Legal Stuff

Court considers fake reviews not deceptive if they’re just puffery

20 August 2018

From Rebecca Tushnet’s 43(B)log:

The parties compete in the wine rack and wine cellar industry. Jive’s principal Jason Miller was formerly employed by WRA. Miller fell out with WRA’s owner, Jeffery Ogzewalla, and founded Vino Grotto.  Jive alleged various acts by WRA to harm its business, such as using Jive’s Vino Grotto and Home Collector Series marks in search engine ads to redirect consumers to WRA’s websites. WRA’s website allegedly copies content, images, trade dress, and look and feel from Jive’s website. WRA also allegedly contacted Jive’s vendors to persuade them not to work with Jive and made defamatory comments about Jive/Miller. WRA also allegedly posted false and deceptive positive reviews on the internet, and also forged photographs and address information on their website “to create the illusion of legitimacy and to hide the geographic origin of their goods.”

. . . .

As for the false reviews, the court rejected the Lanham Act {PG note – the Lanham Act is the primary Federal trademark statute in the US and prohibits a range of bad acts involving trademarks} claims because nothing in the content of the reviews left by WRA’s employees had been shown to be false and much was puffery.  E.g., an employee stating that he “found the 24 bottle table top wine rack fit neatly in that space, arrived quickly, and was very sturdy” could well have concluded these things.  [Arrived quickly, though?  More significantly, the court doesn’t give weight to the at least implicit misrepresentation—I would say necessary implication—that the review is from a true counterparty, rather than from a representative of the seller. The court treats only the statements in the reviews and not the reviews themselves as possible statements of fact, but “I am an independent customer” is also a factual statement and the FTC would surely say it had been conveyed by the reviews.]

Likewise, the court wasn’t impressed that WRA listed its mailing address as being in Bend, Oregon, even though it had Utah as the returns address. The court accepted that WRA had a presence in both states, and any confusion caused by altering an image of a building owned by WRA in Utah (as happened on the website) hadn’t caused any demonstrated injury.

. . . .

Trademark claims related to use of Jive’s marks in bidding for keyword ads didn’t show likely confusion, per 1-800-Contacts. The ad in the moving papers was clearly marked as an ad, and Jive’s website was directly below it.

Jive also made claims based on WRA’s sale of products under the Home Collector Series mark during a time in which, WRA contended, Jive was not using the mark. Some factors favored a finding of likely confusion, but there was no evidence of actual confusion, consumers’ degree of care, and strength of the mark (if any); WRA also ceased use of the mark, making injunctive relief unnecessary.

Tortious interference/defamation: not enough evidence of injury inflicted by improper means; many of the people to whom RWA spoke apparently kept doing business with Jive or ceased doing business with it for other reasons.  (Declarations from the identified customers here helped RWA a lot.)

Link to the rest at Rebecca Tushnet’s 43(B)log

PG notes the term, “puffery”, is legalese for a promotional statement or claim that expresses subjective rather than objective views, which no “reasonable person” would take literally. Puffery serves to “puff up” an exaggerated image of what is being described and is especially featured in testimonials. See Wikipedia-Puffery for more.

For the lay person, whenever a court describes the advertisements and promotions of one party as “puffery” or “mere puffery”, the complaining party is going to lose. “Mere” by itself is a reliable indicator that the party whose behavior is being described as “mere” is going to win on the particular legal point in question.

PG doesn’t believe he has ever read or heard the word, “puffery”, except in the context of a legal dispute. Centuries ago, PG worked for a very large advertising agency and can attest that puffery was not a term of art used by advertising professionals.

Preserve challenged ads/social media posts after receiving a C&D or risk sanctions

13 August 2018

From Rebecca Tushnet’s 43(B)log:

A spoliation/false advertising issue.  “While Defendants produced some social media documents, the production did not include Facebook or Twitter posts relating to the illicit products identified in the complaint.” For a finding of spoliation, a party must show that “(1) the party with control over the evidence had an obligation to preserve it at the time of destruction; (2) the evidence was destroyed with a ‘culpable state of mind’; and (3) the evidence was relevant to the party’s claim or defense.”

