Oregon Law Review : Vol. 89, No. 3 (2011)
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Item Open Access Oregon Law Review : Vol. 89, No. 3, p. 1107-1112 : Mission, Structure, and Governance in Future Electric Markets: Some Observations(University of Oregon School of Law, 2011) Fox-Penner, Peter; Bishop, HeidiItem Open Access Oregon Law Review : Vol. 89, No. 3, p. 1059-1106 : Replacing Antitrust Exemptions for Transportation Industries: The Potential for a “Robust Business Review Clearance”(University of Oregon School of Law, 2011) Carstensen, Peter C.Congress has scattered among various statutes at least thirty exemptions or modifications of antitrust law. The greatest concentration of these exemptions is in the area of commercial transportation where there are six such exemptions, the oldest relating to ocean shipping. Indeed, until the deregulatory movement of the 1970s and 1980s, most rates, routes, and terms for transportation were the subject of direct regulatory control. However, starting in the 1970s, legislative policy toward transportation dramatically changed. Increasingly, federal policy favors market competition in transportation sectors and discourages regulatory interference. Yet the exemptions remain on the books, and companies regularly seek their benefit. This leads to an empirical question, which will form the core of this Article: what kinds of conduct are now being presented to regulators for approval and antitrust immunity? The analysis of this Article proceeds as follows: Part I provides a brief summary of the six statutes that provide immunity for some aspect of transportation as well as the contemporary business review clearance process used by the Antitrust Division; Part II sets forth plausible alternative explanations for retaining antitrust immunity in the transportation industries; Part III then provides the empirical part of this Article, analyzing agency grants of antitrust immunity in light of the possible explanations for the transactions being immunized; Part IV explains why the exemption process is not well adapted to the needs of the parties or the public interest; Part V presents the basic concept of a robust business review clearance process; Part VI considers two arguments against the proposal; Part VII then identifies and discusses some key elements of the process that involve important choices if it were to be implemented.Item Open Access Oregon Law Review : Vol. 89, No. 3, p. 951-1058 : The Dodd-Frank Act: A Flawed and Inadequate Response to the Too-Bigto- Fail Problem(University of Oregon School of Law, 2011) Wilmarth, Arthur E. Jr.Dodd-Frank does contain useful reforms, including potentially favorable alterations to the supervisory and resolution regimes for large, complex financial institutions (LCFIs) that are designated as systemically important financial institutions (SIFIs). However, this Article concludes that Dodd- Frank’s provisions fall far short of the changes that would be needed to prevent future taxpayer-financed bailouts and to remove other public subsidies for TBTF institutions. As explained below, Dodd- Frank fails to make fundamental structural reforms that could largely eliminate the subsidies currently exploited by LCFIs.Parts II and III of this Article briefly describe the consequences and causes of the financial crisis that led up to the enactment of the Dodd- Frank. As discussed in those sections, LCFIs were the primary private-sector catalysts for the crisis, and they received the lion’s share of support from government programs that were established during the crisis to preserve financial stability. Public alarm over the severity of the financial crisis and public outrage over government bailouts of LCFIs produced a strong consensus in favor of financial reform. That public consensus pushed Congress to enact Dodd- Frank. As Part IV explains, governmental rescues of LCFIs highlighted the economic distortions created by TBTF policies, as well as the urgent need to reduce public subsidies created by those policies. In an article written a few months before Dodd-Frank was enacted, I proposed five reforms that were designed to prevent excessive risk taking by LCFIs and to shrink TBTF subsidies. My proposed reforms would have (1) strengthened existing statutory restrictions on the growth of LCFIs; (2) created a special resolution process to manage the orderly liquidation or restructuring of SIFIs; (3) established a consolidated supervisory regime and enhanced capital requirements for SIFIs; (4) created a special insurance fund, pre-funded by riskbased assessments paid by SIFIs, to cover the costs of resolving failed SIFIs; and (5) rigorously insulated FDIC-insured banks that are owned by LCFIs from the activities and risks of their nonbank affiliates. Part V of this Article compares the relevant provisions of Dodd- Frank to my proposed reforms and evaluates whether the new statute is likely to solve the TBTF problem. Dodd-Frank includes provisions (similar to my proposals) that make potentially helpful improvements in the regulation of large financial conglomerates. The statute establishes a new umbrella oversight body (the Financial Stability Oversight Council) that will designate SIFIs and make recommendations for their regulation. The statute also authorizes the FRB to apply enhanced supervisory requirements to SIFIs. Most importantly, Dodd-Frank establishes a new systemic resolution regime (the Orderly Liquidation Authority (OLA)) that should provide a superior alternative to the choice of “bailout or bankruptcy” that federal regulators confronted when they dealt with failing SIFIs during the financial crisis.Item Open Access Oregon Law Review : Vol. 89, No. 3, p. 885-914 : Antitrust Immunities(University of Oregon School of Law, 2011) Farmer, Susan BethIam pleased to be here today to speak about an important issue in American antitrust law: immunities and exemptions that limit or preclude the application of antitrust laws to certain conduct or industries. The core message of my remarks today is that the changing dynamics of many industries coupled with the increasing analytical rigor that courts and antitrust enforcement agencies apply should alleviate the concerns that have been cited by advocates of exemptions. Free market competition is a fundamental and core principle of this country. As the bipartisan Antitrust Modernization Commission recognized, just as private constraints on competition can be harmful to consumer welfare, so can government restraints. Thus, the use of such restraints should be minimized.Item Open Access Oregon Law Review : Vol. 89, No. 3, p. 885-914 : Market Allocation in the Health Insurance Industry and the McCarran- Ferguson Act(University of Oregon School of Law, 2011) Stutz, RandyThis Article examines the scope of the McCarran-Ferguson Act under existing Supreme Court precedent and reviews the sparse case law addressing the MFA’s applicability to market allocation schemes in the insurance industry, including the Blue Cross Blue Shield market allocation scheme. This Article concludes that whether any market allocation scheme is exempt is a close, fact-specific question that courts will not answer in the abstract. On any set of facts, insurers will have considerable leeway in attempting to prove that a given market allocation scheme should be treated as the business of insurance and thus exempt if regulated by state law. A clear determination that the BCBS market allocation scheme is not exempt, or congressional action to repeal the MFA as to the health insurance industry, would remove a primary obstacle to a challenge of the scheme, but it is not clear whether this would affect competitive dynamics among BCBS companies.Item Open Access Oregon Law Review : Vol. 89, No. 3, p. 847-884 : The Provider Monopoly Problem in Health Care(University of Oregon School of Law, 2011) Havinghurst, Clark C.; Richman, Barak D.Health care providers with market power enjoy substantially more pricing freedom than comparable monopolists in other markets, and the reason, which is not generally recognized, is U.S.-style health insurance. Monopoly in health care markets, therefore, has redistributive effects that are especially burdensome for consumers. Significant allocative inefficiencies—albeit not the kind usually associated with monopoly—also result, particularly when the monopolist is a nonprofit hospital. We first note the need for a more aggressive antitrust policy for the health sector, one that effectively prevents the creation of new provider market power through mergers and other alliances. An immediate need is to prevent the formation of “accountable care organizations” that integrate providers horizontally to achieve market power and not just vertically to achieve efficiency. Because it is unlikely that courts or agencies could undo past mergers that bestowed providers with monopoly power, we also suggest some strategies for contesting existing monopolies. One strategy is to apply antitrust rules against “tying” arrangements so purchasers can contest providers’ profit-enhancing practice of overcharging for large bundles of services instead of trying to exploit separately the monopolies they possess in various submarkets. Another strategy is to use antitrust or regulatory rules to prohibit anti-competitive provisions, such as “anti-steering” or “most-favored-nation” clauses, in provider-insurer contracts. The provider monopoly problem is severe enough that we cannot exclude the more radical alternative of regulating provider prices.Item Open Access Oregon Law Review : Vol. 89, No. 3, p. 785-810 : The Affordable Care Act and Competition Policy: Antidote or Placebo?