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Governments and firms often use committees of experts to help them make complex decisions, but conflicts of interest could bias experts’ recommendations. We focus on whether financial ties...

It has become almost an article of faith that large, zero-price platforms, such as Facebook and Google, exercise market power by offering lower levels of privacy. Yet, a rigorous examination of the assumptions underlying this data-price analogy is seriously lacking. Even more important, almost no empirical work has been done in this area. This Article contributes to the debate by filling these important gaps in the literature. After presenting a theoretical examination of the relationship between privacy and competition, we provide empirical evidence on the relationship between market power and privacy. First, using data from PrivacyGrade.org, we find no relationship between privacy grades and our proxies for market concentration—the Herfindahl-Hirschman Index (HHI) and market shares based on Google Play Store categories. Second, we collected website traffic data from SimilarWeb and matched it to DuckDuckGo’s privacy ratings for sites in thirty-seven website categories. Again, the data suggest a lack of a reliable relationship between privacy ratings and market concentration. Our theoretical analysis and empirical results cast serious doubt on the notion that firms exercise market power by reducing privacy levels. Challenging conventional wisdom, our results suggest that antitrust is a poor tool to address perceived privacy problems. Instead, if markets produce less than optimal levels of privacy, it is likely due to informational problems that have no relationship with competition. Accordingly, we conclude that privacy regulation and competition policy might be complementary, but only in one direction: consumer protection designed to increase consumer access to information about firms’ privacy practices—and firms’ ability to credibly commit to these promises—could help foster competition over privacy, but the converse is not true.

The FTC has been in the privacy game for almost twenty years. In that time span, the digital economy has exploded, dramatically increasing the importance of privacy regulation to the economy. Unfortunately, the sophistication of the FTC’s privacy policy has yet to keep pace with its stature. Privacy stands today where antitrust stood in the 1970s. Antitrust’s embrace of economics helped transform it into a coherent body of law that almost all agree has been a boon for consumers. Privacy regulation at the FTC is ripe for a similar revolution. We examine the history of FTC privacy enforcement and policy making, with special attention paid to the lack of economic analysis, and we show the unique ability of economic analysis to ferret out conduct that is likely to threaten consumer welfare, and provide a framework for FTC privacy analysis going forward. Specifically, the FTC needs to be more precise in identifying privacy harms and to develop an empirical footing for both its enforcement posture and prophylactic measures that it urges firms to adopt, such as “privacy by design” and “data minimization.” The sooner that the FTC begins to incorporate serious economic analysis and rigorous empirical evidence into its privacy policy, the sooner consumers will begin to reap the rewards.

Risk of developing Alzheimer's disease is increased by older age, genetic factors, and several medical risk factors. Studies have also suggested that dietary and lifestyle factors may influence risk, raising the possibility that preventive strategies may be effective. This body of research is incomplete. However, because the most scientifically supported lifestyle factors for Alzheimer's disease are known factors for cardiovascular diseases and diabetes, it is reasonable to provide preliminary guidance to help individuals who wish to reduce their risk. At the International Conference on Nutrition and the Brain, Washington, DC, July 19–20, 2013, speakers were asked to comment on possible guidelines for Alzheimer's disease prevention, with an aim of developing a set of practical, albeit preliminary, steps to be recommended to members of the public. From this discussion, 7 guidelines emerged related to healthful diet and exercise habits.

Governments and firms often use committees of experts to help them make complex decisions, but conflicts of interest could bias experts’ recommendations. We focus on whether financial ties to drug companies bias FDA drug advisory committee (AC) members’ voting on drug approval recommendations. We find little significant evidence that AC members vote in their financial interests. We find stronger evidence that experts’ characteristics such as expertise level or associations with advocacy groups drives voting tendencies (biases) either for or against approval. We show that a Congressional Act that effectively excluded financially-conflicted AC members resulted in a sharp drop in average AC member expertise, and an unintended increase in approval voting. Our results have implications for the popular goal of eliminating financial conflicts from all medical decisions. Eliminating conflicts could sharply reduce the level of expertise of the decision makers and lead to unexpected voting tendencies.

