UPDATE:  Trying to find the right hash tag for the event, I’ve changed the title of this post and we’ll follow the convention for our live blogging today–posts from the Workshop will all have “#agworkshop” in the title.

Later this week Mike Sykuta and I will be winging our way to Iowa on behalf of the ICLE to attend the first of the year-long series of DOJ/USDA Workshops on Agriculture and Antitrust Enforcement Issues.  You can find the agenda for the first workshop, to be held Friday, March 12 in Ankeny, Iowa, here.  Intrepid reporters, we, our plan is to “live blog” the event for those of you unable to attend.  This first workshop, in addition to introducing the series, will focus on farming, which means seeds, which means the dispute between DuPont and Monsanto over licensing terms and everyone’s perennial favorite: industry concentration.

The agenda clearly reflects the highly-politicized nature of the issues under discussion, and, for example, a few news reports have suggested that the agenda has changed in response to pressure from Iowa Senator Tom Harkin.  Regardless, we expect a lively and interesting discussion.

For ease of reference all of our blogs from the workshop will be categorized under “ag/antitrust workshop,” and each post will have “DOJ/USDA Workshop” in the title.

TOTM is no stranger to the issues, and Mike and I have blogged a few times about the antitrust/licensing issues involved.  See:

Competition in Agriculture Redux (Manne, Kieff and Wright)

Competition in Agriculture (Sykuta)

Monsanto’s Licensing Case Victory (Manne)

Yet More Evidence Against the DOJ’s Antitrust Plantings (Sykuta)

The Seeds of an Antitrust Disaster (Manne)

DOJ Disconnect: Do We Really Need a Roadshow? (Sykuta)

Together with Scott Kieff and Joshua Wright, we also submitted a comment to the DOJ on the topic, “Comment on Intellectual Property, Concentration and the Limits of Antitrust in the Biotech Seed Industry,” available here (SSRN) or here (if you prefer to get it directly from the DOJ website).

The news has also been covering the seed industry antitrust issues, the DOJ/USDA workshops and agricultural antitrust issues more generally, and you can find a host of relevant news articles here.

We’re looking forward to the workshops and to your comments on the day’s events.

The EU has launched its preliminary investigation of Google’s search engine and search advertising businesses.  From the Financial Times:

According to Google, one of the three complaints was from rival Microsoft. That protest, from an online service called Ciao that was recently bought by the software company, echoes a complaint that had already been lodged with regulators in Germany.

The Commission added that it had asked Google to comment on the complaints and that it was co-operating closely with national competition authorities. This procedure is standard practice when complaints are received in Brussels, and it can take some time – often months – before a decision is made either to begin a formal probe or to drop the matter.

Here is Google’s Blog Response, pretty squarely laying blame for the preliminary investigation at the feet of Microsoft:

The European Commission has notified us that it has received complaints from three companies: a UK price comparison site, Foundem, a French legal search engine called ejustice.fr, and Microsoft’s Ciao! from Bing. While we will be providing feedback and additional information on these complaints, we are confident that our business operates in the interests of users and partners, as well as in line with European competition law.

Given that these complaints will generate interest in the media, we wanted to provide some background to them. First, search. Foundem – a member of an organisation called ICOMP which is funded partly by Microsoft – argues that our algorithms demote their site in our results because they are a vertical search engine and so a direct competitor to Google. ejustice.fr’s complaint seems to echo these concerns….

Regarding Ciao!, they were a long-time AdSense partner of Google’s, with whom we always had a good relationship. However, after Microsoft acquired Ciao! in 2008 (renaming it Ciao! from Bing) we started receiving complaints about our standard terms and conditions. They initially took their case to the German competition authority, but it now has been transferred to Brussels.

Though each case raises slightly different issues, the question they ultimately pose is whether Google is doing anything to choke off competition or hurt our users and partners. This is not the case. We always try to listen carefully if someone has a real concern and we work hard to put our users’ interests first and to compete fair and square in the market. We believe our business practices reflect those commitments.

