orgtheory.net

Archive for the ‘law and society’ Category

the democrats can’t decide how radical they want to be on antitrust

The other day I wrote about the current moment in the spotlight for antitrust. (Here’s the latest along these lines from Noah Smith.) Today I’ll say something about the new Democratic proposals on antitrust and how to think about them in terms of the larger policy space.

The Democrats are basically proposing three things. First, they want to limit large mergers. Second, they want active post-merger review. Third, they want a new agency to recommend investigations into anticompetitive behavior. None of these—as long as you don’t go too far with the first—is totally out of keeping with the current antitrust regime. And by that I mean however politically unlikely these proposals may be, they don’t challenge the expert and legal consensus about the purpose of antitrust.

But the language they use certainly does. The proposal’s subhead is “Cracking Down on Corporate Monopolies and the Abuse of Economic and Political Power”. The first paragraph says that concentration “hurts wages, undermines job growth, and threatens to squeeze out small businesses, suppliers, and new, innovative competitors.” The next one states that “concentrated market power leads to concentrated political power.” This is political language, and it goes strongly against the grain of actual antitrust policy.

Economic antitrust versus political antitrust

Antitrust has always had multiple, competing purposes. The original Progressive-Era antitrust movement was partly about the power of trusts like Standard Oil to keep prices high. But it was also about more diffuse forms of power—the power of demanding favorable treatment by banks, or the power to influence Congress. That’s why the cartoons of the day show the trusts as octopuses, or as about to throw Uncle Sam overboard.

The Sherman Act (1890) and the Clayton Act (1914), the two major pieces of antitrust legislation, are pretty vague on what antitrust is trying to accomplish. The former outlaws combinations and conspiracies in restraint of trade, and monopolizing or attempt to monopolize. The latter outlaws various behaviors if their effect is “substantially to lessen competition, or to tend to create a monopoly.” The courts have always played the major role in deciding what that means.

Throughout the last century, the courts have mostly tried to address the ability of firms to raise prices above competitive levels—the economic side of antitrust. For the last forty years, they have focused specifically on maximizing consumer welfare, often (though not always) defined as allocative efficiency. Since the late 1970s, this has been pretty locked in, both through court decisions, and through strong professional consensus that makes antitrust officials very unlikely to challenge it.

Before the 1970s, though, two things were different. For one thing, the focus was more on protecting competition, and less on consumer welfare per se (the latter was assumed to follow from the former, and was thought of a little more broadly). For another, the courts sometimes took concerns into account other than keeping prices low.

The most common such concern was the fate of small business. Concern for small business motivated the Robinson-Patman Act of 1936, which prohibited anticompetitive price discrimination. It was clear in the Celler-Kefauver Act of 1950, which restricted mergers out of fear that chain stores would eliminate local competition. And the courts acknowledged it in cases like Brown Shoe (1962), which prevented a merger that would have controlled 7% of the shoe market by pointing to Congress’s concern with preserving an “economic way of life” and protecting “local control of industry” and “small business.”

Today, Brown Shoe is seen as part of the bad old days of antitrust, when it was used to protect inefficient small businesses and to pursue confused social goals. This is a strong consensus position among antitrust experts across the political spectrum. While no one thinks that low prices for consumers are the only thing worth pursuing in life, they are the appropriate goal for antitrust because they make it coherent and administrable. Since those experts’ views dominate the antitrust agencies, and have been codified into law through court decisions, they are very resistant to change.

The Democrats’ proposal: radical language, incremental proposals

So when the Democrats start talking about “the abuse of economic and political power,” the effects of concentration on small business, and limiting mergers that “reduce wages, cut jobs, [or] lower product quality,” they are doing two things. First, they are hearkening back to the original antitrust movement, with its complex mix of concerns and its fear of unadulterated corporate power.

Second, they are very much talking about political antitrust, and political antitrust is deeply challenging to the status quo. But their actual proposals are considerably tamer than the fiery language at the beginning, and are structured in a way that doesn’t push very hard on the current consensus. New merger guidelines could make some difference around the margins. Post-merger review would definitely be good, since there’s currently no enforcement of pre-merger conditions that firms agree to, and no good way to figure out which merger approvals had negative effects. I have a hard time seeing a new review agency having much effect, though, since it’s just supposed to make recommendations to other agencies. Even I don’t like bureaucracy that much.

