Working Papers 476-500
476 Merger Control Procedures and Institutions: A Comparison of the EU and US Practice, (William E. Kovacic, Petros C. Mavroidis, and Damien J. Neven), February 1, 2014
The objective of this paper is to discuss and compare the role that different constituencies play in US and EU procedures for merger control. We describe the main constituencies (both internal and external) involved in merger control in both jurisdictions and discuss how a typical merger case would be handled under these procedures. At each stage, we consider how the procedure unfolds, which parties are involved, and how they can affect the procedure. Our discussion reveals a very different ecology. EU and US procedures differ in terms of their basic design and in terms of the procedures that are naturally associated with these alternative designs. On the one hand, there is a single investigator and decision maker operating under a symmetric mandate in the EU and on the other hand, an investigation and settlement operating under the threat of a court decision in case of challenge only in the US. The EU has developed numerous procedures and has granted extensive rights to the parties in the context of these procedures in order to provide some guarantee that the Commission’s role as investigator and decision maker at first instance is not abused. By contrast, the US procedures appear to be rather informal, the balance in the investigation and evaluation of the merger being provided by the credible threat of a court decision. With a strong federal government that has extensive competences for regulation, merger control on competition grounds is subject to the additional public interest test of regulators in the US. Such additional control is weak in the EU, which has more limited competences for regulation. In addition, both the executive and the legislative powers are more fully developed at the federal level in the US. Both the executive power and the legislative seem to be in position to wield greater influence on enforcement in the US than is the case in the EU.
477 Intermediary Influence, (Kathryn Judge), April 30, 2014
Ronald Coase and others writing in his wake typically assume that institutional arrangements evolve to minimize transaction costs. This Article draws attention to a powerful market-based force that operates contrary to that core assumption — “intermediary influence.” It builds on three observations: (1) many transaction costs now take the form of fees paid to specialized intermediaries; (2) intermediaries prefer institutional arrangements that yield higher transaction fees; and (3) intermediaries are often well positioned to promote self-serving arrangements. As a result, high-fee institutional arrangements often remain entrenched even in the presence of more efficient alternatives.
The Article uses numerous case studies from the financial markets to illustrate how intermediaries acquire influence over time and how they have used that influence to promote high-fee arrangements. It further shows that intermediary influence helps to explain an array of observable trends, including the growth and increasing complexity of the financial sector, that are not readily reconciled with traditional predictions. After identifying some of the welfare losses that can result, the Article considers the implications of intermediary influence for both theory and policy.
478 Democracy, Law and Global Finance: A legal and institutional perspective, (Tamara Lothian), May 16, 2014
Finance has become more a problem than a solution to what the world most wants: socially inclusive growth. It has become a source of crises that threaten the development of the real economy. It has escaped accountability to democratic institutions and often helped, instead, to influence and corrupt them. Its potential to contribute to broad-based opportunity-expanding growth has been largely and massively squandered.
In this piece I seek to understand not only how this failure manifests itself in some of the major countries and regions of the world, but also, how it can be corrected.
The intellectual and policy response to the crisis in its American and European epicenters has almost entirely suppressed discussion of two themes of immense importance: the link between redistribution and recovery and the connection of finance to the real economy. My analysis recovers these suppressed themes by relating them to a third theme: the deficit of democratic accountability that lies at the root of many of these problems.
479 Democracy, Law and Global Finance: An example of research agenda for a new practice of law and economics, (Tamara Lothian), May 16, 2014
Finance has become more a problem than a solution to what the world most wants: socially inclusive economic growth. It has become a source of crises that threaten the development of the real economy. It has escaped accountability to democratic institutions and often helped, instead, to influence and corrupt them. Its potential to contribute to broad-based opportunity-expanding growth has been largely and massively squandered.
In this piece and in a developing body of writing, I seek to understand not only how this failure manifests itself in some of the major countries and regions of the world, but also, how it can be corrected. One of the positive programmatic outcomes should be a toolbox of legal-institutional arrangements to use and organize finance in the service of socially inclusive growth.
These innovations do not amount to a confining, universal blueprint. They are nevertheless applicable, with suitable adjustments, to a wide range of contemporary economies. Moreover, we can develop them with conceptual and institutional materials that are already at hand, in contemporary experience. To identify these resources for legal and institutional innovation through comparative analysis, thus forms another goal of the intellectual agenda.
My method of analysis gives pride of place to institutional alternatives and innovations, expressed in the detailed materials of law. It is comparative law turned into a practice of micro-institutional analysis. We expand our sense of institutional alternatives as we begin to grasp the institutional variations already at hand. From small variations, we may begin to imagine larger variations, informed and inspired by a progressive programmatic imagination.