As it so happens, Geoff and I are just getting ready to send out a law review piece analyzing a potential monopolization/ abuse of dominance cases against Google through the lens of an error-cost, evidence-based antitrust framework.   So the timing is perfect!  We’ll blog about that piece in the very near future (and get it posted to SSRN).

Over at the International Center for Law and Economics website we’ve posted a link to a pdf e-book version of the collected content (including both posts and comments) from our recent “Interchange Fees and the Law and Economics of Credit Cards” symposium.  Head on over and download a copy if you’re interested in a dead tree version of the symposium.

I’m sure it’s an honor just to be nominated.

A recent opinion from Judge Posner cites our very own Josh Wright (Joshua D. Wright & Todd J. Zywicki, “Three Problematic Truths About the Consumer Financial Protection Agency Act of 2009,” Lombard Street, Sept. 14, 2009, available here) (by the way, the essay has drawn a few comments, my favorite of which is definitely the one titled, “are you stupid or scumbags[?]“).

The opinion is vaguely interesting touching as it does on the propriety of short-term, high-interest loans, but the holding rests on an analysis of the commerce clause so is pretty well beyond my ken.

At issue is an Indiana statute that purports to apply Indiana’s restrictive usury laws to consumer contracts executed outside the state, but with creditors that have advertised or solicited sales within Indiana.  The Indiana usury statute at issue constrains consumer loan interest to terms under which “the ceiling is the lower of 21 percent of the entire unpaid balance, or 36 percent on the first $300 of unpaid principal, 21 percent on the next $700, and 15 percent on the remainder,” with an exception for payday loans.  Such terms would preclude payday loans if they weren’t excepted under the statute and does preclude car title loans of the sort at issue in the case.  The court rules that the restriction on out-of-state transactions is impermissible under the constitution and strikes down the Indiana law.

The interesting part (to me) of the case, and the part where Josh (and Todd) are cited, is where Posner discusses the law and economics and related scholarship of car title and payday loans.  He doesn’t really come down on one side or another in this debate except to aver that Indiana has a colorable interest in protecting its citizens from “predatory lending,” if it so chooses.  It seems to me that he gives too much credit to the behavioral-economics-based arguments on the “predatory lending is, well, predatory” side of the debate, but he really doesn’t wade into the debate.  Nevertheless, Josh and Todd get their mention (Todd actually gets a couple of mentions) in this section, and kudos to them (and to FinReg21, where their essay appears) for drawing Posner’s attention.

Russ Roberts’ brilliant and eagerly-awaited Keynes vs. Hayek rap video is here.  It’s the best economics pop music since Merle Hazzard.  Here are the lyrics:

We’ve been going back and forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Hayek] Blame low interest rates.
[Keynes] No… it’s the animal spirits

[Keynes Sings:]

John Maynard Keynes, wrote the book on modern macro
The man you need when the economy’s off track, [whoa]
Depression, recession now your question’s in session
Have a seat and I’ll school you in one simple lesson

BOOM, 1929 the big crash
We didn’t bounce back—economy’s in the trash
Persistent unemployment, the result of sticky wages
Waiting for recovery? Seriously? That’s outrageous!

I had a real plan any fool can understand
The advice, real simple—boost aggregate demand!
C, I, G, all together gets to Y
Make sure the total’s growing, watch the economy fly

We’ve been going back and forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Hayek] Blame low interest rates.
[Keynes] No… it’s the animal spirits

You see it’s all about spending, hear the register cha-ching
Circular flow, the dough is everything
So if that flow is getting low, doesn’t matter the reason
We need more government spending, now it’s stimulus season

So forget about saving, get it straight out of your head
Like I said, in the long run—we’re all dead
Savings is destruction, that’s the paradox of thrift
Don’t keep money in your pocket, or that growth will never lift…

because…

Business is driven by the animal spirits
The bull and the bear, and there’s reason to fear its
Effects on capital investment, income and growth
That’s why the state should fill the gap with stimulus both…

