Broadening Consumer Law: Competition, Protection, and Distribution

Policymakers and scholars have in distributional conversations traditionally ignored consumer laws, defined as the set of consumer protection, antitrust, and entry-barrier laws that govern consumer transactions. Consumer law is overlooked partly because tax law is cast as the most efficient way to redistribute. Another obstacle is that consumer law research speaks to microeconomic and siloed contexts—deceptive fees by Wells Fargo or a proposed merger between Comcast and Time Warner Cable. Even removing millions of dollars of deceptive credit card fees across the nation seems trivial compared to the trillion-dollar growth in income inequality that has sparked concern in recent decades. This Article synthesizes the fragmented empirical literature to offer a broader conception of consumer law’s place in governance. The data indicate that consumer market failures raise prices to consumers by well over a trillion dollars annually, aided by sophisticated algorithmic pricing; that this overcharge worsens economic inequality; and that consumer law, despite prominent critiques of its shortcomings, can reduce overcharge when designed well. The preliminary state of the evidence underscores the need for regulatory monitoring of markets to calibrate consumer law’s potential as a tax alternative. Redistribution is one of the government’s most basic functions, and efficiency one of the law’s guiding principles. There are strong normative foundations for making macroeconomic distribution an explicit goal of consumer law

The New Gatekeepers: Private Firms as Public Enforcers

The world’s largest businesses must routinely police other businesses. By public mandate, Facebook monitors app developers’ privacy safeguards, Citibank audits call centers for deceptive sales practices, and Exxon reviews offshore oil platforms’ environmental standards. Scholars have devoted significant attention to how policy makers deploy other private sector enforcers, such as certification bodies, accountants, lawyers, and other periphery “gatekeepers.” However, the literature has yet to explore the emerging regulatory conscription of large firms at the center of the economy. This Article examines the rise of the enforcer-firm through case studies of the industries that are home to the most valuable companies, in technology, banking, oil, and pharmaceuticals. Over the past two decades, administrative agencies have used legal rules, guidance documents, and court orders to mandate that private firms in these and other industries perform the duties of a public regulator. More specifically, firms must write rules in their contracts that reserve the right to inspect third parties. When they find violations, they must pressure or punish the wrongdoer. This form of governance has important intellectual and policy implications. It imposes more of a public duty on the firm, alters corporate governance, and may even reshape business organizations. It also gives resource-strapped regulators promising tools. If designed poorly, however, the enforcer-firm will create an expansive area of unaccountable authority. Any comprehensive account of the firm or regulation must give a prominent role to the administrative state’s newest gatekeepers

In Defense of Breakups: Administering a “Radical” Remedy

Calls for breaking up monopolies—especially Amazon, Facebook, and Google—have largely focused on proving that past acquisitions of companies like Whole Foods, Instagram, and YouTube were anticompetitive. But scholars have paid insufficient attention to another major obstacle that also explains why the government in recent decades has not broken up a single large company. After establishing that an anticompetitive merger or other act has occurred, there is great skepticism of breakups as a remedy. Judges, scholars, and regulators see a breakup as extreme, frequently comparing the remedy to trying to “unscramble eggs.” They doubt the government’s competence in executing such a difficult task, pointing to decision-making flaws dating back to the breakups of Standard Oil in 1911 and AT&T in 1984. Even many scholars calling for more vigorous antitrust enforcement recommend alternative remedies. This Article asserts that the pervasive hesitancy about administering breakups renders antitrust impotent in the face of monopolies—too often a statutory right without a remedy. More importantly, the Article challenges the perception of breakups as unadministrable. The intellectual foundations for the anti-breakup stance are weak, relying on outdated, anecdotal evidence. Moreover, antitrust needs a methodological shift toward paying greater attention to the breakup insights yielded by other disciplines. In particular, business scholars have studied how the world’s leading companies regularly break themselves up voluntarily. Additionally, administrative law scholarship has observed a broader evolution toward collaborative regulation that shows how the much-maligned historical approaches to antitrust remedies could be greatly improved by relying more on the business sector in designing and implementing breakups. In other words, insights from outside of antitrust address many critiques of breakups and show how that remedy is far from radical and messy. Antitrust observers should thus abandon the worldview that compares breaking up prior companies to unscrambling eggs. Or at a minimum they should recognize that scrambled eggs, once cooked, are regularly divided into smaller portions. A greater willingness to do the same to monopolies in the post-merger context and beyond would bring regulators more in line with the business sector, which sees divestitures as a routine part of effective governance

