Competition Project

On May 12, 2009, Christine Varney, newly-named Assistant Attorney General for Antitrust, announced a change in the Division’s approach to Section 2 of the Sherman Act, which deals with monopolization. 

She withdrew the Division’s report on Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act (Sept. 2008), and promised reinvigorated Section 2 enforcement “[that] will . . . require the Division to go ‘back to the basics’ and evaluate single-firm conduct against these tried and true standards that set forth clear limitations on how monopoly firms are permitted to behave.”

The behavior of large firms with strong market positions that provide important platforms for the products of other firms raises important and difficult questions, not just for competition policy, but for intellectual property protection, innovation, and other areas of analysis. The issues cannot be viewed in the context of competition policy alone.

CLI staff members have written often one or another facet of the dominant firm/platform company phenomenon. Because conventional antitrust analysis provides an incomplete framework for analysis, our work takes a more expansive perspective. It emphasizes:

  1. The importance of a dynamic analysis that deals with competition, investment, and innovation over time;

  2. The distinction between relations of dominant firms with customers and relations with rivals; the two present different sets of issues, and most analysis fails to make the distinction. 

Varney’s action has caused considerable concern in business circles. CLI’s current work focuses on analyzing both the withdrawn Report and the cases discussed favorably by Varney, in an effort to develop some middle ground.

Click Here to view our existing publications in this area.

Pharmaceutical Project

Bill Frezza of Adams Capital Management noted recently:

Politically, Big Pharma is at the mercy of all three branches of an increasing hostile government. The executive branch, through its regulatory agencies, has raised the cost of product development to astronomical heights. The judicial branch, through its class action machinery, has made the penalty for delivering anything short of zero-defects untenable. And the legislative branch, on its way to becoming the industry’s monopsony purchasing agent, is hell bent to drive prices down to the marginal cost of production.

He did not mention the international scene, where Pharma is also under a series of attacks designed to undermine its ability to produce life-saving and -enhancing innovations. He also omitted Congressional efforts to drive drug prices down to marginal cost through excessive dilution of intellectual property rights.

CLI is involved in two of these issues: Appropriate protection for intellectual property and preemption of state tort liabilities. 

Click Here to view our existing publications in this area.

News Project

The news business is in turmoil. The Internet is taking over the advertising that provided newspapers with 80% of their revenue, and is allowing virtually unlimited access to the wire service news reports that used to be the exclusive property of each local paper.

Many newspapers are shutting down or becoming on-line only, and it is possible that some iconic nameplates will disappear.

A significant part of this crisis of the news business is the loss of intellectual property rights. Pre-Internet, the newspapers’ IP was protected by the physical impossibility of stealing their work. Now, those who bear the cost of collecting the news have lost the ability to monetize their efforts. They can neither charge for the product directly nor capture sufficient associated advertising revenues. Too many people can free ride on their effort without sharing in the production costs.

Proposals that news collection be supported by foundations or even government grants are made, but these approaches would be inconsistent with our dedication to a free press as a vital ingredient of democracy.

CLI believes that who are devoted to a free press and those who believe in the efficacy of the institution of property rights need to cooperate to develop property-rights-based rules for news organizations that will provide a sound economic basis.

Click Here to view our existing publications in this area.

Software Project

For almost a decade, CLI staff members have been involved in the debate/discussion/conflict over proprietary versus open source software.

During the past few years, peace seemed have broken out, as most software professionals agreed that each method of production has its pluses and minuses, and that ample room exists for both, depending on the circumstances. Customers have also made clear that they see a need for both kinds of products, and that they do not want squabbling among the vendors to expose them (the customers) to risks and inconvenience.

Recently, however, the conflict has arisen again in the context of the Open Government Initiative.. Some arguing that open government equates to open source.

CLI is preparing a report reviewing the issues, pointing out the relative advantages of each form, and the advantages to the government and society of embracing both.

Click Here to view our existing publications in this area.

Telecommunications Project

Telecommunications, including the Internet, is a complex, adaptive, dynamic, iterative, evolutionary system. No such system should be subjected to command-and-control regulations directed toward pre-determined ends. Such mechanisms will stifle innovation and investment, and lead to stagnation.

Current intellectual constructions used in public discussions of how this system should be controlled are inadequate, oscillating between the extremes of "the unregulated free market" and "administrative regulation in the public interest."

CLI is examining this question of how to develop a sensible intermediate approach to government interaction with the telecom world, an approach that recognizes the system’s special characteristics, and is assessing the ability of proposed institutional structures to achieve this goal.

Does anyone really believe that process-laden, lawyer-intensive, notice-and-comment-heavy, full-bore Administrative Procedure Act institutions are optimal tools for regulating the Internet? What are the alternatives? What can be learned from principles of common law common carriage, from the consultation process of the U.K. Office of Communications (Ofcom), from U.S. experience with regulatory negotiation (RegNeg), from academic analysis of networks and complex adaptive systems, and from history? (Many issues of current concern were encountered in the railroad boom of the late 19th Century, and the work of the regulators and business executives of that era has not gotten the respect that it deserves.)

We suspect that the long-term solution lies in self-regulatory institutions created by contract, operating with government oversight but not detailed regulation.

Click Here to view our existing publications in this area.

China Project

Both the U.S. and China are concerned with promoting prosperity and economic growth and with maintaining just and efficient governments. Both face serious challenges: dealing with the consequences of the financial crisis; building and upgrading infrastructure; coping with the impact of demographic change; reacting to globalization. Meeting these challenges will strain the economic and political institutions of each nation.

Most U.S. commentary comparing the two nations simply assumes that China needs to become more like America. This assumption is foolish. Serious thinkers in the United States are concerned about the condition of the United States as a polity, and perceive a need for institutional renewal and reform. At a macro level, this requires attention to major political institutions. At a micro level, it dictates modesty in advising China to use U.S. systems as models. For example, should  China want to import U.S. structures of antitrust law, or telecommunications regulation, or tort liability, or drug review? Is the U.S, moving in the right direction in its increasing disregard of property rights?

China can benefit from studying U.S. institutions, but the lessons will be negative as well as positive. The analysis will warn China about what to avoid as well as what to emulate. Learning from one’s mistakes is good, but learning from the mistakes of others is even better. The United States can also learn from this process, because a critic is often the best friend.  

CLI wants to promote creative cross-fertilization on both economic and political issues, starting with areas with which we are most familiar:  competition policy; telecommunications; property rights, including intellectual property; administrative law.

Click Here to view our existing publications in this area.


CLI Mission

The Convergence Law Institute (CLI) is a non-profit organization dedicated to research and education on public policy issues.
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CLI Projects

  • News
  • Competition
  • Software
  • China
  • Pharmaceutical
  • Telecommunications
See also ...

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