Table of Contents

Innovation Governance Competition: Payment Modernization Strategies in India and China

Jane K. Winn, University of Washington - School of Law

Cartel Settlements Seldom Surpass Actual Damages

John M. Connor, Purdue University, American Antitrust Institute (AAI)
Robert H. Lande, University of Baltimore - School of Law

Like Uber, But for Local Governmental Policy: The Future of Local Regulation of the 'Sharing Economy'

Daniel E. Rauch, Yale University - Law School
David Schleicher, George Mason University School of Law

Promoting Innovation While Preventing Discrimination: Policy Goals for the Scored Society

Frank A. Pasquale, University of Maryland Francis King Carey School of Law, Yale University - Yale Information Society Project
Danielle Keats Citron, University of Maryland Francis King Carey School of Law, Yale University - Yale Information Society Project, Stanford Law School Center for Internet and Society

Innovations in Mobile Broadband Pricing

Daniel Lyons, Boston College - Law School

A Theory for Regulation of Essential Products

Shlomit Azgad-Tromer, Tel Aviv University - Buchmann Faculty of Law


CONSUMER LAW eJOURNAL

"Innovation Governance Competition: Payment Modernization Strategies in India and China" Free Download
University of Washington School of Law Research Paper No. 2015-01

JANE K. WINN, University of Washington - School of Law
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After decades of trade liberalization and ever greater integration of domestic economies into global markets, actors in both public and private sectors recognize the importance of innovation as a source of global comparative advantage. At the same time that governments in advanced market economies compete to foster innovation ecosystems within their domestic economies, private enterprises are complicating governments’ calculations by spawning new private global governance institutions. Payment card networks such as Visa and MasterCard are examples of global private regulators that can leverage their power in global markets to challenge the authority of local regulators. Public regulators in advanced market economies have used a variety of policy instruments to try to reassert their control over card networks, with only modest results. Both China and India have recently launched aggressive payment system modernization strategies as part of their national economic development plans. As part of those payment system modernization strategies, China launched China UnionPay in 2002, and by 2014, China UnionPay had become the second largest card network in the world, ahead of MasterCard and behind Visa. India is pursuing a more complex, standards-based payment system modernization strategy, and launched the RuPay card network in 2010 as part of its financial inclusion strategy. China and India have simply sidestepped the problem of how to control platform operators with de facto regulatory powers by launching competing national card networks to promote local economic development and block the local influence of global card networks at the same time.

"Cartel Settlements Seldom Surpass Actual Damages" Free Download
Iowa Law Review, Forthcoming

JOHN M. CONNOR, Purdue University, American Antitrust Institute (AAI)
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ROBERT H. LANDE, University of Baltimore - School of Law
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Antitrust law authorizes treble damages for victims of antitrust violations, but the vast majority of private cases settle. Consequently, reliable information about the size of settlements relative to injuries has been only anecdotal or speculative. To bring empirical analysis to this issue we assemble a sample of every completed private U.S. cartel case discovered from 1990 to mid 2014 for which we could find the necessary information. For each of these 71 cases we collected neutral scholarly estimates of affected commerce and overcharges. We then compare these to the damages secured in the private cases filed against these cartels.

Our main findings are that the victims of only 14 of the 71 cartels (20%) received back their initial damages (or more) in settlement. Only seven (10%) received more than double damages. The rest — the victims in 57 cases — received less than their initial damages. In four cases the victims received less than 1% of damages and in 12 they received less than 10%. Overall, the median average settlement was 37% of single damages. However, because the distribution of settlement percentages is so skewed, the weighted mean (a figure that weights settlements according to their sales) is much lower (19%) than the unweighted mean settlement of 66% (a figure that gives equal weights to the cartels that operated in large markets and those that operated in small markets). The unweighted mean is larger because plaintiffs tend to be rewarded relatively poorly in the largest cases.

The conclusion of this article briefly discusses some of the implications of these findings.

"Like Uber, But for Local Governmental Policy: The Future of Local Regulation of the 'Sharing Economy'" Free Download
George Mason Law & Economics Research Paper No. 15-01

DANIEL E. RAUCH, Yale University - Law School
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DAVID SCHLEICHER, George Mason University School of Law
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In the past five years, “sharing economy? firms like Uber, ZipCar, AirBnB and TaskRabbit have generated both huge market valuations and fierce regulatory contests in America’s cities. Incumbent firms in the taxi, hotel and other industries, as well consumer protection, labor and neighborhood activists, have pushed for regulations stifling or banning new sharing economy entrants. Sharing firms have fought back, using their popularity with consumers and novel political strategies, lobbying for freedom to operate as broadly as possible without government interference. But to date, both participants and observers of these “sharing wars? have relied on an unstated assumption: if the sharing firms win these fights, their future will be largely free from government regulation. Local governments will either shut sharing down, or they will leave it alone.

