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Saturday, July 19, 2003 :::

Rights & Reason: Discontent Americans Consider Canada

David Crary of the AP has an article about Americans who move to Canada because they embrace Canada's more socialistic values. The key line for me came here:

At Georgia State, Hodges said some conservative schoolmates have challenged his proposed move to Canada, saying he would be abandoning his homeland.

Abandoning his homeland. That's the conservative's argument for America--do it for your country. Don't sacrifice yourself for foreign socialism--sacrifice yourself for the homeland. Right there is all the proof in the world that the conservatives have nothing to offer. They can neither respect Canada's virtues (such as recognizing homosexual relationships under the law) or defend against its vices (such as massive government intervention in the economy). All they have to offer is nationalism.

I do not fight for my homeland. I fight for my freedom. I know why we as a people ought to be free and I am not going to concede one inch of ground in the battle to advance and defend my rights. Yet when I hear the hollow arguments that pass for the defense of America these days, I truly wonder what my chances are.

::: posted by Nicholas Provenzo at 4:46 PM | link | donate |

Rights & Reason: Nevada, cont.

The unusual en banc U.S. district court in Nevada yesterday dismissed a lawsuit brought in an effort to overrule the Nevada Supreme Court's unconstitutional wirt of mandamus directing the legislature, in essence, to raise taxes. In a per curiam order, the seven-judge district court dismissed the complaint on jurisdictional grounds. The basic problem, the court explained, was that the plaintiffs were seeking a review of the Nevada Supreme Court's order, and federal district courts can only exercise original jurisdiction, not appellate jurisdiction. It is well-settled law that only the United States Supreme Court may review final judgments of state supreme courts.

While I think there are ample federal constitutional grounds for overruling the Nevada Supreme Court order�such as Article IV's Guarantee Clause�the district court was probably correct to decline jurisdiction. A writ of certiorari to the U.S. Supreme Court would be the proper avenue for seeking relief from the Nevada high court's action.

::: posted by Skip Oliva at 1:26 PM | link | donate |

Rights & Reason: The Battle for Seattle

The Washington Times produced this report on the latest attack by terrorist lawyers:

Trial lawyers plan to target school board members in Seattle who voted to extend a soda-machine contract with Coca-Cola Co. in elections this fall.

The board voted 4-3 Thursday night to approve a five-year, exclusive contract with the world's largest nonalcoholic beverage company.

However, it made changes to the deal that somewhat mollified the trial lawyers, who had threatened to sue for contributing to child obesity if the contract were extended.

While lawyers assess the likelihood of lucrative settlements in Seattle, others are researching suits and election campaigns against school boards using similar soft-drink contracts in Dallas, Houston and Boston, said George Washington University law professor John Banzhaf III, who is leading the obesity-litigation efforts similar to ones against tobacco companies.

The changes in the Seattle contract were a starting victory for trial lawyers, Mr. Banzhaf said.

"It's obvious we had a significant impact on the current contract, and it has now become a major issue for school board elections later this fall," said Mr. Banzhaf, who sent a legal notice earlier this month warning members of litigation.

Seattle lawyer Dwight Van Winkle said he may take up the case if he can find appropriate plaintiffs.

It's one thing for Banzhaf and company to raise the propriety of soft drink contracts in the context of a school board election (even an election where they have no vested interest.) It's quite another to use the threat of force to win the argument without democratic debate. That's precisely what happened in Seattle: Rather than wait for an election to persuade the public, the terrorist lawyers went right for the threat of legal action to force an accommodation.

If you need further proof of the Banzhaf Brigade's dishonest motives, consider this: If the school district is forced to defend its actions in court--keeping in mind signing a soft drink contract is not a recognized tort in any U.S. jurisdiction--the enormous costs of such litigation will ultimately be bourne by the school district's financiers, the taxpayers. Thus, Banzhaf is using the threat of judicial action to impose a tax on those communities that disagree with his views on what children should and should not be eating.

And before any trial lawyer sympathizers accuse me of trying to deny anyone their potential day in court, consider the statement above that no actual plaintiff currently exists in Seattle. It is the lawyers that are initiating the threat of action in hopes of obtaining an actual client later when needed. John Banzhaf, of course, has no standing to individually sue anyone in a Washington State court over the Seattle soft drink contract. Thus, he's manipulating the system to expand his personal jurisdiction beyond the express scope of the law. This is precisely the sort of conduct that the professional bars must regulate and stamp out.

Here's a suggestion: Any lawyer that threatens legal action without identifying an actual client should be fined $10,000 for the first offense, and thereafter face loss of their bar license for up to one year for each additional offense. It won't curb all the abuses of terrorist lawyers, but it would be a start, not to mention a signal from the judicial system that they're willing to defend their powers from the abuse of a renegade minority.

::: posted by Skip Oliva at 1:04 PM | link | donate |

Antitrust News: Shifting Agendas

On Thursday I mentioned the efforts of Senate Finance Commitee Chairman Chuck Grassley, Iowa Republican, to invoke the Antitrust Division's intervention in stopping a merger in the pork processing industry. Here now is part of the text of Senator Grassley's letter to Antitrust Division chief Hewitt Pate:

I have very strong reservations about this proposed transaction and the continued trend in concentration in the pork industry. I urge the Antitrust Division to carefully scrutinize this proposal, and consider thoroughly the projected impact on independent producers. This is an issue of extreme importance to a vital economic and social mainstay of my state of Iowa and indeed of our nation - the small, independent producer and family farmer. The Antitrust Division must give mergers and acquisitions in agri-business its foremost attention.

I look forward to hearing from you soon about this issue. So you are aware, I plan to speak with Attorney General Ashcroft about my concerns.