The monetary and the fiscal, they’re equally correct
Public works, digging ditches, war has the same effect
Even a broken window helps the glass man have some wealth
The multiplier driving higher the economy’s health

And if the Central Bank’s interest rate policy tanks
A liquidity trap, that new money’s stuck in the banks!
Deficits could be the cure, you been looking for
Let the spending soar, now that you know the score

My General Theory’s made quite an impression
[a revolution] I transformed the econ profession
You know me, modesty, still I’m taking a bow
Say it loud, say it proud, we’re all Keynesians now

We’ve been goin’ back n forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Keynes] I made my case, Freddie H
Listen up , Can you hear it?

Hayek sings:

I’ll begin in broad strokes, just like my friend Keynes
His theory conceals the mechanics of change,
That simple equation, too much aggregation
Ignores human action and motivation

And yet it continues as a justification
For bailouts and payoffs by pols with machinations
You provide them with cover to sell us a free lunch
Then all that we’re left with is debt, and a bunch

If you’re living high on that cheap credit hog
Don’t look for cure from the hair of the dog
Real savings come first if you want to invest
The market coordinates time with interest

Your focus on spending is pushing on thread
In the long run, my friend, it’s your theory that’s dead
So sorry there, buddy, if that sounds like invective
Prepared to get schooled in my Austrian perspective

We’ve been going back and forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Hayek] Blame low interest rates.
[Keynes] No… it’s the animal spirits

The place you should study isn’t the bust
It’s the boom that should make you feel leery, that’s the thrust
Of my theory, the capital structure is key.
Malinvestments wreck the economy

The boom gets started with an expansion of credit
The Fed sets rates low, are you starting to get it?
That new money is confused for real loanable funds
But it’s just inflation that’s driving the ones

Who invest in new projects like housing construction
The boom plants the seeds for its future destruction
The savings aren’t real, consumption’s up too
And the grasping for resources reveals there’s too few

So the boom turns to bust as the interest rates rise
With the costs of production, price signals were lies
The boom was a binge that’s a matter of fact
Now its devalued capital that makes up the slack.

Whether it’s the late twenties or two thousand and five
Booming bad investments, seems like they’d thrive
You must save to invest, don’t use the printing press
Or a bust will surely follow, an economy depressed

Your so-called “stimulus” will make things even worse
It’s just more of the same, more incentives perversed
And that credit crunch ain’t a liquidity trap
Just a broke banking system, I’m done, that’s a wrap.

We’ve been goin’ back n forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Hayek] Blame low interest rates.
[Keynes] No it’s the animal spirits

I’m delighted to report that the Liberty Fund has produced a three-volume collection of my dad’s oeuvre.  Fred McChesney edits, Jon Macey writes a new biography and Henry Butler, Steve Bainbridge and Jon Macey write introductions.  The collection can be ordered here.

Here’s the description:

As the founder of the Center for Law and Economics at George Mason University and dean emeritus of the George Mason School of Law, Henry G. Manne is one of the founding scholars of law and economics as a discipline. This three-volume collection includes articles, reviews, and books from more than four decades, featuring Wall Street in Transition, which redefined the commonly held view of the corporate firm.

Volume 1, The Economics of Corporations and Corporate Law, includes Manne’s seminal writings on corporate law and his landmark blend of economics and law that is today accepted as a standard discipline, showing how Manne developed a comprehensive theory of the modern corporation that has provided a framework for legal, economic, and financial analysis of the corporate firm.

Volume 2, Insider Trading, uses Manne’s ground-breaking Insider Trading and the Stock Market as a framework for many of Manne’s innovative contributions to the field, as well as a fresh context for understanding the complex world of corporate law and securities regulation.

Volume 3, Liberty and Freedom in the Economic Ordering of Society, includes selections exploring Manne’s thoughts on corporate social responsibility, on the regulation of capital markets and securities offerings, especially as examined in Wall Street in Transition, on the role of the modern university, and on the relationship among law, regulation, and the free market.