The issue of consumer payments and data security has reached a high level of public and regulatory interest as a result of a number of recent high-profile data breaches that compromised consumer payment cards. In addition, the ecosystem of consumer payment security has changed dramatically in recent years as a result of the introduction and rapid spread of contactless payment technologies. In response to growing concerns about payment fraud, payment card networks in the United States have moved toward the rapid replacement of traditional magnetic-stripe payment card technology to new EMV (Europay, Mastercard, and Visa) computer chip–based technology. Notably, however, US card issuers and networks have chosen not to adopt the personal identification number (PIN) method of customer verification that has been standard in the United Kingdom and much of Europe for the past decade or so but instead have chosen signature verification as the preferred method. This article conducts an economic analysis of the regulation of consumer payment cards and payment card fraud. We examine the marginal benefits and costs from heightened levels of payment card security. We examine the dynamic evolution of payment card anti-fraud technology over time and suggest that there is little evidence of market failure in the provision of payment security by card networks and issuers and little reason to believe that mandating one exclusive, decades-old, static verification technology (namely, chip and PIN) would be likely to improve overall consumer welfare and economic efficiency today. We conclude that rather than blindly adopting the particular verification technology that Europe put into place many years ago, US regulators should be alert to the evolving and contemporary nature of consumer payments and the fluid nature of threats to data privacy and thus should not freeze or hamper the adaptability of the payment system.

Consumer protection acts (CPAs) developed with the goal to protect American consumers from fraudulent, deceptive and unfair business practices. Initially, Congress, through the FTC Act, sought to define and deter conduct that the existing legal system largely failed to remedy. Subsequently, states localized and individualized these rights while maintaining a careful balance between protecting consumers and preventing the proliferation of lawsuits that harm both consumers and businesses. But in recent decades, this thoughtful balance has yielded to damaging legislative and judicial overcorrections at the state level with a common theoretical mistake: the assumption that more CPA litigation automatically yields more consumer protection. The result has been an explosion in consumer protection litigation, which serves no social function and for which consumers pay indirectly through higher prices and reduced innovation. Using data on state and federal CPA litigation from 2000-2013, we find substantial increases in CPA litigation in both, with federal litigation growing almost twice as fast in federal than state courts (a cumulative average growth rate of 6.1 percent vs. 3.4 percent). We also find that the financial crisis appears to have played a large role in the recent growth in CPA litigation — the financial services industry is the most common target for private CPA actions in a set of cases we sample, and a large proportion of these cases involve debt collection or federal lending or housing statutes. We conclude that although the entire suite of expansive provisions in CPAs — enhanced damages, class actions, attorneys fees, and eliminating the need to show harm — are responsible for the explosion in private CPA litigation, from a social standpoint, requiring consumers to show cognizable harm would be the most efficient reform.

The issue of consumer payments and data security has reached a high level of public and regulatory interest as a result of a number of recent high-profile data breaches that compromised consumer payment card numbers, such as at Target, Home Depot, and Michael’s. In addition, the ecosystem of consumer payments security has changed dramatically in recent years as a result of the introduction and rapid spread of contactless payment technologies, such as ApplePay. In response to growing concerns about payments fraud, payment card networks in the United States have moved toward the rapid replacement of traditional magnetic stripe payment card technology to new EMV computer chip-based technology, which creates a unique encrypted identifier for each transaction, thereby making it more difficult for thieves to steal card numbers and create counterfeit cards. Notably, however, American card issuers and networks have chosen not to adopt the PIN method of verification that has been standard in the United Kingdom and much of Europe for the past decade or so, but instead have adopted signature as the preferred method of customer verification. Many large retail chains and retail trade associations have nevertheless lobbied for regulatory or statutory action to impose a PIN-verification requirement in addition to the addition of EMV chips. This article conducts an economic analysis of the regulation of consumer payment cards and payment cards fraud. We examine the marginal benefits from heightened levels of payment cards security (such as requiring PIN verification for purchases) and marginal costs as well, such as the impact on speed, convenience, and functionality for consumers and merchants, especially uptake of electronic payments by smaller merchants. We examine the dynamic evolution of payment cards anti-fraud technology over time and suggest that there is little evidence of market failure in the provision of payments security by card networks and issuers and little reason to believe that mandating one exclusive, decades old, static verification technology (namely Chip & PIN) would be likely to improve overall consumer welfare and economic efficiency today. We conclude that rather than blindly adopting the particular verification technology Europe put into place many years ago, U.S. regulators should be alert to the evolving and contemporary nature of consumer payments and fluid nature of threats to data privacy and not freeze or hamper the adaptability of the payments system.

