Category: law

Academic articles within the discipline of law, including law review articles and analyses of questions of law.

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Revisiting Barlow’s Misplaced Optimism

Revisiting Barlow’s Misplaced Optimism, Symposium for John Perry Barlow, 18 Duke L. & Tech. Rev. 97.

As part of Duke Technology Law Review‘s Symposium for John Perry Barlow, I reflected on the perspective of early Internet luminary John Perry Barlow, the vision he offered, and what I see as the most promising sources of accountability for online behavior. My piece begins:

Barlow’s A Declaration of the Independence of Cyberspace calls for a “civilization of the mind in cyberspace,” and he says it will be “more humane and fair” than what governments have created. Barlow’s vision is unapologetically optimistic, easily embraced by anyone who longs for better times to come.  Yet twenty years later, it’s easy to see some important respects in which reality fell short of his vision.  Alongside the Internet’s many pluses are clickbait, scams, hacks, and all manner of privacy violations.  Ten thousand hours of cat videos may be delightful, but they’re no civilization of the mind.  With a bit of hindsight, Barlow’s techno-utopianism looks as stilted as other utopianism—and equally far removed from reality.

Beyond being overly optimistic about how perfectly the ‘net would unfold, Barlow was also needlessly skeptical of plausible institutions to bring improvements.  He writes: “The only law that all our constituent cultures would generally recognize is the Golden Rule.” But the moral suasion—and practical effectiveness—of the Golden Rule presupposes participants of roughly equal power and status.  It is no small feat to meaningfully consider what Joe User might want from Mega Social Network if the tables were turned and Joe owned the goliath.  As a practical matter, any claim a user has against a goliath requires state institutions to adjudicate and enforce.  When Barlow wrote A Declaration of the Independence of Cyberspace, tech goliaths were much smaller.  Plus, the Internet’s early users were in a certain sense more sophisticated than the mainstream users who eventually joined.  So the gap from little to big was much narrower then, arguably making governments less important in that era.  But as the big get bigger and as the Internet attracts average users who lack the special sophistication of early adopters, governments play key roles—adjudicating disputes, enforcing contracts and beyond.

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An Introduction to the Competition Law and Economics of “Free” with Damien Geradin

Benjamin Edelman and Damien Geradin. An Introduction to the Competition Law and Economics of ‘Free’.  Antitrust Chronicle, Competition Policy International.  August 2018.

Many of the largest and most successful businesses today rely on providing services at no charge to at least a portion of their users. Consider companies as diverse as Dropbox, Facebook, Google, LinkedIn, The Guardian, Wikipedia, and the Yellow Pages.

For consumers, it is easy to celebrate free service. At least in the short term, free services are often high quality, and users find a zero price virtually irresistible.

But long-term assessments could differ, particularly if the free service reduces quality and consumer choice. In this short paper, we examine these concerns.  Some highlights:

First, “free” service tends to be free only in terms of currency.  Consumers typically pay in other ways, such as seeing advertising and providing data, though these payments tend to be more difficult to measure.

Second, free service sometimes exacerbates market concentration.  Most notably, free service impedes a natural strategy for entrants: offer a similar product or service at a lower price.  Entrants usually can’t pay users to accept their service.  (That would tend to attract undesirable users who might even discard the product without trying it.)  As a result, prices are stuck at zero, entry may be more difficult, effectively shielding incumbents from entry.

In this short paper, we examine the competition economics of “free” — how competition works in affected markets, what role competition policy might have and what approach it should take, and finally how competitors and prospective competitors can compete with “free.” Our bottom line: While free service has undeniable appeal for consumers, it can also impede competition, and especially entry. Competition authorities should be correspondingly attuned to allegations arising out of “free” service and should, at least, enforce existing doctrines strictly in affected markets.

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From the Digital to the Physical: Federal Limitations on Regulating Online Marketplaces with Abbey Stemler

Edelman, Benjamin, and Abbey Stemler. “From the Digital to the Physical: Federal Limitations on Regulating Online Marketplaces.” Harvard Journal on Legislation, Volume 56, Number 1, pp. 141-198.

Abstract:

Online marketplaces have transformed how we shop, travel, and interact with the world. Yet, their unique innovations also present a panoply of challenges for communities and states. Surprisingly, federal laws are chief among those challenges despite the fact that online marketplaces facilitate transactions traditionally regulated at the local level. In this paper, we survey the federal laws that frame the situation, especially §230 of the Communications Decency Act (CDA), a 1996 law largely meant to protect online platforms from defamation lawsuits. The CDA has been stretched beyond recognition to prevent all manner of prudent regulation. We offer specific suggestions to correct this misinterpretation to assure that state and local governments can appropriately respond to the digital activities that impact physical realities.

Informal introduction:

Perhaps the most beloved twenty-six words in tech law, §230 of the Communications Decency Act of 1996 has been heralded as a “masterpiece” and the “law that gave us the modern Internet.” It was originally designed to protect online companies from defamation claims for third-party speech (think message boards and AOL chat rooms), but over the years §230 has been used to protect online firms from all kinds of regulation—including civil rights and consumer protection laws. As a result, it is now the first line of defense for online marketplaces seeking to avoid state and local regulation.

