Under Penalty of Catapult

Sen. Rand Paul (R-KY), son of Republican presidential candidate Rep. Ron Paul, will introduce legislation within the next two weeks aimed at ending the federal antitrust system. I’ve seen a draft copy of the bill, which formally repeals the Sherman and Clayton antitrust acts and forbids the Federal Trade Commission from interfering with any “voluntary economic coordination” among individuals.

My antitrust ebook, Irrelevant Markets, is now available for just $1.99 as a Kindle or ePub file.

Although I retired from antitrust writing last year, I still have a decade’s worth of archives. I decided to compile some of my better antitrust essays into a single e-book, Irrelevant Markets, a play on the annoying antitrust phrase “relevant markets.” You can purchase Irrelevant Markets for $3.99 via Amazon (for the Kindle) or at Lulu (for ePub readers). Here is a sample chapter from the book.

History likes to repeat itself. Just a few months after NFL players tried to decertify-and-antitrust their way to a better labor deal, their NBA brethren are now running the same play. The big difference this time is that the NBA has already cancelled games and yesterday’s decertification announcement effectively kills the 2011–2012 season.

Another difference is that antitrust guru David Boies — one of my Hall of Famers — has switched sides. Boies previously argued for the NFL owners; now he’ll spearhead the NBA players’ antitrust litigation along with Jeffrey Kessler, who also worked for the NFL players.

The antitrust lawyers always do well in these disputes, and that’s a testament to how much the “labor negotiations” process reeks of government intervention. While the storyline is always presented as “billionaires vs. millionaires,” with many media folks livid that the parties can’t come to a timely agreement, we don’t see any blame assigned to the state that created the conditions for these disputes. It’s come to the point where we think of work stoppages in sports like business cycles — something that’s just inevitable with no identifiable cause (beyond “greed,” of course).

The idea of a “collective bargaining agreement” itself is a state invention. Individual players already have contracts with NBA clubs. Antitrust rules forbid the owners from collectively setting prices or restricting player movement. Yet the government exempts the owners from these rules so long as they negotiate with a government-recognized labor union that holds a monopsony over NBA players.

The union itself can override the individual preferences of players, thanks to its government powers. Indeed, the leadership of the NBA players’ union has steadfastly refused to allow its membership to even vote on the league’s proposals — and it was the leadership that voted to decertify and initiate antitrust proceedings. The individual player’s economic rights are completely subsumed to the state-imposed labor system.

As for the lockout, that is nothing more than an ongoing breach of existing individual player contracts by the owners, and as we saw in the NFL case, the courts will refuse to remedy the breach so long as there is a government-sanctioned labor dispute.

In a free market, the owners could certainly band together and boycott the players until they agreed to accept certain rules or working conditions. But the owners could not refuse to honor existing contracts. Nor could they insist on dealing with a single monopsony union. (Remember, the NBA and NFL want unions, as it makes it easier to enforce their bureaucratic mandates.) And neither side could resort to litigation over the other’s refusal to enter into prospective agreements.

The National Antitrust Hall of Fame’s Class of 2012 dishonors and mocks the contributions of five noteworthy individuals to the cause of promoting the spread of what Cato Institute author Edwin Rockefeller has dubbed “The Antitrust Religion.” The Class of 2012 includes US senator and NBA owner Herbert H. Kohl, former chief justice of the United States Edward Douglass White, Jr. (pictured), former San Francisco mayor Joseph Lawrence Alioto, antitrust attorney Joseph J. Simons and former Justice Department antitrust chief Ann Kovacovich Bingaman.This sophomore class adds to the five individuals dishonored in the Hall’s inaugural Class of 2011.

Herbert H. Kohl has represented Wisconsin in the US Senate since 1989. For the past two decades, he’s been the Democratic spokesman on antitrust issues from his perch atop the Judiciary Committee’s Subcommittee on Antitrust, Competition Policy & Consumer Rights. He’s been a zealous advocate of expanded antitrust intervention in all areas of the economy. This past year, Kohl led an inquisition against Google, alleging the provider of free Internet search and related services somehow poses a threat to consumers. Kohl’s influence over US antitrust policy extends to the appointment of his former aide, Jon Leibowitz, as chairman of the Federal Trade Commission.

While Kohl believes antitrust is essential to competition, he makes an exception for his personal ownership of the NBA’s Milwaukee Bucks. As an NBA owner, Kohl enjoys special antitrust privileges and routinely promotes the type of collective action — including price-fixing and group boycotts — that he condemns as illegal activity in other industries.

Edward Douglass White, Jr. served on the United States Supreme Court for 27 years and presided as chief justice from 1910 until his death in 1921. The onetime Louisiana senator made his mark on antitrust law by authoring the Court’s opinion in Standard Oil Co. of New Jersey v. United States, which established the “rule of reason.” The rule — which wasn’t a rule so much as a vague set of guidelines — led to a century of arguing among antitrust scholars and judges over what conduct is and is not permitted under the antitrust laws.

Joseph Lawrence Alioto made a fortune as a private antitrust attorney suing and defending wealthy clients in California, notably movie studios. He used that fortune to build a business and political empire, culminating in his election as San Francisco’s mayor in 1967. After two controversial terms — which included surviving a federal corruption trial over his misuse of settlement funds from an earlier antitrust lawsuit — Alioto resumed his antitrust practice, where he continued litigating until his death in 1998. Alioto’s most famous post-mayoral antitrust victory came representing renegade NFL owner Al Davis against his fellow owners over his moving the Raiders from Oakland to Los Angeles.