So my read on this is that the Democrats feel like they need a new issue, and it needs to look like it helps the little guy, and they want to sound like populist firebrands. But when you get down to the nitty gritty, they aren’t really so interested in challenging the status quo. That is, basically, they’re Democrats. Still, that the language is in there at all is remarkable, and reflects a changing set of political possibilities.

Next time I’ll look at some of the problems people are suggesting antitrust can solve. Because there are a lot of them, and they’re a diverse group. Tying them together under the umbrella of “antitrust” gives an eclectic political project some nominal coherence. But is it politically practicable? And could it actually work?

Final note: If you are interested in the grand historical sweep of antitrust in capitalism, I recommend Brett Christophers’ The Great Leveler. Among other things, he totally called the emerging wave of interest before it actually happened. Sometimes the very long lens is the right one to use.

Advertisements

Written by epopp

August 3, 2017 at 3:04 pm

do we need illegal firms?

Over at Harvard Business Review, Benjamin Edelman argues that Uber’s ultimate problem isn’t bad corporate culture. It’s being an organization that is premised on being illegal. To quote:

But I suggest that the problem at Uber goes beyond a culture created by toxic leadership. The company’s cultural dysfunction, it seems to me, stems from the very nature of the company’s competitive advantage: Uber’s business model is predicated on lawbreaking. And having grown through intentional illegality, Uber can’t easily pivot toward following the rules.

And:

Uber’s biggest advantage over incumbents was in using ordinary vehicles with no special licensing or other formalities. With regular noncommercial cars, Uber and its drivers avoided commercial insurance, commercial registration, commercial plates, special driver’s licenses, background checks, rigorous commercial vehicle inspections, and countless other expenses. With these savings, Uber seized a huge cost advantage over taxis and traditional car services. Uber’s lower costs brought lower prices to consumers, with resulting popularity and growth. But this use of noncommercial cars was unlawful from the start. In most jurisdictions, longstanding rules required all the protections described above, and no exception allowed what Uber envisioned. (To be fair, Uber didn’t start it — Lyft did. More on that later on.)

Edelman goes on to make a number of fair points: by operating illegally, employees are at risk and it encourages poor corporate culture.

But here’s another take. What if some industries need to be developed through illegality? For example, right now in the US, many marijuana firms are operating in a de facto state of illegality, with Federal law (which supersedes state law) outlawing recreational marijuana. Despite this problem, many dispensaries remain committed to marijuana distribution and they innovate. My conjecture is that their practices will set the standards for the future recreational marijuana industry. Even in Edelman’s article, he refers to Napster, which illegally made music easier to distribute. They broke the law, but created a new market in the process.

In these three cases (Uber, Napster, US marijuana distributors), the market was expanded and developed through illegality. This suggests to me that Edelman’s point is good – firms working illegally may be saddled with too many problems. But it elides an even bigger point. Various regulations and state granted monopolies create needless zones of illegality. For some markets to develop, somebody has “break the rules to make the rules.” In many cases, that can be a good thing.

50+ chapters of grad skool advice goodness: Grad Skool Rulz ($4.44 – cheap!!!!)/Theory for the Working Sociologist (discount code: ROJAS – 30% off!!)/From Black Power/Party in the Street 

 

Written by fabiorojas

June 28, 2017 at 4:12 am

supreme court vacancy: no experience needed

The passing of Antonin Scalia creates a Supreme Court vacancy. There’s a lot of politicking already, but Obama will probably nominate in the next month or two. Then, the Senate will likely approve a replacement. Maybe not the first nominee, but lots of justices have been approved in election years and usually in about three months.

What is more interesting in my view is the type of person who gets nominated. History shows that there is some variety. Some have long records as judges, while others have very little. The wiki list of nominees shows that recent nominees have legal experience, but often little judicial experience. Since 1990 (26 years), we’ve had nine distinct nominees:

  • Harriet Miers and Elena Kagan had no judicial experience. Kagan was nominated for the Federal bench by Clinton in the late 1990s, but the Senate refused to take the nomination.
  • Two justices had very short judicial careers: Thomas and Roberts had 2 years of experience each on Federal courts.
  • The rest had very long careers: Souter – 12 years on a state supreme court, Ginsberg had 13 years, Breyer had 18, Alito 16, Sotomayor has 17 years – all on Federal courts.

We have a huge range in experience with an even split between those with almost no experience and those with lots. My sense is that nominees are drawn from two pools of people – long time jurists whose “time has come” and fast track insiders. In other words, to get to the Supreme Court, be connected or get in line … and it’s a very long line.

