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Antitrust and eMarkets
No full textMost antitrust offenses require proof of the defendant’s market power, or ability to control the market and raise prices above cost. For example, many exclusive contracts are harmless and lawful in competitive markets, but they can become anticompetitive when the firm imposing them has significant market power.
The internet has created a large commercial market that rightfully merits attention from antitrust and competition law authorities. Much of the popular press and even some antitrust decisions treat the internet as a market unto itself. Unfortunate dicta in the Supreme Court’s Amex decision seemed to confirm this. The Court stated that “only other two-sided platforms can compete with a two-sided platform for transactions.” For a few products this is true, but not for most others. The implications for market definition are staggering. For example, Amazon’s share of ecommerce is around 40%, but its share of all commerce is 4%. So which is it? It is long past time to “normalize” online markets by treating them as markets, no different in principle from other markets. They are factually distinctive in some ways, but all markets differ from one another in detail. The only way to determine the scope of a relevant antitrust market is to identify the particular product in question and then make the best measurements that the data permit concerning the range of effective substitutes from all sources, both demand and supply. Market definition in antitrust cases presents a question of fact. This makes empirical study of consumer behavior essential, including such things as the ease and frequency of consumer switching and the range of realistically available alternatives. When this is done it becomes clear that some antitrust markets are properly limited to ecommerce. Others are properly limited to traditional commerce. For a large group in the middle, however, the market includes bot
Discriminating Alignment in the Innovation Sphere
No full textContracts play an important role in innovation. As a result, some scholars have proposed theories highlighting contract provisions as devices that can serve to informally enforce agreements and build trust between parties. Others emphasize the hierarchical provisions between firms to promote efficiency. Yet another group views these agreements as a mechanism to institutionalize learning and protect property interests. This article offers a new theory. To understand a firm’s contractual choices and governance, we must look at how the same provisions in different contracts may have distinct meanings or operate differently in different contexts. So, scholars must give context to these contracts by evaluating how specific industries utilize these provisions in different ways. Separate industries may use the same provisions—like information sharing, for example—within their contracts, but they will pair these provisions with different clauses or private strategies, resulting in different governance choices. This article looks at two areas—the manufacturing and biopharma industries—because these fields use collaborative agreements with similar provisions and suggests that the same provisions actually work in very different ways. The theory of discriminating alignment suggests that parties within these two industries use contractual and other strategy choices differently in order to meet their separate goals in a cost minimizing way. This article reaches this conclusion based on qualitative interviews to learn about how participants in the biopharma industry use provisions and understand them. It draws on prior empirical work and scholarship to analyze how the same provisions operate differently within the manufacturing industry. It concludes that the same contract provisions operate differently in manufacturing and biopharma, leading to a divergence in governance choices. In manufacturing, where relational sanctions are possible, parties can combine informal enforcement with formal provisions to achieve their goals. This is consistent with a “braiding theory” of formal and informal enforcement. By contrast, biopharma parties have a joint interest in collaborating early on to achieve profits and success, which renders informal enforcement unhelpful. Biopharma uses formal provisions—including information transfer provisions—because they are the best means of facilitating a successful complex project. However, when the interests of parties within biopharma diverge, property provisions take over. This article echoes Professor Macaulay’s view that to understand governance within a specific industry, the industry must be analyzed using qualitative interviews
Calvin\u27s Case and Birthright Citizenship
No full textPresident Trump’s Executive Order 14,160 asserts that the children of people who are “unlawfully present” are not natural-born citizens because they are not “subject to the jurisdiction” of the United States. In defending this Executive Order, scholars have probed English common law. In 1608, Calvin’s Case established the birthright rule for English subjects. Defenders of the Order claim that Calvin’s Case helps determine the meaning of “subject to the jurisdiction” in the Fourteenth Amendment’s Citizenship Clause. They claim that the rule requires noncitizen parents to be “in amity,” a special common law status, to give birth to natural-born citizens. They claim that the parents subject to the Order do not have this status.