Joseph J. Simons is a partner in the Washington office of Paul, Weiss, Rifkind, Wharton & Garrison LLP. Simons served as the FTC’s chief antitrust enforcer from 2001 thru 2003, a period that saw a dramatic increase in regulatory intervention. Simons’ own law firm profile speaks for itself:

Under his leadership, the Commission pursued a strong bipartisan enforcement agenda under which all but one of the more than 70 antitrust enforcement actions taken by the agency were by unanimous vote. During his tenure, the FTC prevailed in all of the 46 merger enforcement actions taken by the Commission. Mr. Simons was responsible for overseeing the re-invigoration of the FTC’s non-merger enforcement program, initiating well over 100 investigations in two years and producing more non-merger enforcement actions in one year than in any year in the last two decades. He also initiated a new emphasis at the FTC on administrative litigation, substantially increasing the number of trials before the agency, including merger, monopolization, and horizontal restraint cases.

One of Simons’ most notable FTC actions was a challenge to the 2002 merger of Nestlé and Dreyer’s. Simons claimed the deal would create a monopoly in the “market” for “superpremium” ice cream. When challenged by aWall Street Journal columnist to defend such an absurd market definition, Simons replied the author was “a frequent defender of the oppressed cartel classes” who didn’t understand markets better than FTC lawyers. Simons left the FTC shortly afterwards to join Paul, Weiss.

Anne Kovacovich Bingaman spent 15 years as an antitrust lawyer before President Clinton nominated her to head the Justice Department’s Antitrust Division in 1993. Her confirmation was easy given that she was married to a sitting US senator, New Mexico’s Jeff Bingaman. As the Assistant Attorney General for antitrust, Bingaman “reinvigorated” the division by bringing as many cases as she could, increasing the amount of fines collected and abandoning previous administration’s restraints on antitrust imperialism.

Bingaman’s greatest impact, however, came in manufacturing non-merger civil antitrust cases. The crown jewel of this was the DOJ’s decade-long case against Microsoft, which established the antitrust establishment’s foothold in the technology and developing Internet sectors.

After leaving the Justice Department in 1996, Bingaman worked as an executive in the telecommunications industry. She later founded Soundpath Conferencing Services, a legal consulting firm.

(Re-posted from the National Antitrust Hall of Fame.)

Michael Silver of Yahoo Sports pens an open letter to NFL Commissioner Roger Goodell about his apparently inconsistent disciplinary decisions:

I believe you have a blind spot on the issue of punishing coaches whose behavior tarnishes “The Shield,” and it kind of makes you look like a hypocrite.

Personally, I’m not a big fan of fining players for things like improper shoe color or calling wifey on the phone (possibly in a loopy state) to say, “Honey, let’s have a candlelight dinner tonight … actually, make that dinner in a completely darkened room.” But I get it – you’re the Sheriff, and rules are rules.

That said, if you’re going to flex your power, it kind of helps your credibility when you at least go through the motions of doing so in an even-handed manner. Too often, your decisions seem arbitrary.

Actually, it’s not that Goodell’s decisions “seem” arbitrary. They are arbitrary, because the NFL’s rules grant Goodell virtually unlimited discretion not only to punish violators, but to determine ex post what constitutes a violation. By definition anything Goodell does will be arbitrary.

Now I’m no Goodell supporter. Like Silver, I’ve pointed out the glaring inconsistencies in Goodell’s makeshift jurisprudence. But even I’ll admit it’s silly for us to criticize Goodell for hypocrisy. He’s a regulator, not a businessman, and he’s only acting according to his nature.

Think about it. The title “commissioner” alone suggests Goodell’s office is more akin to a member of the Federal Trade Commission — whose members are also “commissioners” — than the CEO of a private trade association. Like an FTC member, he’s granted broad powers to identify and punish malfeasance. In Goodell’s case it’s “conduct detrimental” to the the league; in the FTC’s it’s “unfair” competition. Both mandates rely on the judgment of the individual regulator rather than a clear list of prohibited acts and accompanying penalties.

And like Goodell, the FTC is maddeningly inconsistent. I’ll give one recent example. This week the FTC hears arguments in a case it brought against the State of North Carolina. The FTC objects to a state regulator’s decision to treat teeth-whitening services as a form of “dentistry” subject to the same licensing requirements as dentists. The FTC claims the state’s actions discourage competition and unfairly bolster the licensing board’s monopoly. The FTC has a point.

Except that the FTC does the exact same sort of thing at the federal level. The FTC frequently drives firms out of the marketplace when they try to compete with the federal government’s drug monopoly, aka the Food and Drug Administration. In fact, the FTC uses the exact same legal arguments that North Carolina has in support of its teeth-whitening restrictions. Hypocrisy? Sure. But that’s irrelevant. As long as you accept the premise that the FTC should exercise a broad, discretionary mandate, you can’t then turn around and complain their using that discretion inconsistently. As a famous fictional bureaucrat, Colonel Jessup, put it in A Few Good Men, “I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very freedom that I provide, and then questions the manner in which I provide it.”

Tennis officials fined Serena Williams $2,000 for lashing out (verbally) at a chair umpire during her loss in the US Open final to Samantha Stosur. I applaud the US Open officials for showing greater restraint than Williams. While I’m sure we’ll see the usual round of fabricated media outrage over the “low” fine, the truth is this was a minor incident (that was hardly unusual in the context of professional tennis) that didn’t warrant any great public show of retribution. Unfortunately, other sports leagues and governing bodies rarely exercise such discretion.

