Anticompetitive Merger Review

U.S. antitrust law empowers enforcers to review pending mergers that might undermine competition. But there is growing evidence that the merger-review regime is failing to perform its core procompetitive function. Industry concentration and the power of dominant firms are increasing across key sectors of the economy. In response, progressive advocates of more aggressive antitrust interventions have critiqued the substantive merger-review standard, arguing that it is too friendly to merging firms. This Article traces the problem to a different source: the merger-review process itself. The growing length of reviews, the competitive restrictions merger agreements place on acquisition targets during review, and the targets’ resulting loss of strength harm competition and consumers. As a result, an enforcement regime designed to protect competition is damaging it instead. The rise of antitrust reverse termination fees (“ARTFs”)—payments from the acquirer to the target if the merger fails antitrust review—demonstrates the anticompetitive effect of the review process. This Article argues that these fees represent the parties’ negotiated prediction of the competitive costs to the target of entering the merger agreement (and therefore the competitive gains to the acquirer and other rivals in the relevant market). ARTFs also indicate the possibility of anticompetitive manipulation of the merger-review process. Knowing that reviews sometimes take over a year to resolve, acquirers can enter a merger agreement and use an ARTF to buy competitive peace—even when they expect the merger will be rejected—all the while harming consumers. Reform proponents have suggested several ways potentially to shorten merger investigations, such as limiting enforcement agencies’ discovery demands, but these modifications only reduce the problem at the margins. This Article proposes a more effective reform: a requirement that the antitrust enforcement agencies announce a group of highly concentrated markets in which they will challenge any proposed merger, unless one of the firms is failing. This strategy, which the antitrust agencies have employed in an ad hoc fashion in the past, will discourage anticompetitive mergers and eliminate lengthy reviews that harm consumers

Financial Regulation in the (Receding) Shadow of Antitrust

Mounting evidence that a number of key industries in the U.S. economy have become less competitive in recent years is prompting a renewed national conversation about an enhanced role for antitrust enforcement. But there are limits on the anticompetitive conduct antitrust enforcers and private plaintiffs can reach, especially in regulated markets. This is due in part to the doctrine of implied antitrust immunity: when a court perceives a conflict between the antitrust laws (e.g., the Sherman Act) and a regulatory regime (e.g., the securities laws), it may find immunity for conduct that otherwise would violate the antitrust laws. Two Supreme Court cases from the 2000s, Verizon Communications Inc. v. Law Offices of Curtis V. Trinko and Credit Suisse v. Billing, appeared to enhance these restrictions, seemingly increasing the likelihood that regulation will displace antitrust entirely. This Article argues that these cases have had a surprisingly limited impact in most regulated markets, but have affected the scope of implied immunity in the financial markets. As a result, the job of confronting heightened concentration and reduced competition in financial services may fall to sector regulators, especially the Securities & Exchange Commission and Commodity Futures Trading Commission. But these agencies are unprepared for the task and often are unwilling to undertake it. They have neither the resources nor personnel to enforce competition rules and such enforcement ranks low on their priority list. Competition in financial markets therefore may suffer. The stakes are high: increased concentration in financial markets harms consumers and may threaten systemic financial safety. In light of the sector regulators’ limitations, this Article proposes a regulatory-design solution to the problem of competition enforcement in financial markets and focuses on Dodd-Frank’s regulatory regime for the derivatives markets as a case study. It argues that sector regulators should craft structural rules to protect competition in these markets ex ante rather than solely relying on conduct rules and corrective measures taken ex post. The Article contends that increased reliance on structural regulatory responses to competition problems in regulated markets may be beneficial from a competition standpoint when compared to antitrust enforcement and that these salutary effects may be enhanced when the products involved are potentially toxic, as is the case for some derivatives products. This approach is particularly crucial for the derivatives markets, which are enormous, continue to grow, and pose serious competition and systemic risks that may spill over into the wider economy

Blockchain Neutrality

Blockchain technology is transforming how markets work.Blockchains eliminate the need for trusted gatekeepers likebanks to execute, verify, and record transactions. In thefinancial markets, their disruptive potential threatens bothWall Street banks and Silicon Valley venture capitalists. Howblockchain technology is regulated will determine whether itencourages or inhibits competition. Some blockchainapplications present serious fraud and systemic risks,complicating regulation. This Article explores the antitrust andcompetition policy challenges blockchain presents and proposesa regulatory strategy, modeled on Internet regulation and netneutrality principles, to unlock blockchain’s competitivepotential. It contends that financial regulators should promoteblockchain competition—and the resulting marketdecentralization—except in cases where specific applicationsare shown to harm consumers or threaten systemic safety.Regulators also should ensure open access and non-discrimination on dominant blockchain networks. Thisapproach will not only serve traditional antitrust goals oflowering prices and promoting innovation, but it also mightachieve broader economic and social reform by reducing thepower and influence of the biggest financial institutions