Grassley asks Pate to stop the merger because of the potential social impact on Iowa's small farmers. But this is not a stated objective of the antitrust laws. The Sherman Act, for example, is supposed to prevent "restraints of trade" such as price-fixing. Nowhere in any of the antitrust laws does one find a requirement that company's refrain from impacting "independent" producers and family-owned businesses. Indeed, to state such a goal within the law would render such a statute facially unconstitutional.

In practice, of course, the antitrust laws are often used to take from large companies and give to smaller firms. And that's precisely what Grassley seeks here. But this is not an exercise in law enforcement, but in raw political power.

It's also noteworthy that Grassley claims agribusiness should be the Antitrust Division's "foremost" concern. This demonstrates another key flaw of the antitrust laws�they're unfocused. The Antitrust Division is faced with enforcing a law that, read for plain meaning, effectively bans all acts of commerce in the United States. Lacking the resources or political will to do that, antitrust regulators are left to pick-and-choose targets based on a constantly shifting set of wholly political criteria. Generally the policy preferences of a given Antitrust Division chief will dictate the division's priorities. But that certainly doesn't preclude members of Congress (the controllers of the almighty purse-strings) from trying to get their pet peeves moved to the top of the agenda.

::: posted by Skip Oliva at 12:50 PM | link | donate |

The Courts: Bryant Confesses?

Tonight's "Nightline" featured a panel discussing today's action by Colorado prosecutors charging Kobe Bryant with sexual assault. One panelist, ESPN's Jim Gray, argued that Bryant hasn't been convicted of a crime yet, and that while Bryant did admit today to committing adultery with his alleged victim, Gray said "adultery isn't a crime."

Actually Jim, adultery is a crime in Colorado and most states. Title 18, Section 6-501 of the Colorado Revised Statutes prohibits "[a]ny sexual intercourse by a married person other than with that person's spouse." Of course, the criminal adultery laws have not been enforced for quite some time, but the laws do remain on the books and in force.

::: posted by Skip Oliva at 12:20 AM | link | donate |

Friday, July 18, 2003 :::

Rights and Reason: Senate Bill Blocks Weight-Related Lawsuits

The AP reports on a bill that would put an end to obesity lawsuits:

If too many burgers and fries have left your waistline super-sized, don't expect a sweet pay-off in court, senators said Thursday. A bill would prevent people from suing restaurants and food manufacturers for making them fat.

"I think it's important not to blame poor eating habits on someone else," said Sen. Mitch McConnell, R-Ky., and the sponsor of the bill.

The measure would block lawsuits related to obesity or weight gain, but not suits charging other kinds of injury or fraud. It is similar to one already introduced in the House.

The House held a hearing last month on the relatively new legal trend in which consumers are suing fast food chains like McDonald's and arguing that the food contributed to their obesity.

McConnell, the GOP whip, predicted an uphill battle getting the measure through the Senate.

The Association of Trial Lawyers of America opposes the bill, while the food industry has lobbied for it. Both are big campaign donors.

I figured the trial lawyers would swing for a bill banning stupid lawsuits. And then I snapped out of the alternative universe I was living in.

That there even needs to be a law to check irrationality of the obesity suits is amazing. Anyone, even GW law professor John Banzhaf, ought to be able to grasp that what you put down your gullet has to go somewhere and that you alone bear the responsibility for it.

::: posted by Nicholas Provenzo at 4:20 PM | link | donate |

Stupid News: France Bans the Term 'E-Mail'

Jamey Keaton of the AP reports:

Goodbye "e-mail", the French government says, and hello "courriel" --the term that linguistically sensitive France is now using to refer to electronic mail in official documents.

The Culture Ministry has announced a ban on the use of "e-mail" in all government ministries, documents, publications or Web sites, the latest step to stem an incursion of English words into the French lexicon.

Too bad the French Culture Ministry won't ban "cheese-eating surrender monkeys." The only credible replacement would have to be "the French." This makes the whole "French Fry" renaming fiasco by the Congress look intelligent. Stupid as that was, at least it was in response to a policy disagreement.

What a petty, small place the world can be some days. . .

::: posted by Nicholas Provenzo at 3:16 PM | link | donate |

Antitrust News: Another Surrender

Today comes word from the FTC that yet another physician group--actually an alliance of physicians and hospitals--have settled bogus antitrust charges without putting up a fight. Today's victims are the Maine Health Alliance and the alliance's executive director, William Diggins. The charges are basically the same as in the other physician cases, but here's the FTC summary anyhow:

The Alliance was formed in 1995 by the vast majority of physicians and hospitals in five counties in northeastern Maine to negotiate payor contracts that contained "higher compensation" and more "advantageous" contract terms than the physicians and hospitals could obtain by dealing individually with payors. More than 85% of the physicians on staff at Alliance member hospitals are Alliance members, as are eleven of the sixteen hospitals in the five-county area. The physician and hospital members designated the Alliance as their negotiating agent to contract with payors, and authorized the Alliance to enter into, on their behalf, payor contracts.

Although the Alliance is a nonprofit corporation, and its member hospitals are tax-exempt organizations, a substantial majority of its physician members are for-profit entities. These for-profit physicians play a significant role in the governance of the Alliance and receive pecuniary benefits as a result of their participation. Participating physicians select 11 of the 22 members of the Alliance's Board of Directors and thus exercise substantial authority over the policies and actions of the Alliance. The participating physicians are therefore "members" of the Alliance within the meaning of Section 4 of the FTC Act, which grants the Commission jurisdiction over nonprofit organizations that carry on business for the profit of their members. Because the Alliance engages in substantial activities that confer pecuniary benefits on these for-profit members, its activities engaged in on behalf of the physician and hospital members fall within the Commission's jurisdiction.

