Darth Vader

An obituary for Thomas J. Holdych, contracts and commercial law professor at the Seattle University is presented

Cash Deposits - Burdens and Barriers in Access to Utility Services

The utilities are free from statutory limitations on their deposit rules, practices differ, but most utilities use very broad criteria of income and net worth to select those consumers from whom they will demand a deposit. Under these broad deposit rules it is not surprising that the poor pay virtually all deposits, or that often high income residential areas are exempted altogether from the impact of cash deposits. Such rules impose severe burdens on depositors without proportionately benefitting the utilities, for deposits usually save utilities insignificant amounts of money. For example, estimations of the California Public Utilities Commission in 1967 showed that imposition of deposit rules would save Pacific Telephone & Telegraph Co. only one tenth of one percent (00.1%) of its operating revenues. These small savings contrast sharply with the large burdens imposed on those required to pay the deposits. At most, only 13.4% of those required to pay deposits under Pacific Telephone\u27s identification criteria were actually expected to default. In short, 87% of Pacific Telephone\u27s deposit-paying customers were forced to furnish security for utility service on the grounds that only 13.4% of their number might default in their monthly payments. At the same time, the majority was required to pay in the form of higher utility rates for their share of the bad debt losses not eliminated by the company\u27s deposit policy. This double burden falls on all consumers who are required to pay deposits on the basis of such imprecise deposit criteria. An additional burden falls on poor depositors because deposit amounts often are large in relation to their budgets. Moreover, unlike the affluent, the poor cannot turn so readily to alternative utilities offering less onerous credit terms. In light of these burdens, the existence and application of cash deposits raise serious issues of public utility law and constitutional law

The Robinson-Patman Act and Consumer Welfare: Has Volvo Reconciled Them?

In this article, I address that broader question. In Part II, I summarize the facts and opinions in Volvo, particularly the final section of the majority opinion where the Court observed that Volvo\u27s discrimination was procompetitive. In Part III, I review the growing consensus in antitrust law that the fundamental goal of the antitrust statutes (other than the Robinson-Patman Act) is to promote consumer welfare. Today when most courts say that a practice furthers competition, they mean that it improves consumer welfare-specifically, the welfare of consumers in the relevant market. In Part IV, I use that interpretation of furthering competition to test the Court\u27s view that Volvo\u27s price discrimination was procompetitive. I conclude that the Court was probably correct because it is likely that Volvo\u27s conduct benefited users of trucks. Finally, in Part V, I confront the ultimate question: did Volvo impose new standards for secondary-line liability that would require all future Robinson- Patman Act plaintiffs, not just primary-line plaintiffs, to show probable harm to consumer welfare? I conclude that it did not: while Volvo is not entirely clear, the Court\u27s decision does not appear to jettison any of the basic protectionist features of the Act. Instead, it strengthens the Court\u27s existing, incrementalist approach under which issues of Robinson- Patman Act interpretation are resolved in ways that promote competition and consumer welfare. Where there is an issue of statutory interpretation- as there will be in any case the Court takes the Court is likely to choose the interpretation of the Act that best advances the interests of consumers. Where a plaintiff has brought a completely traditional secondary-line case, however, the Court still appears unwilling to rule that the plaintiff must show harm to market-wide competition

Powerful Buyers and Merger Enforcement

Although large buyers like Walmart and Tyson Foods occupy important positions in the American economy, antitrust law remains focused on the conduct of sellers. Moreover, when mergers of buyers have been challenged, the cases have been based on a single theory – that the merger would create a dominant buyer (or group of buyers) that would exploit small, powerless suppliers. Most powerful buyers, however, face suppliers with power of their own, and in such cases, the buyers exert “countervailing power,” which can also be anticompetitive. Yet buyer mergers that reduce competition through the exercise of countervailing power are not addressed by the government’s guidelines, the leading treatises, or the case law. This article provides a comprehensive analysis of the role of buyer power in merger enforcement. It defines the types of buyer power, describes their competitive effects, and reviews an array of evidence. It also discusses the traditional approach to buyer mergers, suggesting modifications to better reflect the true dynamics of buyer power. Most important, it recommends that courts and enforcement agencies halt mergers that enhance anticompetitive countervailing power. Because many buyer combinations that increase such power are beneficial, the article identifies ten situations in which a merger that augments countervailing power would reduce competition and diminish the welfare of consumers, suppliers, or society