Antisocial Innovation

Innovation is a form of civic religion in the United States. In the popular imagination, innovators are heroic figures. Thomas Edison, Steve Jobs, and (for a while) Elizabeth Holmes were lauded for their vision and drive and seen to embody the American spirit of invention and improvement. For their part, politicians rarely miss a chance to trumpet their vision for boosting innovative activity. Popular and political culture alike treat innovation as an unalloyed good. And the law is deeply committed to fostering innovation, spending billions of dollars a year to make sure society has enough of it. But this sunny vision of innovation as purely beneficial is mistaken. Some innovations, like the polio and Covid-19 vaccines, are unquestionably good for society. But many innovations are, on balance, neutral, and many more are simply bad for society (cigarette additives, worker surveillance, firearm bump stocks), or potentially catastrophic (artificial intelligence). Moreover, some neutral innovations transfer wealth from one group to another in ways that might be morally objectionable (pricing algorithms). This Article argues that a fuller conception of innovation’s costs and benefits counsels a reorientation of law and policy. It begins with a taxonomy of various kinds of antisocial innovation, cataloging and describing individual, environmental, competition, labor, privacy, and societal harms. Then, the Article presents a series of policy recommendations to begin addressing antisocial innovation’s risks. We also consider further opportunities for law to engage in ex ante regulation of some kinds of innovation, to prevent harms before they arise

Venture Predation

Predatory pricing is a strategy firms use to suppress competition. The predator prices below its own costs to force its rivals out of the market. After they exit, the predator raises its prices to supracompetitive levels and recoups the cost of predation. The Supreme Court has described predatory pricing as “rarely tried” and “rarely successful” and has established a liability standard that is nearly impossible for plaintiffs to satisfy. We argue that one kind of company thinks predatory pricing is worth trying and at least potentially successful—venturebacked startups. A venture predator is a startup that uses venture finance to price below its costs, chase its rivals out of the market, and grab market share. Venture capitalists (VCs) are motivated to fund predation—and startup founders are motivated to execute it—because it can fuel rapid, exponential growth. Critically, for VCs and founders, a predator does not need to recoup its losses for the strategy to succeed. The VCs and founders just need to create the impression that recoupment is possible, so they can sell their shares at an attractive price to later investors who anticipate years of monopoly pricing. In this Article, we argue that venture predation can harm consumers, distort market incentives, and misallocate capital away from genuine innovations. We consider reforms to antitrust law and securities regulation to deter it

Addictive Technology and Its Implications for Antitrust Enforcement

The advent of mobile devices and digital media platforms in the past decade represents the biggest shock to cognition in human history. Robust medical evidence is emerging that digital media platforms are addictive and, when used in excess, harmful to users’ mental health. Other types of addictive products, like tobacco and prescription drugs, are heavily regulated to protect consumers. Currently, there is no regulatory structure protecting digital media users from these harms. Antitrust enforcement and regulation that lowers entry barriers could help consumers of social media by increasing competition. Economic theory tells us that more choice in digital media will increase the likelihood that some firms will vie to offer higher-quality and safer platforms. For this reason, evaluating harm to innovation (especially safety innovation) and product variety may be particularly important in social media merger and conduct cases. Another critical element to antitrust enforcement in this space is a correct accounting of social media’s addictive qualities. Standard antitrust analysis seeks to prohibit conduct that harms consumer welfare. Economists have taught the antitrust bar that the output of a product or service is a reliable proxy for consumer welfare. However, output and welfare do not have this relationship when a product is addictive. Indeed, in social media markets, increased output is often harmful. We argue that antitrust analysis must reject the output proxy and return to a focus on consumer welfare itself in cases involving addictive social media platforms. In particular, courts should reject defenses that rely only on gross output measures without evidence that any alleged increases in output actually benefit consumers

The (1+1)-dimensional Massive sine-Gordon Field Theory and the Gaussian Wave-functional Approach