Economics at the Federal Trade Commission (FTC) covers both the antitrust and consumer protection missions. In this year's essay, we focus mainly on the competi- tion-side of the agency. Drawing on a wealth of recent research, we provide descriptive and analytical information about the petroleum industry. Mergers, as always, were a major preoccupation of the FTC, and we discuss a few oil industry mergers as well as one lead- ing litigated case - Arch Coal's acquisition of Triton Coal. Finally, we review the empir- ical literature on the effects of vertical restraints, noting that the literature supporting an animus toward such restraints is surprisingly weak.

Every administration in recent history has attempted to reduce regulatory redundancies. One area of regulatory redundancy that deserves attention is the FTC’s and Department of Transportation’s (DOT) consumer protection authority over online travel agents (OTAs), which generated $111 billion in revenue last in 2013. This regulatory redundancy guarantees that two agencies will oversee OTAs, prevents harmonization of online consumer protection policy, and is likely to impose unnecessary costs on OTAs to adhere to two separate regulatory regimes. The importance of this conflict will grow as privacy and data security become preeminent consumer protection issues and DOT expands its jurisdiction to online information providers. Efficiency suggests the FTC as the sole consumer protection overseer of OTAs. Only the FTC has the current capacity to regulate all OTA activities, and it enjoys unrivaled expertise with respect to e-commerce consumer protection. Further, in contrast with FTC’s ex post enforcement approach, which focuses on actual or likely consumer harm, DOT’s ex ante regulatory approach is ill-suited for the fast moving world of e-commerce. Finally, the FTC faces more serious internal and external constraints on its enforcement authority, which tends to temper the potential for regulatory overreach. There are several possible ways to effect this regulatory reform, ranging from the complete abolition of DOT’s aviation consumer protection authority and the FTC Act’s common carrier exemption, to a memorandum of understanding between FTC and DOT that harmonizes policy.

Privacy is about being “let alone,” so in one sense, privacy means to separate yourself from the world. Paradoxically, by concealing facts about yourself, observers view you as less separated from everyone else. They can no longer make out the features that distinguish you from those to whom you bear a superficial resemblance. In this manner, privacy promotes what economists call “pooling.” Markets, however, tend to benefit from “separation” — the ability to distinguish between different types. This tension between privacy and market efficiency — between pooling and separation — is on full display in the burgeoning privacy law scholarship surrounding big data, which has centered on so-called “predictive privacy harms.” This scholarship has begun to seep into policy discussions, leading to proposals to limit the ability of firms to use big data. Privacy without a doubt is valuable. It’s woven into the fabric of our society. But we must be careful to discern between privacy’s intrinsic and strategic values before prescribing drastic ex ante restrictions to address predictive privacy harms. The major contribution of this paper is to develop a positive framework based on the economics of contracts and torts to identify when limiting big data predictions may be justified. This framework suggests that when strategic privacy is at issue, the mechanisms should be rooted in antidiscrimination law — which embody the choices that society has made about which traits are fair game for classification — rather than privacy law. Alternatively, privacy law should be used when intrinsic privacy is implicated. The analysis suggests that ex ante restrictions on use make sense only in the narrow circumstances in which there is likely to be agreement that the big data predictions implicate highly sensitive information. Alternatively, when there is little agreement on how privacy harms are likely to be suffered, the default regulatory posture should be one of notice of collection and use, with the Federal Trade Commission enforcing a firm’s promises.

While the Joint Air Component Coordination Element (JACCE) was initially an ad hoc organization designed to bridge the coordination gap between the Joint Force Land Component Commander's (JFLCC) fielded subordinates and geographically separated supporting Joint Force Air Component Commander (JFACC), it is now a formally entrenched part of both Joint and United States Air Force (USAF) doctrine. However, the collective experience gained employing the JACCE during both Operations IRAQI FREEDOM (OIF) and ENDURING FREEDOM (OEF) provides mixed results regarding its actual effectiveness at delivering the desired level of air support to ground combat operations. The purpose of this paper is not to dispute the legitimate value of operational level liaison elements, but to examine the limitations and inconsistencies of the JACCE concept as currently described in doctrine, and to discuss how this concept should be improved and implemented to ensure the most effective air support for ground forces in combat. Therefore, given the use of a theater JFACC in the US Central Command (USCENTCOM) area of responsibility (AOR) in accordance with Joint and USAF doctrine, the current JACCE concept is inadequate, and future Joint operations will be better served by employing a dedicated Commander, Air Force Forces (COMAFFOR) to deliver effective and decisive airpower at the Joint Task Force (JTF) and sub-JTF levels.