Alliance physician and hospital members have refused to contract with payors on an individual basis. Instead, the Alliance's Board of Directors authorized Mr. Diggins to act as a principal negotiating agent with payors on behalf of the collective membership of the Alliance. Mr. Diggins was instrumental in forming the Alliance, coordinating the membership's collective bargaining activity, and negotiating payor contracts on behalf of the collective membership.

As guidance for Mr. Diggins, the Board, in conjunction with its Contracts Committee, compiled written "Contracting Guidelines and Parameters," setting forth price-related and other competitively significant terms that the Alliance required in order to contract with payors. Mr. Diggins reported the details of negotiations with payors to the Board and the Contracts Committee. Based on the recommendations of Mr. Diggins, and the Contracts Committee, the Board decided whether to accept or reject contracts with payors on behalf of the Alliance's physician and hospital members.

The Alliance and Mr. Diggins negotiated higher reimbursement for Alliance physician and hospital members, and more advantageous contract language, than the physicians and hospitals could have achieved through individual contracts with payors. Despite a written Alliance policy allowing members to contract independently of the Alliance, in fact the Alliance and Mr. Diggins encouraged the physician and hospital members to contract only through the Alliance, in order to maintain the Alliance's leverage over payors. Mr. Diggins provided Alliance physician and hospital members with a model letter for them to use to notify payors that they refused to negotiate individually, and that the Alliance would negotiate on their behalf. In response to payors' requests to contract directly with Alliance physician and hospital members, the members directed payors to the Alliance for contracting.

The Alliance's and Mr. Diggins' joint negotiation of fees and other competitively significant terms has not been reasonably related to any efficiency-enhancing integration. Although the Alliance has developed some clinical programs limited primarily to hospital members, none of the Alliance's clinical activities create any significant degree of interdependence among the physician or hospital participants, nor do the activities create sufficiently substantial potential efficiencies.

By orchestrating agreements among Alliance physician members, and hospital members, to deal only on collectively-determined terms, together with refusals to deal with payors that would not meet those terms, respondents have violated Section 5 of the FTC Act.

It's amazing that despite the existence of the FTC's supposedly clear policies on what conduct physicians may not engage in, thousands of doctors have managed to violate the rules across the country, doing so not in backroom conspiracies, but out in the open via contract negotiations. It's even more amazing that these violations of the "law"--which in some cases the FTC claims went on for several years--were never discovered and prosecuted until the current FTC leadership took over in 2001. Indeed, despite the Democrats' affinity for regulation, the Clinton-era FTC was not nearly as obsessed with destroying the financial viability of physicians as Bush-appointed FTC boss Tim Muris is.

Another interesting note: William Diggins was represented by John J. Miles, a partner at Ober Kaler here in Washington. Miles practices exclusively in the field of health care antitrust litigation. Miles was also the defense attorney responsible for Mountain Health Care's self-imposed destruction. In criminal law, an attorney who manages to hand his clients over to the government time-after-time would not have a very good reputation, yet in antitrust precisely the opposite is true. It seems Miles is a respected antitrust lawyer because he can negotiate quick settlements where the government gets everything it wants and the client...well the client saves on the inevitable legal bills defending one's innocence (and rights) would produce.

And it's not like Miles and his brethren have a great incentive to take on the system. After all, if the FTC's unconstitutional actions against physicians ever came to an end, lawyers like Miles wouldn't be able to collect the handsome fees that come with negotiating surrenders.

::: posted by Skip Oliva at 2:14 PM | link | donate |

The Courts: A Tort Reform Idea

Altria, the cigarette manufacturer, is facing bankruptcy because an Illinois trial court forced the company to post a $12 billion bond just so it can appeal a $10 billion tort verdict. High appeal bonds are one tactic employed by trial lawyers and their allies in state legislatures to effectively deny defendants meaningful recourse for fraudulent trial verdicts.

Which leads me to this suggestion: What if plaintiffs' attorneys were required to personally post bond in order to file litigation? Suppose you're putting together a class-action seeking $100 million in damages. If you win, you get the money, but if you lose, you've still forced the defendant to spend millions defending itself. One common tort reform proposal is to adopt the "loser pays" system used in countries such as Britain. That's a good suggestion, but in order to have a true deterrent effect, I think you need to require the plaintiffs' counsel�not necessarily the plaintiffs themselves�to post a bond that would be forfeit if the Court ultimately rules against them. If it's good enough for defendants to secure appeal rights, it's certainly good enough for plaintiffs' attorneys who view the courts not as a protector of individual rights, but as a playground for social science experiments.

::: posted by Skip Oliva at 10:15 AM | link | donate |

The Culture: Blair Comes to D.C.

British Prime Minister Tony Blair addressed Congress yesterday and accepted the Congressional gold medal for his support of the United States. Blair took time during his address to clean-up some lingering "business" between America and Britain:

Mr. Speaker, my thrill on receiving this award was only a little diminished on being told that the first Congressional Gold Medal was awarded to George Washington for what Congress called ``his wise and spirited conduct in getting rid of the British out of Boston.''

On our way down here, Senator Frist was kind enough to show me the fireplace where in 1814 the British had burned the Congress library. I know this is kind of late, but sorry.

Actually, you know, my middle son was studying 18th century history and the American War of Independence and he said to me the other day, you know Lord North, Dad. He was the British Prime Minister who lost us America. So just think, however many mistakes you make, you will never make one that bad.

In a way, the British did America a favor. To replace the lost congressional library, former President Jefferson donated his substantial personal collection, thereby endowing the modern Library of Congress.