The ground, one- and two-particle states of the (1+1)-dimensional massive sine-Gordon field theory are investigated within the framework of the Gaussian wave-functional approach. We demonstrate that for a certain region of the model-parameter space, the vacuum of the field system is asymmetrical. Furthermore, it is shown that two-particle bound state can exist upon the asymmetric vacuum for a part of the aforementioned region. Besides, for the bosonic equivalent to the massive Schwinger model, the masses of the one boson and two-boson bound states agree with the recent second-order results of a fermion-mass perturbation calculation when the fermion mass is small.Comment: Latex, 11 pages, 8 figures (EPS files

A Study of Time-Dependent CP-Violating Asymmetries and Flavor Oscillations in Neutral B Decays at the Upsilon(4S)

We present a measurement of time-dependent CP-violating asymmetries in neutral B meson decays collected with the BABAR detector at the PEP-II asymmetric-energy B Factory at the Stanford Linear Accelerator Center. The data sample consists of 29.7 ${\rm fb}^{-1}$ recorded at the $\Upsilon(4S)$ resonance and 3.9 ${\rm fb}^{-1}$ off-resonance. One of the neutral B mesons, which are produced in pairs at the $\Upsilon(4S)$, is fully reconstructed in the CP decay modes $J/\psi K^0_S$, $\psi(2S) K^0_S$, $\chi_{c1} K^0_S$, $J/\psi K^{*0}$ ($K^{*0}\to K^0_S\pi^0$) and $J/\psi K^0_L$, or in flavor-eigenstate modes involving $D^{(*)}\pi/\rho/a_1$ and $J/\psi K^{*0}$ ($K^{*0}\to K^+\pi^-$). The flavor of the other neutral B meson is tagged at the time of its decay, mainly with the charge of identified leptons and kaons. The proper time elapsed between the decays is determined by measuring the distance between the decay vertices. A maximum-likelihood fit to this flavor eigenstate sample finds $\Delta m_d = 0.516\pm 0.016 {\rm (stat)} \pm 0.010 {\rm (syst)} {\rm ps}^{-1}$. The value of the asymmetry amplitude $\sin2\beta$ is determined from a simultaneous maximum-likelihood fit to the time-difference distribution of the flavor-eigenstate sample and about 642 tagged $B^0$ decays in the CP-eigenstate modes. We find $\sin2\beta=0.59\pm 0.14 {\rm (stat)} \pm 0.05 {\rm (syst)}$, demonstrating that CP violation exists in the neutral B meson system. (abridged)Comment: 58 pages, 35 figures, submitted to Physical Review

Measurement of the Branching Fraction for B- --> D0 K*-

We present a measurement of the branching fraction for the decay B- --> D0 K*- using a sample of approximately 86 million BBbar pairs collected by the BaBar detector from e+e- collisions near the Y(4S) resonance. The D0 is detected through its decays to K- pi+, K- pi+ pi0 and K- pi+ pi- pi+, and the K*- through its decay to K0S pi-. We measure the branching fraction to be B.F.(B- --> D0 K*-)= (6.3 +/- 0.7(stat.) +/- 0.5(syst.)) x 10^{-4}.Comment: 7 pages, 1 postscript figure, submitted to Phys. Rev. D (Rapid Communications

Measurement of Branching Fraction and Dalitz Distribution for B0->D(*)+/- K0 pi-/+ Decays

We present measurements of the branching fractions for the three-body decays B0 -> D(*)-/+ K0 pi^+/-$and their resonant submodes$B0 -> D(*)-/+ K*+/- using a sample of approximately 88 million BBbar pairs collected by the BABAR detector at the PEP-II asymmetric energy storage ring. We measure: B(B0->D-/+ K0 pi+/-)=(4.9 +/- 0.7(stat) +/- 0.5 (syst)) 10^{-4} B(B0->D*-/+ K0 pi+/-)=(3.0 +/- 0.7(stat) +/- 0.3 (syst)) 10^{-4} B(B0->D-/+ K*+/-)=(4.6 +/- 0.6(stat) +/- 0.5 (syst)) 10^{-4} B(B0->D*-/+ K*+/-)=(3.2 +/- 0.6(stat) +/- 0.3 (syst)) 10^{-4} From these measurements we determine the fractions of resonant events to be : f(B0-> D-/+ K*+/-) = 0.63 +/- 0.08(stat) +/- 0.04(syst) f(B0-> D*-/+ K*+/-) = 0.72 +/- 0.14(stat) +/- 0.05(syst)Comment: 7 pages, 3 figures submitted to Phys. Rev. Let