Taking behavioralism seriously: some evidence of market manipulation

Over the last ten to fifteen years, economists and legal scholars have become increasingly interested in and sensitive to behavioralist insights. In a companion article, Jon Hanson and Douglas Kysar argued that those scholars have nevertheless given short shrift to what is, at least for policymaking purposes, perhaps the most important lesson of the behavioralist research: individuals' perceptions and preferences are highly manipulable. According to Hanson and Kysar, one theoretical implication of that insight for products liability law is that manufacturers and marketers will manipulate the risk perceptions of consumers. Indeed, to survive in a competitive market, manufacturers and marketers must do so. In this Article, Hanson and Kysar present empirical evidence of market manipulation--a previously unrecognized source of market failure. The Article begins by surveying the extensive qualitative and quantitative marketing research and consumer behavioral studies that discern and influence consumer perceptions. It then provides evidence of market manipulation by reviewing common practices in everyday market settings, such as gas stations and supermarkets, and by examining familiar marketing approaches, such as environmentally oriented and fear-based advertising. Although consumers may be well-aware of those practices and approaches, they appear to be generally unaware of the extent to which those tactics are manipulative. The Article then focuses on the industry that has most depended upon market manipulation: the cigarette industry. Through decades of sophisticated marketing and public relations efforts, cigarette manufacturers have heightened consumer demand and lowered consumer risk perceptions. Because consumers are aware that smoking may pose significant health risks, the tobacco industry's success in manipulating risk perceptions constitutes especially strong evidence of the power of market manipulation. The Article concludes by arguing that the evidence of market manipulation may justify moving to a regime of enterprise liability. Indeed, according to Hanson and Kysar, the evidence of market manipulation confirms the intuitions of the first generation of product liability scholars, who worried about manufacturers' power to manipulate and called for just such a regime.     

Consumer managed care appeals: are the available procedural protections fundamentally fair?

Managed care incentives to reduce costs have also resulted in incentives to deny care. Anecdotes concerning managed care denials of care have led to a consumer outcry for protection either through the use of procedural due process or by the establishment of patient rights that would include appeal and grievance protections. This Article reviews the procedural protections of constitutional due process, the Consumer Due Process Protocol, and the Patient Bill of Rights. The Article then extensively discusses the availability of these procedural protections in various public and private forums. The discussion of public forums includes proposals contained in recent national legislative initiatives. The author then reviews relevant federal and state law, as well as Uniform Law proposals. Next, the Article analyzes the protections provided by accreditation agencies, dispute resolution organizations, professional organizations, and health insurers. Finally, the author recommends criteria to be used to determine whether a procedure is fundamentally fair.     

The European Commission's Guidance on Article 102TFEU: From Inferno to Paradiso?

The European Commission has for the first time issued a document expressing its official position on the enforcement of Article 102TFEU which prohibits the abuse of a dominant position on the Common Market. The Commission Guidance on enforcement priorities in applying Article 102TFEU to exclusionary abuses (adopted in December 2008) has ended a review of about four years. Given the increased enforcement of Article 102TFEU at the European level and the fact that many national provisions in the EU on unilateral conduct are modelled after Article 102TFEU, how the Commission intends to enforce Article 102TFEU is crucial for the application of competition law and the undertakings subject to it under European and/or national laws. The review period was preceded by severe criticisms of the Commission's approach to Article 102TFEU for protecting competitors instead of competition and for being insufficiently grounded in modern economic thinking. At the heart of the review and the discussions surrounding it lay the question of the objective of Article 102TFEU. Some, including the Directorate General for Competition claimed the objective to be ‘consumer welfare’, whereas some argued that ‘consumer welfare’ cannot be adopted as the objective at the expense of the protection of the competitive process. This article critically reviews the Commission Guidance, with an eye to assessing the ultimate objective of and the test of harm under Article 102TFEU. After discussing whether the Guidance indeed sets priorities, it examines the general approach of the Guidance to exclusionary conduct. It points out that despite there being some welcome novelties in the Guidance, there are also suggestions therein whose legitimacy and legality are questionable. Reflecting on the Guidance as a soft‐law instrument, the article argues that although regarding the objective of Article 102TFEU, the Commission's apparent tendency towards ‘consumer welfare’ is not unlawful, the reform of Article 102TFEU to bring it more in line with modern economic and legal thinking seems to be far from complete.     