After plaintiff’s demand letter and complaint, which identified the products and ads at issue, defendants had an obligation to preserve relevant posts on their social media sites.  There was evidence of a culpable mental state, where a deponent responded to a question about whether the deleted posts had anything to do with this lawsuit, with “It’s possible. Actually, it was — I think it had more to do with any copycat companies, law firms like yours trying to file the same frivolous lawsuit.” When asked about deleting posts related to marketing one of the products at issue, he responded, “I have the right to do whatever I want to do with my Facebook account, regardless of a lawsuit or not.” His declaration that no posts were deleted intentionally for purposes of litigation/post-filing was inconsistent with his deposition testimony and unsupported by evidence. Destruction after notice/negligence is sufficent to be culpable.

Link to the rest at Rebecca Tushnet’s 43(B)log

As the OP says, this case involves a legal principle called spoliation (not spoilation, but if spoilation were a word, it might mean about the same thing).

Here’s a definition:

Spoliation is the destruction or alteration of a document that destroys its value as evidence in a legal proceeding. Soliation often carries an inference of intentional destruction in order to avoid negative implications associated with evidence.

The term is pronounced SPO liation  – The first syllable rhymes with go and the second part is pronounced like the ending of pronunciation.

When some people are accused of wrongdoing, their first impulse is to attempt to destroy all evidence that they might have done something wrong.

PG warns this is a bad idea for a couple of reasons:

  1. It makes the person look very guilty of the claimed wrongdoing.
  2. The destruction or alteration can be a crime all by itself under federal law and state law in the United States separate and apart from the bad conduct spoliation attempts to cover up.

Some large organizations have detailed procedures to avoid having their employees intentionally or inadvertently alter or destroy potential evidence. Corporate legal departments have form spoliation letters and emails for use with employees, contractors, vendors, etc., etc.

Digital records have made the avoidance of spoliation far more complex. For someone with a guilty conscience, the temptation to hit the delete button is overwhelming.

Without getting into the weeds, PG cautions that delete commands often remove the file from an individual’s computer display without actually removing the underlying information from all sorts of other places where it may reside. Computer forensics experts are hired for their skill in locating deleted information in such places.

As the OP describes, social media and online discussion forums can be a happy hunting ground for evidence of guilt and inflammatory remarks that can make a defendant look like a jerk or a criminal. Yes, you can be forced to provide your ID and password.

PG suspects most attorneys warn their clients not to destroy or hide anything at the first hint of any potential claim or litigation.

UPDATE:

Here’s an example of a letter designed to prevent spoliation of evidence:

Please be advised that you and your clients, John Jones and Jane Doe, are under a legal duty to maintain, preserve, retain, protect, and not destroy any and all documents and data, both electronic and hard copy, that may be relevant to Ps claims as set forth in the Complaint. The failure to preserve and retain the electronic data and evidence outlined in this notice may constitute spoliation of evidence which will subject you to legal claims for damages and/or evidentiary and monetary sanctions.

For purposes of this notice, electronic data or electronic evidence shall include, but not be limited to, all text files (including word processing documents), presentation files ( such as PowerPoint), financial data, spread sheets, e-mail files and information concerning e-mail files (including logs of e-mail history and usage, header information, and deleted files), Internet history files and preferences, graphical files in any format, databases, calendar and scheduling information, task lists, voice mail, instant messaging and other electronic communications, telephone logs, contact managers, computer system activity logs, and all file fragments, internet usage files, offline storage or information stored on removable media or storage media, information contained on laptops, or other portable devices, network access information and backup files containing electronic data or electronic evidence.

Specifically, you are instructed not to destroy, disable, erase, encrypt, alter, or otherwise make unavailable any electronic data and/or evidence relevant to the Plaintiffs claims, and you are further instructed to take reasonable efforts to preserve such data and/or evidence. To meet this burden, you are instructed by way of example and not limitation, to:

  • Preserve all data storage backup files (i.e., not overwrite any previously existing backups);
  • Preserve and retain all electronic data generated or received by employees who may have personal knowledge of the facts involved in the claims against the Defendants as set forth in the Complaint;
  • Refrain from operating, removing or altering, fixed or external drives and media attached to any workstations or laptops, voice mail systems, and cell phones, copy machines that are reasonably thought to have data related to the claims, including but not limited to the workstations and/or laptops used by John Jones and Jane Doe;
  • Preserve and retain all data from servers and networking equipment logging network access activity and system authentication;
  • Preserve and retain all electronic data in any format, media, or location relating to the claims, including data on hard drives, hard disks, floppy disks, zip drives, CD-ROMs, CD-RWs, DVDs, backup tapes, PDAs, cell phones, smart phones, memory cards/sticks, or digital copiers or facsimile machines;
  • Prevent employees from deleting or overwriting any electronic data related to the Plaintiffs claims; and
  • Take such other security measures, including, but not limited to, restricting physical and electronic access to all electronically stored data directly or indirectly related to the Plaintiff s claims.