Manne’s most auspicious work in corporate law began with the two pieces from the Columbia Law Review that appear in volume 1, says general editor Fred S. McChesney. Editor Henry Butler adds: “Henry Manne was an innovator challenging the very foundations of the current learning.” “The ‘Higher Criticism’ of the Modern Corporation” was Manne’s first attempt at refuting the all too common notion that corporations were merely devices that allowed managers to plunder shareholders. Manne saw that such a view of corporations was inconsistent with the basic economic assumption that individuals either understand or soon will understand the costs and benefits of their own situations and that they respond according to rational self-interest.

My dad tells me the sample copies have arrived at his house, and I expect my review copy any day now.  But I can already tell you that the content is excellent.  Now-under-cited-but-essential-nonetheless corporate law classics like Some Theoretical Aspects of Share Voting and Our Two Corporation Systems: Law and Economics (two of his best, IMHO) should get some new life.  Among his non-corporations works, the classic and fun Parable of the Parking Lots (showing a humorous side of Henry that unfortunately rarely comes through in the innumerable joke emails he passes along to those of us lucky enough to be on “the list”) and the truly-excellent The Political Economy of Modern Universities (an updating of which forms a large part of a long-unfinished manuscript by my dad and me) are standouts.  And the content in the third volume from Wall Street in Transition has particular relevance today, and we would all do well to re-learn the lessons of those important contributions.

The full table of contents is below the fold.  Get it while it’s hot! (more…)

We are delighted to announce the addition of another new permanent blogger here at TOTM:  University of Chicago law professor Todd Henderson.  Like Thom, Todd is a member of the venerable University of Chicago Law School class of 1998 (second only to the most-venerable class of 1997!).  Todd is an expert in corporate law and governance, but his interests and expertise are varied and broad, and we can look forward to his insights on a range of topics.  I would just add that Todd is the co-author of one of my favorite ever (and one of the best-titled) corporate governance law review articles:  “Corporate Heroin: A Defense of Perks, Executive Loans, and Conspicuous Consumption,” 93 Georgetown Law Journal 1835 (2005) (with James C. Spindler).

His official bio follows.  Welcome Todd!

M. Todd Henderson received an engineering degree cum laude from Princeton University in 1993. He worked for several years designing and building dams in California before matriculating at the Law School. While at the Law School, Todd was an Editor of the Law Review and captained the Law School’s all-University champion intramural football team. He graduated magna cum laude in 1998 and was elected to the Order of the Coif. Following law school, Todd served as clerk to the Hon. Dennis Jacobs of the U.S. Court of Appeals for the Second Circuit. He then practiced appellate litigation at Kirkland & Ellis in Washington, D.C., and was an engagement manager at McKinsey & Company in Boston, where he specialized in counseling telecommunications and high-tech clients on business and regulatory strategy. His research interests include corporations, securities regulation, bankruptcy, law and economics, and intellectual property.

Apologies for the late notice on this.  Last week I was on a Federalist Society panel discussing Google’s antitrust issues with Rick Rule, Susan Creighton and Scott Cleland.  The event description follows, and you can find audio of the panel here.  It was an interesting discussion, full of nice ironies in that Microsoft’s chief outside antitrust defender was attacking Google with theories similar to those used against him in the DOJ case, and Google’s chief outside antitrust defender was the author of antitrust case against Microsoft and author of the paper (on cheap exclusion) that was being used as the basis for the case against . . . Google.  Good fun.  Any thoughts from anyone who attended?

Is Google Monopolizing Something, and If So, What?