The A-9: A Program for Drafting Security Agreements Under Article 9 of the Uniform Commercial Code

This article describes and evaluates a computer program for drafting the security agreements and related documents required by Article 9 of the Uni- form Commercial Code to create and perfect security interests in consumer goods and equipment. The authors suggest that such computer applications have great promise and invite further such research.     

Regulatory beneficiaries and informal agency policymaking

Administrative agencies frequently use guidance documents to set policy broadly and prospectively in areas ranging from Department of Education Title IX enforcement to Food and Drug Administration regulation of direct-to- consumer pharmaceutical advertising. In form, these guidances often closely resemble the policies agencies issue in ordinary notice-and-comment rulemaking. However, guidances are generally developed with little public participation and are often immune from judicial review. Nonetheless, guidances can prompt significant changes in behavior from those the agencies regulate. A number of commentators have guardedly defended the current state of affairs. Though guidances lack some important procedural safeguards, they can help agencies supervise low-level employees and supply valuable information to regulated entities regarding how an agency will implement a program. Thus far, however, the debate has largely ignored the distinct and substantial interests of regulatory beneficiaries--those who expect to benefit from government regulation of others. Regulatory beneficiaries include, among others, pharmaceutical consumers, environmental users, and workers seeking safe workplaces. When agencies make policy informally, regulatory beneficiaries suffer distinctive losses to their ability to participate in the agency's decision and to invoke judicial review. This Article argues that considering the interests of regulatory beneficiaries strengthens the case for procedural reform. The Article then assesses some possible solutions.     

Medical malpractice litigation: do the British have a better remedy?

Medical malpractice claims are filed nearly ten times more frequently in America than they are in Great Britain. British patients generally adopt a less adversarial stance toward medical malpractice than do American patients. This Article examines the British malpractice system, as compared with the American system, and explores the differences between the two, in terms of costs and fees, liability rules, statutory provisions, and judicial attitudes toward malpractice litigation. The Article also discusses British social and institutional factors, such as the "taint" of litigation and the National Health Service, and evaluates how these factors affect British malpractice litigation. The Article presents the alternative forums available to British patients in seeking satisfaction for their medical service complaints. The Article concludes with an evaluation of how these factors achieve the three societal objectives of malpractice litigation: reparation, emotional vindication and deterrence.     

PUNITIVE DAMAGES,CHINESE TORT LAW,AND THE AMERICAN EXPERIENCE

In a country such as China, with abundant consumer products and the inevitability of product defects, claims for punitive damages are sure to arise under Article 47 of the new Chinese Tort Law. Article 47 provides that “(w)hereany producer or seller knowingly produces or sells defective products, causing death or serious damage to the health of others, the injured party may request appropriate punitive damages.” As Chinese jurists and scholars interpret Article 47, they may wish to consider whether lessons can be drawn from the American experience. During the past two decades, few areas of American law have changed more radically than the law on punitive damages. While there were once few restraints on the ability of a judge or jury to impose punitive damages in a case involving egregious conduct, today there are a host of limitations embodied in American state and federal law. In many American states, statutes or judicial decisions restrict the ability of a court to award punitive damages by narrowly defining the types of conduct that will justify a punitive award, raising the standard of proof, capping the amount of punitive damages, requiring a portion of a punitive award to be forfeited to the state, or limiting vicarious liability for punitive damages. In addition, under federal constitutional law, the principle of due process limits the imposition of punitive damages by scrutinizing the ratio between compensatory and punitive damages and prohibiting an award to be based on harm to persons other than the plaintiff. An examination of these developments from a comparative law perspective may prove useful to the implementation of Article 47.     

Private credentialing of health care personnel: an antitrust perspective. Part One

This Article explores the antitrust and other implications of private credentialing and accrediting programs in the health care industry. Although such programs are usually sponsored by powerful competitor groups, they serve the procompetitive purpose of providing useful information and authoritative advice to independent decision makers. Part One examines the risk that credentialing will sometimes be unfair to competitors and deceive consumers. Its survey of common-law, antitrust, and regulatory interventions to correct such unfairness and deception seeks to determine the degree of oversight to which credentialing and similar activities have been and should be subjected. In recommending that judicial or regulatory scrutiny should be limited to discovering whether standards and practices have a rational relation to a procompetitive purpose, the Article argues that greater intrusion into credentialing schemes would be inconsistent with market theory and first amendment values and would discourage line-drawing efforts that stimulate competition and facilitate consumer choice. By emphasizing throughout that personnel certification and institutional accreditation embody ideology and opinion as well as factual information, Part One sets the stage for the argument in Part Two that antitrust law can and should be used to contest the dominance of a single ideology of health care and to facilitate the development of alternative sources of consumer information. The Article's overall thesis is that, whereas the quality of advice given to the public about health care personnel and similar matters should not be closely regulated, neither should the supply of competing information and opinion be artificially curtailed.     