To facilitate the retrieval of said data, be advised that a forensic accounting firm will be retained to, in addition to reviewing the requisite documentation, forensically acquire the hard drives and other media that may contain electronic data related to the action.

The Usage of Commas versus Semicolons in a Trademark Application’s Description of Goods and Services — Does It Matter?

11 July 2018

As a brief introduction, PG disparaged semicolons on TPV yesterday. He stated that some types of lawyers tend to overuse this punctuation mark and that writers should be careful when using it.

Many defenders of the semicolon commented on its usefulness and relevance to 21st Century writing.

Following is an example of legal issues arising with using a semicolon when a comma is needed.

From Troy & Schwartz, Attorneys at Law:

Although the usage of commas and semicolons in the description of goods and services included in a trademark application may seem to be nothing more than compliance with a  grammatical rule, the fact is that the presence of a comma and/or semicolon can have a substantive law effect.  Section 1402.01(a) of the Trademark Manual of Examining Procedure (“TMEP”) has specific guidelines governing the usage of semicolons and commas:

Semicolons should be generally used to separate distinct categories of goods or services within a single class.  For example, “cleaners, namely glass cleaners, oven cleaners, and carpet cleaners; deodorizers for pets” is an acceptable classification for [International] Class 3.  In this example, the word “cleaners” means the category covering “glass cleaners, oven cleaners, and carpet cleaners.”  The semicolon prior to “deodorizers for pets” indicates that the deodorizers are a separate category of goods from the cleaners. 

Seems straight forward enough, doesn’t it?   Just use the right punctuation in describing the goods and services.  Yet the 2013 precedential opinion by the Trademark Trial and Appeal Board (“Board”) in In re Midwest Gaming & Entertainment, LLC* demonstrates that punctuation can impact the interpretation of the “reach” of the described goods and services.  In Midwest Gaming, the examining attorney had rejected the standard character word mark LOTUS for “bar services located in a casino” under International Class 43 on likelihood of confusion grounds with the previously registered mark LOTUS, also for Class 43 services.  The registrant’s specified services were for “providing banquet and social function facilities for special occasions; restaurant and bar services.” Note the usage of the semicolon in the registrant’s description of services.

In appealing the examining attorney’s rejection, the applicant argued that the registrant’s bar and restaurant services were limited to services involving banquet and social function facilities.   Thus, the registrant was restricting its services to trade channels and purchasers distinct from the applicant’s trade channels and purchasers associated with casinos and casino patrons.  Since the trade channels were distinguishable, any likelihood of confusion among purchasers of the registered mark owner’s services and the applicant’s own services was eliminated.

The registrant’s usage of a semicolon “ruined” the applicant’s argument.  The Board emphasized that under the standard examination practice, a semicolon is user to separate distinct categories of goods and services.  Here, the semicolon separates the registrant’s restaurant services and bar services into a discrete category of services which are not connected to or dependent on the “ ‘providing banquet and social function facilities for special occasions’ ” services set out on the other side of the semicolon.”

. . . .

The outcome may well have been different if the registrant’s description of goods and services had included a comma instead of the semicolon.   Why?  Because then the applicant would have had a stronger argument that the registrant was limiting its restaurant and bar services to banquet and social function facilities.

Link to the rest at Troy & Schwartz

AI reveals potential Amazon, Facebook GDPR problems to regulators

5 July 2018

From c/net:

AI [artificial intelligence] software reportedly uncovered suspected GDPR breaches by Alphabet, Amazon and Facebook.

The software — created by EU Institute researchers and a consumer group — looked at the privacy policies of 14 major technology businesses in June, the month after the EU’s new data privacy laws went into effect, according to Bloomberg.

