The NCAA is no stranger to defending antitrust suits. Remember Maurice Clarett? How about the NIT? Tom Farrey of ESPN the Magazine brought my attention to a new and very interesting antitrust suit filed last week in Los Angeles on the theory that the NCAA has illegally conspired to prohibit member colleges from offering athletic scholarships covering the “full cost” of attendance. Apparently, the NCAA fixes a standard scholarship package, called “grant-in-aid,” which is approximately $2,500 less than the official cost of attendance. Farrey also notes that:

“[A]thletes are the only students subject to aid restrictions imposed by an agreement among universities. Talented students in music, chemistry or any other area can be bid upon by individual colleges, without limits on the total value of their scholarship packages.”

NCAA President Myles Brand had apparently come out in favor of a proposal bridging the gap between grant-in-aid and full cost in 2003, but to no avail. The lawsuit was filed on behalf of a class of scholarship athletes in the graduating classes from 2002-2010 by none other than (1998 California Antitrust Lawyer of the Year) Maxwell Blecher and seeks damages covering the difference in scholarship costs and full costs for some 20,000 athletes from 144 colleges (the article estimates this difference to be near $117 million, which would be trebled to $351 million). Of course, one expects that the NCAA will trot out the classic sports/antitrust defenses: the fixed scholarship is necessary to maintain “competitive balance” and “preserve amateurism.”
This suit will be a fun one to watch.

*For the sake of disclosure, this suit caught my attention because Ramogi Huma, a UCLA linebacker during the 1990s, was responsible for getting the class of plaintiffs together through his organization, Collegiate Athletes Coalition. CAC has received its own fair share of press for its work over the years with regards conditions for student-athletes (insurance for mandatory summer workouts, health care, eliminating employment restrictions, etc.). This fact caught my attention because, like many former Bruins who managed to make their way to the weightroom from time to time, I met Ramogi during the early days of the CAC. Though I have not been following their activities closely, the CAC has clearly grown from its UCLA days, with Congressional testimony under its belt (and apparently, support from the United Steelworkers of America), and involvement in a federal antitrust suit.

You may or may not know that Oregon’s Measure 37 — our anti-takings measure — was ruled unconstitutional last year by a state trial court. See this post by Todd Zywicki. But today the Oregon Supreme Court reversed, and handed the effort to quash Measure 37 a resounding defeat. The court’s holding, on each of the claims raised:

In sum, we conclude that (1) plaintiffs’ claims are justiciable; (2) Measure 37 does not impede the legislative plenary power; (3) Measure 37 does not violate the equal privileges and immunities guarantee of Article I, section 20, of the Oregon Constitution; (4) Measure 37 does not violate the suspension of laws provision contained in Article I, section 22, of the Oregon Constitution; (5) Measure 37 does not violate separation of powers constraints; (6) Measure 37 does not waive impermissibly sovereign immunity; and (7) Measure 37 does not violate the Fourteenth Amendment to the United States Constitution. The trial court’s contrary conclusions under the state and federal constitutions were erroneous and must be reversed.

For those who don’t know about it, Measure 37 is Oregon’s version of Richard Epstein’s classic refrain on takings: “Take and pay.” It leaves governments a choice — pay for land use planning (and Oregon has a lot of land use planning) or refrain from it. This won’t be the end of the saga, but the court’s opinion is sure a nice waypoint.

By the way — here’s the dispositive language of Measure 37. (There’s more to the measure than I’m about to quote, but this is the real meat of the measure. For the whole thing, follow the link to the court’s opinion and then scroll down to the appendix:

(1) If a public entity enacts or enforces a new land use regulation or enforces a land use regulation enacted prior to the effective date of this amendment that restricts the use of private real property or any interest therein and has the effect of reducing the fair market value of the property, or any interest therein, then the owner of the property shall be paid just compensation.

(2) Just compensation shall be equal to the reduction in the fair market value of the affected property interest resulting from enactment or enforcement of the land use regulation as of the date the owner makes written demand for compensation under this act.

Also sweetening the victory: The case was successfully argued by Lewis & Clark’s dean, Jim Huffman. Congratulations, Jim!

Dale Oesterle has called Gretchen Morgenson a “national treasure.” Today Larry Ribstein exposes the treasure for fool’s gold. I’m with Larry on this one.

