The antitrust/consumer protection paradox: Two policies at war with each other

Yale Law Journal

Volumn 121, Issue 8, 2012, Pages 2216-2268

  Wright, Joshua D ^a  

^a GEORGE MASON UNIVERSITY   (United States)

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EID: 84861886380     PISSN: 00440094     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (323)

1. See William E. Kovacic, The Federal Trade Commission at 100: Into Our 2nd Century 35-38 (2009), available at http://www.ftc.gov/os/2009/01/ftc100rpt.pdf.
2. Mark Armstrong, Interactions Between Competition and Consumer Policy, Competition Pol'y Int'l, Spring 2008, at 97, 100-12.
3. Paul A. Pautler, Consumer Protection Policies, Economics, and Interactions with Competition Policy, Competition Pol'y Int'l, Spring 2008, at 83, 83-84.
4. Mark Armstrong, Interactions Between Competition and Consumer Policy, Competition Pol'y Int'l, Spring 2008, at 97, 100-12.
5. William MacLeod, Org. for Econ. Co-operation and Dev., DAF/COMP/GF/WD (2008)37, The Interface Between Competition and Consumer Policies 3 (2008), available at http://www.oecd.org/dataoecd/31/56/40080545.pdf.
6. See William E. Kovacic, The Federal Trade Commission at 100: Into Our 2nd Century 35-38 (2009), available at http://www.ftc.gov/os/2009/01/ftc100rpt.pdf.
7. 12 U.S.C.A. § 5512(b)(4) (West 2010).
8. 12 U.S.C.A. § 5512(b)(4) (West 2010).
9. 12 U.S.C.A. § 5512(b)(4) (West 2010).
10. Compare id. ("The Bureau may take any action... to prevent a covered person or service provider from committing or engaging in an unfair, deceptive, or abusive act or practice under Federal law in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. "), with 15 U.S.C. § 45(a)(2) (2006) ("The Commission is hereby empowered and directed to prevent persons... from using... unfair or deceptive acts or practices in or affecting commerce. "). The CFPB's enforcement authority is not limited by prior FTC interpretations and guidance. See Identification of Enforceable Rules and Orders, 76 Fed. Reg. 43,569, 43,570 (July 21, 2011) (to be codified at 12 C.F.R. ch. X) (construing enforceable "rules and orders" to exclude guidance issued by the agencies that transferred rules to the CFPB). Some have expressed concerns that the lack of coordination between the FTC and the CFPB will weaken consumer protection. See William E. Kovacic, Comm'r, Fed. Trade Comm'n, The Consumer Financial Protection Agency and the Hazards of Regulatory Restructuring, Lombard Street, Sept, 14, 2009, at 19, 24-27, available at http://www.ftc.gov/speeches/ kovacic/090914hazzrdsrestructuring.pdf.
11. 12 U.S.C.A. § 5531(a) (conferring authority to prevent abusive acts or practices in addition to those that are unfair or deceptive).
12. 12 U.S.C.A. § 5531(a) (conferring authority to prevent abusive acts or practices in addition to those that are unfair or deceptive).
13. 12 U.S.C.A. § 5531(a) (conferring authority to prevent abusive acts or practices in addition to those that are unfair or deceptive).
14. 12 U.S.C.A. § 5531(a) (conferring authority to prevent abusive acts or practices in addition to those that are unfair or deceptive).
15. 12 U.S.C.A. § 5531(a) (conferring authority to prevent abusive acts or practices in addition to those that are unfair or deceptive).
16. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
17. See, e.g., Edward J. Janger, Locating the Regulation of Data Privacy and Data Security, 5 Brook. J. Corp. Fin. & Com. L. 97, 97 (2010) ("The proposal for [an agency like the CFPB was] made initially by Elizabeth Warren and Oren Bar-Gill. ").
18. Jared Elosta, Recent Development, Dynamic Federalism and Consumer Financial Protection: How the Dodd-Frank Act Changes the Preemption Debate, 89 N.C. L. Rev. 1273, 1273 (2011) ("Adopting the idea of Bar-Gill and Warren, Dodd-Frank created the... CFPB.... ").
19. Richard Epstein, Richard Epstein on the Dangerous Allure of Behavioral Economics: The Relationship Between Physical and Financial Products, Truth on the Market (Dec. 6, 2010, 1:20 PM), http://truthonthemarket.com/ 2010/12/06/richard-epstein-on-the-dangerous-allure-of-behavioral-economics-the-relationship-between-physical-and-financial-products (discussing financial regulation and finding that "[f]ew academic publications have had as much direct public influence on the law as the 2008 article by... Oren Bar-Gill... and Elizabeth Warren").
20. See Richard H. Thaler & Cass R. Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness 7, 9 (2008) (explaining that "[h]undreds of studies confirm that human forecasts are flawed and biased, " and that "[h]uman decision making is not so great either, " and claiming that the assumption that "almost all people, almost all of the time, make choices that are in their best interest" is "obviously false").
21. Richard H. Thaler & Cass R. Sunstein, Libertarian Paternalism, 93 Am. Econ. Rev. 175, 175 (2003) ("The false assumption is that people always (usually?) make choices that are in their best interest.... We claim that [such an assumption] is testable and false-indeed, obviously false. ").
22. See Joshua D. Wright & Douglas H. Ginsburg, Behavioral Law and Economics: Its Origins, Fatal Flaws, and Implications for Liberty, 106 Nw. U. L. Rev. (forthcoming Apr. 2012) (manuscript at 30-35) (cataloging these various proposals).
23. See Hal R. Varian, Intermediate Microeconomics: A Modern Approach 121 (9th ed. 2009) (describing revealed preference as the statement that "[i]f a bundle X is chosen over a bundle Y, then X must be preferred to Y").
24. See, e.g., W. Kip Viscusi, Joseph E. Harrington, Jr. & John M. Vernon, Economics of Regulation and Antitrust, at xviii (4th ed. 2005) (describing the foundational question in the economics of regulation as, "[W]hat particular market failures provide a rationale for government intervention?"). However, market failure is a necessary but not sufficient condition for regulation.
25. See, e.g., Harold Demsetz, Information and Efficiency: Another Viewpoint, 12 J.L. & Econ. 1, 1 (1969) (criticizing and comparing the "nirvana approach" with the comparative institutions approach, which presents the relevant policy choice as between "alternative real institutional arrangements").
26. N. Gregory Mankiw, Principles of Economics 11 (5th ed. 2009). For a more technical definition of market failure, see Daniel F. Spulber, Regulation and Markets 3 (1989), which defines market failure as "a departure of the market equilibrium allocation from the set of Pareto optimal allocations of goods and services. "
27. See, e.g., Dennis W. Carlton & Jeffrey M. Perloff, Modern Industrial Organization 443-52 (4th ed. 2005).
28. George A. Akerlof, The Market for "Lemons": Qualitative Uncertainty and the Market Mechanism, 84 Q.J. Econ. 488 (1970).
29. Howard Beales, Richard Craswell & Steven C. Salop, The Efficient Regulation of Consumer Information, 24 J.L. & Econ. 491 (1981).
30. N. Gregory Mankiw, Principles of Economics 11 (5th ed. 2009). For a more technical definition of market failure, see Daniel F. Spulber, Regulation and Markets 3 (1989), which defines market failure as "a departure of the market equilibrium allocation from the set of Pareto optimal allocations of goods and services. "
31. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
32. Jolls, Sunstein, and Thaler describe these departures from perfect optimization as "bounded rationality, bounded willpower, and bounded self-interest. " Christine Jolls, Cass R. Sunstein & Richard Thaler, A Behavioral Approach to Law and Economics, 50 Stan. L. Rev. 1471, 1476 (1998).
