use its full political force to persecute Martha Stewart and Microsoft, but it won't lift a finger against a group of thugs who seek to sabotage even small steps towards restoring the free market for education and saving the nation's children from the cognitive death that awaits them in government schools.
::: posted by Skip Oliva
at 10:16 AM | link
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The Culture: Monopsonies against Monopoly
There are two major unions representing actors and other media artists: the Screen Actors Guild and the American Federation of Television and Radio Artists. For years, there's been a movement to merge the two unions together, a cause which once again has picked up steam. Nothing wrong with that, certainly. If two voluntary groups decide it's in their self-interest to join forces, then we should wish them the best of luck.
The Screen Actors Guild and the American Federation of Television and Radio Artists -- which are pushing to consolidate -- issued a joint statement using the FCC action as solid evidence that their unions need to merge for self-protection.
"Today's ruling by the FCC makes the consolidation of SAG and AFTRA even more urgent and necessary," Melissa Gilbert, SAG's national president, and John Connolly, her counterpart at AFTRA, said in their joint release. "The FCC has voted 'yes' to giving media companies even more power. Now, actors, broadcasters and recording artists must respond to this action by voting 'YES' for new power of our own. We must approve consolidation so that we can match strength with strength.
"By joining together, our members will have a stronger, more effective union with the clout to fight for more jobs and higher wages," Gilbert and Connolly stressed. "That's why it's no surprise the media conglomerates don't want us to consolidate. Our members know employers will not look out for our best interests, and the employer agenda should not be a factor in deciding our future."
SAG and AFTRA vigorously opposed the FCC's recent reregulation vote, which is interesting considering their own merger proposal. Gilbert and Connolly said the FCC was "giving media companies even more power," as if somehow the media companies didn't earn their rightful economic power in the marketplace despite arbitrary government restrictions. Keep in mind, as labor unions, SAG and AFTRA can essentially compel the studios to collectively bargain with them, a function of law giving labor unions special political power not available to the general public. SAG and AFTRA can also, pursuant to collective bargaining, force their contract terms on non-union members who seek to work as actors and artists.
And frankly, given that there are many wealthy members of SAG and AFTRA, you'd think that if they were that concerned about the media companies' power, some of them would get together and buy their own movie studio or television network.
::: posted by Skip Oliva
at 10:06 AM | link
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Antitrust News: Half-Measures, continued
Picking up from Nick's post below, the thing that struck me about yesterday's D.C. Council hearing on physician antitrust is how little the main players—the local medical society and the councilmembers present—actually knew about the impact of antitrust on the medical profession. Since the council first considered a limited antitrust exemption for doctors four years ago, the FTC and Justice Department have become far more aggressive in pursuing physicians. One reason for this, I suspect, is that healthcare costs have been rising faster in the past few years, a point alluded to by a managed-care group lobbyist at yesterday's hearing. This increases the pressure on government officials, unwilling to admit the fundamental flaw of government-run healthcare, to find scapegoats, and the FTC in particular has carved out a fine niche for itself bullying doctor groups and, in effect, stealing their lunch money.
The Republican councilmember Nick talked about, David Catania, actually managed to personify the difficulty in pursuing the physician antitrust issue. Catania is by no means a bad guy; he's been a fairly consistent champion of lower taxes, not an easy task in the District, and most of his initiatives have been pro-business. But on the physician antitrust issue he was clearly ignorant. At the outset, he dismissed the physicians' concerns as a case of "wealthy people" arguing with other wealthy people, that is the health plans. This completely misses the point. Physicians generally do not seek to form labor union cartels; such structures tend to subsidize and promote mediocrity, as we've seen from many AFL-CIO unions that enjoy coercive power to force collective bargaining under the law. What doctors do want, however, is the ability to assert their economic interests against unilateral and unreasonable "efficiency measures" imposed by HMOs with the government's blessing.
One example: A healthcare management consultant recently told me that the physicians in her group were taking a financial bath on child vaccinations. Any pediatrician obviously will have to provide multiple vaccinations to their patients. Indeed, it's required by law in many cases. But the HMO the doctors dealt with wouldn't reimburse the physicians for the full cost of the vaccine; hence they were losing money on every patient for providing that particular service. Such is the nature of the "diagnosis-related group" structure of managed care; each procedure is assigned an arbitrary reimbursement value which need not conform to market realities.
Under antitrust law, it is illegal for independent physicians to get together and say to the insurer, "you need to raise our reimbursements for vaccines so we're not losing money." Indeed, it's arguably illegal for the physicians to have a conversation with one another about the issue, lest the HMO finds out and runs to the FTC. This is the principal reason why physicians are seeking an antitrust exemption. As the head of the D.C. Medical Society said yesterday, this is about the "financial viability" of physician practices, not a case of physicians seeking some unwarranted special favor from the government.