::: posted by Skip Oliva at 10:02 AM | link | donate |

Economics: FTC Drinks Up

Lest I'm accused of never saying anything nice about the Federal Trade Commission, Virginia Postrel has a fine New York Times column discussing the Commission's efforts to bust state laws that impair online sales of wine across state lines. The FTC's policy staff has been quite active on the issue of state barriers to online commerce, and much of the FTC's work in this regard should prove valuable towards promoting free-market policies.

Unfortunately, the policy staff's work stands in sharp contrast to the work of the FTC's legal staff�the 120-plus lawyers at the Bureau of Competition�that work daily to ensure a free market will never exist in this country. Maybe Postrel could use her platform as a Times' columnist to spread the word of the FTC's not-so warm-and-fuzzy efforts.

::: posted by Skip Oliva at 8:36 AM | link | donate |

Thursday, July 17, 2003 :::

Fun News: Happy Birthday Skip!

CAC's Skip Oliva celebrates his birthday today. And of course, how does he celebrate--by filing an amicus on the Mountain Healthcare antitrust settlement.

Skip, you are a lion--I'm glad you are on our side!

::: posted by Nicholas Provenzo at 11:15 AM | link | donate |

Antitrust News: Seeking Antitrust Pork

If you wonder why members of Congress don't regularly scrutinize the abuses of antitrust regulators, it's largely because these same members like to use antitrust as a political weapon themselves, as this AP story demonstrates:

Both of Iowa's U.S. senators have asked federal antitrust officials to oppose the sale of Farmland Industries' pork processing division to rival Smithfield Foods.

"Today's (Tuesday's) announcement that Smithfield Foods plans to purchase Farmland Foods is bad news for the future of our nation's independent pork producers and for Iowa," said Sen. Tom Harkin, an Iowa Democrat. "It represents even more economic concentration and vertical integration in an already rapidly consolidating industry."

In a letter sent Tuesday, Sen. Chuck Grassley, an Iowa Republican, asked the antitrust division of the Department of Justice "to carefully scrutinize this proposal and consider the projected impact on independent producers."

Bankrupt Farmland Industries Inc. announced Tuesday that it had agreed to sell its pork unit -- its remaining major business -- to rival Smithfield Foods for $363.5 million. That signaled the end of efforts by the nation's largest agricultural cooperative to rebuild.

With annual sales of about $1.8 billion, Kansas City-based Farmland Foods is the sixth-largest pork producer in the nation. Smithfield Foods is the country's largest pork producer and processor.

"Farmland is a significant buyer of hogs, especially in Iowa and the Midwest," said Harkin, the ranking Democrat on the Senate Agriculture Committee. "With this move, Smithfield is further strengthening its power and leverage over family pork producers."

Grassley, a member of the Judiciary Committee, has sought to have federal regulators more carefully review agribusiness mergers to ensure competition.

"If a Smithfield acquisition of Farmland is allowed, it could shut out the family farmer from fair and open markets. I believe it would have a serious, adverse impact on family farmers and independent producers in Iowa," Grassley said.

Smithfield shares closed Wednesday at $22.86, down 28 cents.

Now if you're the Antitrust Division, do you refuse the "request" of a powerful senator like Chuck Grassley, a man who controls your agency's budget? Even if Grassley's motives are simply to pander to political groups in his state�and that's almost certainly the case�the Justice Department must take the senator seriously. And therein lies the fundamental problem of antitrust: In the end, it's nothing more than a political tool to manipulate marketplace outcomes.

It's also ironic that two senators are lobbying for greater regulation of pork, since what they're proposing is itself "pork" in that they want the government to favor the economic interests of farmers over pork proecssors.

::: posted by Skip Oliva at 10:21 AM | link | donate |

The Courts: Brown to D.C. Circuit

In a welcome bit of news, the White House will nominate California Supreme Court Justice Janet Rogers Brown to the U.S. Court of Appeals for the D.C. Circuit. Justice Brown penned one of the superb dissents last year in Kasky v. Nike, the commercial speech case recently dodged by the U.S. Supreme Court. Brown also has a solid track record of supporting individual rights in her rulings. She strikes me as a conservative outside the Robert Bork-Antonin Scalia mold, which is certainly a good thing. Hopefully Justice Brown will receive a prompt hearing from the Senate Judiciary Committee and a unanimous confirmation.

::: posted by Skip Oliva at 10:10 AM | link | donate |

The Courts: Judge Just Doesn't Give a Damn

Lawyers can be very anal when they want to be, which is most of the time. Judges, however, always get the last laugh:

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN

HYPERPHRASE TECHNOLOGIES, LLC
and HYPERPHRASE INC.,
ORDER
Plaintiffs,
02-C-647-C
v.
MICROSOFT CORPORATION,
Defendant.

Pursuant to the modified scheduling order, the parties in this case had until June 25, 2003 to file summary judgment motions. Any electronic document may be e-filed until midnight on the due date. In a scandalous affront to this court�s deadlines, Microsoft did not file its summary judgment motion until 12:04:27 a.m. on June 26, 2003, with some supporting documents trickling in as late as 1:11:15 a.m. I don�t know this personally because I was home sleeping, but that�s what the court�s computer docketing system says, so I�ll accept it as true.

Microsoft�s insouciance so flustered Hyperphrase that nine of its attorneys, namely Mark A. Cameli, Lynn M. Stathas, Andrew W. Earlandson, Raymond P. Niro, Paul K. Vickrey, Raymond P. Niro, Jr., Robert Greenspoon, Matthew G. McAndrews, and William W. Flachsbart, promptly filed a motion to strike the summary judgment motion as untimely. Counsel used bolded italics to make their point, a clear sign of grievous iniquity by one�s foe. True, this court did enter an order on June 20, 2003 ordering the parties not to flyspeck each other, but how could such an order apply to a motion filed almost five minutes late? Microsoft�s temerity was nothing short of a frontal assault on the precept of punctuality so cherished by and vital to this court.