Market Power and American Express

The Second Circuit ruled that American Express did not have market power because it operated in a two-sided market and any leverage it exercised over merchants derived from its successful competition for cardholders. As a result, the relevant market had to include both sides of a credit card transaction, the company’s market share was modest, and it could not exploit both merchants and cardholders. In Market Power and Antitrust Enforcement (forthcoming in B.U. L. REV.), I propose a new approach that infers market power from the likely effects of the challenged conduct. This approach shows that American Express clearly exercised market power. Its conduct prevented merchants from steering customers to cheaper credit cards and thus maintained merchant fees above the competitive level. I also explain why these high fees were not justified by the rewards programs the company provided to its cardholders

A Prudent Approach to Climate Change

Climate change poses large and difficult issues. The potential stakes are enormous, but there is vexing uncertainty about the likelihood of a catastrophe, our ability to mitigate it, the economic costs of taking action, and the desirability of doing so without the participation of the world’s rapidly developing economies. This article outlines a prudent response to these uncertainties. Given the state of the economy, it does not endorse high taxes or other severe curbs on carbon emissions. But unlike John Kunich’s article in the same volume, it does not suggest it would be appropriate to do nothing. Instead, the article recommends a measured approach to climate change: (1) substantial government funding for clean energy research and development, (2) limits on greenhouse gas emissions that begin at a modest level but gradually escalate in accord with a predetermined schedule; and (3) use of diplomatic tools to induce China, India, and other rapidly developing countries to adopt a comparable program

A Prudent Approach to Climate Change

Climate change poses large and difficult issues. The potential stakes are enormous, but there is vexing uncertainty about the likelihood of a catastrophe, our ability to mitigate it, the economic costs of taking action, and the desirability of doing so without the participation of the world’s rapidly developing economies. This article outlines a prudent response to these uncertainties. Given the state of the economy, it does not endorse high taxes or other severe curbs on carbon emissions. But unlike John Kunich’s article in the same volume, it does not suggest it would be appropriate to do nothing. Instead, the article recommends a measured approach to climate change: (1) substantial government funding for clean energy research and development, (2) limits on greenhouse gas emissions that begin at a modest level but gradually escalate in accord with a predetermined schedule; and (3) use of diplomatic tools to induce China, India, and other rapidly developing countries to adopt a comparable program

Antitrust and Two-Sided Platforms: The Failure of American Express

Two-sided platforms serve two sets of customers and enable them to interact with each other. The five most valuable corporations in America – Amazon, Apple, Facebook, Google, and Microsoft – all operate two-sided platforms. But despite their growing power, the Supreme Court\u27s American Express decision has made it harder to stop them from stifling competition. This Article systematically exposes the flaws in the Court\u27s reasoning and identifies the principles that should govern future cases. The Court’s most fundamental error was to require plaintiffs in rule of reason cases to make an initial showing of consumer harm that weighs the effects of the defendant\u27s conduct on both sides of its platform. This unprecedented approach will discourage antitrust litigation. It is also flawed antitrust policy because it allows a firm to exploit customers on one side of its platform to benefit customers on the other side. I argue that such conduct by a platform should only be permissible in the face of a market failure - an obstacle that prevents the market from maximizing consumer welfare. Without a market failure - and American Express (Amex) could not demonstrate one - competition will produce the optimal allocation of benefits across a platform. This article shows why the Court was wrong to treat Amex\u27s two sets of customers - cardholders and merchants - as a single market. Instead, it offers a better approach to discerning market power in antitrust cases, based on the likely effects of the defendant\u27s conduct. Under this approach - and contrary to the Court\u27s conclusion - Amex possessed market power, as its steering ban almost certainly enabled it to maintain its merchant fees above the competitive level. The Article concludes that American Express was deeply flawed, and that courts should confine it to its facts and follow the principles set forth in this Article

Market Power and Antitrust Enforcement

Antitrust is back on the national agenda. The Democratic Party, leading Senators, progressive organizations, and many scholars are calling for stronger antitrust enforcement. One important step, overlooked in the discussion to date, is to reform how market power — an essential element in most antitrust violations — is determined. At present the very definition of market power is unsettled. While there is widespread agreement that market power is the ability to raise price profitably above the competitive level, there is no consensus on how to determine the competitive level. Moreover, courts virtually never measure market power (or its larger variant, monopoly power) by identifying the competitive level and comparing a defendant’s price to it. Rather, they attempt to define a relevant market and calculate the defendant’s market share, a process that is often complex and misleading. This Article proposes a new approach that would infer market power from the likely effects of the challenged conduct. Courts ought to identify power by asking whether the challenged conduct is likely to enable the defendant(s) to raise price above the prevailing level or maintain price above the but for level (the level to which price would fall absent the challenged conduct). This method would not only close the definitional gap, it would enable courts to resolve two critical elements of most antitrust offenses — market power and anticompetitive effects — at the same time, while inferring the relevant market from the result. In short, by reducing the cost and improving the accuracy of antitrust enforcement, this step would increase its impact