Go figure. A guy who spent over 20 years as a Democratic congressional staffer — and now writes for a Beltway newspaper — can’t grasp why Ron Paul doesn’t worship Congress and mainstream political thought:

Ron Paul’s campaign ad calling for defeat of a debt-ceiling extension is a trite, minor-league and irresponsible tactic unworthy of any candidate for the presidency. If anyone of importance actually took Ron Paul’s ad seriously and his position prevailed, he would cause a global crash and possibly a new depression.

Yes, as opposed to the current Democratic-Republican policies which…caused a global crash and almost certainly a new depression.

After thinking about this a few days, it is sad and revealing that Ron Paul is abandoning Congress and his position as chairman of a major financial subcommittee. After years as a gadfly, Paul finally has an opportunity to make a major difference as chairman of a major subcommittee and he throws it away, preferring to remain a gadfly on the fringes.

The phrase “Ron Paul is abandoning Congress” makes it sound like he’s leaving his pregnant wife to go shack up with a 20-year-old intern. The fact that Paul didn’t use his elevation to a committee chair as a pretext for spending the rest of his life in the House seems to anger this guy more than anything.

I’m also unclear how Paul is supposed to “make a major difference” while adhering to the traditional party line regarding the debt ceiling and monetary policy in general.

I have always tried to be fair to Ron Paul, sometimes praising him, sometimes criticizing him. His new Hollywood-style ad calling for defeat of the debt ceiling reveals him as just another politician hustling for votes, and just another hack desperately trying to win the lunatic fringe of a lunatic faction of a party out of touch with economic sanity.

Is he just another politician or a fringe lunatic? I think you have to pick one.

All of the Republican candidates for president look ridiculous when discussing the debt ceiling. It is a race to the bottom in a party dominated by extremists, with a third-rate flock of candidates playing amateur night at the farm, now including Ron Paul. His latest ad makes him look like a righty blogger or cranky talk-show host, not a worthy leader of a great nation.

A “great nation” whose “worthy leaders” keep spending so much money that they constantly have to raise the debt ceiling. But Ron Paul’s the lunatic for wanting to break this vicious cycle. Child, please.

Harold Hughes, a former supply clerk at the Federal Trade Commission, will spend 18 months in prison after pleading guilty to embezzling over $200,000 from the agency. According to the Justice Department, Hughes purchased goods from government vendors, resold most of the items at below-retail prices, and pocketed the money. Hughes eluded detection for nearly two years before he was discovered and fired.

Court papers detailed the extent of Hughes’s unauthorized purchases, which began in April 2009 and continued until December 2010. Hughes ordered items from government vendors — primarily Frank Parsons and  Modern Imaging Solutions — which ranged from a $1.62 flashlight to dozens of netbook computers. No individual item cost more than $500, which was presumably the limit of Hughes’s unilateral spending authority. Altogether, Hughes purchased $217,372.11 in goods from the vendors, and he spent an additional $1,264.10 in shipping charges. Hughes agreed to repay the government in full as part of his plea bargain.

Bryan Seeley, an assistant US Attorney who filed the government’s sentencing memorandum, said Hughes “mostly worked alone in the basement” of the FTC’s Pennsylvania Avenue headquarters and operated “with little oversight.” Seeley added, “The other employees in the basement were contract employees who worked in the mailroom, photocopying center, or security guard post.” At least one mailroom employee, whom Seeley did not identify, purchased nine computers from Hughes that were illegally obtained with FTC funds. Ironically, given the FTC’s self-styled mission of protecting consumers from higher prices, Hughes resold the goods “at a price far below the retail price,” according Seeley.

Hughes admitted in court that his motive was “truly greed, pure and simple,” and that he accepted his prison sentence. Prosecutor Seeley said that Hughes’s offense warranted a sentence of 18–24 months, and the DOJ recommended a low end sentence despite the breadth and scope of his theft:

The defendant’s theft from the government was not the act of a desperate man trying to support himself. The defendant, after all, had a sought-after government job. Instead, the defendant was motivated by greed and a drug habit. He took advantage of the lack of supervision of his work by the FTC. One can only imagine how much more FTC money the defendant would have stolen if he had not been caught in December 2010.

Indeed, it’s not clear why it took nearly two years to discover that a low-ranking supply clerk had been making multiple unauthorized purchases each month from government vendors. According to Seeley, Hughes operated largely in the open, having items “shipped directly from the vendor to FTC headquarters, and he used his proximity to the mailroom and his familiarity with its employees to avoid detection.” The FTC, which is headed by Chairman Jon Leibowitz, has issued no public statement on the Hughes case. In an April report to Congress, FTC Inspector General John Seeba said that his office investigated “11 individuals employed by either the FTC or contractors” in connection with the Hughes case:

The case involved management’s initial allegations that the FTC’s supply clerk responsible for ordering all office supplies for the agency, was making unauthorized purchases and misusing the agency’s Federal Express account number for personal use. We immediately investigated the allegations, obtained incriminating evidence and one week following the referral to us, we interviewed the subject with assistance from Department of Homeland Security, Federal Protective Service. Later that day, we informed management of the available evidence and management immediately placed the employee on administrative leave, pending further OIG investigation.

Seeba said that eight employees of FTC contractors were fired in connection with his investigation, and as of April, two FTC employees were subject to “administrative action” for either purchasing goods from Hughes or misusing their government Federal Express accounts for personal shipments. Seeba added that “related investigations remain ongoing,” but he did not offer specifics. Nor did Seeba’s report identify anyone in FTC management who should have been responsible for preventing Hughes’s actions in the first place.

Jon Leibowitz talks a lot and says nothing:

President Obama deserves enormous credit for ensuring regulatory review throughout the federal government, including at independent agencies. Although regulations are critically important for protecting consumers, they need to be reviewed on a regular basis to ensure that they are up-to-date, effective, and not overly burdensome. For all agencies – independent or not – periodic reviews of your rules is just good government. The announcement raises the profile of this issue, and I think that’s a constructive step.

The Federal Trade Commission boss refers here to a cosmetic “review” of government regulations nominally ordered by the White House earlier this year. Technically this doesn’t apply to the FTC — which as an “independent agency” holds a Vatican-like status outside the purview of normal government oversight — but Leibowitz wants to be a good sport and go along with Obama’s public relations effort.

Gary Galles noted just last week that the Obama reforms were mere window dressing:

The intent was to defuse attacks on Obama’s regulatory abuses by claiming the reform mantle. But an “intense review” of burdensome regulations that only turned up hundreds of millions of dollars in savings, from an annual regulatory burden of over 1 trillion dollars, could not really be intense, especially when the waste and abuse discovered were obvious and longstanding.

Consider the milk reform. Sunstein wrote, “Since the 1970s, milk has been defined as an ‘oil’ and subject to costly rules designed to prevent oil spills.” But the EPA has now concluded the burdens were unjustifiable, and given dairies an exemption saving them $140 million a year. Unfortunately, rather than demonstrating that Americans no longer need worry about abusive regulations, it illustrates the opposite.

The fact that a clearly nonsensical and costly policy persisted for decades, despite multiple “reforms,” reveals that almost no attention is actually given to outdated and overly burdensome regulations. But when public outrage becomes severe, a few idiocies must be recognized and sacrificed to pretend regulatory responsibility. Once such a minimal reform diminishes outrage, Americans will again stop paying much attention to the regulatory bureaucracy, and the constraints on abusive regulations will once again shrivel. And thanks to Obama’s regulatory expansions, abuses then will apply to more of our lives than ever.

Also revealing is that during this unjustified regulation hunt, the EPA issued extraordinarily costly new rules requiring US coal-fired power plants to further reduce their emissions of mercury and other air pollutants, finding the costs justified in lives saved and medical benefits. But the benefit claims were bogus.

Similarly, Leibowitz and his colleagues are using the White House’s cover to make it look like they actually care about the burden his agency imposes on American citizens:

In testimony to the House Committee on Energy and Commerce Subcommittee on Oversight and Investigations, Chairman Jon Leibowitz and Commissioner William E. Kovacic said that since 1992, the FTC has had a systematic and rigorous process in place to review its rules “to ensure that they enhance consumer welfare without imposing undue burdens on business.” As a result of that program, “the Commission has rescinded 37 rules and guides and updated dozens of others since the early 1990s.”