33. The Food and Drug Administration and the FTC have long had an agreement to coordinate efforts to protect consumer welfare in food and drug markets. See Working Agreement Between Federal Trade Commission and Food and Drug Administration, 4 Trade Reg. Rep. (CCH) ¶ 9850.01 (June 9, 1954), available at http://www.fda.gov/ohrms/dockets/ DOCKETS/06p0394/06p-0394-cp00001-10-Tab-08-Trade-Reg-Rpts-vol1.pdf.
34. Jolls, Sunstein, and Thaler describe these departures from perfect optimization as "bounded rationality, bounded willpower, and bounded self-interest. " Christine Jolls, Cass R. Sunstein & Richard Thaler, A Behavioral Approach to Law and Economics, 50 Stan. L. Rev. 1471, 1476 (1998).
35. Obviously issues of paternalism become central here. ").
36. But cf. Jonathan R. Macey & James P. Holdcroft, Jr., Failure Is an Option: An Ersatz-Antitrust Approach to Financial Regulation, 120 Yale L.J. 1368 (2011) (arguing that an antitrust approach bolstered by new statutory authority would achieve Dodd-Frank's objective of reducing systemic risk).
37. Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (1978).
38. Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979).
39. See generally Michael R. Baye & Joshua D. Wright, Is Antitrust Too Complicated for Generalist Judges? The Impact of Economic Complexity and Judicial Training on Appeals, 54 J.L. & Econ. 1 (2011) (discussing the increasing complexity of economic analysis in judicial decisionmaking in antitrust and demonstrating judges with economic training exhibit improved performance).
40. Douglas H. Ginsburg & Derek W. Moore, The Future of Behavioral Economics in Antitrust Jurisprudence, Competition Pol'y Int'l, Spring 2010, at 89, 97.
41. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
42. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
43. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
44. William E. Kovacic, The Federal Trade Commission and Congressional Oversight of Antitrust Enforcement, 17 Tulsa L.J. 587, 592 (1982).
45. Federal Trade Commission Act, ch. 311, § 5, 38 Stat. 717, 719 (1914) (codified as amended at 15 U.S.C. § 45(a)(1) (2006).
46. See Marc Winerman & William E. Kovacic, Outpost Years for a Start-Up Agency: The FTC from 1921-1925, 77 Antitrust L. J 145, 193 (2010).
47. FTC v. Raladam Co., 283 U.S. 643, 654 (1931).
48. 15 U.S.C. § 45(a)(1).
49. Victor E. Schwartz & Cary Silverman, Common-Sense Construction of Consumer Protection Acts, 54 Kan. L. Rev. 1, 8 (2005).
50. See, e.g., Letter from James C. Miller III, Chairman, FTC, to Representative John D. Dingell (Oct. 14, 1983), available at http://www.ftc.gov/bcp/policystmt/ad-decept.htm.
51. Letter from Michael Pertschuk, Chairman, FTC, to Senators Wendell H. Ford and John C. Danforth (Dec. 17, 1980) [hereinafter Unfairness Policy Statement], available at http://www.ftc.gov/bcp/policystmt/ ad-unfair.htm.
52. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
53. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
54. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
55. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
56. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
57. Dee Pridgen & Richard M. Alderman, Consumer Protection and the Law § 2:10 (2010).
58. See, e.g., Conn. Gen. Stat. § 42-110b (2011).
59. Haw. Rev. Stat. Ann. § 480-2 (LexisNexis 2011).
60. Mont. Code Ann. § 30-14-103 to-104 (2011).
61. Ohio Rev. Code Ann. § 1345.02 (LexisNexis 2011).
62. S.C. Code Ann. § 39-5-20 (2010).
63. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
64. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
65. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
66. Alan Schwartz & Robert E. Scott, Contract Theory and the Limits of Contract Law, 113 Yale L.J. 541, 570-72 (2003).
67. Alan Schwartz & Robert E. Scott, Contract Theory and the Limits of Contract Law, 113 Yale L.J. 541, 570-72 (2003).
68. Statement of Basis and Purpose of Trade Regulation Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. 8324, 8355 (July 2, 1964) (codified at 16 C.F.R. § 408).
69. Statement of Basis and Purpose of Trade Regulation Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. 8324, 8355 (July 2, 1964) (codified at 16 C.F.R. § 408).
70. Federal Trade Commission Act Amendments of 1994, Pub. L. No. 103-312, § 9, 108 Stat. 1691, 1695 (codified as amended at 15 U.S.C. § 45(n) (2006).
71. Nat'l Conference of Comm'rs of Unif. State Laws, Revised Uniform Trade Deceptive Trade Practices Act with Prefatory Notes and Comments 4 (1966).
72. Dee Pridgen & Richard M. Alderman, Consumer Protection and the Law § 2:10 (2010).
73. See, e.g., Mark Armstrong & Steffen Huck, Behavioral Economics as Applied to Firms: A Primer, Competition Pol'y Int'l, Spring 2010, at 3.
74. Oren Bar-Gill, Seduction by Plastic, 98 Nw. U. L. Rev. 1373 (2004).
75. Jolls, Sunstein, and Thaler describe these departures from perfect optimization as "bounded rationality, bounded willpower, and bounded self-interest. " Christine Jolls, Cass R. Sunstein & Richard Thaler, A Behavioral Approach to Law and Economics, 50 Stan. L. Rev. 1471, 1476 (1998).
76. Christine Jolls, Behavioral Law and Economics, in Behavioral Economics and Its Applications 115 (Peter Diamond & Hannu Vartiainen eds., 2007).
77. Christine Jolls & Cass R. Sunstein, Debiasing Through Law, 35 J. Legal Stud. 199, 212 (2006).
78. Daniel Kahneman, Jack L. Knetsch & Richard H. Thaler, Experimental Tests of the Endowment Effect and the Coase Theorem, 98 J. Pol. Econ. 1325 (1990).
79. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
80. Richard H. Thaler & Cass R. Sunstein, Libertarian Paternalism, 93 Am. Econ. Rev. 175 (2003).
81. Michael S. Barr, Sendhil Mullainathan & Eldar Shafir, New Am. Found., Behaviorally Informed Financial Services Regulation: Preparing for the Asset Building Program 2 (2008).
82. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
83. Elizabeth Warren, Unsafe at Any Rate, Democracy, Summer 2007, at 8.
84. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
85. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
86. Michael S. Barr, Sendhil Mullainathan & Eldar Shafir, The Case for Behaviorally Informed Regulation, in New Perspectives on Regulation 25, 41-42 (David Moss & John Cisternino eds., 2009), available at http://www.tobinproject.org/sites/tobinproject.org/files/assets/ New_Perspectives_Ch2_Barr_Mullainathan_Shafir.pdf.
87. Michael S. Barr, Sendhil Mullainathan & Eldar Shafir, The Case for Behaviorally Informed Regulation, in New Perspectives on Regulation 25, 41-42 (David Moss & John Cisternino eds., 2009), available at http://www.tobinproject.org/sites/tobinproject.org/files/assets/ New_Perspectives_Ch2_Barr_Mullainathan_Shafir.pdf.
88. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
89. Consumer Financial Protection Agency Act, H.R. 3126, 111th Cong. §§ 131, 136 (2009) (proposing 2009 Consumer Financial Protection Agency legislation for passage by Congress).