These readings of Calvin’s Case are wrong. Whether or not parents have the special status of “amity,” it is the location of birth that determines subjecthood under the common law rule. If the common law gives legal content to the Fourteenth Amendment, a birthright rule requiring parental “amity” would still guarantee citizenship for the children of noncitizens under the Order. By probing the meanings of allegiance, natural-born subjecthood, and enemy alienage, this Essay clarifies the extent to which Calvin’s Case and the common law can inform the meaning of the Citizenship Clause. Calvin’s Case supports the traditional understanding that individuals born in the United States are, absent extraordinary circumstances, citizens
Ameliorative Constitutionalism
No full textThe basic problem of American constitutional theory is that (a) the U.S. Constitution, morally speaking, lacks full democratic legitimacy due to the continuing effects of its unjust and undemocratic history, yet (b) we have no realistic chance in the foreseeable future of replacing it with something free from those legacies of exclusion and oppression. This Essay draws from philosophy and political science to sketch a way forward.
From philosophy comes a methodological tool that argues backwards from something that we need (or want) to be true, to the constraints on the cognitions we must have to make that aspiration (here, constitutional legitimacy) possible. From political science comes the idea that a key function of constitutions, including our own, is to create the conditions for a sustainable shared life across lines of social conflict. But to serve this function, a constitution must protect the most important interests and be compatible with the political agency of all who live together under it, such that each social group has good reasons to adhere to the law and participate in constitutional methods of social change rather than risk conflict to improve their conditions.
Bringing these two ideas together while understanding that the U.S. Constitution is susceptible to numerous possible interpretations suggests a strategy for bootstrapping it into legitimate democratic authority: when applying it, we should rely on only those interpretive resources consistent with the idea that it protects the basic interests and is compatible with the political agency of all who live under it.
This approach, when applied to the use of the past, counsels us not just to permit but to prefer subaltern histories as a resource in constitutional interpretation. Such histories, together with the advocacy of those in present-day social movements who continue the legacies of the social movements for inclusion of the past, are our best evidence for what would protect the basic interests and express the political agency of those who are excluded by dominant-group doctrine and history.
In short, the Constitution can oblige us to live under the government it creates only if we read it from below
Redefining Program Integrity: Protecting Consumers and Systems in the Affordable Care Act Marketplaces
No full textGrading Patents
Full text linkIn this Article, we offer a new design for our patent system with a view to optimize its functioning. As multiple patent scholars have recognized, the root cause of the ills of our patent system is the high rate of low-quality patents. Extant patent law employs a binary screening process, under which inventions either qualify for protection or fail. Thereafter, all qualifying inventions are entitled to the same level of protection irrespective of the degree of their novelty, utility and nonobviousness. As we establish throughout this Article, patent law’s failure to distinguish among inventions based on their quality greatly undermines the patent system’s principal objective of optimally incentivizing and adequately rewarding innovative progress. Society, at least in principle, ends up paying the same price for all qualifying inventions, regardless of their level of innovation and improvement upon the prior art. To address this problem, we advocate a fundamental, yet simple, reconceptualization of patent law. Instead of utilizing a threshold-based regime under which the USPTO merely decides whether an invention is patentable, we introduce a mechanism of Patent Grades. According to our proposal, once the USPTO determines the eligibility of a given invention to patent protection, it would proceed to assign it a grade—on a 1-to-5 scale. A grade of 1 would be given to the lowest quality patents and a grade of 5 to the highest. The grade of a patent would determine the invention’s scope of protection. In contrast to the current system that entitles all eligible inventions to 20 years of exclusivity, the protection term under our proposal would vary based on the patent grade. Furthermore, the remedies available to patentholders would be contingent on the grade. As we will show, these changes alone would dramatically reduce the slew of problems associated with bad patents. As importantly, Patent Grades would be known to potential licensees, industry participants and courts. The information represented by the grades would eliminate or significantly ameliorate the abuses that arise under the present patent system. The adoption of Patent Grades would curtail the market power of patentees vis-à-vis users, attenuate the problem of trolling, reduce litigation and enhance cumulative innovation. It would also improve the examination process by equipping the USPTO with a more precise metric for evaluating the work product of patent examiners. Thus, implementation of our proposal would lead to a fairer and more efficient patent system
Judicial Laboratories
Full text linkThis Article reexamines and reconceptualizes Justice Louis Brandeis’ dictum in New State Ice Co. v. Liebmann, which describes States as “laboratories of democracy,” by highlighting the critical yet underexplored role of state courts in laboratories framework. Justice Brandeis envisioned States as independent arenas where social and economic policies could be tested without endangering the entire nation, a principle that Justice Brandeis, lawmakers, courts and scholars have traditionally applied to state legislatures. The Supreme Court’s jurisprudence, likewise, reinforces this Brandeisian laboratories account by crafting doctrines that preserve state autonomy and encourage state legislative experimentation unimpeded by federal actors. However, this legislative-centric view of democratic experimentation is incomplete.