Making Innovation More Competitive: The Case of Fintech

Finance startups are offering automated advice, touchless payments, and other products that could bring great societal benefits, including lower prices and expanded access to credit. Yet unlike in other digital arenas in which American companies were global leaders, such as search engines and ride hailing, the U.S. has lagged in consumer finance. This Article posits that the current competition framework is holding back consumer financial innovation. It then identifies a contributor that has yet to be articulated: the organizational design of administrative agencies. Competition authority—including antitrust and the extension of business licenses—is spread across at least five regulators. Each is focused on other missions or industries. The Federal Reserve and other prudential regulators prioritize financial stability, which conflicts with their competition mandate. The Department of Justice (DOJ), hindered by statutes and knowledge gaps, devotes significantly fewer resources to banking than to other industries in merger review. No regulator has the right authority, motivation, and expertise to promote competition in consumer finance. Innovation has raised the stakes for fixing this structural flaw. If allowed to compete fully, financial technology challengers (“fintechs”) could bring large consumer welfare advances and reduce the size of “Too Big To Fail” banks, thereby lessening the chances of a financial crisis. If allowed to grow unchecked, either fintech startups or the big banks acquiring them may reach the size of technology giants, thereby increasing systemic risk. Whether the goal is to benefit consumers, strengthen markets, or prevent crises, a reallocation of competition authority would better position regulators to navigate the future of innovation

Broadening Consumer Law: Competition, Protection, and Distribution

Policymakers and scholars have in distributional conversations traditionally ignored consumer laws, defined as the set of consumer protection, antitrust, and entry barrier laws that govern consumer transactions. Consumer law is overlooked partly because tax law is cast as the most efficient way to redistribute. Another obstacle is that consumer law research speaks to microeconomic and siloed contexts—deceptive fees by Wells Fargo or a proposed merger between Comcast and Time Warner Cable. Even removing millions of dollars of deceptive credit card fees across the nation seems trivial compared to the trillion-dollar growth in income inequality that has sparked concern in recent decades. This Article synthesizes the fragmented empirical literature to offer a broader conception of consumer law’s place in governance. The data indicate that consumer market failures raise prices to consumers by well over a trillion dollars annually; that these market failures worsen economic inequality; and that consumer law, despite prominent critiques of its failures, can address those market failures when designed well. The preliminary state of the evidence underscores the need for regulatory monitoring of markets to leverage consumer law’s potential as a tax alternative. Redistribution is one of the government’s most basic functions, and efficiency one of the law’s guiding principles. There are strong normative foundations for making macroecomomic distribution an explicit goal of consumer law

The Missing Regulatory State: Monitoring Businesses in an Age of Surveillance

An irony of the information age is that the companies responsible for the most extensive surveillance of individuals in history—large platforms such as Amazon, Facebook, and Google—have themselves remained unusually shielded from being monitored by government regulators. But the legal literature on state information acquisition is dominated by the privacy problems of excess collection from individuals, not businesses. There has been little sustained attention to the problem of insufficient information collection from businesses. This Article articulates the administrative state’s normative framework for monitoring businesses and shows how that framework is increasingly in tension with privacy concerns. One emerging complication is the perception that the state, through agencies such as the National Security Agency, deploys large technology companies to surveil individuals. As a result, any routine regulatory monitoring of platforms—even for the purpose of prosecuting those platforms—would implicate an overbearing state peering into our personal lives. Moreover, opponents of regulation have weaponized privacy arguments to shield other businesses from monitoring, such as banks. A sharper understanding of the institutional, legal, and informational differences between regulatory monitoring and personal surveillance is needed. Juxtaposing these two state tools reveals that the tension between regulation and privacy is largely illusory. Regulators today—most notably the Federal Trade Commission—have untapped power to monitor emerging risks in big technology and other sectors. They should not hesitate to use that power to pursue a more informed and collaborative path to achieving their missions