Researchers named the software “Claudette” — short for automated clause detecter — and Alphabet (Google’s parent company), Amazon and Facebook were among the companies whose policies were under the AI microscope.

It found that a third of the clauses within the policies were “potentially problematic” or contained “insufficient information,” while a further 11 percent of the policies’ sentences used unclear language, the academics noted.

The software also noted that some policies failed to identify third parties that the company could share data with.

. . . .

Despite the software’s findings, researchers admitted that the results of the automated scan “are not 100 percent accurate” since the software has only viewed a small number of policies.

Google insisted that its policy is compliant and highlighted that the updated version doesn’t expand or make any changes to how it collects or processes users’ information.

. . . .

The EU has been enforcing the General Data Protection Regulation since May 25 and the law requires the companies adopt greater openness about data they have on EU residents, as well as with whom they share the data.

Link to the rest at c/net

PG suspects that AI might not be the best solution for reviewing 14 terms of use or similar documents today (he suspects it took more time and effort to create the artificial intelligence application than simply having lawyers or paralegals simply review the 14 documents would have required).

However, over the longer term, he thinks it quite likely that AI apps will become common tools for creating and reviewing legal documents.

From the MIT Technology Review:

Meticulous research, deep study of case law, and intricate argument-building—lawyers have used similar methods to ply their trade for hundreds of years. But they’d better watch out, because artificial intelligence is moving in on the field.

As of 2016, there were over 1,300,000 licensed lawyers and 200,000 paralegals in the U.S. Consultancy group McKinsey estimates that 22 percent of a lawyer’s job and 35 percent of a law clerk’s job can be automated, which means that while humanity won’t be completely overtaken, major businesses and career adjustments aren’t far off (see “Is Technology About to Decimate White-Collar Work?”). In some cases, they’re already here.

“If I was the parent of a law student, I would be concerned a bit,” says Todd Solomon, a partner at the law firm McDermott Will & Emery, based in Chicago. “There are fewer opportunities for young lawyers to get trained, and that’s the case outside of AI already. But if you add AI onto that, there are ways that is advancement, and there are ways it is hurting us as well.”

. . . .

So far, AI-powered document discovery tools have had the biggest impact on the field. By training on millions of existing documents, case files, and legal briefs, a machine-learning algorithm can learn to flag the appropriate sources a lawyer needs to craft a case, often more successfully than humans. For example, JPMorgan announced earlier this year that it is using software called Contract Intelligence, or COIN, which can in seconds perform document review tasks that took legal aides 360,000 hours.

These programs are, simply put, changing the way legal research is carried out. Workers used to have to trudge through stacks of dusty law books and case files to find relevant information.

. . . .

People fresh out of law school won’t be spared the impact of automation either. Document-based grunt work is typically a key training ground for first-year associate lawyers, and AI-based products are already stepping in. CaseMine, a legal technology company based in India, builds on document discovery software with what it calls its “virtual associate,” CaseIQ. The system takes an uploaded brief and suggests changes to make it more authoritative, while providing additional documents that can strengthen a lawyer’s arguments.

“I think it will help make [entry-level lawyers] better lawyers faster. Make them more prolific,” says CaseMine’s founder, Aniruddha Yadav. “If they are handling a couple cases at a time, they will learn the law faster.”

. . . .

Other legal tech startups with AI at their core have been gaining steam as well. Kira Systems, which makes a contract review platform, counts four of the top 10 American law firms, as well as several international firms, as clients. Meanwhile, investors plowed $96 million into Zapproved, a startup that makes a cloud-based electronic discovery tool. Overall, it’s been a banner year for new legal tech companies, with funding up 43 percent in the first three quarters of 2017 compared with the same time last year, according to a report by the research firm CB Insights.

. . . .

There are, however, still obstacles to further adoption of AI in the legal profession. Chief among them is a lack of accessible data to use in training the software. Take the contract analysis company Legal Robot. In order to train its program, a team of developers built their own database of terms and conditions by collecting examples from major websites. But that wasn’t enough—the company also had to strike deals with law firms to gain access to their private repositories. In total, they compiled over five million contracts.

Link to the rest at the MIT Technology Review

PG notes that the MIT article is not the only one about the legal profession which is primarily based upon the methods of practice followed by large American law firms. He doesn’t blame the authors of the article or the firms profiled therein because most of the large sales opportunities for these technical products or services will be in major law firms.