“The Commission will continue to strive to improve techniques for measuring the effectiveness of all aspects of its operations,” said Commissioner Kovacic.

Let’s start with the “37 rules and guides” that the FTC has rescinded. These are basically industry-specific regulations, including, in no particular order: mirrors, luggage, dog and cat food, deceptive use of the word “free” in connection with photographic film and film processing services, beauty and barber equipment, law books, proprietary vocational and home study schools, and my personal favorite, fallout shelters.

Most industry-specific rules are created by the FTC on orders from Congress. Others are Commission initiatives. The problem is that for every rule or guide you eliminate, the FTC will create more. There’s no restriction on the actual power to create regulations, and that’s the core problem.

These formal regulations are also a drop in the bucket compared to the uncodified, often unwritten mandates the FTC imposes through its own Star Chamber process. When the FTC invents a new theory of antitrust liability, it doesn’t have to write a regulation. It can simply sue a company, force them to sign a one-sided settlement, and then use that “precedent” to bludgeon other companies in the same industry into adhering to identical terms. Since the FTC’s mandate is to identify and ban all “unfair competition,” there’s effectively no limit to the agency’s regulatory power. Streamlining a few forms and taking some outdated written rules off the books doesn’t alter that.

Yesterday Netflix announced changes to its subscription plans. Instead of offering a $9.99/month plan that covers unlimited DVD-by-mail rentals (one at a time) and unlimited Internet streaming, Netflix will now sell each service separately for $7.99/month. In other words, to get unlimited DVDs and streaming will now cost $15.98/month, 60% more than it did previously.

Netflix claims the move is designed to bolster the long-term prospects for its DVD business. The previous price system treated DVDs as a $2.00 add-on to the $7.99 streaming charge. The risk is that some customers might switch to the streaming-only plan and rely on other providers, such as Redbox or Blockbuster kiosks, for DVDs. But the real question is whether Netflix can expand its streaming library, which lags well behind its DVD catalogue. As Thom Forbes writes at MediaPost,

Netflix founder Reed Hastings decided some time ago that the future of his business was in streaming, most stories point out. Initially, the company was able to cut favorable streaming deals with several Hollywood studios but everyone expects negotiations in the future to be tougher. At the same time, perhaps because of the scarcity of recent blockbuster releases through streaming, the DVD business has evidently remained stronger than the company anticipated. So it has reassessed its position of offering the mail service for about a $2 per month “premium.”

The International Business Times adds that splitting the subscriptions may be a prelude to those “tougher” negotiations:

“In our view, the company is facing increasing pressure from content providers to base streaming content costs on the number of overall subscribers,” Wedbush Securities analyst Michael Pachter wrote in a note to clients.

By bifurcating its subscriber base into streaming and non-streaming plans, the company may be able to successfully argue that a lesser number of subscribers access streaming content, and may be able to control growth in streaming content costs.

“Our central thesis has been that the company’s streaming content costs are rising faster than its revenues; today’s move reinforces our conviction that this thesis is correct,” Pachter wrote.

The analyst had earlier estimated that Netflix’ streaming costs could rise to between $1.6 – 2.2 billion in 2012 and now believes that content costs are tracking closer to $2.2 – 2.5 billion, perhaps providing the catalyst for today’s action.

Netfix customers, of course, have taken to the virtual barricades to complain about the price increase for an unlimited DVD-and-streaming plan. The phrase “price gouging” has no doubt come up a few times. (Josh Zerkle throws some necessary cold water on that argument.) What’s interesting is that it won’t occur to most people to direct their anger at the Hollywood studios that are actually making it more difficult — thanks largely to the their dependence on the government’s copyright regime — to open up more content to online streaming. Once you get past the knee-jerk emotional reaction to the price increase — the notion that somehow Netflix is violating your “right” to a certain price level — you can start to see how prices reflect changing economic realities.

Well, at least you can’t accuse these bureaucrats of not thinking outside the box (via the Minneapolis Star-Tribune):

It was not difficult to find critics when the government job-service engine Workforce Central Florida said it was spending more than $70,000 of federal stimulus money to help the unemployed by handing out 6,000 satiny capes for jobless “superheroes” to “fight” “Dr. Evil Unemployment.”

“Absolutely absurd” was the reaction of a laid-off customer-service representative to the program. Several critics interviewed by the Orlando Sentinel noted that such a program further erodes the unemployed’s fragile self-respect.

Workforce Central Florida, though, remained convinced. In the words of a spokeswoman, “Everyone is a superhero in the fight against unemployment.”

From the “I love the smell of a cartel in the morning” department comes this Los Angeles Times report:

A coalition comprised of movie and television studios, cable and phone companies and record labels are launching a wide-ranging initiative aimed at cracking down on Internet piracy.

The effort will brings together Internet Service Providers — the companies that are the gatekeepers to to the worldwide web — and content creators in the fight against the theft of intellectual property. It will be overseen by the newly created Center for Copyright Information whose backers include the Motion Picture Association of America, whose members include all the major Hollywood movie and televison producers, the Recording Industry Association of America and Internet Service Providers Comcast Corp., Time Warner Cable, Verizon and AT&T.

Specifically, the initiative will target households whose Internet usage indicates that pirated content is either being uploaded or downloaded. As many as six “copyright alerts” will be sent to those homes in an effort to let subscribers know that their Internet accounts have been used in an illegal fashion. Subscribers will get a series of warnings in the form of emails or pop-up messages.

While the ISPs will not shut down a subscriber’s broadband service as punishment for piracy-related activity, there will be repercussions to users including the potential for having the speed in which they access the Internet reduced, which would hinder piracy. Repeat offenders may also be required to contact their ISP provider to discuss the matter.

On August 27, 2010, the Justice Department’s Antitrust Division, led by Christine Varney, closed its investigation into the merger of United and Continental Airlines without taking any formal action. (The airlines transferred some takeoff and landing slots to Southwest, but the DOJ did not impose that condition via a court order.) The venerable New York law firm Cravath, Swaine & Moore, represented the airlines. According to Cravath, the lead partner on the antitrust review was Katherine Forrest.

Less than two months later, Varney hired Forrest to serve as one of her deputy assistant attorneys general at the Antitrust Division. It was a curious move. Forrest is highly regarded in the legal community and she was a well-paid partner at one of New York’s top firms. Why leave that for a short-term gig as a third-tier government lawyer? As the New York Law Journal noted at the time, when Cravath partners left the firm, it was generally for corporate general counsel gigs, not a deputy AAG’s post.

Well, after just three months on the job at DOJ, Forrest secured a slightly more prominent bureaucratic prize when New York Sen. Chuck Schumer recommended her for a vacant seat on the federal district court in Manhattan. The Senate Judiciary Committee held a confirmation hearing last month, and there’s no reason to believe the full Senate won’t approve her.

Which brings us back to Christine Varney, who announced her resignation yesterday, effective next month, from the DOJ’s Antitrust Division. She’s accepted a new position…as a partner at Cravath, Swaine & Moore. It’s the circle of life!

So in less than a year, Ms. Varney and Ms. Forrest pulled off quite the switcheroo. Varney effectively takes Forrest’s job at Cravath, cashing in on her two-plus years of “experience” running the Antitrust Division — the average Cravath partner earns about $3 million annually, according to one legal publication — while Forrest gets a lifetime appointment to the bench, where she’ll receive a nice taxpayer-funded salary while still collecting over $3.8 million in deferred compensation from Cravath over the next ten years.

For its part, Cravath gets a new antitrust partner who had a major hand in rewriting the DOJ-FTC horizontal merger guidelines — Varney announced those about a week before she approved the United-Continental merger — which will no doubt make her and the firm more attractive to clients who need future antitrust approval for their deals. Who better then the person who wrote the rules to advise you on how to follow them? (Of course, Varney’s successor could go in a completely different direction, since the “merger guidelines” are not binding law.)