Morgenson’s article on executive compensation is yellow journalism at its worst (well, at least a far as business journalism goes. And really — what else is there?).

As Larry suggests, hatchet jobs like Morgeson’s can be quite costly:

To what extent do stories like this shape misguided public policy like the SEC’s recent compensation disclosure rule? What is the social cost of the useless reshuffling firms must do to minimize damage from sensationalist stories like this?

Excellent questions. To me this sort of story highlights one of the dangers of mandatory disclosure: That the information might actually be used. We’re all accustomed to thinking that shareholders are rationally apathetic, but rationality means nothing if it doesn’t mean that shareholders will be less apathetic [does that make them more pathetic? -- ed.] when the cost of action goes down. It is, after all, the fundamental grounding for our securities regulatory regime.

And this may be bad. The problem is that forced, Plain English disclosure of pay packages along with Ms. Morgenson’s finely-honed commentary (”it’s outrrrrrrrrageous!”) may induce shareholder action — in precisely the sort of situation in which the shareholders’ collective best interests are served by specialized decision-making by the board and seriously-limited or no shareholder second-guessing of business decisions. When, that is, their hands should be tied.

One of the great strengths of our system of corporate governance is that it permits corporations to control the level of shareholder participation in the firm — which is to say, the exent to which shareholders may harm themselves. They are routinely denied access to proxies, constrained in their voting, and, of course, completely absent from all regular business decisions. It makes sense that firms should be permitted to select the appropriate level of shareholder action, to the extent it can be controlled. So why shouldn’t boards be permitted to control the flow of information, as well? To the extent that making information more costly functions just like restricting access to corporate proxies in constraining shareholder participation, isn’t it appropriately in the board’s control? Firms can’t always control what shareholders — or journalists — do with the information they disclose, but they can control the disclosure in the first place.

The SEC Advisory Committee on Smaller Public Companies is meeting tomorrow (2/21/06) at 9:00 a.m.  Click here for the Notice of Meeting.  This is the committee that has proposed, among other things, exempting smaller public companies from SOX 404.  The meeting will be audio webcast through www.sec.gov.

I’m going to try to listen to it in part because a committee member called me today about a comment I submitted on one of the proposals.

Matt Bodie at PrawfsBlawg has a nice postscript on Icahn’s settlement with Time Warner (click here). Frank Biondi will get a nice postscript too–$6 million. Biondi agreed late last month to serve as Time Warner’s CEO in the event Icahn was successful in ousting the board. Even though Icahn was unsuccessful, Biondi gets $6 million for the few weeks he helped Icahn. As Biondi put it: “It beats minimum wage, that’s for sure.” See this article for more details.

The Empirical Legal Studies Blog—a collaborative effort of Jason Czarnezki (Marquette), Michael Heise (Cornell), William Ford (Chicago), and Theodore Eisenberg (Cornell)—launched today at www.elsblog.org. Its purpose is to “advance productive and interdisciplinary discourse among empirical legal scholars.” Welcome to the blogosphere ELS!

p.s: I noticed your site is lacking “TM”s. You may want to slap on a few.

I have some questions about Google’s reluctance to turn over user search data to the government. (For background on this story, see here.)

1. Why does Google gather this data to begin with? Wouldn’t the best way to protect user privacy be not to save this information in the first place? Why does Google need to know the identities of those who use the Google product?

2. Does Google release the information it collects to private third parties such as advertisers? If so, why the public-private distinction? Aren’t the same privacy interests implicated in both the private and public contexts? Why not ask the users themselves when they contract with search engines about the circumstances under which their data may be disclosed to third parties? In the early days of the Web, I published a paper, “Regulating Cyberactivity Disclosures: A Contractarian Approach,” 1996 University of Chicago Legal Forum 639, arguing that disclosure of a user’s “cyberactivities” to private third parties should be permitted as a default matter, so long as users have the affirmative right to opt for non-disclosure. Additional “public disclosure” language could easily be added to such opt out clauses.

3. If Google and other search engines such as Yahoo continue to collect user data, then shouldn’t there be a market opportunity for a search engine to break away from the pack and offer users the guarantee of privacy by simply not collecting user data to begin with? If this were to happen, it would be interesting to see which data collection procedure will end up becoming the norm. If enough users vote with their keystrokes in favor a “no collection” regime, one could imagine all the search engines feeling some pressure to adopt such a policy. But it’s equally plausible to think that many users will not care very much one way or the other, in which case users who are idiosyncratically private will have the “no collection” option but the majority of other users will stay with search engines that continue to collect search data.