While state legislatures have long been seen as the primary laboratories for fostering innovation through autonomy, choice, and local interests, this Article argues that state courts play an equally vital role in shaping democratic processes. State courts do far more than interpret statutory law, define state constitutional rights or adjudicate local disputes—they are active agents of democratic experimentation. With procedural flexibility and unique institutional powers distinct from federal courts—including electoral accountability, direct democracy influences, and administrative and rulemaking authority—judicial laboratories wield power that often rivals, overlaps or even supplants that of state legislatures. These courts experiment not only in the interpretation of rights but also in shaping the structure and function of legal institutions, developing policy models and administering solutions for democratic governance that reflect, serve and respond to local needs and values. Indeed, from eviction moratoria, gerrymandering, zoning and school finance, state courts—many enjoying electoral mandates and democratic legitimacy—have stepped into the democratic breach to legally usurp legislative authority, in the name of democracy, to address social and economic matters of local concern
Hidden Fallacies in Corporate Law and Financial Regulation: Reframing the Mainstream Narratives
No full textChallenge your understanding of corporate, securities, and financial law and regulation with this ground-breaking book. Featuring incisive research from preeminent scholars in the field, this seminal work interrogates long-standing assumptions and beliefs that have remained unexamined for decades. Taking a novel approach, the book serves as both a conceptual \u27deconstruction\u27 and a foundation for future research directions. Each chapter delves deep into the often-overlooked origins, mechanics and implications of outdated or misleading concepts (termed \u27fallacies\u27) that form the backbone of contemporary corporate and securities laws, financial regulations and related domains. Beyond simply identifying these fallacies, the authors illustrate the profound implications of recalibrating our analytic perspectives. By expanding the spectrum of inquiry and moving along multiple continuums – such as public to private, micro to macro, transactional to structural, individual to systemic, and static to dynamic – this volume underscores the transformative potential of re-envisioning the fundamentals of these fields. An essential read, this book promises to be a catalyst for change and a must-have for anyone committed to staying at the forefront of law and policy
Absolute Priority, Relative Priority, and Valuation Uncertainty in Bankruptcy
Full text linkBankruptcy reformers advocate substituting relative priority for the prevailing absolute priority standard to promote a more consensual restructuring process. In deciding who does and does not get paid when there is not enough value to pay all creditors, bankruptcy’s prevailing absolute priority rule lines creditors up in rankorder, compensating highest ranking creditors in full before lower-ranking creditors get anything. By contrast, relative priority would account for the possibility that the firm could recover and become more valuable after the bankruptcy.
Relative priority would compensate lower-ranking creditors for that chance of the debtor turning around, thereby reducing both their incentive to delay and seniors’ incentive to rush. Relative priority could have these and other potential advantages, but we show here that it would also introduce valuation difficulties. Valuation difficulties are important because under both priority rules the parties have the Coasean incentive to come to a deal that maximizes the total value of the firm, and then split that maximized value; indeed, we show that the absolute priority conflict structure that relative priority seeks to mitigate could readily reemerge under relative priority. A more difficult valuation could make both a deal among the parties and judicial resolution harder.
Absolute priority requires point-estimate valuations of the enterprise, like valuing equity of a non-indebted enterprise. But relative priority would require judges, parties, and outside investors to make complex valuations needing additional information, as relative priority valuation requires that decisionmakers assess the chances of multiple future outcomes with more precision than absolute priority needs. Worse, the increased valuation uncertainty from relative priority’s added complexity would discourage full-firm sales. Indeed, relative priority could recreate the bargaining problems afflicting absolute priority. Relative priority would, moreover, work poorly with today’s population of large business bankruptcies, which increasingly is made up of private firms, for which we show relative priority valuation would be particularly difficult. Today, financial professionals generally do not trade or offer for sale similar financial instruments: stock options requiring substantially similar valuation analyses exist for stable public firms, but rarely for distressed firms.
True, relative priority could have other advantages over absolute priority. These advantages, however, must outweigh the costs we identify here: namely, that relative priority entails greater valuation uncertainty for the parties, the courts, and outside investors, leads to more valuation conflict than absolute priority, and, in this dimension, would increase bankruptcy’s cost