So all these lawyers benefit handsomely at the expense of the corporations who pay not only for private firms like Cravath but also subsidize the majority of Antitrust Division expenses. It’s a little publicized fact that the Antitrust Division (and FTC) collects “filing fees” from companies that are legally required to submit their mergers — about 95% of which are approved without any formal investigation — to the antitrust agencies for approval. In 2010, about 63% of the Antitrust Division’s budget came from regulated companies and not the general taxpayers. Thus, companies like United Continental are paying for their prosecution and defense.

This is not a system that promotes frugality. If you’re Christine Varney and you know you will only hold your politically appointed office for a couple years at most, you need to maximize your potential marketability to future employers. That means new initiatives, targeting politically unpopular businesses, more cases — even ones that clearly don’t make any sense —  and building alliances with outside law firms, like Cravath, that regularly do business with your department.

All this makes a former assistant attorney general for antitrust a valuable commodity to Big Law and Big Business alike. Varney’s immediate predecessor as AAG, Thomas Barnett, returned to his prior partnership at Covington & Burling, where he co-chairs the antitrust and consumer law group. Barnett’s predecessor, R. Hewitt Pate, is now general counsel at Chevron, a job he took over last year from Charles A. James, who was — wait for it — Pate’s predecessor as assistant attorney general.

That’s not to say there are no “ethics rules” applicable to Varney. She’s barred by law directly representing a client before the DOJ for two years. And Cravath will no doubt prohibit her from working on cases that she initiated at the Antitrust Division. But there’s no way to prevent her from advising clients — even ones she sat across the table from as AAG — and privately counseling them. And the mere fact she’s on the firm’s letterhead instantly makes Cravath a more appealing hire for companies, especially while the rest of the Obama regime remains in power.

As with most government-based “ethics” rules, the two-year lobbying ban is purely cosmetic. It doesn’t address the core of a rotten system that rewards people who aggressively work both sides of the regulatory fence. For example, what if during their meetings on the United-Continental deal, Katharine Forrest told Varney of her plans to leave Cravath, creating a back channel for Varney to express interest in joining the firm. Technically no law would be broken. And if Varney offered Forrest the DOJ position as a means of helping her transition to a federal judgeship — which she was no doubt under consideration for at the time she left Cravath — that also probably didn’t break any laws. As Varney herself might say in a “price-fixing” case, there can be collusion without any overt evidence as such.

Even if there was no fire here, there’s enough smoke to make you wonder. And the answer isn’t for Congress or the White House to make up some more phony “ethics” rules. It’s up to the companies who finance the antitrust system to demand substantive change. If you hire a firm — and pay a premium — to get advice from an ex-AAG or, worse yet, appoint such a person as your in-house counsel, then you are part of the problem.

It’s fallacy to argue that companies need to hire people like Christine Varney or Hewitt Pate because of their alleged expertise. This is the “It’s the cost of doing business” argument. Trust me, you can usually scare off the antitrust regulators by making some public noise and hiring a lawyer who makes it clear from the outset that they won’t negotiate with terrorists. The DOJ and FTC’s records aren’t so impressive in the face of full-force opposition before a nominally impartial court. Smart companies would cultivate dedicated in-house counsel to defend their shareholders’ interests at all costs — as opposed to double agents like Varney promoting their own standing within the antitrust community.

The House of Representatives should immediately impeach Judge Mark W. Bennett of the U.S. District Court for the Northern District of Iowa. This past February, Bennett committed one of the most astonishing abuses of power I’ve seen in over 10 years of covering antitrust policy. He sentenced a defendant in a federal “price-fixing” case to double the prison sentence recommended by the Justice Department’s Antitrust Division based entirely on his personal disagreement with historical sentencing guidelines in antitrust cases — and the fact that the defendant was a rich, Caucasian male. While Bennett’s actions are currently on appeal to the Eighth Circuit Court of Appeals, the House has every right to get this maniac off the federal bench without further delay.

In April 2010 the Justice Department charged Steven VandeBrake with one count of “price-fixing” in violation of the Sherman Act. Mr. VandeBrake ran a family-owned concrete company in Iowa. The DOJ said that over a three-year period, VandeBrake entered into several voluntary agreements with competitors to charge similar prices for certain ready-mix concrete products. The DOJ estimated the entire volume of commerce “affected” by these agreements at about $5.6 million.

VandeBrake signed a plea agreement whereby the Antitrust Division recommended a prison sentence of about 1 1/2 years and a fine of $100,000. The case was assigned to Bennett, a Democrat appointed to the federal bench by Bill Clinton, who didn’t bother to review any of the facts — Mr. VandeBrake had never even appeared in court — before announcing in open court he would reject the plea agreement. At a May 2010 hearing, Bennett explained he rejected the recommended sentence simply because it infringed on his “discretion” to decide for himself how long Mr. VandeBrake should rot in prison. Bennett said he saw this as a “separation of powers issue,” and that as a matter of “judicial philosophy” — and not based on the facts of the case — he was “not willing to give up his discretion.” Bennett then went on to mock the lead prosecutor’s lack of experience with trials and sentences relative to the Great Judge himself:

My question is why should I defer to someone with such little, infinitesimal experience? You could be the greatest lawyer since Clarence Darrow. That remains to be seen. But I’m saying based on what you’ve told me you have zilch, nada, none, virtually no real-world experience. So why should I defer to your judgment about how the [sentencing] factors would apply in a case?

Bennett was so incensed that a week later, he continued to complain about the Division’s plea agreement with Mr. VandeBraks while presiding over a completely unrelated case. And to add insult to injury, Bennett told the lawyers in the unrelated case that Mr. VandeBrake was apparently guilty of things the Antitrust Division never accused him of:

[VandeBrake] said if you don’t participate in the Sherman Act antitrust scheme we’ll put you out of business, so either fix prices with us or we have leverage to put your company out of business. So he used his market share, his market power, and the fact that he was violating the antitrust laws to threaten a legitimate company that wasn’t violating the law to either go along with it or to put him out of business. And then the government waltzes in and recommends a 19-month sentence.

In other words, Bennett said Mr. VandeBrake engaged in coercion. But the Antitrust Division never said any such thing. The government only accused Mr. VandeBrake into entering voluntary agreements with competitors regarding prices.

When Bennett finally sentenced Mr. VandeBrake, the judge substituted character assassination for legal reasoning:

Writer Pearl S. Buck cogently observed in her novel The Good Earth, “Hunger makes a thief of any man.” Defendants Steven Keith VandeBrake and Kent Robert Stewart came before the court for sentencing on February 8, 2011, for violations of the Sherman Act, 15 U.S.C. § 1. Neither defendant, however, suffered from hunger, at least as Pearl Buck knew it, but from insatiable greed, which is all the more shocking because both were already wealthy, multi-millionaire businessmen. Sir Francis Bacon wrote, “Opportunity makes a thief.” While Stewart’s greed was at least tempered a modicum by Stewart’s misguided motivation to ensure the jobs and livelihood of his employees, VandeBrake’s appalling greed knew no such bounds and was fueled by the unique ease and opportunity that his industry, concrete sales, gave him in establishing a concrete cartel in northwest Iowa. The defendants, although dressed in the attire of hard working businessmen, were nothing more than common thieves, and serial ones at that. Like a neighborhood thief, they stole from friends, acquaintances, businesses and local governments The defendants tools of their trade were not dark clothing worn in midnight burglaries facilitated by pry bars and screw drivers. Instead, in ordinary business attire and in the glare of broad daylight, they used the ordinary communication tools of modern commerce and business, cell phones, Blackberries, and e-mail to rob their victims. Unlike the neighborhood thief who values high end TV’s, computers, jewelry, and furs, the defendants specialized in cold hard cash. Unlike the neighborhood thief whose victims immediately recoiled in shock at the loss of their property, the defendants stole from their victims without them ever knowing it.

Now the basic problem here is that Mr. VandeBrake didn’t “steal” anything. “Price-fixing” is not fraud or theft, despite Bennett’s repeated wishes that were so. Mr. VandeBrake was accused of charging more for his goods than the government would have liked him to charge. But it’s not as if Mr. VandeBrake took people’s money and gave them nothing in return. Yes, he apparently entered into voluntary exchanges of information with other individuals selling the same product as him. Freedom of speech and association are supposed to be protected from government encroachment by the First Amendment. More to the point, Mr. VandeBrake has every right to determine the disposition of his own property — even if that involves entering into agreements with similarly situated property owners. To say what happened here was “theft” is an outright lie.