(University of Oregon School of Law, 2011) Greaney, Thomas L.In the run-up to its enactment, the Patient Protection and Affordable Care Act (ACA) elicited howls of protest from opponents who claimed the federal government was taking over the American healthcare system, micromanaging medicine, and generally exposing the nation to the bête noire of socialized medicine. Hyperbole, misrepresentation, and chauvinism aside, these sound bites suffer from a deeper flaw: they mischaracterize the fundamental thrust of the new law. Though the ACA establishes significant new regulatory authority, this is not a new development (indeed it can be faulted for preserving pre-existing regulatory regimes), nor does it impair market competition. To the contrary, much of the law aims at improving conditions conducive to effective competition. With numerous programs designed to correct perverse incentives in the payment system, to mitigate market imperfections, and to make the delivery system responsive to market signals, the ACA might well be rechristened as the “Accommodation of Competition Act.”Item Open Access Oregon Law Review : Vol. 89, No. 3, p.785-810 : Standardization and Markets: Just Exactly Who Is the Government, and Why Should Antitrust Care?(University of Oregon School of Law, 2011) Sagers, ChrisMy assignment at the symposium at which this Article was presented was to relate private standard setting to the symposium theme: the “public and the private,” and the possibility that whatever “boundaries” they may have are in “transition.” This Article is basically a sociological exercise. It will make two basic arguments about how the role of standard setting in our economy is at odds with the commonly assumed dichotomy between bureaucracy and markets. First, I stress the great ubiquity and influence of standard-setting activity in the United States. A large proportion of the standards we adopt have more or less binding force, and they exert influence far beyond high technology and manufacturing. They are everywhere. Moreover, most matters governed by standards are not subject to any government oversight. They are formulated outside the government purview, and they get their influence not from the formal force of law but from independent forces. And yet, as I argue, those standards cannot easily be explained as merely the results of market-driven influences. That is to say, even though most standards are formulated outside any government purview––and, therefore, under the bureaucracy-markets dichotomy, should be explainable in some way as the product of competitive markets––they are in fact not subject to price-competitive pressures. In the discussion below, I relate this phenomenon to theoretical developments in the social sciences concerning “isomorphism” or “institutionalism” in markets. Second, the nature of standards activities also tends to suggest that much of the social decision making that occurs outside of markets is not actually overseen by government––contrary to the impression given by the bureaucracy-markets dichotomy. This second issue is the flip side of the first. The ubiquity of SSOs not only casts some doubt on the prominence of markets as resource allocators but also casts some doubt on government as markets’ chief alternative.Item Open Access Oregon Law Review : Vol. 89, No. 3, p. 775-784 : Antitrust Immunities(University of Oregon School of Law, 2011) Varney, Christine A.I am pleased to be here today to speak about an important issue in American antitrust law: immunities and exemptions that limit or preclude the application of antitrust laws to certain conduct or industries. The core message of my remarks today is that the changing dynamics of many industries coupled with the increasing analytical rigor that courts and antitrust enforcement agencies apply should alleviate the concerns that have been cited by advocates of exemptions. Free market competition is a fundamental and core principle of this country. As the bipartisan Antitrust Modernization Commission recognized, just as private constraints on competition can be harmful to consumer welfare, so can government restraints. Thus, the use of such restraints should be minimized.Item Open Access Oregon Law Review : Vol. 89, No. 3, p. 753-774 : An Introduction to the American Antitrust Institute’s 11th Annual National Conference: Are the Boundaries Between Public and Private in Transition?(University of Oregon School of Law, 2011) Foer, Albert A.The theme of the American Antitrust Institute’s (AAI) conference on June 24, 2010, was embedded in a question: are the boundaries between what is public and what is private in transition? Our premise was that antitrust strikes a balance between government regulation of the economy and an extremely free market system. Another way to say this is that there is, on one hand, the public sector, represented by the government, and on the other hand, the private sector, represented by individuals, families, commercial units, and various other associations. Our concern as experts in antitrust and competition policy is in the nuances of the relationship between what, at any point in time, is public and what is private because the balance establishes the framework in which competition plays its role.