Federalist Society Corporations, Securities and Antitrust Practice Group

December 7, 2009.  Last June, Christine Varney, then a lawyer in private practice, now President Obama’s nominee to be the next Assistant Attorney General for Antitrust, warned that Google, not Microsoft, is the monopolist of the future.  “For me, Microsoft is so last century. They are not the problem,” Varney said at a June 19 panel discussion sponsored by the American Antitrust Institute. The U.S. economy will “continually see a problem — potentially with Google” because it already “has acquired a monopoly in Internet online advertising.”  Concerns of this nature ultimately led Tom Barnett, the last Assistant Attorney General for Antitrust, to threaten a Sherman Act monopolization lawsuit if Google went through with plans to buy Yahoo.  Google, on the other hand, contends that the concerns are completely misplaced.  “The nature of the Internet is just a fundamentally different world from the sale of packaged software or the bundling of software with OEMs (original equipment manufacturers),” according to Kent Walker, Google’s General Counsel.  “The standard line we have is that competition is just one click away.”

[ Full Audio]
Audio Running Time: 01:32:58

Panelists:

• Mr. Scott Cleland, President, Precursor LLC and Chairman, NetCompetition.org
• Ms. Susan Creighton, Partner, Wilson Sonsini Goodrich & Rosati, PC
• Prof. Geoffrey Manne, Founder and Executive Director, International Center for Law & Economics and Lecturer in Law, Lewis & Clark Law School
• Mr. Rick Rule, Partner, Cadwalader, Wickersham & Taft LLP
• Moderator: Mr. Montgomery N. Kosma, Vice President of Legal Services Outsourcing, CPA Global

An announcement from John Stossel:

It’s finally here – my new Fox Business show!  Fox fittingly has titled it, Stossel.  It premieres Thursday at 8 p.m.  It will repeat Fridays at 10 p.m., where I’ll be up against my old program, 20/20.

FBN has given me an opportunity to do 44 TV shows on what I am passionate about: economic liberty.  For my first shows, at least, I will experiment with a studio audience. I’m inviting both friends, and people who will scream at me and tell me free markets are evil.  If you are in the New York area and you’d like to join an audience on 48th and 6th Avenue, please e-mail me at stosseltix@foxnews.com.

My first show, Thursday Dec. 10, will be on Ayn Rand’s novel Atlas Shrugged or on Global Warming.  Then I’ll do one on health care.

I hope you will watch and tell me what I’m doing wrong.  Or right.

Unfortunately, some of you don’t get Fox Business News on your Cable system.  Please call your cable company and tell them you won’t pay your bill until they offer FBN!

Best,

John Stossel

The season opener is, reportedly, to focus on climate change.

Thanks to all of our participants and readers for the blog symposium–both the posts and the comments were engaging and thoughtful, and I hope these entries will be helpful in the ongoing debate over credit cards and interchange fees.

A concluding point or two:

Credit card networks are incredibly complex, and no one fully understands the full consequences of tinkering with these markets.  The best empirical evidence we have is difficult to interpret, and the broad interactions among the parts of the credit card system, between cards and other payment systems, and in the macro-economy more generally are simply unknown:  Richard’s do no harm principle seems like the strongest conclusion in this debate.

At worst, theory and empirical evidence suggest that lowering interchange fees does nothing to help consumers, and in fact harms them by raising annual fees and thus again by limiting competition among cards at the point of sale.  Perhaps there is some policy reason why we would want to help merchants at the expense of consumers, but the issue, often framed as merchants and consumers against banks and card networks, really seems to be merchants against consumers.  At best, we have no idea what the full social implications of capping interchange fees would be–but there is still a conflict between merchant and consumer interests, and we should be wary.

As I read the comments and posts in this debate, essentially all of us agree that, at minimum, there is a potential for consumer harm from government intervention in these markets.  Certainly all of us engaged in this discussion–even those with a more “pro-regulatory” bent–are far more circumspect about the prospects for positive social welfare effects and effects on consumers in particular than are the proponents of regulation.  I do wish our system limited the political salience of regulatory initiatives unsupported by evidence–the burden should be on the proponents of intervention to demonstrate affirmatively that regulation will likely have net positive effect.  Here, this is simply not the case.