However, only a small percentage of practicing attorneys work for major law firms in the US. About 85% of American attorneys work in firms of 50 lawyers or fewer and about half of all American attorneys are sole practitioners. The legal “market” is really fragmented into business organizations that may have less in common than non-experts first assume.

In PG’s experience, the most technically-savvy lawyers are either in very small firms (many with a single attorney) or as small groups in very large firms (fewer than 5 lawyers in a firm of 500 attorneys, for example).

Tech companies and venture capital firms typically misjudge the true size of the legal market for advanced tech products. The average gross revenue (not profit) per lawyer (not including paralegal, secretary, other support staff, etc.) for the 100 largest law firms in the United States was somewhat less than $1 million in 2017 and about $850K in 2016.

Additionally, the management structure of many major firms is not well-suited for supporting the acquisition of major technology products via a capital spending budget. A typical industrial firm will calculate profits after including all costs, including salaries and bonuses.

Generally speaking, a law firm’s “profits” don’t include all salaries and bonuses the firm routinely pays year in and year out. These law firm “profits” are divided among the long-term partners or major shareholders of law firms and distributed each year rather than retained or accumulated to fund long-term growth.

It is not unusual for the controlling partners/shareholders to take relatively small salaries or draws against distributions based on equity compared to their end-of-year distributions. Using money to acquire new technology products or services typically means that each of the firm’s big shots takes home less money at the end of the year.

The bottom line is that, as a group, major law firms are not big-time purchasers of new technology products and services because of the immediate hit to the partners’ income. For example, it took many years for the original computer-assisted legal research services, Lexis and Westlaw, which had a clear and compelling value proposition for lawyers, to achieve any sort of respectable penetration of and associated revenue from these firms.

Emma Cline’s ex-boyfriend’s copyright claim dismissed

5 July 2018

From The Guardian:

A California judge has dismissed a lawsuit filed by author Emma Cline’s ex-boyfriend alleging that Cline’s bestselling debut novel, The Girls, stole from his own writings and infringed his copyright.

Cline’s former partner Chaz Reetz-Laiolo’s suit, filed last November, claimed that she used spyware installed on a computer she sold him to steal from the screenplays he was writing. A countersuit from Cline acknowledged that while she had used spyware to keep track of Reetz-Laiolo during their relationship, she lost access to the software once she sold him the computer. Calling the theory that she stole unpublished work from his computer “ludicrous”, she said that her “abusive ex-boyfriend” was trying “to extract millions of dollars by intimidation and threat, all under the auspices of frivolous claims of copyright infringement”.

After Cline and Reetz-Laiolo broke up, Cline went on to win a $2m (£1.5m) book deal for The Girls, her bestselling story of a teenage girl who is drawn into a dark cult in the 1960s. Reetz-Laiolo’s lawyers argued for publisher Penguin Random House to stop printing the book; Cline asked for the court to declare she did not infringe copyright.

Judge William Orrick dismissed Reetz-Laiolo’s claim of copyright infringement, writing in an order that while “there are undeniable similarities between the works … they are predominantly isolated to a few intermittent scenes and general plot ideas”.

“Both stories are ‘coming of age’ tales of sorts. But they vary significantly in detail, breadth and texture,” Orrick wrote. “The commonalities Reetz-Laiolo identifies – an alienated youth, in the care of a single parent, falling in with a bad crowd and/or committing a crime, and being sent away as a result – are merely ‘familiar stock scenes and themes that are staples of literature and are not protected’.”

Link to the rest at The Guardian

Facebook’s Latest Problem: It Can’t Track Where Much of the Data Went

27 June 2018

Not exactly to do with book authors, but game and app developers are authors as well. Interesting issues about how your data can potentially become someone else’s intellectual property.

From The Wall Street Journal:

Facebook Inc.’s internal probe into potential misuse of user data is hitting fundamental roadblocks: The company can’t track where much of the data went after it left the platform or figure out where it is now.

Three months after CEO Mark Zuckerberg pledged to investigate all apps that had access to large amounts of Facebook data, the company is still combing its system to locate the developers behind those products and find out how they used the information between 2007 and 2015, when the company officially cut data access for all apps. Mr. Zuckerberg has said the process will cost millions of dollars.