Because a patient must have a prescription to purchase contact lenses, prescribing eye care professional (ECPs) have incentives to take advantage of locked-in patients. I use the Fairness to Contact Lens Consumers Act (FCLCA) – which outlawed lock-in – as a natural experiment to perform (to my knowledge) the first empirical examination of the effect of lock-in on aftermarket prices. Examination of the pre- and post-FCLCA price gap between ECPs and online sellers indicates that pricing in the contact lens market has not systematically changed since FCLCA. One conjecture from these results is that search costs may be responsible for persistent ECP premiums in this market. To the extent that they are generalizable, these results also indicate that the current antitrust treatment of power derived from proprietary aftermarkets may be welfare reducing.

The Twenty-first Amendment repealed prohibition, but granted the states broad power to regulate the distribution and sale of alcohol to consumers within their borders. Pursuant to this authority, states have established a complex web of regulations that limit the ability of beer, wine, and liquor producers to control the distribution of their product. From a consumer welfare perspective, one of the most potentially harmful state alcohol distribution regulations are “post and hold” laws (“PH laws”). PH laws require that alcohol distributors share future prices with rivals by “posting” them in advance, and then “hold” these prices for a specified period of time. Economic theory would suggest that PH laws reduce unilateral incentives for distributors to reduce prices and may facilitate tacit or explicit collusion, both to the detriment of consumers. Consistent with economic theory, we show that the PH laws reduce consumption by 2-8 percent. We also test whether PH laws provide offsetting benefits in the form of reducing a range of social harms associated with alcohol consumption. We find no evidence of such offsetting benefits. Taken together these results suggest that PH laws are socially harmful and result only in a wealth transfer from marginal alcohol consumers, who are unlikely to exert externalities on society, to wholesalers. These results also suggest a socially beneficial role for antitrust challenges to PH laws and similar anticompetitive state regulation. If states wish to reduce the social ills associated with drinking, our results suggest that increasing taxes and directly targeting social harms are superior policy instruments to PH laws.

Dealing with the complex problem of pregnancy in adolescence may involve working with many people. If the physician approaches the patient with an attitude of acceptance and understanding, the adolescent girl may be helped to make realistic decisions concerning her pregnancy and to adjust in a healthy manner. If she does not receive such assistance, pregnancy may be a misunderstood event that leads to further negative psychologic sequelae.

In recent years divergence between United States ("US") and European Union ("EU") competition policy has garnered a lot of attention. One particular area where these differences are evident is the treatment of vertical restraints. In the USA, an antitrust plaintiff must show that a vertical agreement is likely to harm competition - that is, reduce economic welfare. EU competition law, on the other hand, places a lower burden on the European Commission ("EC"). The EC recently has promulgated a block exemption regulation ("BER") that defines circumstances under which vertical arrangements are automatically exempted under Article ("Art.") 81(3); still, European competition law condemns many more vertical agreements than does US antitrust law. "Dominant" firms entering into vertical agreements receive even harsher treatment under EU competition law. Because the Guidelines to the BER explicitly exclude dominant firms from exemption under Art. 81(3), it appears that Art. 81 proscribes dominant firms from entering into vertical agreements that restrict the behavior of the contracting parties. Additionally, Art. 82 discourages dominant firms from entering into vertical agreements. This paper uses a Bayesian framework to analyze the disparate treatment of vertical arrangements in the USA and EU. The practice of antitrust is the problem of inferring the competitive consequences of various types of market conduct. We argue that an optimal enforcement estimator would minimize an expected social loss function, where the expectation is taken over the posterior probability that a given practice is anticompetitive, given evidence in a particular case. Empirical literature informs priors, whereas theory informs the likelihood. We show how differences in antitrust treatment of vertical practices can be explained by different loss functions, even when each jurisdiction shares the same beliefs regarding the theoretical and empirical effects of vertical restraints.