480 We Need To Talk About Aereo: Copyright-Avoiding Business Models, Cloud Storage and a Principled Reading of the 'Transmit' Clause, (Rebecca Giblin and Jane C. Ginsburg), May 29, 2014
Businesses are exploiting perceived gaps in the structure of copyright rights by ingeniously designing their technologies to fulfill demand for individual access through a structure of personalized copies and playback engineered in ways intended to implicate neither the public performance nor the reproduction rights. The archetypal example is Aereo Inc.’s system for providing online access to broadcast television. Aereo allows users to tune into individual antennae to stream TV to themselves, near-live, online. Aereo’s activities look a lot like the retransmission of broadcast signals, an activity which Congress has made very clear must result in remuneration for rightholders. However, Aereo’s careful design, which assigns each user her own antenna to generate an individual transmission copy from which she can access only the signals she could freely pick up from her own rooftop, means that it can also be argued that Aereo is simply enabling consumers to engage in legitimate non-remunerable uses. If the legality of this design is upheld by the Supreme Court this term, Aereo and subsequent comers will be able to offer consumers on-demand access to content, in a way that competes with licensed services, without any obligation to remunerate the rightholder.
The implications of these business models are significant: in the case of audio and audiovisual works, for example, the on-demand access market may soon exceed the value of the retention copy-based market. When some participants are licensed but their competitors are not, the imbalance may provoke licensees to revise or forego their agreements. More generally, opportunistic engineering choices that obscure some courts’ perceptions of the impact on the on-demand access market risk removing evolving markets from the scope of copyright owners’ exclusive rights. Businesses that free-ride on copyrighted works also obtain an unfair competitive advantage over copyright licensees. The authors of this paper approach copyright from very different perspectives, but are united in the view that it is undesirable for legal outcomes to depend so heavily on technical design.
This article addresses the U.S. caselaw that encouraged businesses such as Aereo to design technologies that could rival or even displace copyright-remunerative modes of making works of authorship available to the public. We consider the implications for copyright owners were Aereo and its supporters to succeed in their reading of the Copyright Act, as well as the implications for other technologies, particularly those involving “cloud” storage, were the broadcasters to prevail. Finally, each author offers her own analysis to demonstrate how it is possible to read the U.S. Copyright Act’s transmit clause in a way that does not make technological design determine the outcome. Either one of our readings, we argue, enables copyright’s exclusive rights to remain effective without discouraging technological innovation.
481 Fair Use for Free, or Permitted-but-Paid?, (Jane C. Ginsburg), June 2, 2014
Fair use is an on/off switch: Either the challenged use is an infringement of copyright, or it is a fair use, which Section 107 declares “is not an infringement of copyright.” As a result, either the copyright owner can stop the use, or the user not only is dispensed from obtaining permission, but also owes no compensation for the use. The unpaid nature of fair use introduces pressures that may distort analysis, particularly of the “transformative” character of the use, and of potential market harm. Faced with a use, particularly in the context of new technologies, that a court perceives to be socially beneficial, a court may overemphasize its “transformativeness,” and correspondingly underestimate the market consequences, in order to prevent the copyright owner from frustrating the social benefit. Distortions can appear in the other direction as well: A court sensitive to the economic consequences of the unpaid use may feel obliged to downplay the public interest fostered by the use. Statutory licenses or privately negotiated accords within a statutory framework can alleviate the tension, by ensuring that uses that the legislator perceives to be in the public interest proceed free of the copyright owner’s veto, but with compensation – in other words, “Permitted but Paid.”
The United States is an outlier in the broader international landscape of copyright exceptions. The copyright laws of EU member states, Canada, Australia, and New Zealand do not include an all-purpose fair use defense (though one has been proposed in Australia), but all these states have enacted a panoply of copyright exceptions, many of which require remuneration. Thus, while our fair use doctrine confronts courts with an all-or-nothing choice, other countries have charted middle courses between barring the use and permitting its unremunerated pursuit.
In contending that some uses previously ruled “fair” should not remain unpaid, I argue that the copyright law should distinguish new distributions from new works, and should confine (free) “fair use” to the latter. I propose that many redistributive uses be “Permitted but Paid,” and be subject to a statutory framework for license negotiations, with compulsory licensing as a backstop. “Permitted but Paid” uses may be divided into two classes: Subsidy (socially worthy redistributions); and Market Failure (transactions costs are too high to warrant a licensing solution; or a new mode of dissemination – infant industry – is threatened by copyright owner recalcitrance). Because the inclusion of a use within the Market Failure class turns largely on facts that may evolve, these uses’ classification as “Permitted but Paid” should be subject to a phase-out, for example, a renewable sunset following a five-year review by the Copyright Office.
Where the use confers a public benefit and the choice is all-or-nothing, a fair use outcome is assured. But were “Permitted but Paid” an option, we would not be lured by a dichotomy falsely pitting authors against a perceived social good: The licensing mechanism would allow both broader dissemination and provide payment to authors. One might rejoin that there is no need to license if the use is fair. But if the use is “fair” because it supposedly cannot reasonably be licensed, then “Permitted but Paid” should replace fair use for free.