50+ chapters of grad skool advice goodness: Grad Skool Rulz ($2!!!!)/From Black Power/Party in the Street

Written by fabiorojas

February 15, 2016 at 4:43 am

a warm welcome to guest blogger Ellen Berrey

Please join us in welcoming sociologist Ellen Berrey, who will be guest blogging about her hot-off-the-press book The Enigma of Diversity: The Language of Diversity and the Limits of Racial Justice  (2015, University of Chicago Press).

Here’s the blurb for the book:

Diversity these days is a hallowed American value, widely shared and honored. That’s a remarkable change from the Civil Rights era—but does this public commitment to diversity constitute a civil rights victory? What does diversity mean in contemporary America, and what are the effects of efforts to support it? 

Ellen Berrey digs deep into those questions in The Enigma of Diversity: The Language of Race and the Limits of Racial Justice (University of Chicago Press, May 2015). Drawing on six years of fieldwork and historical sources dating back to the 1950s, and making extensive use of three case studies from widely varying arenas—affirmative action in the University of Michigan’s admissions program, housing redevelopment in Chicago’s Rogers Park neighborhood, and the workings of the human resources department at a Fortune 500 company—Berrey explores the complicated, contradictory, and even troubling meanings and uses of diversity as it is invoked by different groups for different, often symbolic ends. In each case, diversity affirms inclusiveness, especially in the most coveted jobs and colleges, yet it resists fundamental change in the practices and cultures that are the foundation of social inequality. Berrey shows how this has led racial progress itself to be reimagined, transformed from a legal fight for fundamental rights to a celebration of the competitive advantages afforded by cultural differences.

Powerfully argued and surprising in its conclusions, The Enigma of Diversity reveals the true cost of the public embrace of diversity: the taming of demands for racial justice.

Berrey’s other publications on this and related topics are available here.

Written by katherinechen

May 10, 2015 at 10:40 am

“you can’t fire your way to finland”

Last week a judge struck down tenure for California teachers on civil rights grounds. (NYT story here, court decision here.) Judge Rolf Treu based his argument on two claims. First, effective teachers are critical to student success. Second, it is poor and minority students who are most likely to get ineffective teachers who are still around because they have tenure — but moved from school to school in what Treu calls, colorfully, the “dance of the lemons.”*

To be honest, I have mixed feelings about teacher tenure. I’d rather see teachers follow a professional model of the sort Jal Mehta advocates than a traditional union model. This has personal roots as much as anything: I’m the offspring of two teachers who were not exactly in love with their union. But at the same time, the attack on teacher tenure just further chips away at the idea that organizations have any obligation to their workers, or that employees deserve any level of security.

But I digress. The point I want to make is about evidence, and how it is used in policy making — here, in a court decision.

Read the rest of this entry »

Written by epopp

June 18, 2014 at 3:00 pm

how corporations got rights

This week the Supreme Court considered whether corporations ought to have constitutional rights of religious freedom, as given to human individuals, in Sebelius v. Hobby Lobby Stores Inc. For many people, the idea that companies ought to be given all of the rights of humans is absurd. But in recent years, this idea has become more and more of a reality, thanks to game-changing cases such as Citizens United vs. FEC. How did we get to this place?

In an article on Slate, Naomi Lamoreaux and William Novak briefly go over the history of how corporations evolved from artificial persons to real persons with human rights. They emphasize that this change was a slow descent that still seemed unthinkable to justices as late as the Rehnquist court.

The court’s move toward extending liberty rights to corporations is even more recent. In 1978, the court held in First National Bank of Boston v. Bellotti that citizens had the right to hear corporate political speech, effectively granting corporations First Amendment speech rights to spend money to influence the political process. But even then, the decision was contentious. Chief Justice William H. Rehnquist, in dissent, reminded the court of its own history: Though it had determined in Santa Clara that corporations had 14th Amendment property protections, it soon after ruled that the liberty of the due-process clause was “the liberty of natural, not artificial persons.”

If you find this piece interesting then I would encourage you to read Lamoreaux’s collaboration with Ruth Bloch, “Corporations and the Fourteenth Amendment,” a much more detailed look at this history. One interesting point that emerges from this paper is that our general understanding of how rights became ascribed to corporations is historically inaccurate. Bloch and Lamoreaux assert that although the Court in Santa Clara v. Southern Pacific Railroad  likened corporations to individuals and asserted that they might have some protected rights, they were careful to distinguish between corporate and human civil rights.