As is so often the case, Richard has the last word:

The clear upshot is that it is difficult through informed speculation to identify all the collateral consequences of running a credit card system, both positive and negative.  The only sure piece of data that we have is that credit transactions have done far better than cash and checks, even if they are losing ground to the next generation of payment systems that rely on cell phones and other technologies that are untied to the now ubiquitous magnetic strip.  These dynamic changes could easily force down interchange prices without the need for administrative proceedings.

The hard institutional question therefore is why concentrate major reforms on the interchange fees when all these other components must be added into the mix.  On this question, priors really matter. And after reading the assembled posts, my own view is that technological innovation is a far more important driver of improvements than partial fine-tuning of the current system, whatever its flaws.

In one sense, therefore, we, the members of this blog-fest, may well be part of the problem.  By putting one part of a complex payment industry under a microscope we divert resources from cost reduction measures that have unambiguously positive effects.  How large a cost is this?  Frankly, no one knows.  But given the risks of error in implementation, the best response still seems to be, play for the next big breakthrough, and in the short run, leave well enough alone.

Thanks once again to all of our great participants, and to our readers.  The full set of posts and comments from the symposium are available by clicking on the “credit card symposium” link on the right side of the TOTM page.

The Law and Economics of Interchange Fees and Credit Card Markets

Welcome to day two of of our two-day symposium on the law and economics of interchange fees and credit cards.

Our symposium brings together several of the world’s leading experts on interchange fees and the law and economics of credit card markets.  Our participants will discuss a range of issues surrounding the regulation of interchange and credit card markets.

• Omri Ben-Shahar (University of Chicago Law School)
• Tom Brown (O’Melveney & Myers)
• Bob Chakravorti (Federal Reserve Bank of Chicago)
• Richard Epstein (University of Chicago and NYU Law Schools)
• Joshua Gans (University of Melbourne Business School)
• Ron Mann (Columbia University Law School)
• Geoffrey Manne (International Center for Law & Economics and Lewis & Clark Law School)
• Tim Muris (George Mason University School of Law and O’Melveney & Myers)
• Allan Shampine (Compass/Lexecon)
• Bob Stillman (CRA International)
• Jim Van Dyke (Javelin Strategy & Research)
  
• Joshua Wright (George Mason University School of Law)
• Todd Zywicki (George Mason University School of Law)

Today’s posts will cover the following topics:

• Assessing Cross-Subsidies.  Posts from Tom Brown & Tim Muris and Todd Zywicki
• Assessing the Network Rules.  Posts from Bob Chakravorti and Joshua Gans
• Considering the Costs: Fraud.  Posts from Jim Van Dyke, Allan Shampine and Geoffrey Manne
• Additional Responses and Closing Thoughts.  Posts from Omri Ben-Shahar and Joshua Wright and TBD

The posts will appear regularly throughout the day to allow time between posts for discussion: Check back for updates and comments.  Expect free-ranging discussion in the comments–most of these issues are inter-related and we will return to several themes throughout the symposium.

You can find all of the symposium posts under the “credit card symposium” link on the right side of the page.

Thank you for joining us!

The Law and Economics of Interchange Fees and Credit Card Markets

Today marks the start of our two-day symposium on the law and economics of interchange fees and credit cards.  As I noted in my announcement, the scholarly and policy debates over interchange fees and credit card markets more generally are raging, with several bills pending in Congress and a recent report by the GAO on the topic.  Meanwhile, the financial crisis has brought increased scrutiny to financial institutions and credit markets, and consumer credit in particular is in the regulatory cross hairs.  Litigation continues in the Eastern District of New York, and outside the US other countries continue to scrutinize (and regulate) interchange fees.