Indeed, on the same day the Williams fine came down, the NBA fined Charlotte Bobcats owner Michael Jordan $100,000 for talking about the ongoing NBA lockout without permission from Commissioner David Stern. Jordan’s comments were innocuous; he did little more than repeat the company line to an Australian newspaper. He also said some nice things about a player who wasn’t on his roster. It’s odd to think the NBA would punish Jordan for being complementary towards a player — something which Jordan isn’t exactly famous for. It’s even odder to wonder why the NBA turned on a non-story — most of us would never have seen Jordan’s comments had Stern not imposed a fine — into a story.

Punishment is often justified on deterrence grounds: By fining so-an-so today, it discourages him and others from committing a similar transgression in the future. This is generally bunk. Punishment is usually about the punisher, not the punishee. It’s an exercise in making the punisher feel important. This is why the level of fines and penalties tend to increase over time.

Years ago, I attended a panel discussion with the lawyer then running the Justice Department’s Antitrust Division. He was gushing that his office continued to collect record fines — at that time, about $500 million annually — from defendants in “price fixing” cases. Another lawyer in the room, an experienced antitrust practitioner himself, asked then how could the fines be deterring “price fixing” if the levels kept rising. The Division chief tried to cover his tracks and said that while the level of punishment kept rising, the amount of “undetected” antitrust violations were decreasing. In other words, he argued that his fines deterred conduct he couldn’t actually see. I don’t think anyone in the room bought this.

Government agencies usually fine as a backdoor method of taxation. I doubt the NBA or NFL fine people for the money. Sports commissioners are simply on personal power trips. They need to constantly reaffirm their own dubious value to the sports culture. I’ve long argued that commissioners, in all sports, are unnecessary at best and hindrances at worst. In no other industry can an employee punish his employers for speaking about the businesses they own. For that matter, few if any businesses allow CEOs to withhold part of their employees’ salaries on dubious grounds like “protecting the integrity of the league.”

As noted above, fines also take minor incidents and turn them into major ones. Most corporate executives strive to avoid this. You don’t publicly discipline employees (or shareholders) in an attempt to minimize bad public relations. This is why Roger Goodell’s behavior has always baffled me. He consistently lengthens the media cycle for scandals by imposing arbitrary and capricious fines and suspensions. Just look at the Terrelle Pryor and Jim Tressel punishments. Their presence in the league would have been a minor, sidebar story to the start of the NFL season — until Goodell made a public display of punishing both men, ensuring the story will last several weeks into the season. I’m sorry, this isn’t deterrence or discipline; it’s simply poor public relations management.

The NFL is playing with antitrust fire in its efforts to enforce NCAA penalties against Ohio State football alumni. Following the four-game “suspension” of now-Oakland Raiders quarterback Terrelle Pryor, Mike Freeman of CBS Sports reports that the Indianapolis Colts will “delay” its hiring of former Ohio State coach Jim Tressel as a consultant:

But let’s be clear on this. This is a suspension.

The statement from the Colts: “After the announcement of Coach Jim Tressel’s agreement to join the Colts as a game day consultant, questions were raised with respect to the equity of his appointment as opposed to suspensions being served this season by present and former Ohio State players.

“Over the weekend Coach Tressel, Mr. Irsay, Coach Caldwell and I had a discussion of the issue. In addition, we had a conversation with league officials to apprise them of the details of Coach Tressel’s employment and the issues we were reviewing.

“At Coach Tressel’s suggestion, and with Mr. Irsay’s concurrence and support, we have decided to begin Coach Tressel’s employment effective with our seventh regular season game. We have informed the league office of our decision and expect that they will be supportive of it.

As I previously noted, NFL Commissioner Roger Goodell required Pryor, Tressel’s former player, ”to serve the NCAA’s five-game suspension as a condition of allowing him into the NFL.” Goodell effectively created a new employment requirement that didn’t exist in the NFL’s rules. Superficially, the Tressel case appears different since the Colts are portraying it as a joint decision between the employee and employer without any direct involvement from Goodell or the league office.

But as Freeman notes, this is clearly a suspension, and one he approves of: “The NFL got the Tressel suspension right. We knock the league when it does stuff wrong but Goodell and the Colts should be applauded.” I’m unclear as to why this should be applauded. Goodell acted illegally in the Pryor case. Putting on a charade of consistency in the Tressel case does not retroactively sanctify the original illegal act.

The long-term problem is that the NFL may be dragging itself and the NCAA into a massive antitrust trap. If two wholly independent entities collude to fix employment conditions, that’s a textbook Sherman Act violation. A recent Justice Department case illustrates the problem. Last year the DOJ obtained an order against six technology companies over allegations they colluded to restrain competition for employees:

According to the complaint, the six companies entered into agreements that restrained competition between them for highly skilled employees. The agreements between Apple and Google, Apple and Adobe, Apple and Pixar and Google and Intel prevented the companies from directly soliciting each other’s employees. An agreement between Google and Intuit prevented Google from directly soliciting Intuit employees.

“The agreements challenged here restrained competition for affected employees without any procompetitive justification and distorted the competitive process,” said Molly S. Boast, Deputy Assistant Attorney General in the Department of Justice’s Antitrust Division. “The proposed settlement resolves the department’s antitrust concerns with regard to these no solicitation agreements.”

In the high technology sector, there is a strong demand for employees with advanced or specialized skills, the department said. One of the principal means by which high tech companies recruit these types of employees is to solicit them directly from other companies in a process referred to as, “cold calling.” This form of competition, when unrestrained, results in better career opportunities, the department said.

According to the complaint, the companies engaged in a practice of agreeing not to cold call any employee at the other company. The complaint indicates that the agreements were formed and actively managed by senior executives of these companies.

The complaint alleges that the companies’ actions reduced their ability to compete for high tech workers and interfered with the proper functioning of the price-setting mechanism that otherwise would have prevailed in competition for employees.