During the late nineteenth and early twentieth centuries, the Supreme Court drew careful distinctions among the various clauses of the Fourteenth Amendment. Some parts it applied to corporations, in particular the phrases involving property rights; but other parts, such as the privileges and immunities clause and the due –
process protections for liberty, it emphatically did not. Although this parsing might seem strange to us today, it derived from a remarkably coherent theory of federalism in which the Court positioned itself both as the enforcer of state regulatory authority over corporations and as the guardian of individual (but not corporate) liberty against state intrusion. To the extent that the Court extended constitutional protections to corporations, it did so to protect the interests of the human persons who made them up.

Read the whole paper. It’s fascinating!

Written by brayden king

March 28, 2014 at 3:15 pm

new book on work and family: Unfinished Business: Paid Family Leave in California and the Future of U.S. Work-Family Policy

When I visiting another university to give a talk a few years back, I met two faculty members for lunch.  One was wincing visibly in pain.  When I asked what was wrong, my colleague explained that he was suffering a migraine but that he would still teach class.  When I suggested cancelling class that day to recuperate, he felt he couldn’t.  He explained that he needed to save his vacation days for helping his ailing father, who was aging in place in another state.  Moments like these made me realize that for workers of all ages, attending to family matters is not easy or well-supported in the US.

Such policy issues are addressed in a new book by sociologist Ruth Milkman and economist Eileen Appelbaum: Unfinished Business: Paid Family Leave in California and the Future of U.S. Work-Family Policy (2013, ILR/Cornell University Press).

Here is a description of Unfinished Business: Paid Family Leave in California and the Future of U.S. Work-Family Policy provided by the authors:

This book documents the history of California’s decade-old paid family leave program, the first of its kind in the United States, which offers wage replacement for up to six weeks for all private-sector workers when they need time off from their jobs to bond with a new child or to care for a seriously ill family member. Based on original fieldwork and surveys of employers, workers, and the larger California adult population, it analyzes the impact of paid family leave on employers and workers in the state, and explores the implications for crafting future work-family policy for the nation.

The book makes three key arguments. The first concerns the politics of paid leave. In contrast to most government-sponsored social programs, which are under attack and often have little popular support, paid family leave (and indeed work-family policy more generally) is a crossover issue politically. Conservatives see it as an expression of “family values,” whereas for progressives it is a much-needed element of the safety net for working families. As a result it has strong support across the political spectrum. Business routinely opposes any and all legislative initiatives in this area, which is a major obstacle to passing laws like the one that created the California program. But because the population generally is so highly supportive of paid leave, that opposition can be overcome by means of coalition organizing, as the passage of California’s landmark 2002 law – documented here in detail – illustrates.

The second argument is that contrary to the claims of the Chamber of Commerce and other business lobbyists, paid family leave and other programs like it do not impose any major burdens on employers. This book presents survey data that show that in California, employers themselves concluded that the impact of the new state program on their productivity, profitability and performance was minimal and often positive. In addition, paid leave often reduced turnover and improved workers morale, at little or no cost to employers. The tax supporting the program is paid for entirely by workers, and many employers enjoyed cost savings as a result of the program’s creation, because they could coordinate their own wage replacement benefits with now offered by the state.

The third argument is more disturbing. This book shows that although workers who use California’s paid leave program and their family members have benefitted greatly, and although the program is well-managed and easy to access, awareness of its existence remains low. Moreover, those who are in most need of the program’s benefits – low wage workers, young workers, immigrants and disadvantaged minorities – all of whom have little or no access to employer-provided wage replacement benefits when they need to take time off to care for a new baby or a seriously ill relative – are least likely to know about it. As a result, the program’s potential to act as a social leveler, making paid leave available not only to managers and professionals, who are much more likely than lower-level workers to have access to paid time off in any form, but to all private-sector workers, has not yet been achieved. Instead the longstanding pattern of inequality in access to paid leave has remained largely intact. And even workers who are aware of the new state program are often reluctant to take advantage of it because they fear repercussions on the job.

Here’s the front and back of the book cover:

Milkman-Pprbk, Proof#1 copy

Check out the book – the 2014 ESS annual meeting in Baltimore will feature this book (and others) as an author-meets-critics session.

Written by katherinechen

October 11, 2013 at 7:39 pm