Yet the core of Bennett’s opinion was that “price-fixing” should be treated just as harshly as fraud, even though neither the law nor the Antitrust Division demand as much. Bennett said he disagreed with this “sentencing policy,” so he demanded Mr. VandeBrake spend four years in prison — more than double the government’s recommendation — and pay a fine of nearly $830,000 (three times what the DOJ sought) to correct what he considered the improper disparity between fraud and antitrust sentences:

One cannot help but wonder why sentences under the Sherman Act are so low. Is it the result of be explicit and/or implicit bias on behalf of Congress? The captains of American industry at the time of the Sherman Act’s passage in 1890, and the most likely targets of prosecution under the Sherman Act, were the likes of J.P. Morgan, John D. Rockefeller, Andrew Carnegie, and Meyer Guggenheim. These individuals were almost exclusively wealthy, white, Anglo-Saxon, protestant males who were politically well-connected. Although the demographics of American industry have changed since 1890, the overly lenient sentencing (in my view) for white collar, antitrust criminals found in the origins of the Sherman Act lingers today in the United States Sentencing Commission Guidelines.

So Mr. VandeBrake will spend an additional two-plus years in jail because he’s a white male who unfairly benefitted from the 1890 Congress’s “leniency” towards antitrust sentencing. (Bennett himself is white, incidentally.)

In justifying the four-year prison sentence — which, by the way, ties the record for the longest pure antitrust sentence ever imposed in the US — Bennett grasped at all manner of straw to show why Mr. VandeBrake was a truly evil man. First, Bennett said, it would be one thing if Mr. VandeBrake fixed prices for a “luxury” — but this Godless bastard fixed prices of “concrete,” which people need to build buildings!:

[C]oncrete is employed in the construction of significant portions of our nation’s infrastructure. Indeed, one would be hard pressed to gaze in any direction in a modern city and not see an architectural structure which does not have as a component, some concrete. Moreover, in many instances, there will be no reasonable substitute for concrete. For instance, any individual or family seeking to build a new home, or a community planning to construct a new school, will be required to purchase concrete for their new building’s foundation. Thus, the price of concrete in turn determines the price of all projects in which it is used and has a secondary effect on our economy. Excess monies spent on VandeBrake or his co-conspirator’s overpriced concrete deprived their concrete purchasers of the option and ability to spend those lost monies on other products. This is particularly troublesome when one considers the fact that a number of projects that VandeBrake rigged bids on were public works. By rigging bids on these public works projects, VandeBrake effectively robbed several local governments of monies that could have been used for the betterment of their communities. Given VandeBrake’s utter lack of involvement in any charitable or civic activities, this is hardly surprising.

It never occured to Bennett that Mr. VandeBrake might actually be performing a greater “charitable or civic” function by, y’know, providing concrete to people in the first place. Nor did it cross Bennett’s mind that local governments ever waste money on unnecessary, ego-driven projects. If the state does it, it must be for the “betterment” of the community, while anything Mr. VandeBrake does is motivated by his intrinsic evil and lack of a social conscience.

There is also no “necessity” factor in determining antitrust sentences. As Mr. VandeBrake’s counsel noted in their appeal brief, “It strains reality to suggest, as the district court implicitly did, that Americans are significantly more dependent on ready-mix concrete than they are on vitamins, air transportation, citric acid, milk, gasoline, and refrigeration,” all of which have been the subjects of previous criminal “price-fixing” cases. And no judge in any of those cases saw cause to impose a four-year prison sentence on antitrust charges alone. To the contrary, even in cases where the total volume of commerce affected was substantially higher — that is, international markets versus the highly localized concrete market in northwestern Iowa — no court ever imposed as high a sentence as Bennett did on Mr. VandeBrake. (The average sentence, according to VandeBrake’s appeal brief, is 7-8 months, as opposed to the 48 months he received.)

Ultimately, Bennett simply saw Mr. VandeBrake as a target of opportunity — a scapegoat for the judge’s arrogant belief in his own righteousness and the error of Congress’s ways:

I appear to be the first federal judge to consider varying upward from the Sentencing Guidelines based on my policy disagreements with the Sentencing Guidelines’s relatively lenient treatment of antitrust violations when compared to fraud sentences. This action, by changing the status quo of antitrust sentences, will understandably result in a sentencing disparity between the defendants here and those sentenced previously.

This is legislating from the bench at its scariest. Bennett’s actions, if left unchecked, provide a license to every federal judge to impose draconian antitrust sentences based on his or her personal perception of a defendant’s wealth and background. By Bennett’s admission, he punished Mr. VandeBrake not for what he did, but because he came from a wealthy family and was motivated by “greed.” This was a pure witch-hunt on Bennett’s part.

Regardless of whether the Eighth Circuit overturns Mr. VandeBrake’s sentence, Mark Bennett should never be allowed to stand in judgment of another human being again. He abused his power in such a flagrant, heartless and ignorant manner, that impeachment is the only just remedy.

Last week the Federal Trade Commission ordered Breiersdorf, Inc., manufacturer of Nivea skin cream, to cease representing — or really, even hinting — that its product can help users lose weight. FTC Chairman Jon Leibowitz, in perhaps the creepiest statement of his tenure, chastised, “The real skinny on weight loss is that no cream is going to help you fit into your jeans. The tried and true formula for weight loss is diet and exercise.” Leibowitz was referring to a Nivea commercial — now banned by the FTC — that no doubt appealed to every vain woman too dumb to critically assess anything she sees on television:

New Nivea My Silhouette! with Bio-Slim Complex helps redefine the appearance of your silhouette and noticeably firm skin in just four weeks. [Depicts woman getting jeans out of rear of closet, and trying them on to discover that they fit.] So you can rediscover your favorite jeans. And how they still get his attention. New Nivea My Silhouette! with Bio-Slim Complex. Touch and be touched.

The most notable aspect of this case, however, is that the FTC also cited Google search results as separate evidence of illegal activity:

Respondents also entered into agreements with Google, an Internet search engine, to preferentially identify a webpage marketing My Silhouette in response to consumer searches for information relating to body size. As a result, if a consumer entered the terms “stomach fat,” “nivea slim silhouette,” or “thin waist” into Google, a link to this My Silhouette webpage would appear as a sponsored result at the top of the search results, such as follows:

So now it apparently violates the FTC Act if you pay to use words that the Commission deems misleading to potential customers. Leibowitz and company can veto any company’s use of a word or phrase if it even hints at something the Commission deems cannot be true. Since the FTC does not have to prove a claim is false to ban it — only that the speaker’s statements are not supported by evidence the government, usually the Food and Drug Administration, deems correct — this new power to ban individual search words could have potentially limitless uses.

This also suggests yet another motive for the FTC’s pursuit of Google. If Leibowitz can get his hands on Google’s search engine, he will probably demand new filters on words and phrases he deems likely to “mislead” consumers. He could even require Google’s basic search algorithm to discriminate against speech and speakers he deems unworthy. Ultimately, he could — and I believe he wants to — destroy the viability of advertising-based web services altogether.

Christine Varney, the assistant attorney general in charge of the Justice Department’s Antitrust Division, has decided to scapegoat third-party investors for not doing enough to bail-out banks and home buyers who entered into risky mortgages. Since last year the Obama-created “Financial Fraud Enforcement Task Force,” which includes the FBI and Varney’s division, has been actively policing public foreclosure auctions and prosecuting bidders who, in Varney’s estimation, aren’t bidding high enough for properties. Instead of pursuing the scores of federal officials who inflated the housing bubble, Varney has chosen to prosecute — and imprison — these private bidders for what she deems illegal “price-fixing.”

Yesterday Varney announced eight individuals in California were forced to plead guilty to Sherman Act violations after participating in what Varney deemed an illegal scheme to drive down the prices paid at public foreclosure auctions by staging subsequent private auctions:

According to the court documents, the real estate investors conspired with others not to bid against one another at public real estate foreclosure auctions in Northern California, participating in a conspiracy in various lengths of time between May 2008 and January 2011.  After the conspirators’ designated bidder bought a property, the conspirators would hold a secret, private auction at which each participant would bid the amount above the public auction price he was willing to pay.  The [DOJ] said that the secret, private auctions took place at or near the courthouse steps where the public auctions were held.  The highest bidder at the private auction won the property.  According to the court documents, the difference between the public auction price and that at the second auction was the group’s illicit profit, and it was divided among the conspirators, often in cash.