How is this relevant to the NFL’s actions against Pryor and now Tressel? The NFL and NCAA do compete, indirectly if not directly, for employees. Tressel and Pryor are perfect examples. Both went to the NFL rather than remain in the NCAA under the restrictions imposed by their suspensions. Both found teams willing to employ them despite their recent scandals. It’s hardly unusual for a person to leave one firm for less-than-ideal reasons and find employment with a competing firm. It is unusual for the competing firm to honor its competitor’s disciplinary policies.

And this brings us back to the Apple case. There the issue was Apple entering into an agreement with competitors to not openly recruit each other’s employees. The DOJ’s complaint never specified actual victims — that is, employees of one company who were denied better jobs at a competing firm due to the collusion. The DOJ didn’t have to offer specifics. In a price fixing case, the mere act of collusion is itself illegal, irrespective of whether there was actual harm.

With the NFL, we have a case where there is at a minimum tacit collusion with the NCAA to restrict the conditions by which employees can move from one employer to another. Given a competent antitrust lawyer and adequate time for discovery, it probably won’t be hard to find express evidence of collusion between Goodell and the NCAA. And then you’re talking substantial antitrust liability, not just civilly, but potentially criminal. In this country, we send people to prison for “price fixing.”

The NFL is on especially shaky ground because there is no legal or contractual authority to enforce NCAA suspensions. The NFL’s labor antitrust exemption only applies to matters specifically negotiated in the collective bargaining agreement. The NFL’s bylaws — the contract among league owners — does not authorize the commissioner to enforce NCAA suspensions as a condition of NFL employment. This undercuts any argument that there is a “procompetitive justification” for the suspensions, since they are clearly not necessary to preserve the lawful objectives of the owners’ joint venture in the NFL.

And while the NFL may be doing this to help bolster its de facto minor league, the antitrust risk to the NCAA is even greater. The NCAA is, by any conventional antitrust standard, the biggest illegal cartel in the United States. It survives antitrust scrutiny largely because the courts afford a wide berth for the association’s “amateurism” policies. But if the NCAA and NFL openly collude to restrict employment in what is clearly a professional league, then all bets are off. The courts may well decide its long past time to enforce the same antitrust standards against the NCAA as the NFL and other professional sports leagues.

The House of Representatives should immediately impeach Judge Mark W. Bennett of the U.S. District Court for the Northern District of Iowa. This past February, Bennett committed one of the most astonishing abuses of power I’ve seen in over 10 years of covering antitrust policy. He sentenced a defendant in a federal “price-fixing” case to double the prison sentence recommended by the Justice Department’s Antitrust Division based entirely on his personal disagreement with historical sentencing guidelines in antitrust cases — and the fact that the defendant was a rich, Caucasian male. While Bennett’s actions are currently on appeal to the Eighth Circuit Court of Appeals, the House has every right to get this maniac off the federal bench without further delay.

In April 2010 the Justice Department charged Steven VandeBrake with one count of “price-fixing” in violation of the Sherman Act. Mr. VandeBrake ran a family-owned concrete company in Iowa. The DOJ said that over a three-year period, VandeBrake entered into several voluntary agreements with competitors to charge similar prices for certain ready-mix concrete products. The DOJ estimated the entire volume of commerce “affected” by these agreements at about $5.6 million.

VandeBrake signed a plea agreement whereby the Antitrust Division recommended a prison sentence of about 1 1/2 years and a fine of $100,000. The case was assigned to Bennett, a Democrat appointed to the federal bench by Bill Clinton, who didn’t bother to review any of the facts — Mr. VandeBrake had never even appeared in court — before announcing in open court he would reject the plea agreement. At a May 2010 hearing, Bennett explained he rejected the recommended sentence simply because it infringed on his “discretion” to decide for himself how long Mr. VandeBrake should rot in prison. Bennett said he saw this as a “separation of powers issue,” and that as a matter of “judicial philosophy” — and not based on the facts of the case — he was “not willing to give up his discretion.” Bennett then went on to mock the lead prosecutor’s lack of experience with trials and sentences relative to the Great Judge himself:

My question is why should I defer to someone with such little, infinitesimal experience? You could be the greatest lawyer since Clarence Darrow. That remains to be seen. But I’m saying based on what you’ve told me you have zilch, nada, none, virtually no real-world experience. So why should I defer to your judgment about how the [sentencing] factors would apply in a case?

Bennett was so incensed that a week later, he continued to complain about the Division’s plea agreement with Mr. VandeBrake while presiding over a completely unrelated case. And to add insult to injury, Bennett told the lawyers in the unrelated case that Mr. VandeBrake was apparently guilty of things the Antitrust Division never accused him of:

[VandeBrake] said if you don’t participate in the Sherman Act antitrust scheme we’ll put you out of business, so either fix prices with us or we have leverage to put your company out of business. So he used his market share, his market power, and the fact that he was violating the antitrust laws to threaten a legitimate company that wasn’t violating the law to either go along with it or to put him out of business. And then the government waltzes in and recommends a 19-month sentence.

In other words, Bennett said Mr. VandeBrake engaged in coercion. But the Antitrust Division never said any such thing. The government only accused Mr. VandeBrake into entering voluntary agreements with competitors regarding prices.