As the GAO notes:

Proposals for reducing interchange fees in the United States or other countries have included (1) setting or limiting interchange fees, (2) requiring their disclosure to consumers, (3) prohibiting card networks from imposing rules on merchants that limit their ability to steer customers away from higher-cost cards, and (4) granting antitrust waivers to allow merchants and issuers to voluntarily negotiate rates. If these measures were adopted here, merchants would benefit from lower interchange fees. Consumers would also benefit if merchants reduced prices for goods and services, but identifying such savings would be difficult. Consumers also might face higher card use costs if issuers raised other fees or interest rates to compensate for lost interchange fee income. Each of these options also presents challenges for implementation, such as determining at which rate to set, providing more information to consumers, or addressing the interests of both large and small issuers and merchants in bargaining efforts.

Our symposium will bring together several of the world’s leading experts on interchange fees and the law and economics of credit card markets.  Our participants will discuss a range of issues surrounding the regulation of interchange and credit card markets.

• Omri Ben-Shahar (University of Chicago Law School)
• Tom Brown (O’Melveney & Myers)
• Bob Chakravorti (Federal Reserve Bank of Chicago)
• Richard Epstein (University of Chicago and NYU Law Schools)
• Joshua Gans (University of Melbourne Business School)
• Ron Mann (Columbia University Law School)
• Geoffrey Manne (International Center for Law & Economics and Lewis & Clark Law School)
• Tim Muris (George Mason University School of Law and O’Melveney & Myers)
• Allan Shampine (Compass/Lexecon)
• Bob Stillman (CRA International)
• Jim Van Dyke (Javelin Strategy & Research)
  
• Joshua Wright (George Mason University School of Law)
• Todd Zywicki (George Mason University School of Law)

The Symposium will proceed in the following order:

December 8:

• Introductory Statements.  Posts from Richard Epstein and Ronald Mann
• Framing the Discussion.  Posts from Bob Stillman, Allan Shampine, Tom Brown & Tim Muris, and Bob Chakravorti
• The Consequences of Regulation and the View from Australia. Posts from Joshua Gans and Todd Zywicki
• Looking at the Proposed US Legislation.  Posts from Omri Ben-Shahar and Joshua Wright

December 9:

• Assessing Cross-Subsidies.  Posts from Tom Brown & Tim Muris and Todd Zywicki
• Assessing the Network Rules.  Posts from Bob Chakravorti and Joshua Gans
• Considering the Costs: Fraud.  Posts from Jim Van Dyke, Allan Shampine and Geoffrey Manne
• Antitrust Issues.  Posts from Joshua Wright and Geoffrey Manne
• Additional Responses and Closing Thoughts.  Posts from TBD

The posts will appear regularly throughout the day to allow time between posts for discussion: Check back for updates and comments.  Expect free-ranging discussion in the comments–most of these issues are inter-related and we will return to several themes throughout the symposium.

We look forward to an engaged discussion in the comments to the symposium posts, and we hope all of our readers will check in frequently during the symposium and will contribute to the debate.

Finally, I am delighted to announce that this symposium is being hosted by the International Center for Law and Economics.

The International Center for Law and Economics (ICLE) is a new entity—a global think tank aimed at building a strong, managed, international network of meaningful (and self-sustaining) institutions and academics devoted to methodologies and research agendas that will inject rigorous, evidence-based thinking into important policy debates. Pursuing the most successful and rigorous aspects of law and economics, dynamic competition analysis, New Institutional Economics and similar approaches to law, economics and policy, the ICLE aims to become an essential part of the policy landscape in the most important policy debates around the globe. The goals of the ICLE are both to create important scholarship as well as to ensure that it has policy relevance. The ICLE develops intellectual work itself as well as drawing on its global intellectual network.  The ultimate goal is the reinvigoration of a law and economics movement in the spirit of intellectual forebears like Armen Alchian, Ronald Coase, Harold Demsetz, Frank Easterbrook, Benjamin Klein, Henry Manne and Oliver Williamson.  The ICLE is founded in honor of Armen Alchian.