Regulatory Monitors: Policing Firms in the Compliance Era

Like police officers patrolling the streets for crime, the front line for most large business regulators — Environmental Protection Agency (EPA) engineers, Consumer Financial Protection Bureau (CFPB) examiners, and Nuclear Regulatory Commission (NRC) inspectors, among others — decide when and how to enforce the law. These regulatory monitors guard against toxic air, financial ruin, and deadly explosions. Yet whereas scholars devote considerable attention to police officers in criminal law enforcement, they have paid limited attention to the structural role of regulatory monitors in civil law enforcement. This Article is the first to chronicle the statutory rise of regulatory monitors and to situate them empirically at the core of modern administrative power. Since the Civil War, often in response to crises, the largest federal regulators have steadily accrued authority to collect documents remotely and enter private space without any suspicion of wrongdoing. Those exercising this monitoring authority within agencies administer the law at least as much as the groups that are the focus of legal scholarship: enforcement lawyers, administrative law judges, and rule writers. Regulatory monitors wield sanctions, influence rulemaking, and create quasi-common law. Moreover, they offer a better fit than lawyers for the modern era of “collaborative governance” and corporate compliance departments, because their principal function — information collection — is less adversarial. Yet unlike lawsuits and rulemaking, monitoring-based decisions are largely unobservable by the public, often unreviewable by courts, and explicitly excluded by the Administrative Procedure Act (APA). The regulatory monitor function can thus be more easily ramped up or deconstructed by the President, interest groups, and agency directors. A better understanding of regulatory monitors — and their relationship with regulatory lawyers — is vital to designing democratic accountability not only during times of political transition, but as long as they remain a central pillar of the administrative state

Federal Rules of Platform Procedure

Tech platforms serve as private courthouses for disputes about speech, lodging, commerce, elections, and reputation. After receiving allegations of defamatory content in top search results, Google must decide between protecting one person’s public image and another’s profits or speech. Amazon adjudicates disputes between consumers and third-party merchants about defective or counterfeit items. For many small businesses, layoffs and bankruptcy hang in the balance. This Article uncovers the processes that these platforms use to resolve disputes, and proposes reforms. Other powerful businesses that intermediate, such as credit card companies ruling on a disputed charge between a merchant and consumer, must by federal law provide timely notice, a reasonable investigation, and other procedural minimums. In contrast, platforms have almost unfettered discretion. Under intense public pressure, Facebook recently began building an independent oversight board that can overrule content moderation decisions. But whether other platforms will follow is unclear, and Facebook’s oversight board has significant limits. If platforms are to continue as the primary arbiters of disputes in the information age, they warrant mandated procedures as did financial institutions before them. The procedures would aim to improve the administration of justice through public accountability and separation of at least one of platforms’ executive, legislative, and judicial powers

A Tale of Two Debtors: Bankruptcy Disparities by Race

This article offers the first quantitative evidence on race and bankruptcy. Minority debtors fare worse overall in bankruptcy — blacks are 40% and Hispanics 43% less likely than whites to receive a discharge in Chapter 13 after controlling for variables such as education, income, and employment. While the data do not allow for causal inference, Chapter 13 trustees were twice as likely to have made a motion to dismiss even against black debtors who ultimately completed their multi-year bankruptcy plans than against similar white debtors. The paper also indicates that a lack of attorney representation by minority debtors may make them less likely to obtain relief

Consumer Law As Tax Alternative

Policymakers and scholars have in distributional conversations traditionally ignored consumer laws. Tax law dominates distributional conversations partly because legal rules are seen as less efficient and partly because consumer law research speaks to narrow and siloed contexts. Even millions of dollars in reduced credit card fees seem trivial compared to the trillion-dollar growth in income inequality that has sparked concern in recent decades. This Article is the first to synthesize the fragmented studies quantifying inefficiently higher consumer prices across diverse markets — called overcharge. These studies indicate that laws reducing overcharge could make a substantial reduction in inequality. Moreover, this massive redistribution would be driven by laws making markets more competitive, rather than tax increases that distort markets. If the empirical literature currently available is right, consumer law — defined more broadly as including antitrust and consumer protection — merits serious consideration as an alternative to tax