One problem is that many of the app developers that scooped up unusually large chunks of data are out of business, according to developers and former Facebook employees. In some cases, the company says, developers contacted by Facebook aren’t responding to requests for further information.

Facebook is now trying to forensically piece together what happened to large chunks of data, and then determine whether it was used in a way that needs to be disclosed to users and regulators. In cases where the company spots red flags, Facebook said it would dispatch auditors to analyze the servers of those developers and interrogate them about their business practices.

Ime Archibong, Facebook’s vice president of product partnerships, said most developers have been “responsive” but noted that the process requires a fair bit of detective work on their end. “They have to go back and think about how these applications were built back in the day,” Mr. Archibong said.

. . . .

Facebook’s app investigation is a response to broader criticism over revelations earlier this year that data-analytics firm Cambridge Analytica improperly accessed and retained user data obtained from Aleksandr Kogan, a psychology professor at the University of Cambridge. The data, which was gathered by Mr. Kogan and his associates through a personality-quiz app, was used by the Trump campaign in 2016. Facebook eventually notified around 87 million users that their data may have been improperly shared with Cambridge Analytica, though many questions remain about that incident as well.

. . . .

Some developers say they have little incentive to respond to Facebook’s requests to cooperate with the probe, either because they are out of business, have moved on to other projects or are uneasy about allowing another company to look at their servers and the way their apps are constructed. Such intellectual property is “the lifeblood” of a developer’s business, said Morgan Reed, president of ACT | The App Association, a trade group that represents more than 5,000 app makers and connected-device companies.

In addition, Facebook doesn’t have legal authority to force developers to cooperate.

“They can’t really compel these developers to hand over information,” said Ian Bogost, a professor at Georgia Institute of Technology. “This is not a federal inquiry about a crime or something. It’s a private company. What are the consequences?”

Mr. Bogost is also a game developer, and built a game for the Facebook platform called Cow Clicker. He said Facebook hasn’t contacted him about conducting a full-scale audit of Cow Clicker, which drew about 180,000 users.

. . . .

Facebook created its developer platform in 2007, giving outsiders the ability to build businesses by leveraging the Facebook data of users and their friends. Facebook tightened access in 2014 and gave pre-existing apps a one-year grace period to comply with the new rules.

Facebook engineers working on the platform didn’t always document their changes, according to one former employee. At times, apps would stop working because of some unannounced tweak by a Facebook employee and developers would have to complain to get it fixed, developers said.

Over the years, Facebook at times tried to build systems that would allow the company to track down user info gleaned from the developer platform—but those efforts failed in part for technical reasons, former employees said.

The internal investigation is a sign of what Mr. Archibong, echoing other Facebook executives, described as a massive cultural shift within Facebook to focus more on “enforcement as a key component” of its system. Previously, executives have said, the emphasis was on growth and connecting more users to one another around the world.

Link to the rest at The Wall Street Journal

How to Fight Amazon (before you turn 29)

16 June 2018

From The Atlantic:

Shortly after I met Lina Khan, her cellphone rang. The call was from a representative of a national organization, regarding a speech it had asked her to give. Khan was courteous on the phone, but she winced momentarily after hanging up. “That was the American Bar Association,” she confessed. “I don’t know if I’ve passed the bar yet.”

This feeling—that Khan’s ideas are in high demand slightly before her time—has characterized much of her life lately. In the past year, the 29-year-old legal scholar’s work has been cited approvingly by the lefty, rabble-rousing congressman Keith Ellison and by a Trump-appointed assistant attorney general, Makan Delrahim. She has been interviewed by NPR and written op-eds for The New York Times.

She has done it neither by focusing on a hot-button issue nor by cultivating a telegenic demeanor. She is just a young adult—one of many, I would learn—interested in an old topic: antitrust law, that musty corner of American jurisprudence aimed at curtailing monopoly power.

. . . .