A cure for the Blues: resolving nonprofit Blue Cross conversions

This Article analyzes the issues involved in converting nonprofit Blue Cross organizations to for-profit status. These issues have arisen in the context of litigation regarding the "reorganization" of Blue Cross and Blue Shield of Missouri ("BCBSMo"). BCBSMo had reorganized by creating and transferring a majority of its business to a new for-profit subsidiary. Missouri consumer groups and state regulators characterized the "reorganization" as a conversion requiring BCBSMo to transfer its assets to a foundation dedicated to charitable health purposes. BCBSMo, however, denied that it had any obligation to leave behind its assets in the nonprofit sector. The BCBSMo litigation raises issues common to most conversions of nonprofit healthcare organizations, particularly conversions of nonprofit Blue Cross plans. This Article provides a road map for state regulators and the public to follow in ensuring that the public interest is fully protected in such conversions.     

Excessive Prices: Using Economics to Define Administrable Legal Rules

European competition laws condemn as ‘exploitative abuses’the pricing policies of dominant firms that may result in adirect loss of consumer welfare. Article 82(a) of the EC Treaty,for example, expressly states that imposing ‘unfair’prices on consumers by dominant suppliers constitutes an abuse.Several firms have been found to abuse their dominant positionsby charging excessive prices in cases brought by the EuropeanCommission and the competition authorities of several MemberStates. Those cases show that the assessment of excessive pricingis subject to substantial conceptual and practical difficulties,and that any policy that seeks to detect and prohibit excessiveprices is likely to yield incorrect predictions in numerousinstances. In this paper, we evaluate the pros and cons of alternativelegal standards towards excessive pricing by explicitly consideringthe likelihood of false convictions/acquittals and the costsassociated with those errors. We find that the legal standardthat maximizes long-term consumer welfare, given the informationtypically available to regulators, would involve no ex postintervention on the pricing decisions of dominant firms. A possibleexception to this general rule is discussed.     

The law and the public's health: a study of infectious disease law in the United States

Law plays crucial roles in the field of public health, from defining the power and jurisdiction of health agencies, to influencing the social norms that shape individual behavior. Despite its importance, public health law has been neglected. Over a decade ago, the Institute of Medicine issued a report lamenting the state of public health administration, generally, and calling, in particular, for a revision of public health statutes. The Article examines the current state of public health law. To help create the conditions in which people can be healthy, public health law must reflect an understanding of how public health agencies work to promote health, as well as the political and social contexts in which these agencies operate. The authors first discuss three prevailing ways in which the determinants of health are conceptualized, and the political and social problems each model tends to create for public health efforts. The analysis then turns to the core functions of public health, emphasizing how law furthers public health work. The Article reports the results of a fifty-state survey of communicable disease control law, revealing that few states have systematically reformed their laws to reflect contemporary medical and legal developments. The Article concludes with specific guidelines for law reform.     

The summer of union discontent portends a season of employer discomfort

The recent splintering of the unions of the Change to Win Coalition from the AFL-CIO has received a great deal of attention in the media. Few have watched these developments with greater interest than employers in a broad variety of employment settings. As union prospects in the manufacturing industries have dwindled, employers in the service industries such as healthcare have become especially sensitive to changes in the labor movement and the opportunities to organize. This Article explores the philosophical differences responsible for the AFL-CIO schism, the likely effect this division will have on union organizing efforts in the healthcare industry, and the negative consequences these organizing efforts could have on employee free choice within the industry. In addition, this Article outlines some of the steps healthcare employers can take to protect their ability to communicate freely and directly with their employees.     

FDA preemption of drug and device labeling: who should decide what goes on a drug label?

The Supreme Court decided an issue that is critical to consumer health and safety last year. In April 2009, the Supreme Court held that extensive FDA regulation of drugs did not preempt a state law claim that an additional warning on the label was necessary to make the drug reasonably safe for use. Thus, states--and even courts and juries--are now free to cast their vote on what a drug label should say. This is in direct contrast to medical devices, where the federal statute regulating medical devices expressly provides that state regulations are preempted. This Article discusses basic preemption principles and drugs, and explores the policy ramifications of pro- and anti-preemption policy in the healthcare industry.     