The profit was “illicit,” according to Varney, because in her mind, any auction proceeds should go to pay off the original mortgage and, in some cases, to the original homeowner. Because the eight investors put their own financial interests ahead of banks that made bad loans, they are now felons according to Varney, who blamed the eight investors for exacerbating the country’s foreclosure crisis:

While the country faces unprecedented home foreclosure rates, the collusion taking place at these auctions is artificially driving down foreclosed home prices and is lining the pockets of the colluding real estate investors. The Antitrust Division will vigorously pursue these kinds of collusive schemes that eliminate competition from the marketplace.

Varney’s economic ignorance truly knows no bounds. In the first place, there was no “artificially driving down foreclosed home prices.” If anything, the investors were trying to restore the market wrecked by decades of government efforts to artificially inflate home prices. The reason the country “faces unprecedented home foreclosure rates” is that Varney’s sister regulators did everything in their power to ensure people with little or no credit obtained cheap mortgages. As Doug French noted in his recent book, Walk Away:

Congress gave Fannie Mae and Freddie Mac a mandate to increase their purchases of mortgages going to low and moderate income borrowers by passing the Federal Housing Enterprise Financial Safety and Soundness Act of 1992.

The very next year, regulators threw standard historical underwriting out the window. Forget about down payments, good credit, and adequate income to service a mortgage. “Substituted were liberalized lending standards that led to an unprecedented number of no down payment, minimal down payment and other weak loans, and a housing finance system ill-prepared to absorb the shock of declining prices,” writes [former Fannie Mae EVP Edward] Pinto.

In 1994, HUD Secretary Henry Cisneros, working in the Clinton Administration, rolled out a National Homeownership Strategy that championed the looser loan standards and partnered with most of the private mortgage industry, announcing that “Lending institutions, secondary market investors, mortgage insurers, and other members of the partnership [including Countrywide] should work collaboratively to reduce homebuyer downpayment requirements.”

[ ... ]

The looser lending standards had a chain reaction on the mortgage industry. Financial institutions had to compete with Fannie and Fred- die that “only needed $900 in capital behind a $200,000 mortgage— many of which had no down payment,” as Pinto points out. Private institutions did their best to lever up like the GSEs and they relaxed their underwriting to HUD’s affordable housing policies.

And yet, there was never a single DOJ antitrust investigation into whether these “collusive” activities artificially drove up home prices to the detriment of free-market competition. Now we’re supposed to believe there’s a massive problem — warranting a federal task force and prison sentences — for a handful of local speculators trying to salvage some of the wreckage of Freddie Mae and Freddie Mac’s bloated housing market.

The other major flaw in Varney’s argument is that it contradicts the very principle modern antitrust claims to cherish — the supremacy of the consumer. Since when does it violate antitrust law for buyers to join together and seek a better deal for themselves? Apparently, when the sellers are government-sponsored banks.

There’s no argument here that what the investors did harmed competition. By Varney’s own admission, there was robust competition among the defendants in the private after-auction. The crime, according to her, is that private investors got together behind the government’s back and formed a private market. The government wanted to maximize the return to banks and mortgagees. The crime was not that profit was made — it was that the most politically connected group didn’t get a big enough share.

And despite throwing around hollow pejoratives like “illicit profit” and “collusive schemes,” there’s nothing to suggest the investors engaged in any force or fraud. They didn’t prevent anyone from outside their group from out-bidding them at the public auctions. The banks were free to set the terms of the auction — including a minimum acceptable price — and the DOJ never said they weren’t paid the publicly bid prices. Again, Varney’s sole objection is that the investors didn’t take every action to maximize the bank’s profit from their prior bad loans.

This is actually the second time in recent weeks that Varney has demonstrated the crass politics that dominate her office. As I reported earlier, Varney tried to undo a chicken processing plant sale in Virginia on nonsensical antitrust grounds, only to be thwarted by a lack of evidence and external political support. Like the foreclosure auction cases, Varney tried to parlay a political initiative — in the chicken case, a series of “workshops” on how to more aggressively apply antitrust to the agricultural industry — into regulation-by-litigation. She’s trying to manufacture more and more “problems” that require antitrust solutions.

Today a three-judge panel of the US Court of Appeals for the Fourth Circuit dismissed William Isely’s appeal of a Federal Trade Commission order refusing to compensate Isely for the $130,000 in legal fees he incurred defending himself in an earlier FTC case. The FTC had falsely accused Isely, an elderly retiree, of running a foreign website that allegedly made false claims about the health benefits of certain herbal supplements. FTC staff intentionally ignored evidence that another individual was responsible for the website.

Despite ultimately dismissing its own case against Isely, the FTC refused to compensate him, as required by federal law. FTC Chairman Jon Leibowitz said in a February decision that any FTC case was “substantially justified” — the legal threshold for assessing damages against the Commission — if it was tried on the merits. Since the FTC itself decides whether to try a case on the merits, Leibowitz’s decision, left undisturbed by the Fourth Circuit, effectively exempts the Commission from ever having to pay attorney fees to prevailing defendants, even in cases where there is demonstrable prosecutorial misconduct.

The Fourth Circuit refused to consider the merits of Isely’s appeal. Instead, the court granted the FTC’s motion to dismiss the appeal on the grounds that Isely filed several days after the statutory deadline. Isely said he was confused by conflicting information in the federal court rules as well as advice he received directly from the Fourth Circuit clerk. (Isely represented himself on appeal as he could no longer afford his prior attorney; I contacted several attorneys — including some who work for prominent “free-market” groups — to accept the case, but all declined.)

The Copyright Lobby has asked the British courts to block public access to a Sweden-based website, Newzbin2, which provides links to unauthorized copies of Hollywood films. The film industry claims it can’t survive without massive government censorship:

Spyro Markesinis, the vice president of legal affairs for Momentum Pictures, the distributor of The King’s Speech, said there were 75 different versions of the Colin Firth movie on Newzbin2.

“The survival of our business depends on the revenues we receive for our content,” he said. “Our recent film, The King’s Speech, is available on the Newzbin2 website without our consent. Neither we, nor the filmmakers, receive anything for this.

“Lost revenues not only threaten our business and our employees’ jobs but also mean we have less money to invest in new films, so the whole industry – and particularly the independent film business – is at risk. That’s why we fully support this action against Newzbin.”

“The King’s Speech” generated over $414 million in global box office receipts (off a reported production budget of just $15 million). And this was despite the existence of Newzbin and other “infringing” websites. It’s laughable to suggest these websites are threatening the survival of the film industry. (Incidentally, did Mr. Markesisnis pay any royalties to Queen Elizabeth II, as “The King’s Speech” makes use of her father’s name, image, and personal history?)

One way to deal with the lawyer surplus Doug French mentioned earlier is for unemployed lawyers to discover new ways of generating legal activity. To that end, recent law school graduate Joel F. Murray released a working paper earlier this month demanding the Federal Trade Commission investigate law schools for false advertising practices. Murray claims law schools use “false or misleading employment statistics” to lure potential students into enrolling. Somehow, he thinks adding more lawyers to the fray will somehow result in a more honest marketplace.

Murray claims that law schools misreport data regarding the employment of their graduates to media outlets, notably U.S. News and World Report‘s annual rankings survey, and that this constitutes advertising subject to the FTC’s jurisdiction. Unfortunately, Murray’s examples of this alleged misreporting are weak. Consider his first example:

In 2007, the Tulane University Law School reported a starting median private-sector salary of $135,000 per year for 2005 graduates based on a survey that only 24% of graduates completed. The school amended the figure after the Wall Street Journal cited the school’s use of the survey in marketing materials in a front-page article on poor job prospects for recent law school graduates. While law schools are increasingly disclosing the percentage of graduates who respond to the surveys that they use to calculate employment statistics, listing average and median salaries based on such an unrepresentative sample is potentially misleading, if not dishonest, to prospective students. Furthermore, because there is no standardized methodology for schools to release employment statistics, the statistics reported by schools vary widely.