For the past few decades of American life, the specter of monopoly was generally raised only regarding companies that seemed custom-designed to rip off consumers—airlines, cable providers, Big Pharma. These were businesses that pulled from the long-standing monopolist’s bag of tricks: They seemed to keep prices artificially high, or they formed an unspoken cartel with other industry titans. Typically, consumers worried most about how monopolies would pinch their wallet.
For Khan and her colleagues at the Open Markets Institute, an anti-monopoly think tank based in Washington, D.C., monopoly power includes all of that. But it goes further. Even when monopolies appear to benefit consumers by offering free services or low prices, Khan contends that they can still be deeply harmful. Among the group’s frequent targets are some of the most popular companies in America: Google, Facebook, and the one to which Khan has committed much of her published work, Amazon. She tells a comprehensive story about how these companies make Americans less free.. . . .“There’s a whole line of critique about Amazon that’s culture-based, about how they’re wrecking the experience of bookstores,” Khan told me as we surveyed Neil deGrasse Tyson’s latest tome. “I personally am less focused on that element.”

Instead, she argues that Amazon has denuded America’s book-buying landscape in other ways. “Amazon has massively—and I’m trying not to use this particular word, but I can’t not use it here—disrupted the business model in publishing,” she told me. “Publishers used to be able to take risks with heavier books that might not be as popular, and they used to be able to subsidize them with best sellers.” But Amazon’s demand for discounts has made it harder to cross-subsidize this way, leading to consolidation among book publishers and reduced diversity.

This is a typically Khanian analysis. In her telling, monopolies don’t just exploit consumers and workers in their part of the economy. Even when they offer low prices to consumers, their influence propagates through the entire system. If one part of an industry consolidates, then all the other parts of the industry will feel pressure to consolidate too.

. . . .

[I]n January 2017, she published the result of that study, “Amazon’s Antitrust Paradox,” in the Yale Law Journal. It went viral—or at least as viral as dense legal scholarship can go. Its driving question is simple: How did Amazon get so big?

The answers are nearly as straightforward. First, Khan says, Amazon has been willing “to sustain losses and invest aggressively at the expense of profits.” This isn’t a controversial assertion: Amazon has posted an annual profit for only 13 of the past 21 years, according to The New York Times. Historically, it has plowed any profits right back into cheaper prices and R&D into everything from robotics to image recognition. Second, Amazon is integrated vertically, across business lines. In addition to selling stuff online, Amazon now publishes books, extends credit, sells online ads, designs clothes, and produces movies and TV shows. It is also one of the world’s largest providers of cloud storage and computing power, renting server space to Netflix, Adobe, Airbnb, and NASA.

. . . .

[Judge Robert] Bork’s views become interesting in light of Amazon. Bork thought vertical integration was fine: Since he believed markets were perfectly efficient, he assumed that a lower-cost competitor would always butt in and fight off a would-be monopolist. And predatory pricing? It is “a phenomenon that probably does not exist,” he wrote. The Chicago school, he said, had proved that companies would always pursue short-term profits over long-term growth.

Amazon’s history seems to belie this claim. For more than a decade, Wall Street allowed the company to plow any profits into price discounts. Partly as a result, Amazon has grown so large that it can undercut other companies just by announcing that it will soon compete with them. When Amazon purchased Whole Foods, its market cap rose by $15.6 billion—some $2 billion more than it paid for the chain. Meanwhile, the rest of the grocery industry immediately lost $37 billion in market value. (Amazon protests that it has no control over how investors value its competitors.)
When a company has such power, Khan believes, it will almost inevitably wield that power far and wide, distorting not just the market itself, but the whole of American life. With sufficient power, companies can commission studies, rewrite regulations, bulldoze neighborhoods, and impoverish education and welfare systems by securing billions in sweetheart tax cuts. When a company comes to monopolize a market—when it grows so big that it can threaten other industries just by entering them—it ceases to be merely a company. It becomes an institution so powerful that it can rule over people like a government.

Link to the rest at The Atlantic

PG suggests Ms. Kahn, as an “expert” in antitrust law, is remarkably ignorant about American publishers. Publishers are a classic example of a shared monopoly, offering identical royalty rates and nearly identical contract terms to authors and attacking competitors who don’t join the cartel.

Additionally, there is the inconvenient fact that most of the largest American publishers have already plead guilty to conspiring to fix book prices, a classic antitrust violation, in order to keep Amazon from lowering book prices for consumers. Publishers are, by their own admissions, violators of antitrust laws.