When Bennett finally sentenced Mr. VandeBrake, the judge substituted character assassination for legal reasoning:

Writer Pearl S. Buck cogently observed in her novel The Good Earth, “Hunger makes a thief of any man.” Defendants Steven Keith VandeBrake and Kent Robert Stewart came before the court for sentencing on February 8, 2011, for violations of the Sherman Act, 15 U.S.C. § 1. Neither defendant, however, suffered from hunger, at least as Pearl Buck knew it, but from insatiable greed, which is all the more shocking because both were already wealthy, multi-millionaire businessmen. Sir Francis Bacon wrote, “Opportunity makes a thief.” While Stewart’s greed was at least tempered a modicum by Stewart’s misguided motivation to ensure the jobs and livelihood of his employees, VandeBrake’s appalling greed knew no such bounds and was fueled by the unique ease and opportunity that his industry, concrete sales, gave him in establishing a concrete cartel in northwest Iowa. The defendants, although dressed in the attire of hard working businessmen, were nothing more than common thieves, and serial ones at that. Like a neighborhood thief, they stole from friends, acquaintances, businesses and local governments The defendants tools of their trade were not dark clothing worn in midnight burglaries facilitated by pry bars and screw drivers. Instead, in ordinary business attire and in the glare of broad daylight, they used the ordinary communication tools of modern commerce and business, cell phones, Blackberries, and e-mail to rob their victims. Unlike the neighborhood thief who values high end TV’s, computers, jewelry, and furs, the defendants specialized in cold hard cash. Unlike the neighborhood thief whose victims immediately recoiled in shock at the loss of their property, the defendants stole from their victims without them ever knowing it.

Now the basic problem here is that Mr. VandeBrake didn’t “steal” anything. “Price-fixing” is not fraud or theft, despite Bennett’s repeated wishes that were so. Mr. VandeBrake was accused of charging more for his goods than the government would have liked him to charge. But it’s not as if Mr. VandeBrake took people’s money and gave them nothing in return. Yes, he apparently entered into voluntary exchanges of information with other individuals selling the same product as him. Freedom of speech and association are supposed to be protected from government encroachment by the First Amendment. More to the point, Mr. VandeBrake has every right to determine the disposition of his own property — even if that involves entering into agreements with similarly situated property owners. To say what happened here was “theft” is an outright lie.

Yet the core of Bennett’s opinion was that “price-fixing” should be treated just as harshly as fraud, even though neither the law nor the Antitrust Division demand as much. Bennett said he disagreed with this “sentencing policy,” so he demanded Mr. VandeBrake spend four years in prison — more than double the government’s recommendation — and pay a fine of nearly $830,000 (three times what the DOJ sought) to correct what he considered the improper disparity between fraud and antitrust sentences:

One cannot help but wonder why sentences under the Sherman Act are so low. Is it the result of be explicit and/or implicit bias on behalf of Congress? The captains of American industry at the time of the Sherman Act’s passage in 1890, and the most likely targets of prosecution under the Sherman Act, were the likes of J.P. Morgan, John D. Rockefeller, Andrew Carnegie, and Meyer Guggenheim. These individuals were almost exclusively wealthy, white, Anglo-Saxon, protestant males who were politically well-connected. Although the demographics of American industry have changed since 1890, the overly lenient sentencing (in my view) for white collar, antitrust criminals found in the origins of the Sherman Act lingers today in the United States Sentencing Commission Guidelines.

So Mr. VandeBrake will spend an additional two-plus years in jail because he’s a white male who unfairly benefitted from the 1890 Congress’s “leniency” towards antitrust sentencing. (Bennett himself is white, incidentally.)

In justifying the four-year prison sentence — which, by the way, ties the record for the longest pure antitrust sentence ever imposed in the US — Bennett grasped at all manner of straw to show why Mr. VandeBrake was a truly evil man. First, Bennett said, it would be one thing if Mr. VandeBrake fixed prices for a “luxury” — but this Godless bastard fixed prices of “concrete,” which people need to build buildings!:

[C]oncrete is employed in the construction of significant portions of our nation’s infrastructure. Indeed, one would be hard pressed to gaze in any direction in a modern city and not see an architectural structure which does not have as a component, some concrete. Moreover, in many instances, there will be no reasonable substitute for concrete. For instance, any individual or family seeking to build a new home, or a community planning to construct a new school, will be required to purchase concrete for their new building’s foundation. Thus, the price of concrete in turn determines the price of all projects in which it is used and has a secondary effect on our economy. Excess monies spent on VandeBrake or his co-conspirator’s overpriced concrete deprived their concrete purchasers of the option and ability to spend those lost monies on other products. This is particularly troublesome when one considers the fact that a number of projects that VandeBrake rigged bids on were public works. By rigging bids on these public works projects, VandeBrake effectively robbed several local governments of monies that could have been used for the betterment of their communities. Given VandeBrake’s utter lack of involvement in any charitable or civic activities, this is hardly surprising.

It never occured to Bennett that Mr. VandeBrake might actually be performing a greater “charitable or civic” function by, y’know, providing concrete to people in the first place. Nor did it cross Bennett’s mind that local governments ever waste money on unnecessary, ego-driven projects. If the state does it, it must be for the “betterment” of the community, while anything Mr. VandeBrake does is motivated by his intrinsic evil and lack of a social conscience.

There is also no “necessity” factor in determining antitrust sentences. As Mr. VandeBrake’s counsel noted in their appeal brief, “It strains reality to suggest, as the district court implicitly did, that Americans are significantly more dependent on ready-mix concrete than they are on vitamins, air transportation, citric acid, milk, gasoline, and refrigeration,” all of which have been the subjects of previous criminal “price-fixing” cases. And no judge in any of those cases saw cause to impose a four-year prison sentence on antitrust charges alone. To the contrary, even in cases where the total volume of commerce affected was substantially higher — that is, international markets versus the highly localized concrete market in northwestern Iowa — no court ever imposed as high a sentence as Bennett did on Mr. VandeBrake. (The average sentence, according to VandeBrake’s appeal brief, is 7-8 months, as opposed to the 48 months he received.)