Exceptions to Article 226: Alternative Administrative Procedures and the Pursuit of Member States

This article considers the procedures used in EC law to prosecute infringements committed by Member States, in addition to the well-known Article 226 (ex Article 169) EC. It has three purposes. The first is to systematise the main categories of these, to examine the reasons for the creation of these procedures and the interaction among them, using Article 226 as the main point of reference. The basic criterion is the distinction between procedures established by the EC Treaty and procedures established by secondary legislation but without a clear legal basis in the Treaty. The second purpose is to explain why Member States have accepted the development of new procedures, even though they serve to reinforce the Commission's powers. The article argues that this acceptance can be explained, first, by the active participation of Member States, through committees, in the establishment of these procedures; and, secondly, a deliberate strategy to convince Member States, on both a sectoral basis, and a case-by-case basis, by the Commission. The article concludes, however, that the current procedures should be improved and that it is time for them to be realigned and rationalised.     

The collision of healthcare and corporate law in a hospital closure case

This Article analyzes potential conflicts that arise from both the judicial and administrative approval processes that govern the closure of charitable hospitals through a sale of all or substantially all of their assets. Examining the recent closure attempt by the Manhattan Eye, Ear & Throat Hospital as an example, the Article highlights the various public health and corporate law issues that are raised when a not-for-profit hospital seeks closure. The Article thoroughly discusses both the statutorily and judicially required approval schemes applicable to the closure of charitable hospitals. The Article also suggests ways in which these conflicts might be avoided or remedied, as well as gives advice regarding hospital board decisionmaking.     

‘Consumer’ versus ‘Customer’: The Devil in the Detail

According to the European Commission, the objective of EU competition rules is enhancing ‘consumer welfare’. In EU competition law, however, ‘consumer’ means ‘customer’ and encompasses intermediate customers as well as final consumers. Under Article 102TFEU, harming intermediate ‘customers’ is generally presumed to harm ‘consumers’ and where intermediate customers are not competitors of the dominant undertaking, there is no requisite to assess the effects of conduct on users further downstream. Using advances in economics of vertical restraints and, in particular, non‐linear pricing, this article shows that there are instances where the effect on ‘customer welfare’ does not coincide with the effect on ‘consumer welfare’ and the presumption can potentially lead to decisional errors. Thus, if the law is to serve the interests of ‘consumers’, the Commission should reconsider this presumption and its interpretation of the ‘consumer’ in ‘consumer welfare’; otherwise, it remains questionable whose interests EU competition law serves.     

The new economic credentialing: protecting hospitals from competition by medical staff members

This Article addresses hospitals' use of economic criteria to determine an individual's qualifications for staff privileges. Hospitals are resorting to economic conflict-of-interest credentialing policies in an attempt to ensure physician's loyalty and maintain their own economic viability. Physicians, however, argue that entrepreneurial activities are necessary for them to meet the economic challenges posed by declining reimbursements and rising insurance costs. The Article surveys the numerous legal theories that physicians (and, in some cases, the federal government) could employ in attacking these new types of credentialing policies and concludes that, on balance, hospitals should be able to implement their policies in ways that minimize liability in most jurisdictions. The Article concludes by discussing other issues that economic credentialing policies raise, including those implicating tax-exempt status and nonlegal considerations.     

What Sorts of Things are Public Morals? A Liberal Cosmopolitan Approach to Article XX GATT

Existing theories of WTO law cannot adequately explain the form or content of the GATT exceptions, in particular Article XX(a) Public Morals. Nor, in consequence, can they satisfactorily answer the interpretive questions they raise. This article explains Article XX in terms of self‐determination as a political and moral value, and the choices it mandates peoples make for themselves. Drawing on debates in contemporary political philosophy, it distinguishes three categories of argument for self‐determination: intrinsic, expressive and instrumental, each having implications for the scope of the choices a self‐determining community must make for itself. This account of self‐determination in trade regulation is used to reconstruct Article XX, both explaining the individual provisions, and suggesting how these might be developed and interpreted. It concludes by examining Article XX(a) in detail, highlighting the interpretive questions public morals pose, and how understanding Article XX in terms of self‐determination suggests these should be answered.