90. See, e.g., 12 U.S.C.A. §§ 5532, 5536(a)(1)(B) (West 2010).
91. The CFPB's disclosure authority requires disclosures that "are fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service. " Id. § 5532(a). If the CFPB interprets the vague language in the statute to mean that all or nearly all consumers-rather than most consumers or even the reasonable consumer-understand disclosures before a product is authorized, then this authority is the functional equivalent of the plain vanilla requirement. Professor Warren has claimed that 95% of consumers would be likely to understand plain vanilla contracts, a target that would require significantly increased disclosures if deemed necessary for "full, accurate, and effective" disclosure by the CFPB. Elizabeth Warren, Three Myths About the Consumer Financial Product Agency, Baseline Scenario (July 21, 2009, 6:00 AM), http://baselinescenario.com/2009/07/21/three-myths-about-the-consumer-financial-product-agency. Others have recognized that the CFPB's broad disclosure authority is sufficient to replicate the plain vanilla provision through rulemaking. See Who's Watching the Watchmen? Oversight of the Consumer Financial Protection Bureau: Hearing on H.R. 4173 Before the H. Comm. on Fin. Servs., 112th Cong. 11 (2011) [hereinafter Who's Watching the Watchmen?] (statement of David S. Evans, Chairman, Global Economic Group) (explaining that, even without explicit authority to do so, "the CFPB has the ability through its rule making procedures [to] steer financial services companies towards offering 'plain vanilla products' by either banning products that do not conform to the CFPB's view or by making it legally risky and expensive for lenders to deviate too far from the products that the CFPB approves. In addition, it is possible for the CFPB to use disclosure requirements to force companies to standardize products around certain criteria that are the focus of those requirements").
92. Brian C. McCormally et al., The Dodd-Frank Act Establishes the Consumer Financial Protection Bureau as the Primary Regulator of Consumer Financial Products and Services, Arnold & Porter LLP 7 (July 2010), http://www.aporter.net/resources/documents/Advisory-The_Dodd-Frank_Act_Establishes _the_Consumer_Financial_Protection_Bureau_071510.pdf.
93. Richard H. Thaler & Cass R. Sunstein, Libertarian Paternalism, 93 Am. Econ. Rev. 175 (2003).
94. Richard H. Thaler & Cass R. Sunstein, Libertarian Paternalism, 93 Am. Econ. Rev. 175 (2003).
95. Ted O'Donoghue & Matthew Rabin, Studying Optimal Paternalism, Illustrated by a Model of Sin Taxes, 93 Am. Econ. Rev. 186 (2003).
96. Sherman Antitrust Act, ch. 647, 26 Stat. 209 (1890) (codified as amended at 15 U.S.C. §§ 1-7 (2006).
97. Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 899 (2007) ("From the beginning the Court has treated the Sherman Act as a common-law statute. ").
98. see also Richard A. Posner, Antitrust Law 1 (2d ed. 2001) ("The courts have spent many years interpreting, or perhaps more accurately supplying, th[e] meaning [of the antitrust laws].... The result of the 'common-law' (that is, judge-made) character of antitrust law... is a considerable fluidity in the meaning and application of the law.... ").
99. Richard A. Posner, How Judges Think 5 (2008) ("American antitrust law is far more the creation of judicial decisions than of antitrust legislation: the most important antitrust laws are as skimpy and vague as most provisions of the Bill of Rights. ").
100. See Bd. of Trade of Chi. v. United States, 246 U.S. 231, 238 (1918) (construing the term "restraint" under the Sherman Act as prohibiting only unreasonable restraints of trade).
101. Alan Schwartz & Robert E. Scott, Contract Theory and the Limits of Contract Law, 113 Yale L.J. 541, 570-72 (2003).
102. 384 U.S. 270 (1966).
103. 384 U.S. 270 (1966).
104. See Oliver E. Williamson, Allocative Efficiency and the Limits of Antitrust, 59 Am. Econ. Rev. 105, 113 (1969) (observing "the regrettable condition in which a company proposing a merger, an apparent effect of which is to realize economies, consciously suppresses the economies aspect lest it be used affirmatively by the government to attack the merger").
105. Herbert Hovenkamp, Book Review, 33 Hastings L.J. 755, 761 n.44 (1982) (reviewing Theodore P. Kovaleff, Business and Government During the Eisenhower Administration: A Study of the Antitrust Policy of the Antitrust Division of the Justice Department (1980) (noting that the defendants in Brown Shoe Co. v. United States, 370 U.S. 294 (1962), "were forced to argue that in fact the merger did not create any efficiency and that the post-merger company would not be any better able to undersell competitors").
106. See Andrew I. Gavil, William E. Kovacic & Jonathan R. Baker, Antitrust Law in Perspective: Cases, Concepts and Problems in Competition Policy 65 (2d ed. 2008). See generally Joe S. Bain, Industrial Organization (2d ed. 1968) (discussing the structure-conduct-performance paradigm).
107. Leonard W. Weiss, The Structure-Conduct-Performance Paradigm and Antitrust, 127 U. Pa. L. Rev. 1104, 1105 (1979) (same).
108. Jonathan B. Baker & Carl Shapiro, Detecting and Reversing the Decline in Horizontal Merger Enforcement, Antitrust, Summer 2008, at 29, 29.
109. see, e.g., Brown Shoe, 370 U.S. at 345-46 (condemning a merger that would have given Brown Shoe control over only 2.3% of all national retail shoe outlets).
110. Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (1978).
111. Christina Bohannan & Herbert Hovenkamp, IP and Antitrust: Reformation and Harm, 51 B.C. L. Rev. 905, 908-09 (2010) (discussing prior antitrust policies that condemned procompetitive conduct).
112. Herbert Hovenkamp, The Federal Trade Commission and the Sherman Act, 62 Fla. L. Rev. 871, 874 (2010) ("[I]n the Brown Shoe decision, the Supreme Court upheld an FTC order condemning exclusive dealing by a shoe manufacturer where there was no realistic expectation of harm to competition. ").
113. But see Lawrence A. Sullivan & Warren S. Grimes, The Law of Antitrust: An Integrated Handbook 556-57 (2006) ("Despite the shortcomings of Brown Shoe, it is by no means clear that a merger with the characteristics of the Brown-Kinney consolidation would wholly escape antitrust merger enforcement under modern standards. ").
114. Timothy J. Muris, Improving the Economic Foundations of Competition Policy, 12 Geo. Mason L. Rev. 1, 8-9 (2003). See generally Industrial Concentration: The New Learning (Harvey J. Goldschmid, H. Michael Mann & J. Fred Weston eds., 1974) (memorializing the conference at which scholars from the Chicago School debunked the structure-conductperformance paradigm).
115. Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. Pa. L. Rev. 925, 925-33 (1979) (discussing the Chicago School's development).
116. R.H. Coase, Industrial Organization: A Proposal for Research, in 3 Economic Research: Retrospect and Prospect: Policy Issues and Research Opportunities in Industrial Organization 59, 67 (Victor R. Fuchs ed., 1972), available at http://www.nber.org/ chapters/c7618.pdf ("[I]f an economist finds something-a business practice of one sort or other-that he does not understand, he looks for a monopoly explanation. And as in this field we are very ignorant, the number of ununderstandable practices tends to be rather large, and the reliance on a monopoly explanation frequent.").
117. 433 U.S. 36 (1977).
118. 433 U.S. 36 (1977).
119. See Andrew I. Gavil, William E. Kovacic & Jonathan R. Baker, Antitrust Law in Perspective: Cases, Concepts and Problems in Competition Policy 65 (2d ed. 2008). See generally Joe S. Bain, Industrial Organization (2d ed. 1968) (discussing the structure-conduct-performance paradigm).
120. Douglas H. Ginsburg, Originalism and Economic Analysis: Two Case Studies of Consistency and Coherence in Supreme Court Decision Making, 33 Harv. J.L. & Pub. Pol'y 217, 218 (2010) ("Starting in the 1970s, the Supreme Court began systematically reworking antitrust doctrine in order to bring it into alignment with the modern economic understanding of competition. ").