Wounded though this court may be by Microsoft�s four minute and twenty-seven second dereliction of duty, it will transcend the affront and forgive the tardiness. Indeed, to demonstrate the even-handedness of its magnanimity, the court will allow Hyperphrase on some future occasion in this case to e-file a motion four minutes and thirty seconds late, with supporting documents to follow up seventy-two minutes later.

Having spent more than that amount of time on Hyperphrase�s motion, it is now time to move on to the other Gordian problems confronting this court. Plaintiff�s motion to strike is denied.

Entered this 1st day of July, 2003.

BY THE COURT:

STEPHEN L. CROCKER
Magistrate Judge

Credit to Eugene Volokh for bringing this to my attention.

::: posted by Skip Oliva at 10:05 AM | link | donate |

Antitrust News: Postal Service Must Be More Businesslike, Panel Says

This from Reuters:

The U.S. Postal Service should be overhauled to be more businesslike, and needs to close some facilities and accelerate outsourcing to the private sector, a presidential commission said on Wednesday.

"We believe that the only way this business is going to survive and prosper is if it learns from the commercial business world," said Harry Pearce, a panel co-chairman and chairman of Hughes Electronics Corp., as he released a summary of the group's findings.

The commission was appointed by President Bush last year to examine how the 228-year-old service can further modernize as it faces challenges from electronic mail and package delivery companies.

The bipartisan commission, which includes senior business executives, rejected options for privatization and concluded the postal service should retain its monopoly over collecting and distributing mail to 140 million homes and businesses.

But it said the postal business model, which it said was steeped in bureaucracy and patronage, must become more efficient in everything from setting rates to selling stamps.

The postal service is a company overseen by government that receives federal benefits unavailable to corporate America. For example, it does not pay taxes. The service earned $224 million in the third quarter and is on track to post a profit in 2003. Cost cutting has offset stagnant mail volume.

The commission proposed that the board of governors be replaced by an 11-member corporate-style board of directors.

The panel also sought oversight changes and unprecedented flexibility for management to set postal rates and quickly respond to market changes without political interference.

So the Postal Service should be more businesslike. That will be the day. And aren't monopolies bad for consumers?

I wonder what the commission's take was on USPS v. Flamingo. There, the USPS was being treated just like a business, and the Post Office was none too happy about that.

You can read CAC's amicus to the US Supreme Court on the Flamingo case here.

::: posted by Nicholas Provenzo at 12:55 AM | link | donate |

Wednesday, July 16, 2003 :::

The Courts: Nevada v. Property Rights

Last week the Nevada Supreme Court ordered the Nevada Legislature to ignore the state's constitution and raise taxes in order to fund government-run schools. There's been a budget impasse for some time now over the schools, with the legislature resisting Governor Kenny Guinn's efforts to raise taxes in order to avoid cutting school funds and upsetting the teachers unions (who are the real interested party here, not the students). Guinn asked the Court for a writ compelling the legislature to ignore the Constitution's requirement that a two-thirds vote is necessary to raise taxes.

Eugene Volokh and Rick Henderson have produced excellent posts on this dispute, and I'm especially impressed with Eugene's identification of this case as a matter of property rights v. "education" rights. The Nevada court's ideological error stems largely from this paragraph from their decision:

When a procedural requirement that is general in nature prevents funding for a basic, substantive right, the procedure must yield. Here, the application of the general procedural requirement for a two-thirds majority has prevented the Legislature as a body from performing its obligation to give life to the specific substantive educational rights enunciated in our Constitution.

This is obvious nonsense, since most constitutions and laws are "procedural" requirements designed to protect fundamental individual rights. Government-financed education is not one of these rights, but a social welfare benefit provided by the state at the expense of fundamental property rights. Yet here the Court found that property rights�protected by the two-thirds tax increase rule�is too "general" in nature to withstand the pressure of financing the education system.

The Court could have ordered the legislature to simply cut school funding enough to satisfy current budget resources. But the Court probably figured that would be too hard and unpopular, so they tried to take the easy way out. This may be another example of Sandra Day O'Connor's influence on our judicial system.

All is not lost, however. On Monday, the chief U.S. district judge in Nevada issued a restraining order halting the Nevada Supreme Court's order. This morning, in a procedure I can't recall seeing before, all of the District of Nevada's active judges will hold an en banc hearing via teleconference to review the Nevada Supreme Court's decision.

Volokh and Henderson are squeamish by the thought of using federal constitutional grounds to strike down the Nevada ruling. I have no such qualms. The Nevada Supreme Court acted to deprive Nevada property owners of their substantive right not to be taxed outside the clearly expressed procedure's of the state constitution. To hell with federalist niceties�when a state government violates basic rights, their actions are entitled to no deference from federal authorities who have an independent duty to protect those rights under the federal Constitution. Furthermore, the U.S. Constitution guarantees to every state a republican form of government, a doctrine deliberately breached here by the Nevada court. That confers more than ample authority on the federal courts to remedy this violation.

That said, I do agree with Volokh that there is a political remedy for what happened: boot the Nevada Supreme Court out of office. Nevada provides two such procedures: the legislature can remove a justice for "reasonable cause," a standard far easier to meet than for a regular impeachment; and the voters can submit petitions to force a recall election. Hopefully one of these procedures will be attempted.

::: posted by Skip Oliva at 9:51 AM | link | donate |

Congress: Hospital Hearings

This morning at 11 a.m., the Senate Judiciary Committee is holding a hearing entitled: "Hospital Group Purchasing: Has the Market Become More Open to Competition?� If you're interested in hearing a live webcast of the hearing, you can access the committee's website. If not, come back later and I'll post something if anything interesting comes out at the hearing, though I doubt it will.