According to this Business Week article, top managers are fleeing public companies for jobs with private equity funds to hunt for deals, head portfolio companies, or both.

The attractions are twofold: money and freedom. The pay can be outrageously good even at the entry levels; for CEOs, it can be spectacular. The flexibility is alluring, too. In private equity there’s less annoyance from the Sarbanes-Oxley Act, the controversial regulations passed in 2002 to police publicly held companies. And many private CEOs will avoid the Securities & Exchange Commission’s new proposal that would require the highest-paid executives at public companies to disclose their compensation in excruciating detail. (These rules and proposals still apply to companies that issue registered public debt.)

Regulatory issues aside, the fundamental nature of private-equity work is different. CEOs have a freer hand to do the tough but necessary things to repair companies for the long term, with less focus on quarterly results and placating public shareholders and more on meeting the strategic yardsticks of a multiyear turnaround effort.

Looks like we should add contributing to public company executive brain drain to the list of possible SOX and executive pay disclosure costs.

David Fischer at Antitrust Review posts an excerpt from Information Resources, Inc.’s (IRI) press release issued to explain the recent settlement of their ten year long litigation against VNU (A.C. Nielsen, IMS Health, and Dun and Bradstreet). IRI’s claims were based on an “above cost” bundling theory that Thom has discussed in detail here. In that post, Thom expressed optimism (like me) about Justice Alito’s influence on the Supreme Court’s antitrust jurisprudence in large part because of his sensible dissent in LePage’s. It looks like we do not have to wait long to for evidence of that influence. Notice this section from IRI’s press release:

Even if IRI were to prevail at the Second Circuit on the bundling issue, both litigation teams felt there was a significant risk that the Supreme Court would rule against IRI if it accepted the case for appeal, particularly in light of the current make-up of the Supreme Court and the fact that Justice Alito, the newest addition to the Supreme Court, was the author of an appellate court decision in 2002 that was adverse to IRI’s bundling position in this case. Although Justice Alito’s position was overturned on en banc review by the Third Circuit Court of Appeals in 2003, Justice Alito has recently expressed his opinion that his original view of that case was correct.

I do not recall seeing such a detailed explanation of a settlement, at least, not referencing an individual Justice’s views on a particular subject. In any event, I guess this means that antitrusters might have to wait a bit longer for SCOTUS to articulate a rule for above cost bundling.

The Council on Foreign Relations puts on some really impressive webcasts/conference calls. Here’s one TOTM readers may be especially interested in (if, that is, you’re one of those lucky people who doesn’t get hives listening to extended bouts of highly-politicized self rationalization):

The SEC in a Globalizing Securities Market:
A Conversation with the Past Four Chairmen

with

WILLIAM H. DONALDSON
Chairman & CEO, Donaldson Enterprises, Inc.;
Chairman, Securities and Exchange Commission, 2003 to 2005
Speaker

HARVEY L. PITT
CEO, Kalorama Partners;
Chairman, Securities and Exchange Commission, 2001 to 2003
Speaker

ARTHUR LEVITT
Senior Advisor, The Carlyle Group;
Chairman, Securities and Exchange Commission, 1993 to 2001
Speaker

RICHARD C. BREEDEN
Chairman, Richard C. Breeden & Co.;
Chairman, Securities and Exchange Commission, 1989 to 1993
Speaker

BENN STEIL
Senior Fellow and Director of International Economics,
Council on Foreign Relations
Presider

Wednesday, February 22, 2006
8:30 a.m. to 9:45 a.m. (Eastern Time)

See below the fold for viewing instructions

Read the rest of this entry »

Below are highlights from the recent two part “State of the Blogosphere” Report by David Sifry, the founder and CEO of Technorati. Click here for Part 1 and here for Part 2.

From part 1:

• Technorati now tracks over 27.2 Million blogs.
• The blogosphere is doubling in size every 5 and a half months.
• It is now over 60 times bigger than it was 3 years ago.
• On average, a new weblog is created every second of every day
• 13.7 million bloggers are still posting 3 months after their blogs are created.
• Spings (Spam Pings) can sometimes account for as much as 60% of the total daily pings Technorati receives.
• Sophisticated spam management tools eliminate the spings and find that about 9% of new blogs are spam or machine generated.
• Technorati tracks about 1.2 Million new blog posts each day, about 50,000 per hour.