But this assumption is almost surely wrong. If sharing firms prevail in the current fights over the right to operate (and indications suggest they will), it is unlikely that cities and states ignore them. Instead, as sharing economy firms move from being upstarts to important and permanent players in key urban industries like transportation, hospitality and dining, local and state governments are likely to adopt the type of mixed regulatory strategies they apply to types of firms with whom sharing firms share important traits, from property developers to incumbent taxi operators. Using tools of agglomeration economics and public choice, this Article sketches the future of such policy regimes.

Specifically, local and state governments will adopt some combination of the following policies in addition to insisting on consumer/incumbent protections: (1) subsidizing sharing firms to encourage expansion of services that produce public goods, generate substantial consumer surplus and/or minimize the need for excessive regulation of the property market; (2) harnessing sharing firms as a tool for redistribution; and/or (3) contracting with sharing firms to provide traditional government services. The future of sharing economy regulation will be very different from its present, and the changes will pose profound legal, political and ethical questions for our cities.

"Promoting Innovation While Preventing Discrimination: Policy Goals for the Scored Society" Free Download
Washington Law Review, Vol. 89, pp. 1413-24, 2014
U of Maryland Legal Studies Research Paper No. 2015-1

FRANK A. PASQUALE, University of Maryland Francis King Carey School of Law, Yale University - Yale Information Society Project
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DANIELLE KEATS CITRON, University of Maryland Francis King Carey School of Law, Yale University - Yale Information Society Project, Stanford Law School Center for Internet and Society
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There are several normative theories of jurisprudence supporting our critique of the scored society, which complement the social theory and political economy presented in our 2014 article on that topic in the Washington Law Review. This response to Professor Tal Zarsky clarifies our antidiscrimination argument while showing that is only one of many bases for the critique of scoring practices. The concerns raised by Big Data may exceed the capacity of extant legal doctrines. Addressing the potential injustice may require the hard work of legal reform.

"Innovations in Mobile Broadband Pricing" Free Download
2014 TPRC Conference Paper
Boston College Law School Legal Studies Research Paper No. 341

DANIEL LYONS, Boston College - Law School
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The FCC’s net neutrality rules sought to limit interference by broadband service providers in markets for Internet-based content and applications. But to do so, the Commission significantly reduced the amount of innovation possible in the broadband service market. Within limits, broadband providers were permitted to offer different plans that vary the quantity of service available to customers, as well as the quality of that service. But they generally could not vary the service itself: with limited exceptions, broadband providers were generally required to offer customers access to all lawful Internet traffic, or none at all.

This paper explores the way in which this all-or-nothing homogenization of the American broadband product differs from innovative experiments taking place in other countries. In various parts of the world, customers are offered a variety of alternatives to the unlimited Internet model. These include:

Social Media Plans: In 2010, Turkey’s Turkcell began offering a plan that included voice, text, and Facebook access for a single price. This promotion helped bring mobile data to customers who wanted to use their mobile phones to participate in social media, but did not want to pay the higher rate for unlimited Internet access. Turkcell also used the promotion to encourage tech-phobic customers to get more comfortable with mobile browsing, after which Turkcell hoped to migrate some of them to more advanced data packages. In the first year of the promotion, Turkcell saw an 820 percent increase in mobile Facebook use. In early 2013, Facebook announced that it had struck similar deals with 18 wireless-service providers in 14 countries. Turkcell and other providers have offered similar promotions with Twitter, What’sApp, and other popular apps.

Facebook and Google “Free Zones?: To encourage greater brand penetration into new markets, Facebook and Google have developed stripped-down versions of their sites in partnership with wireless companies in developing countries, particularly those where prepaid, underpowered feature phones are more common. Net neutrality proponents decry these initiatives as watered-down, “walled garden? experiences that are pale imitations of true Internet access. But among users in the developing world, for whom some connectivity is better than none, the services have proven to be very popular.

TELUS VoIP partnership: TELUS, Canada’s third-largest wireless provider, has signed a strategic partnership with Microsoft to promote Skype on many smartphones on its network. The app runs on both Wi-Fi and the wireless network, and although use on the latter incurs data charges, TELUS customers receive unlimited Skype-to-Skype voice calls and instant messages. Partnerships such as these allow consumers another option for services such as voice and text that traditionally have only been available directly through the wireless providers.

The paper also explores the positive role that vertical agreements may play when promoting competition and innovation within a market. Requiring standardization of a product, as net neutrality does, removes a plane upon which firms can compete, and can advantage large incumbent players over upstarts by denying them opportunities to distinguish their product or compete for niche markets. Requiring services providers to offer all users access to all online content is costly, and this model does not fit into the needs of consumers who may not want or need broadband that supports heavy bandwidth activities such as online gaming and video streaming.

Undoubtedly, the FCC can and should intervene to stop anticompetitive practices, including anticompetitive vertical foreclosure. But these determinations should be made on a case-by-case basis based on proof of market power and consumer harm. A case-by-case approach would allow wireless providers to experiment with new and different Internet business models without risking an unnecessary regulatory response.