This doesn’t exactly sound like a federal crime. Tulane selectively reported data, but Murray exaggerates when he claims this was “potentially misleading, if not dishonest, to prospective students.” If potential law students are that easily swayed by incomplete data, I’d say the fault lies with them.

Murray next said there were “questions about the veracity of the employment statistics that” the University of California-Davis law school reported to U.S. News. Again, he can’t really show there were any false statistics; in a footnote Murray said that a partial response to a freedom of information request showed that “the law school considered individuals who were studying for the bar exam full-time” to be employed. Granted, that might be misleading, but it’s still a stretch to consider this false advertising.

Beyond that, Murray does little more than cite academic concerns about the general veracity of law school employment statistics. He cites one survey from University of Colorado law professor Paul Campos:

Despite the fact that nearly all ABA accredited law schools previously reported employment rates of over 90% nine months after graduation to U.S. News and World Report, Professor Campos found that only 45% of graduates of top 50 law schools had non-temporary, legal full-time positions nine months after graduation.72 Professor Campos’ inquiry regarding law school employment statistics raises further questions about the veracity of the statistics that law schools report to U.S. News and Report. In fact, even U.S. News and World Report questions the legitimacy of law school’s reported employment statistics. In March 2011, editor Brian Kelly sent a letter to law school deans requesting that they ensure that their school is reporting accurate employment statistics.

Now, I suspect Campos is right, and that there is quite a bit of inaccuracy in law school post-graduation employment figures. That still doesn’t explain why the FTC needs to get involved. Murray himself noted the American Bar Association is already considering amending its own accreditation rules to require “fair, accurate, and not misleading” statistics. The media — including U.S. News — also serves as a market-based watchdog. So what can the FTC bring to the party?

Murray asserts — with absolutely no supporting arguments —  that “enforcement of the FTC Act for law schools would improve [sic] legal education system.” Murray claims, “Investigation and prosecution would increase accountability and transparency in the legal education system, and enable prospective law students to make a more fully informed enrollment decisions.” But that is speculative hyperbole. It’s just as likely FTC meddling would lead to less transparency, as law schools could opt not to report any employment statistics at all.

Murray also ignores — or perhaps he never learned this in law school — the full consequences of FTC intervention. His entire paper is devoted to proving the FTC has jurisdiction and should act, but he never explains what that action would entail. In theory, the FTC could investigate and issue simple cease-and-desist orders — in other words, “Don’t report false or misleading statistics in the future!” But in most false advertising cases, the FTC demands a pound of flesh, i.e. money. Typically the Commission demands a financial penalty which is first distributed as refunds to the customers allegedly harmed by the false advertising (minus expenses for the FTC’s outside contractor who administers the refunds), with the remainder deposited in the federal treasury as “disgorgement” of ill-gotten gains.

In an FTC case, it is immaterial whether any actual consumer was misled or injured. That’s not the standard. The FTC need only construct a hypothetical “reasonable” consumer and, if the Commission determines this fictional person would have been misled by a particular advertisement, then the advertisement is legally false. Murray follows this hypothetical construction in his own argument: “Employment outcomes are material in a law student’s decision to attend a law school, and false or misleading employment statistics reported by a law school misrepresents a law school’s employment outcomes.” If the FTC accepted this view, it would then conclude that employment statistics are material to every student’s decision and seek financial remedies on their behalf.

In essence, the FTC would have to order any law school deemed guilty of false advertising to refund the full tuition and fees paid by every single student who matriculated during the period when the false advertising was published. This is standard practice. Of course, normally the FTC goes after nickel-and-dime cases, such as an exaggerated health claim on a box of $5 cold medication. Demanding law schools refund millions in already paid tuition would be a far larger undertaking.

A FTC action would also open the door for civil class actions to piggyback on the Commission’s false advertising charges. Again, this is standard practice. Lawyers would demand millions in additional compensation, most of which would go to the lawyers bringing the lawsuit, not the unemployed lawyers. (Ironically, plaintiffs lawyers often divert class settlement funds to favored nonprofits, including, um, law schools.)

So the net effect of Murray’s demands for FTC intervention might not be a more transparent and accountable law school market so much as a bankrupt law school market. Which I suppose wouldn’t be the worst thing in the world.

The US Supreme Court today upheld the decision of two lower courts to prevent the State of California from banning the sale of “violent video games” to any person under the age of 18. The Court said the state’s law violated the First Amendment’s protections for freedom of speech. (And before anyone points it out in the comments, yes it violates Kinsellan libertarianism for a federal court to apply the Bill of Rights to the states; I’ll stipulate that, but this post isn’t about libertarian centralism, so let’s move on.) Justice Antonin Scalia and four of his colleagues said that video games are just another form of expression — no different than books or movies — and that the government could not “create a wholly new category of content-based regulation that is permissible only for speech directed at children.”

Two other justices, Samuel Alito and John Roberts, reluctantly agreed that the California law violated the First Amendment, but they wrote separately to express their discomfort with violent video games, noting, “There are reasons to suspect that the experience of playing violent video games just might be very different from reading a book, listening to the radio, or watching a movie or a television show.” Justice Stephen Breyer dissented outright, saying the ban was a “modest” restriction on free expression that was justified because, well, elite opinion holds that violent video games are bad for children. 

And then we have Clarence Thomas, the only other dissenter, who authored the judicial equivalent of a conniption. His position is that, “‘The freedom of speech,’ as originally understood, does not include a right to speak to minors without going through the minors’ parents or guardians.” And when he says “as originally understood,” he means as understood by Puritans who settled the United States long before there even was a First Amendment:

In the Puritan tradition common in the New England Colonies, fathers ruled families with absolute authority. “The patriarchal family was the basic building block of Puritan society.” S. Mintz, Huck’s Raft 13 (2004) (hereinafter Mintz); see also R. MacDonald, Literature for Children in England and America from 1646 to 1774, p. 7 (1982) (hereinafter MacDonald). The Puritans rejected many customs, such as godparenthood, that they considered inconsistent with the patriarchal structure. Mintz 13.

Part of the father’s absolute power was the right and duty “to fill his children’s minds with knowledge and . . . make them apply their knowledge in right action.” E. Morgan, The Puritan Family 97 (rev. ed. 1966) (hereinafter Morgan). Puritans thought children were “innately sinful and that parents’ primary task was to suppress their children’s natural depravity.” S. Mintz & S. Kellogg, Domestic Revolutions 2 (1988) (hereinafter Mintz & Kel- logg); see also B. Wadsworth, The Well-Ordered Family 55 (1712) (“Children should not be left to themselves . . . to do as they please; . . . not being fit to govern themselves”); C. Mather, A Family Well-Ordered 38 (1699). Accordingly, parents were not to let their children read “vain Books, profane Ballads, and filthy Songs” or “fond and amorous Romances, … fabulous Histories of Giants, the bom- bast Achievements of Knight Errantry, and the like.” The History of Genesis, pp. vi–vii (3d ed. corrected 1708).

This conception of parental authority was reflected in laws at that time. In the Massachusetts Colony, for example, it was unlawful for tavern keepers (or anyone else) to entertain children without their parents’ consent. 2 Records and Files of the Quarterly Courts of Essex County, Massachusetts, p. 180 (1912); 4 id., at 237, 275 (1914); 5 id., at 143 (1916); see also Morgan 146. And a “stubborn or rebellious son” of 16 years or more committed a capital offense if he disobeyed “the voice of his Father, or the voice of his Mother.” The Laws and Liberties of Massachusetts 6 (1648) (reprint M. Farrand ed. 1929); see also J. Kamensky, Governing the Tongue 102, n. 14 (1997) (citing similar laws in the Connecticut, New Haven, Ply- mouth, and New Hampshire Colonies in the late 1600’s).