Ultimately, Bennett simply saw Mr. VandeBrake as a target of opportunity — a scapegoat for the judge’s arrogant belief in his own righteousness and the error of Congress’s ways:

I appear to be the first federal judge to consider varying upward from the Sentencing Guidelines based on my policy disagreements with the Sentencing Guidelines’s relatively lenient treatment of antitrust violations when compared to fraud sentences. This action, by changing the status quo of antitrust sentences, will understandably result in a sentencing disparity between the defendants here and those sentenced previously.

This is legislating from the bench at its scariest. Bennett’s actions, if left unchecked, provide a license to every federal judge to impose draconian antitrust sentences based on his or her personal perception of a defendant’s wealth and background. By Bennett’s admission, he punished Mr. VandeBrake not for what he did, but because he came from a wealthy family and was motivated by “greed.” This was a pure witch-hunt on Bennett’s part.

Regardless of whether the Eighth Circuit overturns Mr. VandeBrake’s sentence, Mark Bennett should never be allowed to stand in judgment of another human being again. He abused his power in such a flagrant, heartless and ignorant manner, that impeachment is the only just remedy.

A month after the Federal Trade Commission appointed a British government agent to a senior managerial post, the nominally American agency is at it again. On July 27, FTC Chairman Jon Leibowitz and his Justice Department counterpart, outgoing Assistant Attorney General Christine Varney, signed a “memorandum of understanding” with three agents of the People’s Republic of China. This new alliance will strengthen antitrust enforcement in both countries — what China calls “antimonopoly” law, a hideous Orwellism given the Communist Party outlaws any competition for control of the state apparatus.

The FTC/DOJ-China alliance was not a surprise. American antitrust officials spent years — and unspecified taxpayer dollars — lobbying the Communist regime to adopt its antitrust statutes in the first place. Several years ago I obtained, via a Freedom of Information Act request, a line-by-line vetting of the then-under-discussion Chinese anti-monopoly law prepared by the Justice Department’s Antitrust Division. And in 2009, the DOJ’s Varney told Congress that the Division “has had exchanges with Chinese agencies on their proposed regulations and guidelines, arranged a training program for 80 Chinese judges, and participated as instructors in workshops on merger enforcement, cartels, and other topics.”

Under the new alliance, the PRC will have an equal opportunity to influence our regulators. The memorandum of understanding identifies the following subjects for future FTC/DOJ-PRC coordination:

[quote](a) keeping each other informed of significant competition policy and enforcement developments in their respective jurisdictions; (b) enhancing each agency’s capabilities with appropriate activities related to competition policy and law such as training programs, workshops, study missions and internships; (c) exchanging experiences on competition law enforcement, when appropriate; (d) seeking information or advice from one another regarding matters of competition law enforcement and policy; (e) providing comments on proposed changes to competition laws, regulations, rules and guidelines; (f) exchanging views with respect to multilateral competition law and policy; and (g) exchanging experiences in raising companies’, other government agencies’ and the public’s awareness of competition policy and law.[/quote]

Items (b) and (e) are particularly disturbing. The former creates a pretext for additional American taxpayer subsidies of antitrust activities. Conversely, it allows the Communist regime to lavish junkets and favors on American antitrust officials (two FTC commissioners were part of just such a junket in Shanghai a few years ago). By committing to “enhancing each agency’s capabilities,” the US and Chinese authorities are now full partners in the war against American businesses and individuals, particularly successful firms like Intel and Google that have been deemed threats to public order by Leibowitz’s FTC.

The FTC has long objected to companies like Google voluntarily gathering information from customers. The Commission claims this violates some unspecified right to “privacy.” Yet the same Commission has no qualms whatsoever about sharing information with a Communist regime that has a long documented history of violating individual rights — and punishing anyone who even advocates respecting such rights.

There is also great potential for abuse by the DOJ, which has openly declared war against non-American citizens in its quest to cleanse the world of “price fixing.” Just one week before announcing the China alliance, the DOJ arrested a Taiwanese manufacturing executive at Los Angeles International Airport and charged him with criminal “price fixing.” In fact, several Taiwanese citizens have been hauled to the US on spurious antitrust charges over the past few years. The fact that China maintains a political claim over Taiwan had nothing to do with any of this, of course.

The other major problem with this alliance is the special privileges afforded the PRC to provide “comments on proposed changes” to American antitrust laws and regulations. On one level, it’s simply unfathomable that people who claim to uphold the United States Constitution would openly grant agents of a repressive foreign dictatorship any say over the laws that govern American citizens. On another level, however, this isn’t surprising in the least. The FTC and DOJ already embody significant departures from the constitutional framework envisioned by the federalists of 1789. The FTC in particular violates just about every principle American government claims to cherish, from abolishing the right to jury trial to combining executive, legislative and judicial functions in a single unelected body. Of course the FTC sought out a natural ally in the PRC to strengthen its own illegitimate domestic monopoly.

Over at Saturday Down South, I explore the possible causes for SEC expansion, and at the National Antitrust Hall of Fame I critique the FTC and DOJ’s new alliance with the Chinese government.