"A Theory for Regulation of Essential Products" Free Download

SHLOMIT AZGAD-TROMER, Tel Aviv University - Buchmann Faculty of Law
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In our affluent societies, the typical consumer purchases more than what is basically required. Certain products are purchased because the consumer has to have them, while other products are purchased as a discretionary consumer choice. Yet, current consumer protection law does not make the distinction between essential and non-essential products. Consumers of luxury products and consumers of essential products are considered equal, and receive similar legal protection under the contractual framework of the consumer transaction.

This essay offers a theory of essential products and their regulation. The essay surveys the behavioral literature discussing human needs and the distinction between essentials and luxuries, and applies the needs-based theory to consumption, creating a pyramid of consumption following Maslow’s hierarchy of needs. The essay identifies the determinants of essentiality, including a moral baseline of consumption; lack of good substitutes and inability to decline purchase, and time constraints creating difficulty to defer purchase. The continuum of essentiality is then demonstrated using four examples of consumption, including electricity for heating, infant formula, broadband services and a violin.

The essay argues that essential needs-based consumption is creating an enhanced behavioral market failure, where consumers' decision-making process is particularly vulnerable and inevitably distorts sellers' incentives towards a sub optimal equilibrium. Markets of essentials tend toward failure of demand, due to consumers’ bounded voluntariness and lower probability of informed choice. Accordingly, sellers in markets of essentials have higher incentives for collusion and lower incentives for price competition and for investment in product quality. Thus, the likelihood of market failure increases with the essentiality of the product: the more basic the underlying need, the higher the probability for market failure.

The difficulty of regulators to tell what’s essential is addressed. The essay suggests two methods for assessment of essentiality, the first, through political assessment, and the second, through analysis of market data documenting elasticity of demand for popular product categories. Low elasticity of demand for popular product categories is proposed as a market signal for consumers’ bounded voluntariness and for product essentiality.

The normative implications of this structural division of products are discussed and policy guidelines suggested. Essentiality and its tendency to create a behavioral market failure implies that consumer law should be structured with a hierarchy of rights, similar to constitutional or international human rights laws. Essential products should be subject to a higher degree of paternalism compared with non-essentials.

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About this eJournal

This eJournal distributes working and accepted paper abstracts of articles, recently published articles, books, legislative reports, conferences, and other publications that address issues of interest to consumer law scholars and practitioners. Coverage includes legal issues pertaining to advertising, consumer reporting (including credit repair organizations), discrimination (including redlining), consumer disclosure (such as the Truth in Lending Act, the Real Estate Settlement Procedures Act, and consumer leasing), consumer fraud (including issues arising under the Federal Trade Commission Act, state UDAP statutes, odometer laws, referral sales, and bait and switch statutes), unconscionability, standard form contracts, consumer privacy (including telemarketing, spam, spyware, phishing, direct mail, financial privacy, common law privacy torts in consumer transactions, and online privacy), identity theft, data protection, cooling off rules (including door to door sales regulation), payment systems (such as credit and debit cards, internet payment issues, stored value cards (including gift cards and phone cards), and electronic transfers), warranties (including UCC warranties, lemon laws, and the Magnuson-Moss Warranty Act), consumer product safety, commercial speech doctrine, debt collection, repossession, predatory lending (including asset-based lending, equity stripping, flipping, balloon payments, negative amortization, loan packing, rate-risk disparities and yield-spread premiums), payday lending, usury, credit insurance, electronic shopping (including electronic signatures and records, formation of contracts, and payments), the holder in due course regulation, mortgages, student loans, repossession, foreclosure, regulation that pertains to consumer markets and enforcement of consumer laws (including class actions, preemption, arbitration, administrative enforcement, small claims courts and attorney's fees). The eJournal does not cover landlord-tenant issues or criminal law. The eJournal welcomes a broad range of methodological approaches, including conventional doctrinal analyses, law and economics approaches, historical discussions, socio-legal analyses, law and society approaches, discussions of consumer psychology that bear on legal issues, international law analyses and comparative law approaches.

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Consumer Law eJournal

RICHARD M. ALDERMAN
Associate Dean, Director - Consumer Law Center, Dwight Olds Chair in Law, University of Houston Law Center

JEAN BRAUCHER
Roger Henderson Professor of Law, University of Arizona - James E. Rogers College of Law

MARK ELLIOTT BUDNITZ
Professor of Law, Georgia State University College of Law

MICHAEL M. GREENFIELD
George Alexander Madill Professor of Contracts and Commercial Law, Washington University in Saint Louis - School of Law

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Professor of Law, Oklahoma City University - School of Law

CREOLA JOHNSON
Professor of Law, Ohio State University - Michael E. Moritz College of Law

DEE PRIDGEN
Associate Dean and Professor of Law, University of Wyoming College of Law

IAIN D. C. RAMSAY
Professor of Law, University of Kent, Canterbury - Kent Law School

RALPH J. ROHNER
Professor of Law, Catholic University of America - Columbus School of Law

NORMAN I. SILBER
Associate Dean for Intellectual Life and Professor of Law, Hofstra University School of Law