121. Sylvania, 433 U.S. at 54-55.
122. Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407-16 (2004).
123. see also United States v. Microsoft Corp., 253 F.3d 34, 58 (D.C. Cir. 2001) (en banc) (per curiam) ("[T]o be condemned as exclusionary, a monopolist's act must... harm the competitive process and thereby harm consumers. ").
124. FTC v. Staples, Inc., 970 F. Supp. 1066, 1081-82 (D.D.C. 1997) (citing 1992 Horizontal Merger Guidelines, 57 Fed. Reg. 41,552 (Sept. 10, 1992), in the analysis of a proposed merger).
125. Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979).
126. 220 U.S. 373 (1911).
127. 551 U.S. 877 (2007). In resale price maintenance, a manufacturer and its distributors agree that the latter will sell the former's products at certain prices or within specifies ranges of prices. If the distributors refuse to adhere to this agreement, either openly or covertly, the manufacturer may refuse to continue doing business with them. See The Supreme Court, 2006 Term-Leading Cases, 121 Harv. L. Rev. 185, 425-26 (2007).
128. Leegin, 551 U.S. at 889-92.
129. Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).
130. 549 U.S. 312 (2007).
131. 549 U.S. 312 (2007).
132. See, e.g., Leegin, 551 U.S. at 889-98 (holding that vertical price restraints are not per se illegal because "economics literature is replete with procompetitive justifications for a manufacturer's use of resale price maintenance" and "recent studies documenting the competitive effects of resale price maintenance also cast doubt on the conclusion that the practice meets the criteria for a per se rule").
133. See, e.g., Leegin, 551 U.S. at 889-98 (holding that vertical price restraints are not per se illegal because "economics literature is replete with procompetitive justifications for a manufacturer's use of resale price maintenance" and "recent studies documenting the competitive effects of resale price maintenance also cast doubt on the conclusion that the practice meets the criteria for a per se rule").
134. See, e.g., Leegin, 551 U.S. at 889-98 (holding that vertical price restraints are not per se illegal because "economics literature is replete with procompetitive justifications for a manufacturer's use of resale price maintenance" and "recent studies documenting the competitive effects of resale price maintenance also cast doubt on the conclusion that the practice meets the criteria for a per se rule").
135. See, e.g., Credit Suisse Sec. (USA) LLC v. Billing, 551 U.S. 264, 282 (2007) (focusing upon the possibility of error costs and noting that "antitrust courts are likely to make unusually serious mistakes" in determining whether conduct is pro-or anticompetitive).
136. R.H. Coase, Industrial Organization: A Proposal for Research, in 3 Economic Research: Retrospect and Prospect: Policy Issues and Research Opportunities in Industrial Organization 59, 67 (Victor R. Fuchs ed., 1972), available at http://www.nber.org/ chapters/c7618.pdf ("[I]f an economist finds something-a business practice of one sort or other-that he does not understand, he looks for a monopoly explanation. And as in this field we are very ignorant, the number of ununderstandable practices tends to be rather large, and the reliance on a monopoly explanation frequent.").
137. Leegin, 551 U.S. at 878.
138. See, e.g., Joshua D. Wright & Judd E. Stone II, Misbehavioral Economics: The Case Against Behavioral Antitrust, 33 Cardozo L. Rev. 1517 (2012).
139. See Nat'l Collegiate Athletic Ass'n v. Bd. of Regents of the Univ. of Okla., 468 U.S. 85, 107 (1984) ("Congress designed the Sherman Act as a consumer welfare prescription. A restraint that has the effect of reducing the importance of consumer preference in setting price and output is not consistent with this fundamental goal of antitrust law. " (citation and internal quotation marks omitted).
140. See Nat'l Collegiate Athletic Ass'n v. Bd. of Regents of the Univ. of Okla., 468 U.S. 85, 107 (1984) ("Congress designed the Sherman Act as a consumer welfare prescription. A restraint that has the effect of reducing the importance of consumer preference in setting price and output is not consistent with this fundamental goal of antitrust law. " (citation and internal quotation marks omitted).
141. Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (1978).
142. Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 22 (1979).
143. Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 22 (1979).
144. FTC v. Algoma Lumber Co., 291 U.S. 67, 78 (1934) (citations omitted). The notion that existing consumer protection law shares antitrust law's approach to consumer welfare is taken for granted in modern consumer protection. A leading modern consumer protection law treatise begins with the assertion that "[i]t is widely understood that competition and consumer protection law are mutually reinforcing" and have "shared objectives: fair competition and consumer welfare. " Am. Bar Ass'n Section of Antitrust Law, Consumer Protection Law Developments, at iii (2009).
145. Ted O'Donoghue & Matthew Rabin, Studying Optimal Paternalism, Illustrated by a Model of Sin Taxes, 93 Am. Econ. Rev. 186 (2003).
146. Mario J. Rizzo & Douglas Glen Whitman, Little Brother Is Watching You: New Paternalism on the Slippery Slopes, 51 Ariz. L. Rev. 685, 701 (2009) ("[T]he normative standard inherent in any attempt to 'help' agents with hyperbolic preferences is inherently vague. We do not know where 'reasonable' impatience ends and 'excessive' patience begins. ").
147. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
148. See, e.g., Harold Demsetz, Information and Efficiency: Another Viewpoint, 12 J.L. & Econ. 1, 1 (1969) (criticizing and comparing the "nirvana approach" with the comparative institutions approach, which presents the relevant policy choice as between "alternative real institutional arrangements").
149. see also Daniel R. Fischel, The Corporate Governance Movement, 35 Vand. L. Rev. 1259, 1272 (1982) ("Those who purport to discover discrepancies between an ideal norm and existing imperfect institutional arrangements and then conclude that existing arrangements should be displaced... commit the nirvana fallacy well known in economic literature. ").
150. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
151. See generally Steven D. Levitt & John A. List, Viewpoint: On the Generalizability of Lab Behaviour to the Field, 40 Can. J. Econ. 347, 351 (2007) (finding that "it is likely that the qualitative findings of the lab are generalizable, even when the quantitative magnitudes are not").
152. Joshua D. Wright, Behavioral Law and Economics, Paternalism, and Consumer Contracts: An Empirical Perspective, 2 N.Y.U. J.L. & Liberty 470 (2007) (concluding that conventional price-theoretic approaches have greater explanatory power than behavioral approaches for explaining firm behavior and consumer contracts).
153. Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (1978).
154. Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (1978).
155. Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (1978).
156. See, e.g., Harold Demsetz, Information and Efficiency: Another Viewpoint, 12 J.L. & Econ. 1, 1 (1969) (criticizing and comparing the "nirvana approach" with the comparative institutions approach, which presents the relevant policy choice as between "alternative real institutional arrangements").
157. George J. Stigler, The Economics of Information, 69 J. Pol. Econ. 213, 216 (1961).
158. 603 F.2d 263 (2d Cir. 1979).
159. See, e.g., Abbott Labs. v. Teva Pharm. USA, Inc., 432 F. Supp. 2d 408 (D. Del. 2006) (denying motion to dismiss).
160. Herbert Hovenkamp, Mark D. Janis & Mark A. Lemley, IP and Antitrust: An Analysis of Antitrust Principles Applied to Intellectual Property Law § 12.5 (2007) (discussing product hopping).