The center’s work is built around the following principles:

• A commitment to the application of economic theory, particularly price theory and new institutional economics, to antitrust and regulatory problems
• A commitment to empirical scholarship and applications of economic theory with real world relevance
• The use of formal mathematical modeling exclusively as a means to furthering our knowledge about the world, rather than an ends in its own right
• A dedication to understanding both the role of the law and institutions in facilitating competition as well as the consequences of legal rules
• A commitment to promoting an international discourse on issues of antitrust and regulatory policy in the increasingly-global regulatory environment

And so without further ado . . .

(credit card photo credit: http://www.flickr.com/photos/andresrueda/ / CC BY 2.0)

Just a reminder that our blog symposium begins tomorrow,  Tuesday, December 8.

The Law and Economics of Interchange Fees and Credit Card Markets

For the uninitiated, the interchange fee is the fee charged (usually) by the credit card issuing bank (the cardholder’s bank) to the credit card acquiring bank (the merchant’s bank) to settle a credit card transaction between the cardholder and the merchant.  Interchange fees, as well as various rules set by credit card networks governing credit card transactions and the structure of the industry more generally have long been the subject of debate, litigation and regulation.  Credit cards have been among the most successful financial innovations ever, and credit card markets are fascinatingly complex–two features leading inexorably not only to commercial disputes but also to academic dispute and scholarly attention.

As regular readers may recall, we have had a few posts on the topic, including a spirited exchange when Steve Salop was visiting a few weeks ago.  I noted at the time that the topic of the regulation of interchange was interesting and timely–in fact, since then, while the then-pending bills are still pending in Congress, the GAO has issued its report on the effects of interchange fees on consumers and merchants.  The GAO report notes that interchange fees have been increasing, but questions whether this leads to any viable policy responses.  As the GAO notes:

Proposals for reducing interchange fees in the United States or other countries have included (1) setting or limiting interchange fees, (2) requiring their disclosure to consumers, (3) prohibiting card networks from imposing rules on merchants that limit their ability to steer customers away from higher-cost cards, and (4) granting antitrust waivers to allow merchants and issuers to voluntarily negotiate rates. If these measures were adopted here, merchants would benefit from lower interchange fees. Consumers would also benefit if merchants reduced prices for goods and services, but identifying such savings would be difficult. Consumers also might face higher card use costs if issuers raised other fees or interest rates to compensate for lost interchange fee income. Each of these options also presents challenges for implementation, such as determining at which rate to set, providing more information to consumers, or addressing the interests of both large and small issuers and merchants in bargaining efforts.

Our symposium will bring together several of the world’s leading experts on interchange fees and the law and economics of credit card markets.  Our participants will discuss a range of issues surrounding the regulation of interchange and credit card markets.

The symposium will take place on Tuesday and Wednesday, December 8 and 9.

• Omri Ben-Shahar (University of Chicago Law School)
• Tom Brown (O’Melveney & Myers)
• Bob Chakravorti (Federal Reserve Bank of Chicago)
• Richard Epstein (University of Chicago and NYU Law Schools)
• Joshua Gans (University of Melbourne Business School)
• Ron Mann (Columbia University Law School)
• Geoffrey Manne (International Center for Law & Economics and Lewis & Clark Law School)
• Tim Muris (George Mason University School of Law and O’Melveney & Myers)
• Allan Shampine (Compass/Lexecon)
• Bob Stillman (CRA International)
• James Van Dyke (Javelin Strategy & Research)
• Joshua Wright (George Mason University School of Law)
• Todd Zywicki (George Mason University School of Law)

We look forward to an engaged discussion in the comments to the symposium posts, and we hope all of our readers will check in frequently during the symposium and will contribute to the debate.

The European Union has re-numbered its governing Articles following the entering into force of the Treaty of Lisbon.  So the former “Treaty Establishing the European Community” is now the “Treaty on the Functioning of the European Community.”  And the chapter on competition, former Articles 81 through 89, is now the new (and unchanged) Articles 101 through 109.  Thought you might like to know.