::: posted by Skip Oliva at 9:16 AM | link | donate |

Tuesday, July 15, 2003 :::

News of the Off-Beat: Pat Robertson urges 'prayer offensive' against US Supreme Court

This in from AFP:

Prominent US televangelist Pat Robertson launched a "prayer offensive" against the Supreme Court, urging his supporters to pray for the removal of three sitting justices.

"Would you join with me and many others in crying out to our Lord to change the Court?" Robertson asked viewers of his Christian Broadcasting Network.

Robertson and other prominent members of the religious right have condemned the recent Supreme Court ruling, decriminalising gay sex between consenting adults.

They argue that the decision opens the door to bigamy, legalized prostitution, and even incest.

"No culture has ever endured which has turned openly to homosexuality," said Robertson, who described the nine-member Supreme Court as a "non-elected oligarchy" capable of changing the moral fabric of the nation.

But rather than calling for the abolition of the court, Robertson urged his viewers to pray for the retirement of three judges and their replacement by three conservative justices.

Oh, Lordy.

Do you remember when Oral Roberts said if he didn't get 6 million dollars in donations, God was going to call him. Can't we set a sufficiently high enough fundraising goal to get God to call Pat Robertson? Would you join with me and many others in crying out to our Lord on the issue of this annoying man?

::: posted by Nicholas Provenzo at 8:30 PM | link | donate |

Education: Closed Shops

Joanne Jacobs highlights another failure of the government-run education monopoly:

With a few years of experience, an auto mechanic at a dealership can earn $80,000 a year. But high schools are eliminating auto shop classes. The equipment is costly, industrial tech (shop) teachers are hard to find and students' schedules are filled with college-prep classes. Students assume the only way to make a living is to go to college, but many don't have the motivation or the academic skills to earn a college degree. Only about half of students who enroll in college ever earn a degree; most of those who graduate won't be earning $80,000 a year.

Community colleges are picking up the slack. But students often enter with no hands-on skills: They don't know how to change the oil, or how big a 13 mm wrench is. And many can't read well enough to understand the manual or use the diagnostic data on the computer screen. Qualifying for a skilled trade is more demanding than qualifying for most colleges.

Many slacker students, bored and frustrated by college-prep courses, would work much harder on reading and math if they knew what they had to do to get an $80,000-a-year job. But the snobbery of the times tells students they have to sit in a classroom for 16 years -- with or without learning anything -- to earn a living.

There are two factors conspiring against the skilled trades: the teacher unions are dominated by, well, teachers who themselves are the products of many years of (fairly worthless) higher education, contributing to an elitist scorn of tradesmen; and second, schools are often measured by the number of kids they get into college, not the number of kids who find gainful employment. Indeed, the kids who learn a trade and never go to college are likely more successful and financially stable at 25 than the English majors who graduate from the middle of the Ivy League pack.

::: posted by Skip Oliva at 6:22 PM | link | donate |

Antitrust News: Models Unite!

Antitrust class actions always produce some interesting claims. Here's just one example:

NEW YORK (Reuters) - Thousands of models can launch a unified attack on management agencies they say conspired to cheat them by charging inflated commission fees and expenses, a U.S. judge ruled on Tuesday.

U.S. District Judge Harold Baer granted class action status to a complaint against defendants including Elite Model Management and Ford Models Inc. The class is expected to be made up of thousands of models.

The suit, filed in Manhattan federal court, alleges the agencies fixed models' commission rates at 20 percent, twice the 10 percent allowed by state law for employment agencies. The models alleged that the defendants conspired to evade state pricing regulations by calling themselves model management companies.

Here we have an antitrust claim on top of a government price control scheme. This provides further proof that antitrust laws do not serve their stated purpose of protecting the "free" market, since the management agencies are defending an alleged scheme to circumvent government price controls. Certainly such price controls are not "competitive" since they are arbitrarily determined by govermnent authorities outside the marketplace.

::: posted by Skip Oliva at 4:41 PM | link | donate |

Antitrust News: FTC Settlements Ratified

Today's announcement from the Federal Trade Commission:

Following a public comment period, the Commission has approved the issuance of two final consent orders in the matters concerning Anesthesia Service Medical Group, Inc. and Grossmont Anesthesia Medical Group, Inc., as well as a letter to the commenter of record. The Commission vote to approve the final consent orders and letter was 5-0.

You can get more information on these cases at CAC's Antitrust Action Center. The lone commenter of record the FTC refers to is, of course, CAC, and you can read our comments opposing these settlements here.

::: posted by Skip Oliva at 4:34 PM | link | donate |

Righits & Reason: 'Repulsing the right'

Rajeev Goyle, ACLU staff attorney, is glad the Supreme Court affirmed the use of racial preferences in America. In the process, he takes a cheap shot at CAC. In the Baltimore Sun, Goyle wrote:

Thankfully, common sense and mainstream values prevailed in the Supreme Court.

On issues of enormous social importance - most notably decriminalizing the lives of millions of gay Americans and protecting affirmative action in higher education - the court recognized that our nation's commitment to fundamental equality for all Americans cannot, and will not, be turned back.

In doing so, the court confirmed how plainly out of touch social conservatives are with the way most Americans lead their lives. With millions of dollars to shape public perception and litigate relentlessly, a small band of conservative activists have for too long misled the public and the media into believing they represent a much larger constituency than they actually do.