161. U.S. Dep't of Justice & FTC, Horizontal Merger Guidelines § 9 (2010), available at http://www.justice.gov/atr/public/guidelines/hmg-2010.pdf ("The prospect of entry into the relevant market will alleviate concerns about adverse competitive effects only if such entry will deter or counteract any competitive effects of concern so the merger will not substantially harm customers."). The antitrust laws also give some deference to new products in the form of immunizing them from per se treatment. See, e.g., Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 9 (1979) ("[I]t is only after considerable experience with certain business relationships that courts classify them as per se violations.") (citing United States v. Topco Assocs., Inc., 405 U.S. 596, 607-08 (1972).
162. White Motor Co. v. United States, 372 U.S. 253, 261 (1963) ("This is the first case involving a territorial restriction in a vertical arrangement.
163. and we know too little of the actual impact of both that restriction and the one respecting customers to reach a conclusion on the bare bones of the documentary evidence before us. ").
164. R.H. Coase, Industrial Organization: A Proposal for Research, in 3 Economic Research: Retrospect and Prospect: Policy Issues and Research Opportunities in Industrial Organization 59, 67 (Victor R. Fuchs ed., 1972), available at http://www.nber.org/ chapters/c7618.pdf ("[I]f an economist finds something-a business practice of one sort or other-that he does not understand, he looks for a monopoly explanation. And as in this field we are very ignorant, the number of ununderstandable practices tends to be rather large, and the reliance on a monopoly explanation frequent.").
165. R.H. Coase, Industrial Organization: A Proposal for Research, in 3 Economic Research: Retrospect and Prospect: Policy Issues and Research Opportunities in Industrial Organization 59, 67 (Victor R. Fuchs ed., 1972), available at http://www.nber.org/ chapters/c7618.pdf ("[I]f an economist finds something-a business practice of one sort or other-that he does not understand, he looks for a monopoly explanation. And as in this field we are very ignorant, the number of ununderstandable practices tends to be rather large, and the reliance on a monopoly explanation frequent.").
166. See Harold Demsetz, How Many Cheers for Antitrust's 100 Years?, 30 Econ. Inquiry 207, 209 (1992).
167. Alan J. Meese, Market Failure and Non-Standard Contracting: How the Ghost of Perfect Competition Still Haunts Antitrust, 1 J. Competition L. & Econ. 21, 26-27 (2005).
168. Jerry A. Hausman, Valuation of New Goods Under Perfect and Imperfect Competition, in The Economics of New Goods 209, 213-16 (Timothy F. Bresnahan & Robert J. Gordon eds., 1997) (discussing the consumer welfare gains from new product introductions and product line extensions). The same lesson can be applied to new business models.
169. See Jerry Hausman & Ephraim Leibtag, Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart, 22 J. Applied Econometrics 1157 (2007).
170. Amil Petrin, Quantifying the Benefits of New Products: The Case of the Minivan, 110 J. Pol. Econ. 705 (2002).
171. See, e.g., Verizon Commc'ns, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004) ("The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful.
172. it is an important element of the free-market system. The opportunity to charge monopoly prices-at least for a short period-is what attracts 'business acumen' in the first place.
173. It induces risk taking that produces innovation and economic growth. ").
174. Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 226 (1993) (describing ease of entry as justifying summary disposition of predatory pricing claims on the grounds that monopolists could not recoup losses sustained during the predation period).
175. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 589 (1986) ("[I]t is not enough simply to achieve monopoly power, as monopoly pricing may breed quick entry by new competitors eager to share in the excess profits. ").
176. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 589 (1986) ("[I]t is not enough simply to achieve monopoly power, as monopoly pricing may breed quick entry by new competitors eager to share in the excess profits. ").
177. Frank H. Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1, 2-3 (1984) ("Monopoly prices eventually attract entry, " thus allowing the market to self-correct in the face of a false negative).
178. Michael S. Barr, Sendhil Mullainathan & Eldar Shafir, The Case for Behaviorally Informed Regulation, in New Perspectives on Regulation 25, 41-42 (David Moss & John Cisternino eds., 2009), available at http://www.tobinproject.org/sites/tobinproject.org/files/assets/ New_Perspectives_Ch2_Barr_Mullainathan_Shafir.pdf.
179. See Letter from Barney Frank, Chairman, House Comm. on Fin. Servs., to Democratic Members, House Comm. on Fin. Servs. (Sept. 22, 2009), available at http://garrett.house.gov/ UploadedFiles/FSCMemberMemoreCFPA092209.pdf (explaining that the plain vanilla requirement would be removed in the final version of the bill). However, the structure and broad authority of the CFPB indicate that, even absent an express provision, the Bureau can still implement a plain vanilla requirement.
180. See Letter from Barney Frank, Chairman, House Comm. on Fin. Servs., to Democratic Members, House Comm. on Fin. Servs. (Sept. 22, 2009), available at http://garrett.house.gov/ UploadedFiles/FSCMemberMemoreCFPA092209.pdf (explaining that the plain vanilla requirement would be removed in the final version of the bill). However, the structure and broad authority of the CFPB indicate that, even absent an express provision, the Bureau can still implement a plain vanilla requirement.
181. Michael S. Barr, Sendhil Mullainathan & Eldar Shafir, The Case for Behaviorally Informed Regulation, in New Perspectives on Regulation 25, 41-42 (David Moss & John Cisternino eds., 2009), available at http://www.tobinproject.org/sites/tobinproject.org/files/assets/ New_Perspectives_Ch2_Barr_Mullainathan_Shafir.pdf.
182. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
183. see also David S. Evans & Joshua D. Wright, The Effect of the Consumer Financial Protections Agency Act of 2009 on Consumer Credit, 22 Loy. Consumer L. Rev. 277, 319-20 (2010) (discussing the CFPA's authority to ban consumer lending products).
184. Jonathan Gruber & Botond Koszegi, Tax Incidence When Individuals Are Time-Inconsistent: The Case of Cigarette Excise Taxes, 88 J. Pub. Econ. 1959 (2004) (discussing excise taxes on cigarettes).
185. Ted O'Donoghue & Matthew Rabin, Studying Optimal Paternalism, Illustrated by a Model of Sin Taxes, 93 Am. Econ. Rev. 186 (2003).
186. There is another possible conflict. Regulatory barriers to entry erected for new consumer financial products could favor incumbent firms over new entrants, increasing market concentration and rendering acquisition of monopoly power and antitrust scrutiny more likely.
187. Although the possibility of predatory pricing resulting in long-run increased prices can complicate the simple neoclassical model, it is important to recognize that antitrust law's real objection to lower prices is not that they are too low, but that consumer welfare will ultimately be taxed by higher prices when the monopolist has driven its rivals to exit the market and is finally free from competition.
188. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 224 n.59 (1940).
189. see Edward D. Cavanagh, Vertical Price Restraints After Leegin, 21 Loy. Consumer L. Rev. 1, 19 (2008).
190. Richard Dagen, Rambus, Innovation Efficiency, and Section 5 of the FTC Act, 90 B.U. L. Rev. 1479, 1493 (2010).
191. Antitrust Enforcement and the Consumer, U.S. Dep't of Justice, http://www.justice.gov/atr/ public/div_stats/276198.pdf (last visited Mar. 19, 2012).
192. See, e.g., Mandeville Island Farms, Inc. v. Am. Crystal Sugar Co., 334 U.S. 219 (1948) (involving a purchasers' agreement to depress prices of sugar beets).
193. In re Travel Agent Comm'n Antitrust Litig., 583 F.3d 896 (6th Cir. 2009) (involving an allegation of agreement to cut commission rates for travel agents).
194. see also Roger D. Blair & Jeffrey L. Harrison, Cooperative Buying, Monopsony Power, and Antitrust Policy, 86 Nw. U. L. Rev. 331, 335 (1992) ("Monopsony's social welfare effects are analogous to those of monopoly in that too few resources will be employed. ").