It is possible for an organization to violate antitrust laws by lowering prices to drive competitors out of business, then raising prices once it obtains the monopoly power to do so.

However, lowering prices by itself is a benefit to consumers, not a detriment, and speculation that, at some time in the future, Amazon is going to use monopoly power to raise prices is just that, speculation, without any facts to back it up.

“Predatory pricing” is a characteristic of this type of monopoly activity – cutting prices to drive competitors out of business, then raising prices to capture monopoly profits.

When Amazon starts taking advantage of its market position to force unconscionable price increases on consumers, PG will be happy to condemn the company, but amateur mind-readers who claim this is Amazon’s business plan are simply speculating for purposes that likely aren’t connected to the welfare of consumers at all.

Looking into a crystal ball and perceiving an evil Amazon that will be going into the price-gouging business is a bizarre practice that is often funded by Amazon’s competitors who find Amazon’s consistent price-cutting business strategy offensive because Amazon takes sales away from them or disturbs their way of doing business in their particular fiefdoms.

If we are to speculate, let us speculate about the state of the book business had Jeff Bezos started the company selling something other than books online and stayed out of the book business because he didn’t ever want to upset people like the author of the OP. For the purposes of our speculation, we’ll assume no Bezos clone stepped in to do what Bezos has done.

Would readers be purchasing more or fewer books today? Would the price of books be higher or lower today? (remember that Steve Jobs wanted publishers to fix the retail price of ebooks so there would be no price competition) Would authors be earning more or less than they do today? Would there be a wider or a narrower selection of books offered to readers today? Would more or fewer authors be publishing their own books than do that today?

For any Amazonians who happen to stumble across this post, PG suggests that it might be a good idea for Amazon to consider publicizing how much money they pay directly to individual indie authors each year through KDP and similar programs, bypassing the Big Publishing and small publishing middlemen and middlewomen.

Heffel auction house takes to court over barred shipment of French painting

14 June 2018

From The Globe and Mail:

A prominent auction house is arguing in court that the government gatekeepers for exporting art are too sweeping in their definition of what it means for something to be Canadian.

Heffel, which operates auction houses across the country, has asked the Federal Court of Canada to quash a decision by the Canadian Cultural Property Export Review Board that prevented the shipment of a French Impressionist painting last year.

The work, Iris bleus, jardin du Petit Gennevilliers(1892) by Gustave Caillebotte, was sold at a Toronto auction to a British buyer for $678,500.

In its decision, the review board said an object can be of “national importance,” even if it or its creator has no direct connection to Canada.

“Canada is a diverse country with a multitude of cultural traditions,” the decision said. “The loss of an object to Canada could significantly diminish the national heritage if that loss would deny a segment of the population exposure to or study of their cultural traditions or the cultural traditions of other Canadians.”

A private collector brought the Caillebotte canvas to Canada from France in the 1960s and has never exhibited it publicly.

. . . .

“[The law] requires the board to consider the degree of importance or connection to Canada’s heritage – our shared identity as a country – not to world arts or culture generally,” Heffel’s lawyers wrote. They also raised concerns with some of the board’s procedures.

The question of what art is important to Canadian heritage came up last month when the National Gallery of Canada announced it would sell Marc Chagall’s 1929 The Eiffel Tower on the global markets to raise money to purchase a 1779 Jacques-Louis David painting.

The National Gallery said the David, which has been in Canada for more than a century, was important to Canada’s “national heritage” and was at risk of being sold to a foreign buyer. Both Chagall and David are French painters and both works were created overseas. The Eiffel Tower, which came to Canada in 1956, was given an export permit so it could be sold at a Christie’s auction in New York. The National Gallery has since said it will cancel the sale because of public outcry.

Canada’s cultural property export regime was created in the seventies to keep important art or historical artifacts in the country. Export permits are required if the item is more than 50 years old, made by someone no longer living and if it meets other criteria, such as monetary value, that depend on the kind of object it is. The item must be judged to be of both outstanding significance and of national importance.

. . . .

In a statement, auctioneer David Heffel said he was concerned there could be a chill on international buyers purchasing works in Canada if they aren’t sure they will be allowed to take the items out of the country.

Link to the rest at The Globe and Mail

PG predicts a surge in Canadian art collectors who make arrangements for large storage vaults in Switzerland.

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