Councilmember Catania, however, appeared too blinded by his own prejudices to seriously consider the facts. He said it was an ineviatble fact of "human nature" that physicians would form price-fixing cartels and hold the District's insurance companies (and by extension, the city's Medicaid program) hostage to their supposedly insatiable greed.
But let's look at the bright side. The D.C. Council passed the limited antitrust exemption there years ago (only to be thwarted by the then-federal control board, which was basically corrupted by the insurance industry's lobbyists) and there is good reason to believe the exemption can pass now. Councilmember Phil Mendelson, a Democrat and the current bill's chief sponsor, provided a solid defense of the physicians yesterday. I was particularly impressed when he derided the use of the "loaded term" of "price-fixing" to smear the doctors' desire to exercise their right to collective negotiations. That shows Mendelson understands that antitrust, at its core, is an exercise in political power, not protecting the free-market.
::: posted by Skip Oliva
at 9:55 AM | link
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Tuesday, June 10, 2003 :::
Antitrust News: Take No Half-Measures Protecting Doctors from Antitrust
[i]s an implicit confession that the current regime has failed. Yet rather than address the source of that failure—which is a cornucopia of price control schemes over health care—this bill, in key areas, simply repackages that failure and tries to sell it as an improvement. Rather than acknowledge and protect the freedom of doctors to negotiate their own price terms, this bill subjects them to yet another set of complex and onerous regulations. To subject the exercise of a doctor’s legitimate rights to regulatory approval effectively denies these rights. Specifically, the bill denies doctors the unrestricted right to collectively negotiate price and compensation terms with health plans. Only if the health plan possesses a certain market share—a figure that has a history of being arbitrarily manipulated by hostile regulators—are doctors permitted to enjoy even limited rights to control their economic destiny.
I argued that the Council ought to pass a modified version of the current bill that eliminates the distinction between collectively negotiating the terms of patient care—which the current bill exempts fully—and negotiating price and compensation terms. A doctor’s right to negotiate price and compensation terms should not be assigned to a regulatory ghetto, but should instead be affirmed proudly as the cornerstone of the doctor-patient relationship.
I spoke after representatives of the Medical Society of the District of Columbia and a team of lobbyists for the health insurance industry. Unfortunately the one member of the Council who was most enthusiastic to use antitrust to limit doctor's economic rights (typically enough, a Republican) left early on other business, I was not able to refute his position directly to his face. His view was that since the District has a mandate to provide the poor with medical services and had a finite budget to do this, anything that raises prices is reflexively bad. Other members of the Council seemed to understand that artificial barriers on price would reduce the supply of doctors, but were reluctant to constantly integrate this fact with a position that would fully protect doctor’s rights.
The Council was interested in CAC's analyses of FTC antitrust enforcement efforts and we will endeavor to provide it with further analyses. We'll also seek private meetings with council members to brief them more fully on our position.
The most important achievement of the day was we made friends with the DC Medical Society. While from their perspective, even limited reform is a step in the right direction, they appreciated that our position fully protects doctors. We intend to educate them on our efforts against the FTC’s reign of terror against doctors and we are looking forward to working with them mounting a defense.
All in all, a good day. I know Skip will want to weigh in on this further, so I yield the floor to my honorable colleague.
::: posted by Nicholas Provenzo
at 11:44 PM | link
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The chief executive of J.D. Edwards on Monday said Oracle's hostile bid for his company's intended acquirer PeopleSoft would ``drive out'' competition from a key area of business software and raise ``serious anti-trust issues.''
Robert Dutkowsky, J.D. Edwards' president and chief executive, said that Oracle's hostile bid would require an extensive review by antitrust regulators in the United States and European Union because it would eliminate PeopleSoft as one of Oracle's biggest rivals. A week ago, PeopleSoft had said it intended to buy Denver-based J.D. Edwards in a stock deal now valued at around $1.84 billion.
Oracle, of course, was a major instigator of the Microsoft antitrust case. Turnabout may not be fair play here—antitrust is wrong, regardless of circumstance—but there is a powerful lesson here. When you use antitrust against a rival, the day will likely come when someone will use antitrust against you. It's a vicious cycle with no long-term winners, at least in a free-market context.
Organizations in Tennessee will split $5.6 million as part of a national settlement with vitamin manufacturers who allegedly engaged in price-fixing.
The Tennessee money, which represents the largest antitrust settlement in the state's history, will go to 75 organizations who'll use it to improve health and nutrition.
The alleged price-fixing pushed up costs for vitamin tablets as well as cereal, meat and baby food enriched with vitamins.
"We are pleased so many Tennesseans will benefit from such an unfortunate situation," Tennessee Attorney General Paul Summers says.