From part 2:

• Blogging and Mainstream Media continue to share attention in blogger’s and reader’s minds, but bloggers are climbing higher on the “big head” of the attention curve, with some bloggers getting more attention than sites including Forbes, PBS, MTV, and the CBC.
• Continuing down the attention curve, blogs take a more and more significant position as the economics of the mainstream publishing models make it cost prohibitive to build many nice sites and media.
• Bloggers are changing the economics of the trade magazine space, with strong entries covering WiFi, Gadgets, Internet, Photography, Music, and other nice topic areas, making it easier to thrive, even on less aggregate traffic.
• There is a network effect in the Technorati Top 100 blogs, with a tendency to remain highly linked if the blogger continues to post regularly and with quality content.
• Looking at the historical data shows that the inertia in the Top 100 is very low – in other words, the number of new blogs jumping to the top of the Top 100 as well as the blogs that have fallen out of the top 100 show that the network effect is relatively weak.

Here’s an NYT article that talks about the report.

I had my post-decision debriefing meeting with our Reappointment, Tenure and Promotion (RP&T) Committee this week (I got promoted to associate). This was my first RP&T meeting since I started blogging so I was interested in getting the committee’s take on it. Without a doubt it is favorable. In fact, to my surprise the committee consensus was that my blogging can count as scholarship, teaching and service for tenure purposes. It is up to me to make the case in my tenure materials as to why it should count. I plan to do so.

Now, I’m under no illusion that I can blog my way to tenure; I still intend to continue to crank out traditional scholarship. But it’s nice to know that blogging can help. And I think it’s a smart move for law schools, especially regional law schools like mine, to encourage faculty blogging—many of the benefits that flow to the blogger also flow directly or indirectly to the blogger’s school.

WARNING: This post is off-topic for this blog (it doesn’t relate to markets). If that bothers you, don’t read any further. Moroever, I do not purport to speak for my co-bloggers. Their opinions of the issue discussed below may differ from my own.

Having issued those caveats, I cannot resist making one more comment (my first comment is here) on the American Bar Association’s utter hypocrisy regarding the rule of law.

At its mid-year meeting this week, the ABA did two notable things. First, the House of Delegates “voted overwhelmingly” to approve a resolution calling on the President to follow the law with respect to domestic spying. Among other things, the six-clause resolution “call[ed] upon the President to abide by the limitations which the Constitution imposes on a president…” (Paragraph 1), and “urge[d] the President, if he believes [the law] is inadequate…to seek appropriate amendments or new legislation rather than acting without explicit statutory authorization” (Paragraph 2). In other words, Mr. President, you must abide by the Constitution, and if you don’t like a statute, you can’t just violate it; you should go to the legislature and get it amended.

While I’m taking no position on the legality of the NSA’s domestic spying program, this little tongue-lashing seems appropriate for an organization that, according to its own press release, “works to build public understanding around the world of the importance of the rule of law in a democratic society.”

But what about the ABA’s second major action this week? After chiding the President for not following the law, the Association turned its attention to the law schools. It told them that, to be accredited (i.e., to be viable at all), they must demonstrate their commitment to racial and gender diversity “by concrete action.” That means they must show actual results, not just sincere and extensive efforts. Moreover, they’re not allowed to let that pesky little law thing get in their way. The Association specifically stated that:

The requirement of a constitutional provision or statute that purports to prohibit consideration of gender, race, ethnicity or national origin in admissions or employment decisions is not a justification for a school’s non-compliance with Standard 211.

(Amended standards available here.)

So I’m confused. The organization dedicated to “build[ing] public understanding around the world of the importance of the rule of law in a democratic society” is telling the President he must follow the Constitution and statutes, but public law schools don’t have to (and, indeed, are not permitted to, if doing so would cause them to disappoint the Almighty ABA)? I guess the law applies only when we like what it’s telling us to do. Or maybe the rule is that lawyers are above the law. Maybe Michael Greco can explain this to me.

(It’s interesting to note, by the way, that the ABA’s website proudly posts all sorts of information about its little lecture to the President. There’s zero mention of the order telling law schools to ignore the law.)

For more on the ABA’s accreditation standards, see here, here, and here.