Please note, this is Thomas writing in his official capacity as a Supreme Court justice. He goes on and on like this at some length. There’s a discussion of how Locke and Rosseau — two non-American philosophers — viewed the role of children within society. There’s a recitation of Thomas Jefferson’s views of parenting. At one point Thomas favorably cites the view that not only parents, but government schools, should have “absolute” authority over children. He adds that in better days — you know, back when slavery was constitutional — “Stories written for children were dedicated to moral instruction and were relatively austere, lacking details that might titillate children’s minds.” Ultimately, an originalist view of the Constitution, according to Thomas, holds that a person under the age of 18 is the property of his parents — specifically the father.

Thomas sees no reason that we should depart from the social mores of ate 18th century America: “Although much has changed in this country since the Revolution, the notion that parents have authority over their children and that the law can support that authority persists today.” Of course, the law has changed over the centuries, and as Justice Scalia helpfully noted in his opinion, none of these changes provide even remote support for Thomas’s misogynistic, authoritarian gibberish:

JUSTICE THOMAS … denies that persons under 18 have any constitutional right to speak or be spoken to without their parents’ consent. He cites no case, state or federal, supporting this view, and to our knowledge there is none. Most of his dissent is devoted to the proposition that parents have traditionally had the power to control what their children hear and say. This is true enough. And it perhaps follows from this that the state has the power to enforce parental prohibitions—to require, for example, that the promoters of a rock concert exclude those minors whose parents have advised the promoters that their children are forbidden to attend. But it does not follow that the state has the power to prevent children from hearing or saying anything without their parents’ prior consent. The latter would mean, for example, that it could be made criminal to admit persons under 18 to a political rally without their parents’ prior written consent—even a political rally in support of laws against corporal punishment of children, or laws in favor of greater rights for minors. And what is good for First Amendment rights of speech must be good for First Amendment rights of religion as well: It could be made criminal to admit a person under 18 to church, or to give a person under 18 a religious tract, without his parents’ prior consent. Our point is not, as JUSTICE THOMAS believes, merely that such laws are “undesirable.” They are obviously an infringement upon the religious freedom of young people and those who wish to proselytize young people. Such laws do not enforce parental authority over children’s speech and religion; they impose governmental authority, subject only to a parental veto. In the absence of any precedent for state control, uninvited by the parents, over a child’s speech and religion (JUSTICE THOMAS cites none), and in the absence of any justification for such control that would satisfy strict scrutiny, those laws must be unconstitutional. This argument is not, as JUSTICE THOMAS asserts, “circular.” It is the absence of any historical warrant or compelling justification for such restrictions, not our ipse dixit, that renders them invalid.

I recently reported on the Justice Department’s lawsuit to undo the sale of a chicken processing plant in Virginia’s Shenandoah Valley — an exercise of private property rights that horrified Antitrust Division lawyers, who saw a conspiracy to undermine the right of farmers to receive higher prices for their poultry. Now, weeks before the case was set for trial, the DOJ declared the case over with a settlement. But unlike the typical antitrust “settlement,” it appears the DOJ failed to achieve its objective of forcing the resale of the chicken processing plant at issue. In fact, the DOJ’s order simply requires the plant’s owner to…make capital improvements that were delayed by the DOJ’s decision to bring an antitrust lawsuit in the first place.

In a June 23 press release, the DOJ’s Antitrust Division declared victory in its litigation against George’s Inc. Division chief Christine Varney took credit for preserving competition in the Harrisonburg area for chicken processing services:

The proposed settlement enhances the competitive viability and increases the production of the Harrisonburg poultry processing plant, which translates into more opportunities to grow and process poultry. This resolution not only benefits poultry growers, but also the Shenandoah Valley community. It also demonstrates our commitment to enforcing the antitrust laws to protect competition in important agricultural markets.

“This resolution,” however, did nothing more than accomplish what George’s intended to do all along. In court papers filed in May, George’s explained the negative impact of Varney’s decision to try and undo the Harrisonburg acquisition by force:

To avoid throwing “good money after bad,” George’s will therefore need to postpone capital improvements to the Harrisonburg complex during the pendency of the litigation. Those investments, all of which were intended to increase the productive capacity of the Harrisonburg complex, include: (a) The purchase and installation of an IF (individually frozen) freezer at Harrisonburg, which will allow George’s to add value to the birds processed at Harrisonburg and Edinburg; [and] (b) The purchase of both leg processing and whole leg deboning equipment to improve dark meat value.

And here’s what Varney’s press release said was the “resolution” to her antitrust concerns:

The settlement requires that George’s make capital improvements to the Harrisonburg chicken processing plant that will lead to a significant increase in the number of chickens that will be processed at the facility. The improvements include the installation of a special freezer and deboning equipment, which will allow George’s to produce a variety of highly valued products at both its Harrisonburg and Edinburg facilities in the Shenandoah Valley. As a result of these improvements, George’s will have the incentive and ability to increase local poultry production, thereby increasing the demand for grower services and averting the likely adverse competitive effects arising from the acquisition. In addition, the division will monitor George’s efforts to improve the plant until the new equipment is installed and operational. (Italics added)

In other words, the DOJ is now ordering George’s to make the exact capital improvements the company would have made months ago if not for Varney’s decision to bring a lawsuit — a lawsuit that was motivated primarily by Varney’s anger over George’s decision to close the Harrisonburg purchase without waiting for her to make up her mind about whether to challenge the deal.

Now Varney wants to rewrite history to make it look like she carefully considered the best alternatives: “Taking all of the facts and circumstances into consideration, including the likely benefits resulting from the required improvements, the [DOJ] determined that the proposed settlement is an effective remedy.” That reverses the position Varney took a month ago when she filed the lawsuit. It was George’s, not Varney, who made the court aware of the “facts and circumstances” of the situation — including the negative economic impact on the very farmers Varney claimed to be helping.

Varney’s incompetence led her into a bad decision, even by antitrust standards. She also faced resistance, not just from George’s, but according to one report, she ”heard from a number of growers and plant employees, as well as a number of local, state and federal officials — including Virginia’s governor and two U.S. senators — that [the lawsuit] threatened the economic viability of the complex and local and regional economies.”

Yet don’t expect any consequences for Varney and her department. The case was “settled,” not dismissed, so Varney can claim victory with a straight (if deluded) face. When the DOJ compiles their annual litigation statistics, this will go down as a win along with all of the routine settlements where the DOJ actually managed to violate some company’s property rights. And while the George’s deal allows the company to resume its previously planned capital improvements, the DOJ unfortunately will have the right, which may never be exercised, to rifle through the company’s records to ensure that new freezer and deboning equipment are actually installed.

I expect this will be my last post on this subject until something actually happens, but I wanted to address a few final concerns and possible misconceptions regarding the Federal Trade Commission’s war against Google:

1. This isn’t about party politics

Ted Frank, a respected critic of the US legal system, observed that Google was partially to blame for its current misfortune because, “Google executives were big cheerleaders for the 2008 Obama campaign, [and] you have to expect Democratic-run federal agencies to adopt a view of antitrust that expands government oversight of successful companies.” I think Ted overstates the importance of the 2008 election. The FTC had already embarked on a far more interventionist direction during the Bush regime. Three of the five sitting commissioners — including Democratic Chairman Jon Leibwoitz — are holdovers from the prior administration thanks to the seven-year term all commissioners serve. Indeed, it was Leibowitz and Republican Commissioner John Thomas Rosch who have been the architects of the FTC’s efforts to aggressively expand both the quantity of the agency’s prosecutions and the reliance on novel Section 5, “unfair competition” arguments instead of more traditional antitrust theories.

Furthermore, 2008 Republican presidential nominee John McCain is hardly a paragon of limited government. Given that George W. Bush — a perceived “pro-business” Republican — put Leibowitz and Rosch on the FTC, it’s hard to imagine McCain would have appointed a bunch of libertarians. The antitrust bar, unlike the tort bar, is a fairly bipartisan entity not beholden to the Democratic Party.

2. The FTC has been building to this for awhile

As I said, the FTC didn’t suddenly become an activist agency when Barack Obama became president. Since the early days of the Bush regime, the FTC has been ratcheting up its attacks on the Internet and technology sectors. I spent years documenting the FTC’s litigation against Rambus — a case that, despite its superficial ties to intellectual property, was really about allowing the FTC to control industry standards — and while that case ended in a defeat, it only proved to be a temporary setback for the Commission.