195. Bruce H. Kobayashi, The Law and Economics of Predatory Pricing, in Antitrust Law and Economics 116, 116-17 (Keith N. Hylton ed., 2010).
196. Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222-24 (1993).
197. Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222-24 (1993).
198. Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222-24 (1993).
199. Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222-24 (1993).
200. See, e.g., Wal-Mart Stores, Inc. v. Am. Drugs, Inc., 891 S.W.2d 30, 34 (Ark. 1995) (requiring specific intent to harm competition rather than probability of recoupment).
201. Bay Guardian Co. v. New Times Media LLC, 114 Cal. Rptr. 3d 392, 404-06 (Ct. App. 2010) (finding that California's predatory pricing law does not require a showing of probability of recoupment or anticompetitive impact).
202. See Generic Retail Drug Pricing and States: $4 and Free Drug Promotions by Large Chains Affected by State Laws, Nat'l Conference of State Legislatures (Mar. 2011), http://www.ncsl.org/default.aspx?tabid=14440.
203. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
204. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
205. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
206. Matthew A. Edwards, The Law, Marketing and Behavioral Economics of Consumer Rebates, 12 Stan. J.L. Bus. & Fin. 362, 384-90 (2007).
207. Russell Korobkin, The Endowment Effect and Legal Analysis, 97 Nw. U. L. Rev. 1227, 1228 (2003).
208. Bruce H. Kobayashi, Does Economics Provide a Reliable Guide To Regulating Commodity Bundling by Firms? A Survey of the Economic Literature, 1 J. Competition L. & Econ. 707, 707 (2005).
209. Stefan Stremersch & Gerard J. Tellis, Strategic Bundling of Products and Prices: A New Synthesis for Marketing, 66 J. Marketing 55, 55 (2002).
210. Bruce H. Kobayashi, The Law and Economics of Predatory Pricing, in Antitrust Law and Economics 116, 116-17 (Keith N. Hylton ed., 2010).
211. See U.S. Dep't of Justice & FTC, Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition 103 (2007), available at http://www.ftc.gov/ reports/innovation/P040101PromotingInnovationandCompetitionrpt0704.pdf ("Tying and bundling [are] so ubiquitous that we forget they are there.... Tying and bundling [are], roughly speaking, what the modern firm does. It's the rationale. It puts things together and offers them in packages to consumers.").
212. David S. Evans, Antitrust Issues Raised by the Emerging Global Internet Economy, 102 Nw. U. L. Rev. 285, 304-05 (2008).
213. For economic analysis of bundling in competitive markets, see David S. Evans & Michael Salinger, Why Do Firms Bundle and Tie? Evidence from Competitive Markets and Implications for Tying Law, 22 Yale J. on Reg. 37 (2005).
214. Stefan Stremersch & Gerard J. Tellis, Strategic Bundling of Products and Prices: A New Synthesis for Marketing, 66 J. Marketing 55, 55 (2002).
215. See, e.g., George J. Stigler, United States v. Loew's Inc.: A Note on Block-Booking, 1963 Sup. Ct. Rev. 152, 155.
216. But see Roy W. Kenney & Benjamin Klein, The Economics of Block Booking, 26 J.L. & Econ. 497, 500, 539 (1983) (explaining that block booking did not facilitate price discrimination, but rather reduced transaction costs by preventing buyers from rejecting components of a package of products that is average-priced in order to reduce opportunism in the form of investments in informational advantages with little or no social value).
217. Bruce H. Kobayashi, The Law and Economics of Predatory Pricing, in Antitrust Law and Economics 116, 116-17 (Keith N. Hylton ed., 2010).
218. Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 25 (1984).
219. See Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28, 31 (2006).
220. Joshua D. Wright, Missed Opportunities in Independent Ink, 2005-06 Cato Sup. Ct. Rev. 333, 333.
221. See United States v. Microsoft Corp., 253 F.3d 34, 88 (D.C. Cir. 2001) (en banc) (per curiam).
222. Oren Bar-Gill, Bundling and Consumer Misperception, 73 U. Chi. L. Rev. 33, 36 (2006) ("When bundling reduces welfare, regulation that discourages bundling may provide a valuable tool for policymakers. "). The argument that bundling is a competitive response to consumers' cognitive biases has also been discussed in the economics literature.
223. See Richard Craswell, Tying Requirements in Competitive Markets: The Consumer Protection Issues, 62 B.U. L. Rev. 661, 681-87 (1982).
224. Stefano DellaVigna & Ulrike Malmendier, Contract Design and Self-Control: Theory and Evidence, 119 Q.J. Econ. 353, 357 (2004).
225. Richard Thaler, Mental Accounting and Consumer Choice, 4 Marketing Sci. 199, 211 (1985).
226. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
227. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
228. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
229. This analysis is highly related to the inefficiencies in aftermarket tying in the antitrust context. See Carl Shapiro, Aftermarkets and Consumer Welfare: Making Sense of Kodak, 63 Antitrust L.J. 483, 511 (1995).
230. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
231. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
232. cf. Russell Korobkin, Bounded Rationality, Standard Form Contracts, and Unconscionability, 70 U. Chi. L. Rev. 1203 (2003) (discussing inclusion in standard form contracts of inefficient, nonsalient terms that do not affect consumer perception of the contracts' values although they benefit drafters).
233. Cass R. Sunstein, Boundedly Rational Borrowing, 73 U. Chi. L. Rev. 249, 260 (2006) (discussing companies' incentives to exploit consumers' bounded rationality in order to extract high fees and late charges).
234. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
235. Empirical evidence is not consistent with the "seduction" hypothesis. See Tom Brown & Lacey Plache, Paying with Plastic: Maybe Not So Crazy, 73 U. Chi. L. Rev. 63, 66-67 (2006).
236. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
237. Howard Beales & Lacey L. Plache, Rationality, Revolving, and Rewards: An Analysis of Revolving Behavior on New Credit Cards 9 (Apr. 20, 2007) (unpublished manuscript), http://www.ftc.gov/be/consumerbehavior/docs/papers/ Beales _Plache_Paper.pdf. Interestingly, following Brown and Plache, supra, Beales and Plache present microlevel data on VISA consumers who choose to switch to new rewards cards. Their behavioral theories predict that these consumers should be more likely to revolve debt and that the probability of their doing so should increase over time. The authors find a significant difference between rewards and non-rewards cards and the likelihood of carrying a balance, but it cuts against the behavioral theories. Notably, the authors find that holders of new rewards cards are significantly less likely to revolve debt than holders of non-rewards cards.
238. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
239. See Alan M. White, The Case for Banning Subprime Mortgages, 77 U. Cin. L. Rev. 617 (2008).
240. Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 6-7 (2008) (identifying a "need for systemic regulation" in the financial services market and advocating for creation of a new federal agency to regulate consumer credit products). Numerous academics credit Bar-Gill and Warren's work for influencing the creation of the CFPB.
241. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
242. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
243. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
244. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
245. Joshua D. Wright & Todd J. Zywicki, Three Problematic Truths About the Consumer Financial Protection Agency Act of 2009, Lombard Street, Sept. 14, 2009, at 29, 29.
246. The costs arising from the uncertainty generated by this conflict are significant in their own right. However, uncertainty attributable to conflicting laws is not the only source of costs consumers will face as a result of the intellectual rift in consumer law. There are also the consumer welfare costs of policy error. Ultimately, the most restrictive consumer policy-whether antitrust-or consumer protection-based-will govern firm behavior. As discussed, many of the behavioral consumer protection policies have included proposals to prohibit outright products that economists of all methodological stripes would agree produce value for some consumers.