Consider the court's sweeping opinion striking down Texas' discriminatory sodomy law. Most Americans feel the government should not criminalize consensual sex (a May Gallup poll put the number at 60 percent). The last 20 years in particular have seen a steady expansion of social acceptance of homosexuality, as state sodomy laws have fallen like flies and gays have assumed leadership positions nationally. And July 2, Wal-Mart, the nation's largest private employer, adopted policies forbidding discrimination against gay employees.

Yet social conservatives, never reluctant to impose their morality on others, were apoplectic after the decision. Led by Justice Antonin Scalia's spiteful dissent, they predicted the swift legalization of bigamy, prostitution and incest (and most bizarrely, the spread of "man on dog" relationships, as expressed by Republican Sen. Rick Santorum of Pennsylvania three months ago).

The challenge to the University of Michigan's affirmative action policies was perhaps an even more galling example of conservative chutzpah.

The plaintiffs, represented by a small organization called the Center for Individual Rights and backed by an echo chamber of think tank activists, convinced many that mainstream Americans opposed affirmative action. A quick glance at the list of supporters of Michigan's policies puts the lie to that misguided notion.

Dozens of Fortune 500 corporations, virtually all prestigious private and public universities, half the states, countless professional organizations and that bastion of liberal activism, the U.S. military, filed briefs expressing their support for diversity in higher education. Opinion polls reveal a solid majority support "special preferences" for qualified individuals, according to a Pew Charitable Trusts survey in March.

So who, aside from President Bush, supported the plaintiffs? Florida and a handful of organizations such as the Center for the Advancement of Capitalism, an outfit that might have a prickly time at its next board meeting defending its opposition to the Fortune 500.

Lesser-publicized decisions also demonstrated the court's unwillingness to capitulate to the extreme right wing of the conservative movement.

In the face of widespread concern over unfairness in the administration of the death penalty, the court strengthened the requirement that capital defendants receive an effective legal defense. And in upholding the applicability of the Family and Medical Leave Act to state employees, the court recognized that women have long suffered workplace discrimination when deciding between children and a career.

As expected, the right is not going gently into that good night. The New York Times reported that conservative activists reacted with "white-hot fury" to the court's decisions and have pledged to continue their legal assault.

But it is difficult to imagine how they can expect to win given that they failed with this deeply conservative court, which has redefined the standard for judicial activism and results-oriented decision-making (think Bush vs. Gore).

Singed by the bitter disappointment of finally reaching the endgame in their lengthy quest to reverse gains for racial minorities and gays, and then badly losing, these activists are now calling for the heads of Justices Sandra Day O'Connor and Anthony M. Kennedy, who had the temerity to dissent from the reactionary playbook of the conservative right.

The vast majority of Americans are not consumed by the private desires of consenting adults and the mechanics of university admissions. It is time conservative activists realize the game is up. It is also time the rest of us realize that, despite the loud voices and aggressive tactics of those who wish to stop progress in its tracks, mainstream American values are our values.

It is interesting how Goyle switches from condemning �social conservatives� to all conservatives in the space of 700 words. Goyle attempts to make a thin distinction between different positions within the right, but in the end, he treats the right as a monolith that ought to be reflexively opposed. And it�s also interesting how Goyle (rightfully) applauds the protection of the individual rights of gays in the enjoyment of their sexual capacity, but not the individual rights of citizens to be treated equally under the law when seeking access to government educational services. Apparently, as long as you are a member of a group Goyle considers to be maligned, you merit protection, if not outright license to run roughshod over your neighbors.

Goyle�s position is not based on a thoughtful understanding of rights, but a reflection of the same old pressure group tactics that has plagued human relationships from caveman days onward. Only individuals have rights, not maligned groups. Rather than jump for joy about the Court�s decision in the University of Michigan case, Goyle ought to step back and recognize that the Court has just created an arbitrary boondoggle that uses race as a standard in gaining access to government services. That standard ought to repel any honest person on its face.

Yet instead, Goyle coos about opinion polls that justify his support for race-based decision making�and there he reveals his hand�Goyle�s thinking is without principle. Goyle works for an organization that claims to defend civil liberties, but his article in the Sun reveals why the ACLU is utterly inconsistent and unreliable in that mission. What guides them? It does not seem to be the principle of individual rights and equality under the law.

::: posted by Nicholas Provenzo at 12:08 PM | link | donate |

Monday, July 14, 2003 :::

Antitrust News: ARI in a Pickle

It's nice to see the Ayn Rand Institute paying attention to antitrust, but there's just no excuse for presenting misleading information:

Over at the FTC, meanwhile, the agency has been flexing its antitrust muscles to prevent mergers in even the most obscurely defined markets, such as "superpremium ice cream," "jarred pickles," and "food service glassware."

As those of us who follow the FTC know, the agency never tried to prevent a merger in the "jarred pickle" industry. They tried to prevent a merger in the refrigerated jarred pickle industry. In fact, the successfully prevented the merger. There is also a separate market for "shelf-staple" jarred pickles that apparently is not being monopolized by anyone.

::: posted by Skip Oliva at 9:30 PM | link | donate |

Antitrust News: DOJ Speaks on Voice Case

On June 24, I filed a motion to intervene in the federal antitrust case against Village Voice and NT Media for purposes of appealing the settlement forced on the two media companies by the Justice Department. On July 10, the government filed its brief in opposition to my motion.

Because this matter is still pending before the district court, I won't offer extended commentary on the government's position right now, but I will comment on one argument raised by the DOJ. One of my key contentions is that in requiring Village Voice and NT Media to divest assets to third parties before the expiration of the public comment period, the government effectively violated the Tunney Act, since the public and the district court were denied a "meaningful" opportunity to review the settlement. This is purportedly the main reason Congress passed the Tunney Act�avoiding judicial rubber stamping of antitrust settlements�so it's hard to see how Congress would approve of irrevocably altering the status quo to carry out the principal terms of a settlement before the Court can review said terms.