1. Canada’s Founders Debated Justification for Patents
2. Will Copyright Kill the Virtual Bunnies?
3. Peter King vs. Economic Literacy — The sportswriter, not the congressman
4. Ever Wonder Why College Games Are On Saturday & NFL Games Are On Sunday?
5. FTC Lies, Ignores Monopolistic Practices
6. The Antitrust Playoffs Have Begun
7. MPAA: Cartelization, Not Creativity
8. If You Build It… — Quebec politicians build a hockey arena without a hockey team
9. Virginia Is Not For Small Businesses
10. Nobody Likes Competition — Especially restaurant owners charging $18 for a “locally grown” hamburger
11. Dim Bulbs Indeed — The nation’s “consumer protection” agency explains why it’s better to pay more for less efficient light bulbs
12. SEC Revenue: Where’s the Money Come From?
13. Chizik Gets Paid $3.5M Annually: Overpaid, Underpaid, or Necessary Evil in the SEC?
14. Lord Stanley’s Riots
15. Antitrust Case Tastes Like Chicken
16. Laboring Against the Idea of Labor — The eternal debate over whether college football players are a labor force
17. From Farm to Zoning Official
18. Copying, Not Trolling, Is “Fair Use”
19. FTC Names British Government Agent to Senior Position
20. A series of posts on the FTC’s looming war with Google: I, II, III, IV
21. DOJ Orders Company to Make Improvements Delayed by DOJ Lawsuit
22. Justice Thomas Longs for a More Puritan America
23. Only Lawyers Can Fix Problem Created by Lawyers

The Federal Trade Commission recently appointed a British government agent to a senior management position, raising serious concerns about the FTC’s commitment to US sovereignty and the increasing role of unelected foreign antitrust regulators in restricting the property rights and economic liberties of American citizens.

On June 22, the FTC named Dr. Alison Oldale as deputy director for antitrust in the agency’s Bureau of Economics. Dr. Oldale, who is not a US citizen, is currently the chief economist for the United Kingdom’s Competition Commission (UKCC). According to a UKCC press release, Dr. Oldale will be “on a year’s secondment” — in effect, on loan to the FTC — and she is expected to return to UKCC after completing her service in the US. The FTC’s press release on Dr. Oldale’s appointment did not disclose this.

Dr. Oldale joined the UKCC in 2009 after working as a director at LECG Corporation, an international consulting firm that provided expert testimony in antitrust litigation. LECG employees were frequent participants in FTC policy workshops, and David Scheffman, a former LECG director, served twice as director of the FTC’s Bureau of Economics. LECG ceased operations earlier this year.

At the Bureau of Economics, Dr. Oldale will oversee approximately 45 economists and support staff working in two groups to review potential antitrust cases. While the FTC’s Bureau of Competition — one of the agency’s two enforcement arms — makes the final decisions on what cases to prosecute, the Bureau of Economic plays a critical policymaking role, according to FTC documents:

Staff economists work closely with the attorney staff in designing investigations, formulating candidate economic theories, and searching for confirming or denying evidence in documents, from customers, or industry sources. BE [Bureau of Economics] takes the lead role in data gathering and econometric analysis regarding various issues connected with a case. For antitrust cases, such analysis might relate to demand estimation or price comparisons across markets with differing structures. … Interaction between BE and the parties’ economists is now more common that it once was during investigations, due, in part, to the increased use of econometric work by the enforcement agencies and outside parties in merger investigations.

In the course of an FTC antitrust investigation — which can last for months if not years — Bureau of Economics staff has access to private business documents obtained from investigation targets. The FTC is not subject to the Fourth Amendment’s probable cause and judicial oversight requirements, and antitrust investigations often devolve into fishing expeditions designed to uncover information that can be used (or misused) into forcing companies to take certain actions desired by Commission officials.

As deputy director, Dr. Oldale will be in a position where she can directly influence the decision-making of American companies and, more importantly, provide cover for the predetermined actions of Bureau of Competition officials who wish to oppose a particular merger or business practice for political reasons. This is a sensitive position, and it is highly questionable for the FTC to appoint an agent of a foreign government to it, especially since there is no shortage of similarly credentialed economists in the US who could fill the role.

Indeed, the FTC seems to value its relationship with the UKCC over any perceived duty to serve the American public. David Saunders, chief executive of the UKCC, said in a statement that Dr. Oldale’s tenure at the FTC “will bring longer-term benefits for us and further strengthen our relationship with the FTC.” Yet it’s unclear how Americans benefit from that relationship. The UKCC is a the democratically elected agent of the British people. Like the FTC, it is an unelected bureaucracy with only nominal ties to the elected constitutional government.

These types of inter-bureaucratic relationships only widen the chasm between the public and the government, because they foster the creation of networks that transcend any attempt at constitutional limits. The FTC understands this. That explains not only Dr. Oldale’s appointment, but the Commission’s creation and leadership of the International Competition Network, a UN-type organization composed of unelected antitrust regulators from around the world. The ICN is yet another forum where the FTC can meet with its foreign counterparts away from prying eyes — their most recent meeting was in the Netherlands — and coordinate policies that directly inhibit the rights and liberties of American citizens.

That said, this is not first and foremost a “one world order” scheme for its own sake. The international antitrust community is ultimately a cartel designed to advance the private economic interests of its participants. Dr. Oldale is a perfect example; a person who has moved between government and private “consulting,” where her value increases as she becomes more and more connected to the key antitrust decision-makers around the world.

That Bureau of Economics attracts dozens of economists in the first place by offering a credential that makes the holder more valuable to future academic and corporate employers. For instance, Dr. Oldale’s predecessor as deputy director, Howard Shelanski, has made a career of going through the revolving door of academia and government, serving stints at the FTC, FCC, and the White House in between professorships at Berkeley and Georgetown. Other academics have taken temporary leave from their grueling teaching duties to serve temporary assignments — ”secondments,” as the British call it — at the FTC as “scholars-in-residence” or staff economists. As one lawyer told me, the Bureau of Economics is really the FTC’s own private think-tank. Except that it’s forcibly funded by taxpayers who are largely kept in the dark about the group’s actual work.