More recently, the FTC scored a major victory when the Sixth Circuit Court of Appeals upheld the Commission’s decision to seize a privately owned real estate listings database. The FTC said it was “unfair” that database access was restricted to the brokers who paid for its development and maintenance. This set an important precedent: The FTC can declare any “popular” online service a public utility, and thus alter the rules by which the company — and ultimately the public — can access that service. This is exactly what the FTC will try to do with Google.

3. The Internet may not be free much longer

Antitrust cases are first and foremost about enriching the antitrust community. But we shouldn’t ignore the ideological component of all this. Since taking over the FTC, Jon Leibowitz has made it clear that his biggest policy objective is ending the “free” Internet. There are a variety of reasons for this: Free websites are supported by advertising, the FTC’s historical archenemy; online news and commentary has destroyed the market for traditional, government-centered media (including the Washington Post, which employs Leibowitz’s wife); the decentralized exchange of information makes it harder for government agencies to monitor and control the public’s behavior; and, of course, the general paranoia that somehow children are being harmed.

It’s unlikely the FTC wants to destroy Google, or even break it up into smaller companies. What the FTC wants is to control Google’s future development — and by extension, direct the future of the Internet itself. The FTC wants to set standards. And that will mean fewer free services — goodbye Twitter and Facebook — and more websites designed by government committees. There will be more pay walls (to protect “intellectual property”) and greater restrictions on anonymity (mandatory ID codes to access many websites). New product development will be disfavored while incumbent firms — including a new, FTC-overseen Google — enjoy stronger state privileges.

Declan McCullagh reports from the front lines of the Google wars:

It was inevitable that Google, one of the world’s largest technology companies, would find itself in the crosshairs of the Washington antitrust establishment. But what is, or should be, a little surprising is how enthusiastic the establishment became about pulling the trigger.

Take an event I moderated last week in the U.S. Capitol building … In theory, members of Congress and their staff carefully craft public policies that encourage the development of new technologies and benefit the entire nation.

But the reality of the questions asked was less Schoolhouse Rock and more jockeying over who gets to be on the firing squad at a corporate execution. One staffer on the Senate antitrust committee offered this complaint, which I’m not making up: “Nobody on the panel talked about innovation and that being a potential harm to consumers.”

McCullagh notes one of the leading Senate antagonists towards Google is Wisconsin Sen. Herb Kohl. And as luck would have it, Federal Trade Commission Chairman Jon Leibowitz spent the bulk of his career as an aide to Kohl. Indeed, it was Kohl who helped engineer Leibowitz’s appointment to the Commission during the Bush administration.

If nothing else, the Federal Trade Commission’s leaked-but-not-yet-declared war against Google provides a good opportunity to review how the agency’s internal machinery operates. Here are some basic points about what Google (and the rest of us) can expect going forward:

1. This won’t be like the Microsoft case

There are already suggestions that Google will be for the FTC what Microsoft was for the Justice Department’s Antitrust Division back in the 1990s. There’s an important distinction, however. The DOJ still operates under the jurisdiction of the federal courts. It had to bring a case against Microsoft before a district court for trial. In Google’s situation, the company faces both investigation and trial before the FTC. As an “independent” agency, the Commission appoints its own trial judges and conducts both the trial and the initial appeal. Google won’t be permitted to plead its case before a regular Article III court for several years.

2. The FTC Has Already Made Up Its Mind

Technically, the FTC is preparing to open a formal investigation of Google to determine whether any laws were broken. In reality, FTC Chairman Jon Leibowitz and his colleagues have already decided that Google is guilty — of what they aren’t quite sure yet. In FTC investigations, officials determine guilt before formulating the actual charges. The subsequent investigation is intended to (1) uncover information that can be used to publicly damage the defendant, (2) fatigue the defendant into signing a “consent order” that relieves the Commission of any duty to publicly prove its case, and (3) justify the expenditure of funds on outside consultants.

3. The FTC Is Writing Law, Not Enforcing It

In Microsoft, the DOJ had to rely solely on the Sherman Act, which punishes the vaguely defined offense of “monopolization.” The FTC can pursue similar arguments against Google, but the Commission has a broader weapon known as Section 5 of the Federal Trade Commission Act — which outlaws any “unfair” act that affects competition. As Congress never defined “unfair,” it is wholly within the Commission’s discretion to decide, after the fact, what acts are illegal. Thus, it can retroactively decide Google was wrong and punish the company accordingly.

4. The Commission Will Prevail — At Least Initially

As noted above, the FTC both prosecutes and tries cases. The judge is a career civil servant who is supposed to be impartial. And, in fact, these judges have ruled against the Commission at the trial stage on a handful of occasions. That’s largely irrelevant, however, since the first appeal from the trial judge is heard by the FTC members — the same people who approve the investigation, complaint, and prosecutors. The FTC has never ruled against itself in an appeal. And why would they?

5. The Ends Justify the Means

Once the FTC goes after a company, all bets — and constitutional principles — are off. If the FTC feels their trial judge won’t give them a favorable initial decision, the commissioners will simply get rid of the judge. The FTC has done this at least twice in recent years under the auspices of Chairman Leibowitz. There are no Fourth Amendment protections in FTC cases, so the Commission will be able to freely rifle through Google’s files — including access to individual customer accounts — in order to find anything that might be of value. There are also no penalties for prosecutorial misconduct, so even if FTC lawyers brazenly and publicly break the law, there will be no fear of reprisal. Everything is on the table when the FTC decides it’s in the right.

I’ve already seen a couple comments regarding the looming FTC-Google war along the lines of, “Google is anti-free market because they’ve supported certain government initiatives” and “Google supported Obama, so it’s great Obama is now stabbing them in the back.” I understand why people make these statements, but I feel they’re missing the point here. As with any FTC case, the issue shouldn’t be whether the company under fire is a perfect model of libertarianism — no company will ever meet that standard — but whether you want the Commission to have more power. Every other consideration is secondary.

I doubt FTC leaders have any personal animosity towards Google. They don’t even have any ideological animosity. Like most antitrust crusades, Google is simply a target of opportunity: It’s a company with deep pockets that can keep a few hundred lawyers, economists, and support staff employed for the better part of the next decade arguing over the esoteric issues of the company’s antitrust liability. More importantly, if the FTC can get its claws into Google, it will gain greater access to the entire technology sector — if Google is defeated, or even if it capitulates to a consent order, the Commission will have a precedent it can use to bludgeon much smaller firms into complying with its demands.

Where we should be leery of Google is its commitment to defending itself. Google has already bowed to FTC and Justice Department demands in previous cases, and the company seems to be following the same lobbyist-based strategy that has doomed other firms to a life of government subservience. At the end of the day, successful companies are tempted by the Devil’s bargain — allow regulators to control your business practices, and in exchange the regulators will protect you from future competitors. I have serious doubts that Google leaders can avoid that temptation, and the burden is on them to prove me wrong.

The Federal Trade Commission is ready to formally declare war against Google, reports the Wall Street Journal:

WASHINGTON—The Federal Trade Commission is poised to serve Google Inc. with civil subpoenas, according to people familiar with the matter, signaling the start of a wide-ranging, formal investigation into whether the Internet-search giant has abused its dominance on the Web.

The agency’s five-member panel of commissioners is preparing to send its formal demands for information to Google within days, these people said. They said other companies are likely to receive official requests for information about their dealings with Google at a later stage.

Representatives for Google and the FTC declined to comment.

[...]

The [FTC's] inquiry…will examine fundamental issues relating to Google’s core search-advertising business, said people familiar with the matter. The business is the source of most of Google’s revenue. The issues include whether Google—which accounts for around two-thirds of Internet searches in the U.S. and more abroad—unfairly channels users to its own growing network of services at the expense of rival providers.

In November, the European Commission, the European Union’s executive arm, opened its own formal investigation into allegations by several companies that Google had violated European competition laws. Google denies the allegations.

A key player in the FTC’s investigation will be the Bureau of Economics antitrust unit — which is now headed by a British government official with extensive ties to European Union authorities. I suspected something was up yesterday, but now I think it’s clear: Jon Leibowitz brought in a foreign economist to help oversee the Google investigation because he couldn’t trust any American economist to validate his insane obsession with destroying one of America’s most successful companies.