247. I adopt the New Institutional Economics' broad conception of institutions. See Claude Ménard & Mary M. Shirley, Introduction to Handbook of New Institutional Economics 1, 1 (Claude Ménard & Mary M. Shirley eds., 2005) (defining institutions as the "written and unwritten rules, norms and constraints that humans devise to reduce uncertainty and control their environment" which include "(i) written rules and agreements that govern contractual relations and corporate governance, (ii) constitutions, laws and rules that govern politics, government, finance, and society more broadly, and (iii) unwritten codes of conduct, norms of behavior, and beliefs").
248. Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. Pa. L. Rev. 925, 925-33 (1979) (discussing the Chicago School's development).
249. Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (1978).
250. Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. Pa. L. Rev. 925, 925-33 (1979) (discussing the Chicago School's development).
251. Douglas H. Ginsburg & Derek W. Moore, The Future of Behavioral Economics in Antitrust Jurisprudence, Competition Pol'y Int'l, Spring 2010, at 89, 97.
252. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
253. Douglas H. Ginsburg & Derek W. Moore, The Future of Behavioral Economics in Antitrust Jurisprudence, Competition Pol'y Int'l, Spring 2010, at 89, 97.
254. Jolls, Sunstein, and Thaler describe these departures from perfect optimization as "bounded rationality, bounded willpower, and bounded self-interest. " Christine Jolls, Cass R. Sunstein & Richard Thaler, A Behavioral Approach to Law and Economics, 50 Stan. L. Rev. 1471, 1476 (1998).
255. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
256. Douglas H. Ginsburg & Derek W. Moore, The Future of Behavioral Economics in Antitrust Jurisprudence, Competition Pol'y Int'l, Spring 2010, at 89, 97.
257. That price theory ideally generates determinate results is its great virtue as an aspect of jurisprudence. ").
258. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
259. Herbert A. Simon, A Behavioral Model of Rational Choice, 69 Q.J. Econ. 99 (1955). The window appears to be closing, if not closed.
260. See, e.g., Amanda P. Reeves & Maurice E. Stucke, Behavioral Antitrust, 86 Ind. L.J. 1527 (2011) (describing the potential for incorporating behavioral economics into antitrust agencies' analyses).
261. J. Thomas Rosch, Comm'r, FTC, Remarks at the Conference on the Regulation of Consumer Financial Products: Managing Irrationality: Some Observations on Behavioral Economics and the Creation of the Consumer Financial Protection Agency (Jan. 6, 2010) (endorsing incorporation of insights from behavioral economics into the FTC's approach to antitrust law), available at http://ftc.gov/speeches/rosch/100106financial-products.pdf.
262. See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 881-82, 887-88 (2007).
263. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
264. See R. Hewitt Pate, Assistant Att'y Gen., Antitrust Div., U.S. Dep't of Justice, Address Before the Thirtieth Annual Conference on International Antitrust Law and Policy: The Common Law Approach and Improving Standards for Analyzing Single Firm Conduct 1 (Oct. 23, 2003), available at http://www.justice.gov/atr/public/speeches/202724.pdf.
265. Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (1978).
266. 504 U.S. 451 (1992).
267. see Herbert Hovenkamp, Post-Chicago Antitrust: A Review and Critique, 2001 Colum. Bus. L. Rev. 257, 283-86.
268. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
269. see also Bruce H. Kobayashi, Game Theory and Antitrust: A Post-Mortem, 5 Geo. Mason L. Rev. 411 (1997) (explaining the limited role of the game-theoretical approach in antitrust law). Following the post-Chicago School's Supreme Court debut, lower courts applying Kodak have construed it as narrowly as possible in similar aftermarket "lock-in" cases.
270. see also David A.J. Goldfine & Kenneth M. Vorrasi, The Fall of the Kodak Aftermarket Doctrine: Dying a Slow Death in the Lower Courts, 72 Antitrust L.J. 209 (2004).
271. Bruce H. Kobayashi & Joshua D. Wright, Federalism, Substantive Preemption, and Limits on Antitrust: An Application to Patent Holdup, 5 J. Competition L. & Econ. 469, 484-86 (2009) (discussing Kodak's treatment in lower courts).
272. See, e.g., FTC/DOJ/ABA/GULC Conference, Post-Chicago Economics: New Theories-New Cases?, Washington, D.C., May 26-27, 1994.
273. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
274. Douglas H. Ginsburg & Derek W. Moore, The Future of Behavioral Economics in Antitrust Jurisprudence, Competition Pol'y Int'l, Spring 2010, at 89, 97.
275. See Who's Watching the Watchmen? (statement of Todd Zywicki, Foundation Professor of Law, George Mason University).
276. William E. Kovacic, The Federal Trade Commission and Congressional Oversight of Antitrust Enforcement, 17 Tulsa L.J. 587, 592 (1982).
277. C. Boyden Gray & John Shu, The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: Is It Constitutional?, Engage, Dec. 2010, at 66, 67.
278. Who's Watching the Watchmen?, (statement of Todd Zywicki, Foundation Professor of Law, George Mason University).
279. See Troy A. Paredes, Comm'r, SEC, Remarks at the 43rd Annual Rocky Mountain Securities Conference (May 26, 2011) (noting that the SEC's structure of five commissioners, of whom no more than three may be from the same political party, allows for "five unique perspectives" and thus a "better regulatory regime"), available at http://www.mondovisione.com/ media-and-resources/news/speech-by-sec-commissioner-troy-a-paredes-remarks-at-the-43rd-annual-rocky-mou. Elizabeth Warren and proponents of the CFPB appear to have originally agreed with this approach, proposing a commission rather than a single-directorheaded bureau.
280. cf. David Schkade, Cass R. Sunstein & Reid Hastie, What Happened on Deliberation Day?, 95 Calif. L. Rev. 915, 929 (2007) (discussing deliberation within groups with mixed viewpoints and the benefits gained from increased political tolerance and openness to potential counterarguments).
281. George Loewenstein & Peter Ubel, Op-Ed., Economics Behaving Badly, N.Y. Times, July 14, 2010, http://www.nytimes.com/2010/07/15/opinion/15loewenstein.html.
282. William E. Kovacic, The Federal Trade Commission and Congressional Oversight of Antitrust Enforcement, 17 Tulsa L.J. 587, 592 (1982).
283. C. Boyden Gray & John Shu, The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: Is It Constitutional?, Engage, Dec. 2010, at 66, 67.
284. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
285. See Elena Kagan, Presidential Administration, 114 Harv. L. Rev. 2245, 2250 (2001).
286. William E. Kovacic, The Federal Trade Commission and Congressional Oversight of Antitrust Enforcement, 17 Tulsa L.J. 587, 592 (1982).
287. William E. Kovacic, The Federal Trade Commission and Congressional Oversight of Antitrust Enforcement, 17 Tulsa L.J. 587, 592 (1982).
288. William E. Kovacic, The Federal Trade Commission and Congressional Oversight of Antitrust Enforcement, 17 Tulsa L.J. 587, 592 (1982).
289. Josh Wright, Organizing Economists at the CFPB, Truth on the Market (May 13, 2011, 12:16 PM), http://truthonthemarket.com/2011/05/13/organizing-economists-at-the-cfpb (discussing the potential role and influence of economists within the CFPB based upon the Bureau's design).
290. Michael S. Barr, Sendhil Mullainathan & Eldar Shafir, The Case for Behaviorally Informed Regulation, in New Perspectives on Regulation 25, 41-42 (David Moss & John Cisternino eds., 2009), available at http://www.tobinproject.org/sites/tobinproject.org/files/assets/ New_Perspectives_Ch2_Barr_Mullainathan_Shafir.pdf.