In our new working paper, Abbey Stemler and I challenge existing interpretations of §230 and highlight how it and other federal laws interfere with state and local government’s ability to regulate online marketplaces—particularly those that dramatically shape our physical realties, such as Uber and Airbnb. §230 is sacred to many, but as Congress considers revising §230 and Courts continually reassess its interpretation, we hope our paper will encourage a richer discussion about the duties of online marketplaces.

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When Your Competitors Ignore the Law

Last fall I flagged the problem of transportation network companies (Uber and kin) claiming a cost advantage by ignoring legal requirements they considered ill-advised or inconvenient. But the problem stretches well beyond TNCs. Consider Airbnb declining to enforce (or, often, even tell hosts about) the insurance, permitting, tax, zoning, and other requirements they must satisfy in order to operate lawfully. Or Zenefits using selling insurance via staff not trained or certified to do so (and, infamously, helping some staff circumvent state-mandated training requirements). Or Theranos offering a novel form of blood tests without required certification, yielding results that federal regulators found “deficient” and worse. The applicable requirements may be clear — get commercial insurance before driving commercially; be zoned for commercial activities if you want to rent out a room; be trained and licensed to sell insurance if you intend to do so. Yet a growing crop of startups decline to do so, finding it faster and more expedient to seek forgiveness rather than permission. And the approach spreads through competition: once one firm in a sector embraces this method, others have to follow lest they be left behind.

A first question is how violations should be sanctioned. I’ve long thought that penalties could appropriately be severe. Consider the Pennsylvania Public Utility Commission’s $49 million civil penalty against Uber for its intentional operation in violation of a PUC order. The PUC discussed the purpose of this penalty: “not just to deter Uber, but also [to deter] other entities who may wish to launch … without Commission approval.” Their rationale is compelling: If the legal system requires a permit for Uber’s activity, and if we are to retain that requirement, sizable penalties are required to reestablish the expectation that following the law is indeed compulsory. Now suppose every state and municipality were to impose a penalty comparable in size. Despite Uber’s wealth, the numbers add up — 100 such penalties would take $4.9 billion from Uber’s investors, a sizable share of Uber’s valuation and plausibly more than the company’s cash on hand.

Meanwhile, competitors are compelled to respond. For a typical taxi fleet owner or driver, or anyone else trying to compete with a law-breaking entrant, it’s little answer to hope that regulators may some day impose penalties. (And indeed there’s scant evidence that Pennsylvania’s approach will prevail more broadly.) What to do? Damien Geradin and I offer a menu of suggestions in two recent articles:

Spontaneous Deregulation: How to compete with platforms that ignore the rules – Harvard Business Review

Competing with Platforms that Ignore the Law – HBR Online

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Android and Competition Law: Exploring and Assessing Google’s Practices in Mobile

Edelman, Benjamin, and Damien Geradin. “Android and Competition Law: Exploring and Assessing Google’s Practices in Mobile.” European Competition Journal 12, nos. 2-3 (2016): 159-194.

Since its launch in 2007, Android has become the dominant mobile device operating system worldwide. In light of this commercial success and certain disputed business practices, Android has come under substantial attention from competition authorities. We present key aspects of Google’s strategy in mobile, focusing on Android-related practices that may have exclusionary effects. We then assess Google’s practices under competition law and, where appropriate, suggest remedies to right the violations we uncover.

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Efficiencies and Regulatory Shortcuts: How Should We Regulate Companies like Airbnb and Uber?

Edelman, Benjamin, and Damien Geradin. “Efficiencies and Regulatory Shortcuts: How Should We Regulate Companies like Airbnb and Uber?” Stanford Technology Law Review 19, no. 2 (2016): 293-328.

New software platforms use modern information technology, including full-featured web sites and mobile apps, to allow service providers and consumers to transact with relative ease and increased trust. These platforms provide notable benefits including reducing transaction costs, improving allocation of resources, and creating information and pricing efficiencies. Yet they also raise questions of regulation, including how regulation should adapt to new services and capabilities, and how to correct market failures that may arise. We explore these challenges and suggest an updated regulatory framework that is sufficiently flexible to allow software platforms to operate and deliver their benefits, while ensuring that service providers, users, and third parties are adequately protected from harm that may arise.

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Does Google Leverage Market Power Through Tying and Bundling?

Edelman, Benjamin. “Does Google Leverage Market Power Through Tying and Bundling?” Journal of Competition Law & Economics 11, no. 2 (June 2015): 365-400.

I examine Google’s pattern and practice of tying to leverage its dominance into new sectors. In particular, I show how Google used these tactics to enter numerous markets, to compel usage of its services, and often to dominate competing offerings. I explore the technical and commercial implementations of these practices, then identify their effects on competition. I conclude that Google’s tying tactics are suspect under antitrust law.

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Price Restrictions in Multi-sided Platforms: Practices and Responses

Edelman, Benjamin, and Julian Wright. “Price Restrictions in Multi-sided Platforms: Practices and Responses.” Competition Policy International 10, no. 2 (Fall 2014).

In connecting buyers to sellers, some two-sided platforms require that sellers offer their lowest prices through the platform, disallowing lower prices for direct sales or sales through competing platforms. In this article, we explore the various contexts where such restrictions have arisen, then consider effects on competition, entry, and efficiency. Where there are plausible mitigating factors, such as efficiencies from platforms’ price restrictions, we explore those rationales and compare them to the harms. We identify a set of responses for competition policy, look at experiences to date, and suggest some future attempts to improve the functioning of these markets.