The presence of academic economists at the FTC does not improve the agency’s work in any sense; it merely furthers the state’s corruption of academia. When would-be scholars know the best way to advance their careers is by currying favor with the lawyer-politicians who run the antitrust agencies, they will adjust their research and temper their criticisms accordingly. The public, and their elected representatives, are in turn less eager to challenge agency decisions supported by the “empirical” evidence that these economists provide. And in the end, if the FTC doesn’t get the results it wants, it can simply go out and hire new economists — of, if necessary, import them from a foreign country.

(Cross-posted to the National Antitrust Hall of Fame)

The Bowl Championship Series “vacated” the University of Southern California’s 2005 win in the Orange Bowl — and concurrently the school’s BCS national championship title for the 2004-2005 season. This comes after the NCAA retroactively declared a USC player ineligible for that season, thus nullifying all wins for that season. USC will reportedly return its championship trophy, but neither the school nor the Pac-10 Conference will return any of the money it received in payment for participation in the Orange Bowl.

This raises an interesting question: Has the BCS committed fraud upon the people who paid to see the 2005 Orange Bowl thinking it was a “national championship” game? I’m sure there’s some language on the game tickets that the BCS would use to claim immunity from any legal action. But looking at this from a purely individual rights — i.e., libertarian — viewpoint, there’s at least a circumstantial case for fraud. Stephan Kinsella offers this libertarian definition of fraud:

[quote][F]raud is a type of aggression (namely, theft), just because it is a means by which one party receives or uses or takes the property of someone else without their consent–and there is failure of consent because the first party’s misrepresentation meant that one of the conditions to transfer of title was not satisfied.[/quote]

Kinsella offers the following illustration of fraud:

[quote]The theory of contract espoused here demonstrates that fraud is properly viewed as a type of theft. Suppose Karen buys a bucket of apples from Ethan for $20. Ethan represents the things in the bucket as being apples, in fact, as apples of a certain nature, that is, as being fit for their normal purpose of being eaten. Karen conditions the transfer of title to her $20 on Ethan’s not knowingly engaging in ‘fraudulent’ activities, like pawning off rotten apples. If the apples are indeed rotten and Ethan knows this, then he knows that he does not receive ownership of or permission to use the $20, because the condition ‘no fraud’ is not satisfied. He is knowingly in possession of Karen’s $20 without her consent, and is, therefore, a thief.[/quote]

Now the BCS situation is admittedly different. There’s no reason to believe BCS officials knew USC was ineligible to play in the 2005 Orange Bowl — pawning off rotten oranges, as it were. As far as the BCS was concerned, at the time they were staging a legitimate championship game. So does the subsequent revelation that USC was ineligible retroactively convert the sale of game tickets into theft?

I don’t really know the answer. I suspect this is not a case of fraud under libertarian theory, but it’s not crystal clear. The whole notion of “vacating” a championship title six years after the fact is laughable. The BCS did not award the Orange Bowl/national championship to the other team. They simply declared the title “vacant” for 2005. Which suggests an event that people paid money to see never happened according to the “official” records. That’s why it’s impossible for me to declare, at this juncture, that no fraud occurred.

It would be different if this was simply a case where the outcome of the event was in temporary doubt. For example, at the recent Indianapolis 500 there was an official review after Dan Wheldon passed J.R. Hilderbrand on the final lap to win the race; there was a legitimate question as to whether the pass occurred after race officials issued a caution signal due to Hilderbrand hitting a wall on his final turn. Once a caution issues, the order of the field is frozen under race rules. If Wheldon’s hadn’t completed his pass before the caution signal was visible, Hilderbrand would’ve been declared the winner after-the-fact. It turned out to be a non-issue, and the replay confirmed Wheldon’s victory.

But even if Hilderbrand was declared the winner after the fans had gone home, there would have been no injury to those fans. They paid to see a “legal” race and that’s what they got regardless of who the ultimate winner was. In the BCS situation, however, we have a case where the organizer claims, in retrospect, there was no legitimate winner. That certainly seems like a bait-and-switch.

I’d note that non-libertarian principles of “consumer protection” are far more black-and-white. I’d argue with reasonable conviction that the BCS’ actions violate the Federal Trade Commission Act. The FTC routinely claims the authority to punish companies — and require consumer refunds — over advertising claims that might be misleading in any way. For example, if you sell a vitamin supplement where the package claims certain health benefits, the FTC will say it’s illegal if the Commission disagrees with any of the claims. It doesn’t matter if the claims are true. It doesn’t matter if any consumers believed or were misled by the claims. And it doesn’t matter if the customer has already used and enjoyed the product. The FTC will demand the seller provide refunds for all customers who bought the product.

Mind you, I don’t endorse this standard. But it exists. Given the FTC’s relatively low threshold for intervening on behalf of consumers, it’s hard to see how they couldn’t take action against the BCS in this situation. By FTC standards, the BCS “misled” consumers and engaged in “unfair” competition. The Commission could order the BCS to pay refunds to anyone who purchased an Orange Bowl ticket in 2005. But don’t hold your breath for that.

At least three women now claim they “sexted” with Rep. Anthony Weiner. The terrible thing about this isn’t that Weiner lied to the press about his activities or that he embarrassed his family — it’s that Weiner blatantly ignored the Federal Trade Commission’s warnings on this subject. As the Commission’s recent “OnGuardOnline” sternly warned:

You may have heard stories at school or in the news about people “sexting”—sending nude photos from mobile phones. Don’t do it. Period. People who create, forward or even save sexually explicit photos, videos or messages put their friendships and reputations at risk. Worse yet, they could be breaking the law.

Okay, so the Commission was talking to teenagers, not members of Congress. Maybe Chairman Leibowitz and his staff need to prepare a separate pamphlet for elected officials.