291. Douglas H. Ginsburg & Derek W. Moore, The Future of Behavioral Economics in Antitrust Jurisprudence, Competition Pol'y Int'l, Spring 2010, at 89, 97.
292. Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C.A. § 5513(a)-(c) (West Supp. 2010).
293. C. Boyden Gray & John Shu, The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: Is It Constitutional?, Engage, Dec. 2010, at 66, 67.
294. See Who's Watching the Watchmen?, (statement of Todd Zywicki, Foundation Professor of Law, George Mason University).
295. C. Boyden Gray & John Shu, The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: Is It Constitutional?, Engage, Dec. 2010, at 66, 67.
296. Presidents have traditionally declined to exercise authority, through the OMB, over independent agencies. See Exec. Order No. 12,866, § 3(b), 58 Fed. Reg. 51,735, 51,737 (Sept. 30, 1993) (excluding independent agencies from the Order's scope).
297. ("[A] statutory delegation to an executive agency official-although not to an independent agency head-usually should be read as allowing the President to assert directive authority... over the exercise of the delegated discretion. " (emphasis added). President Obama has indicated a desire for independent agencies to comply with his orders but has not required them to do so. Exec. Order No. 13,579, § 1(c), 76 Fed. Reg. 41,587, 41,587 (July 11, 2011) (stating only that independent agencies "should" comply with Executive Order Number 13,563, 76 Fed. Reg. 3821 (Jan. 18, 2011).
298. Memorandum from President Barack Obama on Regulation and Independent Regulatory Agencies (July 11, 2011), http://www.whitehouse.gov/the-press-office/2011/07/11/memorandum-regulation-and-independent-regulatory-agencies ("I am asking [independent agencies] today to join in this review and produce your own plans to reassess and streamline regulations.").
299. William E. Kovacic, The Federal Trade Commission and Congressional Oversight of Antitrust Enforcement, 17 Tulsa L.J. 587, 592 (1982).
300. Wheeler-Lea Act of 1938, Pub. L. No. 75-447, § 3, 52 Stat. 111, 111 (codified as amended at 15 U.S.C. § 45(a) (2006).
301. J. Howard Beales III, The Federal Trade Commission's Use of Unfairness Authority: Its Rise, Fall, and Resurrection, 22 J. Pub. Pol'y & Marketing 192, 192-93 (2003) (quoting Statement of Basis and Purpose of Trade Regulation Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. 8324, 8355 (July 2, 1964) (codified at 16 C.F.R. § 408).
302. J. Howard Beales III, The Federal Trade Commission's Use of Unfairness Authority: Its Rise, Fall, and Resurrection, 22 J. Pub. Pol'y & Marketing 192, 192-93 (2003) (quoting Statement of Basis and Purpose of Trade Regulation Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. 8324, 8355 (July 2, 1964) (codified at 16 C.F.R. § 408).
303. 405 U.S. 233 (1972).
304. William MacLeod, Elizabeth Brunins & Anna Kertesz, Three Rules and a Constitution: Consumer Protection Finds Its Limits in Competition Policy, 72 Antitrust L.J. 943, 947 (2005).
305. See Sperry & Hutchinson, 405 U.S. at 241-42.
306. J. Howard Beales III, The Federal Trade Commission's Use of Unfairness Authority: Its Rise, Fall, and Resurrection, 22 J. Pub. Pol'y & Marketing 192, 192-93 (2003) (quoting Statement of Basis and Purpose of Trade Regulation Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. 8324, 8355 (July 2, 1964) (codified at 16 C.F.R. § 408).
307. Barry R. Weingast & Mark J. Moran, The Myth of Runaway Bureaucracy: The Case of the FTC, Regulation, May/June 1982, at 33, 34-35.
308. Henry N. Butler & Joshua D. Wright, Are State Consumer Protection Acts Really Little-FTC Acts?, 63 Fla. L. Rev. 163, 168-69 (2011).
309. Barry R. Weingast & Mark J. Moran, The Myth of Runaway Bureaucracy: The Case of the FTC, Regulation, May/June 1982, at 33, 34-35.
310. William MacLeod, Org. for Econ. Co-operation and Dev., DAF/COMP/GF/WD (2008)37, The Interface Between Competition and Consumer Policies 3 (2008), available at http://www.oecd.org/dataoecd/31/56/40080545.pdf.
311. Barry R. Weingast & Mark J. Moran, The Myth of Runaway Bureaucracy: The Case of the FTC, Regulation, May/June 1982, at 33, 34-35.
312. Michael Pertschuk, Stoning the National Nanny: Congress and the FTC in the Late 1970s, in Revolt Against Regulation: The Rise and Pause of the Consumer Movement 69, 69 (1982) (quoting The FTC as National Nanny, Wash. Post, Mar. 1, 1978, at A22).
313. William MacLeod, Org. for Econ. Co-operation and Dev., DAF/COMP/GF/WD (2008)37, The Interface Between Competition and Consumer Policies 3 (2008), available at http://www.oecd.org/dataoecd/31/56/40080545.pdf.
314. Barry R. Weingast & Mark J. Moran, The Myth of Runaway Bureaucracy: The Case of the FTC, Regulation, May/June 1982, at 33, 34-35.
315. Barry R. Weingast & Mark J. Moran, The Myth of Runaway Bureaucracy: The Case of the FTC, Regulation, May/June 1982, at 33, 34-35.
316. Barry R. Weingast & Mark J. Moran, The Myth of Runaway Bureaucracy: The Case of the FTC, Regulation, May/June 1982, at 33, 34-35.
317. J. Howard Beales III, The Federal Trade Commission's Use of Unfairness Authority: Its Rise, Fall, and Resurrection, 22 J. Pub. Pol'y & Marketing 192, 192-93 (2003) (quoting Statement of Basis and Purpose of Trade Regulation Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. 8324, 8355 (July 2, 1964) (codified at 16 C.F.R. § 408).
318. William MacLeod, Org. for Econ. Co-operation and Dev., DAF/COMP/GF/WD (2008)37, The Interface Between Competition and Consumer Policies 3 (2008), available at http://www.oecd.org/dataoecd/31/56/40080545.pdf.
319. William MacLeod, Org. for Econ. Co-operation and Dev., DAF/COMP/GF/WD (2008)37, The Interface Between Competition and Consumer Policies 3 (2008), available at http://www.oecd.org/dataoecd/31/56/40080545.pdf.
320. William MacLeod, Org. for Econ. Co-operation and Dev., DAF/COMP/GF/WD (2008)37, The Interface Between Competition and Consumer Policies 3 (2008), available at http://www.oecd.org/dataoecd/31/56/40080545.pdf.
321. J. Howard Beales III, The Federal Trade Commission's Use of Unfairness Authority: Its Rise, Fall, and Resurrection, 22 J. Pub. Pol'y & Marketing 192, 192-93 (2003) (quoting Statement of Basis and Purpose of Trade Regulation Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. 8324, 8355 (July 2, 1964) (codified at 16 C.F.R. § 408).
322. William MacLeod, Org. for Econ. Co-operation and Dev., DAF/COMP/GF/WD (2008)37, The Interface Between Competition and Consumer Policies 3 (2008), available at http://www.oecd.org/dataoecd/31/56/40080545.pdf.
323. The intellectual regime change in antitrust economics also played a considerable role at the Antitrust Division. See Robert H. Bork, The Role of the Courts in Applying Economics, 54 Antitrust L.J. 21, 25 (1985) ("[I]t would have been politically impossible for... [William] Baxter to have done what he did [as head of the DOJ Antitrust Division], had there not been an intellectual shift in the underpinnings of antitrust.... ").