The DOJ's only answer to me is that they needed to act quickly to "restore competiton." But as I've pointed out (twice) now, the Tunney Act provides a mechanism for shortening the review period if extraordinary circumstances warrant. The DOJ never opted to use this mechanism, yet insists the situation was dire. But there's no argument or evidence that demonstrates why "consumers" would not have benefitted had the government waited until the court completed its review of the settlement. We're only talking a period of a few weeks�does the market for "alternative newsweeklies" really evolve that quickly? Doubtful.

In a footnote, the DOJ tries to turn my argument against me, without success:

Moreover, if one adopted the Movant's interpretation of the Tunney Act, it would compromise the usefulness of the consent decree as a viable settlement option in other antitrust contexts. As the United States explained in its Response to Public Comments, it is customary in other Tunney Act proceedings that involve mergers to permit the defendants to merge after the complaint and proposed final judgment are filed, subject to the defendants' obligations under the proposed final judgment to take steps to divest certain specified assets. In these mergers, the defendants are generally allowed to complete the merger prior to the close of the sixty-day comment period and entry of the final judgment by the court.

I assume this is an effort to catch me in a trap: Since I presumably want mergers to go forward (as a capitalist opposed to antitrust), I would not want to force merging firms to hold up consummating their deals longer than necessary. It's a nice try, but the principle here remains constant despite the particulars: If a court has Tunney Act jurisdiction to review a merger settlement, does it not prejudice that court's powers to permit the merger to proceed prior to judicial review? What if the court decides the settlement is weak and the merger should not be permitted to proceed? It's very hard to unscramble the eggs, so to speak, after the fact. Congress presumably wanted to avoid this when they required a statutory public comment period in the first place. But the DOJ views legal deadlines as inconvenient challenged to their unlimited antitrust powers.

::: posted by Skip Oliva at 5:06 PM | link | donate |

Antitrust News: St. Louis Docs "Settle"

Score another FTC victory in the War Against Doctors:

WASHINGTON (Reuters) - U.S. antitrust enforcers said on Friday they had settled antitrust charges against a group of doctors in St. Louis whom they claimed had inflated prices by bargaining collectively with insurers.

The Federal Trade Commission said the 1,500-member Washington University Physician Network agreed to stop negotiating fees with insurers and preferred provider organizations on behalf of members, a practice that violates antitrust laws.

"This group of St. Louis-area physicians engaged in overt price-fixing," said Joe Simons, director of the FTC's competition bureau. "Its conduct was plainly anticompetitive and harmful to consumers, by forcing up prices in the area."

The settlement also bars the doctors from "facilitating exchanges of information among physicians concerning whether, or on what terms, to contract with (an insurer)."

The St. Louis case marks the 10th time during the last 15 months that the commission has charged doctors groups with conspiring to raise fees in violation of U.S. antitrust laws.

Thankfully for the FTC, Reuters didn't actually report on this story, instead simply repeating the FTC's press release. Had Reuters (or any media outlet) looked at the FTC's statements critically, they would have to answer the following questions:

1. Does physician collective negotiating violate the antitrust laws? Contrary to the FTC's claims, it does not. Physicians have the same basic economic rights as any American to act in their own self-interest when voluntarily deciding what conditions to accept a contract offer. The specific antitrust law the FTC enforces only prohibits "unfair" methods or acts of competition. Under no reasonable standard do the acts of physcians like those at Washington University violate this vague prohibition. Indeed, the FTC Act was not enforced against doctors for decades until the FTC, needing some new business to justify their relevancy, started targeting doctors as victims of opportunity.

2. Were consumers harmed? No. The fact that prices rise does not indicate the presence of criminal activity. Prices rise for many reasons, such as inflation, higher costs, and government regulations. The FTC falsely assumes that any price increase must be due to an illegal conspiracy among producers; in none of the recent physician cases did the FTC consider any other factor that might have led to higher prices. And in any case, physicians have the right to ask for more money. Consumers are not legally entitled to a given price level for medical services. That would, in fact, be price fixing.

3. Can the FTC ban doctors from "facilitating exchanges of information" with each other? No, the First Amendment prohibits the government from banning simple acts of speech. The FTC argues, in contrast, that there's an antitrust exception to the First Amendment that permits censorship of speech that may cause "anticompetitive" behavior. But this is circular reasoning. Under this logic, the government could ban individuals from discussing the legalization of marijuana on the grounds that such speech might lead to individuals advocating a position that is contrary to existing law. Of course, that's not a precise analogy, because the doctors did not violate the law in the first place...

::: posted by Skip Oliva at 10:10 AM | link | donate |

Antitrust News: A Rare Occurrence

Once in awhile, the FTC actually quits while they're ahead:

The Federal Trade Commission (FTC) plans to close its antitrust investigation of Vista Health, the joint venture of two Waukegan hospitals, according to Vista attorney Laura Martin.

The FTC began its inquiry after the venture was accused by insurers three years ago of violating antitrust law by seeking substantial rates hikes before fully consolidating the hospitals' operations. The FTC is now acknowledging, Ms. Martin says, that Provena St. Therese Medical Center, one of the hospitals, would have raised rates with or without a merger and that the increases were not as high as those of other merged hospitals under investigation. The other hospital in the venture is Victory Memorial Hospital.

The important fact to take from this story is that insurers went to the FTC to settle what is nothing more than a normal business dispute over prices. Wouldn't it be nice if any business could do that�agree to a price increase then ask federal regulators to undo it because it "violates the antitrust laws"?

::: posted by Skip Oliva at 10:00 AM | link | donate |

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