Funny how the money from these large antitrust settlements never go to the actual victims. Perhaps that's because there were no actual victims. After all, the vitamin companies never forced anyone to pay a particular price for their products.
Finally, some good news—the government actually admitted they were wrong for once:
Antitrust enforcers Monday recommended that the government abolish key regulations on airline computer reservations systems (CRS), saying they have failed to foster competition in the industry.
The Justice Department advised the Transportation Department, which is weighing the matter, that the long-standing rules may have imposed unnecessary costs on consumers and should not be extended after they expire next January.
Justice officials recommended that transportation regulators abandon price regulations that require reservation systems to charge all airlines the same prices for the same services. They argue that the price rules have not led to competitive CRS fees and may have hurt the ability of some airlines to negotiate lower ones.
There are four CRS companies operating in the United States, and airlines remain heavily dependent on them to sell tickets, even though Internet sales have become more popular. CRS operations provide the essential link between airlines and travel agents.
Yup, government price controls never benefit consumers. Hardly a shocking discovery. Of course, the antitrust regulators continue to believe price controls will work on other areas of the economy, such as physician services.
::: posted by Skip Oliva
at 9:10 PM | link
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"The language of threats and force won't work against Iran. It will only backfire," [Iranian foreign Ministry spokesman Hamid Reza Asefi] told a press conference.
True. Iran is the worlds most notorious sponsor of terrorism. Threats will not mollify its mullahs.
Here's to hoping for the 2nd Iranian revolution.
::: posted by Nicholas Provenzo
at 6:59 PM | link
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A nonprofit corporation representing approximately 1,000 participating physicians in the Dallas/Fort Worth, Texas metropolitan area has agreed to settle Federal Trade Commission charges that collective bargaining on behalf of its members has led to decreased competition and increased prices for the provision of medical services to the area's consumers. Under the terms of the proposed consent order reached with the Commission and announced today, Southwest Physician Associates (SPA) will be barred from jointly negotiating fees and other competitively significant terms on behalf of its physicians, unless certain conditions are met.
"The FTC remains committed to stopping fee-fixing and other forms of anticompetitive conduct among health care industry participants," said Joe Simons, Director of the FTC's Bureau of Competition. "We believe that SPA's actions were in violation of the law and caused consumers to pay illegally inflated prices for medical services."
There comes a point when you have recognize that the FTC is not simply a group of people who hold different opinions from your own, but committed enemies of freedom. Indeed, I'm beginning to think we're dealing with sociopaths—people who enjoy exercising power over others for the sheer enjoyment of it. No rational person can support the FTC's actions in these cases, certainly no person who claims to live under the principles of the Declaration of Independence and a government under the Constitution of the United States.
Perhaps it's time the nation's physicians take a lesson from Martha Stewart. When the government falsely charges you with committing a crime, the answer is not to surrender and cower in fear, but to hold your head high and publicly proclaim your innocence. Heck, after she's acquitted, maybe Martha would consider joining CAC as an advisor on how to stand up to prosecutorial tyranny. We'd love to have her.
::: posted by Skip Oliva
at 11:38 AM | link
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Sunday, June 08, 2003 :::
Rights & Reason: Bush Conflicted on Health Care?
President Bush's plan to force taxpayers to provide prescription drugs for the elderly has an interesting feature. In exchange for adding a prescription drug entitlement to Medicare, the White House plan would encourage seniors to get out of Medicare altogether and join a preferred-provider organization. PPOs are networks of doctors and health care providers that contract with insurance plans to provide care at a discounted rate.
Why is this interesting? Because while the president and congressional leaders seek to subsidize PPO operations, the Justice Department's Antitrust Division (helped by the FTC) is doing what they can to undermine PPOs. Mountain Health Care, a North Carolina PPO, was forcibly dissolved by the DOJ after government lawyers complained the group was "collectively bargaining" with health plans. Of course, that's precisely the point of a PPO, but the Antitrust Division felt that Mountain was simply too big—i.e., it had too many physicians in the network—and that if allowed to continue operating, the government felt Mountain would ultimately monopolize the market and harm consumers. There was no evidence to support these arguments, of course, but the antitrust laws do not require the government to prove much of anything beyond a hypothetical "injury" to consumer welfare.
This is even more interesting when you consider a case on the Supreme Court's fall docket, an antitrust claim against the U.S. Postal Service. There, the Justice Department claims that permitting such antitrust suits would undermine the Postal Service's government-mandated objectives. Funny how it's okay for the antitrust laws to thwart some arbitrary government objectives, but not others. Apparently the Bush administration can't achieve internal consistency even among its own bureaucrats.
::: posted by Skip Oliva
at 8:18 PM | link
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