Learn more about Peltz-Steele v. UMass Faculty Federation at Court Listener (complaint) and the Liberty Justice Center. The case is now on appeal in the First Circuit as no. 22-1466 (PACER paywall). Please direct media inquiries to Kristen Williamson.
Showing posts with label business regulation. Show all posts
Showing posts with label business regulation. Show all posts

Wednesday, November 23, 2022

Anti-corruption law violates business-owner privacy, EU court holds with myopic appraisal of transparency

A key European Union transparency law that allows watchdogs to trace corporate ownership to combat corruption has been struck down by the EU high court for compromising personal privacy.
EU beneficial owner registry map from Transparency International, 2021. Read more.
CC BY-NC-ND 3.0

I'm not a hard skeptic on the personal privacy prerogative of the EU General Data Protection Regulation. To the contrary, I've written that there's a lot to like about the emerging global privacy norms embodied in the GDPR, and, contrary to conventional wisdom, American social expectations, if not yet federal law, are converging with Europe's.

That said, the EU Court of Justice yesterday announced a profoundly problematic decision at the junction of public access and personal privacy. The blanket disclosure requirements of a key anti-money-laundering law can't stand, the court held, because they don't calibrate the public need for access with the privacy of natural-person business owners with sufficient precision, that is, as a function of necessity and proportionality.

Troublingly, the court characterized transparency norms, which are grounded in treaty and law more firmly in the EU than in the United States, as specially relevant to the public sector and not fully implicated in the private sector, in the context of business regulation.

The potential implication of this proposition is that access to information is limited to a requester learning "what the government is up to," to the exclusion of government oversight of the private sector. That's a cramped and problematic construction of access law that has dogged journalists and NGOs using the U.S. Freedom of Information Act (FOIA) for decades. Read more in Martin Halstuk and Charles Davis's classic 2002 treatment. As I have written in my comparative research on access to information, access to and accountability of the private sector is a problem of our times. We must solve it if we're to save ourselves from the maw of corporatocracy.

In my opinion, the CJEU decision fundamentally misunderstands and overstates the legitimate scope of data protection regulation with the effect of enervating transparency as a vital oversight tool. The impact is ironic, considering that data protection regulation came about as a bulwark to protect the public from private power. The court turned that logic on its head by using personal privacy to shield commercial actors from public scrutiny.

Unfortunately (for this purpose), I have my hands full in Europe (coincidentally) right now, and I lack time to write more. Fortunately, Helen Darbishire and the team at Access Info Europe already have written a superb summary. Their lede:

In a ruling that has sent shockwaves through Europe’s anti-corruption and transparency community, the Court found that the Fifth Anti-Money Laundering Directive (AMLD5, 2018) is too loosely framed and provides for overly-wide public access to the [ownership] registers without a proper justification of the necessity and proportionality of the interference with the rights to privacy and personal data protection of the beneficial owners.

A saving grace, Access Info observed, is that the court did not rule out transparency per se; rather, requesters will have to fight for access case by case on the facts, upon a properly narrowed regulation. In U.S. constitutional terms, it's like saying the one-size-fits-all law was struck for vagueness, but the regulatory objective still can be achieved under a narrower rule that works as applied. All the same, journalists and non-profit watchdogs are not famously well financed to fight for access on a case-by-case basis.

The case is No. C‑37/20 & No. C‑601/20 in the Grand Chamber of the CJEU.

Wednesday, September 28, 2022

Proposed Biden rule would try again to compel airline pricing transparency; it worked out so well last time

President Biden has his own plane.
(U.S. Mission photo by Eric Bridiers CC BY-SA 2.0 via Flickr)
The U.S. Department of Transportation (DOT) has proposed a rule to refresh pricing transparency in the airline industry.

According to a DOT press release: "Under the proposed rule, airlines and travel search websites would have to disclose upfront—the first time an airfare is displayed—any fees charged to sit with your child, for changing or cancelling your flight, and for checked or carry-on baggage." 

For me, the new rule can't happen soon enough. At the same time, I'm doubtful we'll see much change in the opacity of the airfare market.

I'm a libertarian. But in America, libertarianism is too often confused with a radically absolutist version of laissez-faire capitalism. Libertarianism rather is about the virtues of a free market. And free markets depend on conditions that don't naturally tend to exist in the real world, including a free flow of information between buyer and seller—that is, transparency. Free markets require regulation to ensure that they remain free.

The airline industry, especially since it moved to online sales, is case in point. In the online marketplace, customers are attracted by low upfront prices. Airlines found that sales improved when the upfront price was lowered by moving some of the fare, especially bag-check costs, to add-on fees later in the purchase transaction. Southwest famously resisted bag-check fees and has capitalized on its exceptionalism, though not without costs

In the usual purchase transaction, the low upfront price is too attractive to resist. And competitors' add-ons are not always apparent until the customer has sunken too much time and money into the booking to look back. Indeed, Delta does not even allow customers to prepay bag check, so fliers are not confronted with the bag-check add-on until the day of departure.

Dollars are not the only costs that airlines can conceal from customers doing online price comparison. Inconvenient routing with multiple and lengthy layovers can cost fliers time and money down the line. Early morning and late night flight departures and arrivals can significantly increase airport transfer costs, besides risking personal security and inducing exhaustion. Seat availability can be limited, making flying literally painful for someone six-foot-five or weak of bladder. 

Negotiating these options can be grueling for the consumer, and the market can seem ungoverned by logic. For me, it is not unusual to take days, at hours per day, sifting and testing the market to get the best deal on an air itinerary. In a recent search process, I found, not atypically, that I could fly from city A to city B to city C for less than it cost to fly from city A to city B, which was my actual destination, because direct service is more desirable. But buying the cheaper fare and leaving the airport at city B is called "skiplagging," or "hidden city ticketing," and airlines can be nasty about enforcing their prohibition on it.

On the one hand, I respect the airlines' free-market discretion to charge a higher price for a direct flight than for a less desired routing. On the other hand, there is a confounding absurdity to the idea that I would find myself at home in city B, yet be obligated to board a plane to carry on to someplace I don't want to go. Courts have been hostile to airlines' efforts to penalize skiplaggers financially. But they won't stop an airline from zeroing out a customer's frequent flier miles or even banning the flier from the line.

Like radar detector technologists with speeding enforcers, airlines have played cat and mouse with private and public regulators. Search engines have become more sophisticated in allowing customers to specify parameters, such as bag checks and connections. But the providers vary in options and their efficacy. Kayak tries to help with bag-check fees; Expedia not as much. And the mere act of online price comparison might introduce costs; despite industry denials, there is some evidence that consumers trigger price increases by repeating searches on Kayak and Google.

The search engines anyway can only sort data that the airlines provide, and they are not always forthcoming with details. Some airlines shun intermediary booking sites wholly. Airlines started gaming bag-check fees in 2008. Customer frustration finally precipitated disclosure regulation in 2011.

The regulation failed; bag-check fees are not easy to find. At Frontier and Spirit, the pricing is variable, so a shopper must enter data about a specific flight to get a number that allows price comparison. Meanwhile, bag-check fees have extended to an array of options. United is among airlines that now charge for a carry-on bag, and JetBlue charges for overhead bin space.

Add to the mix that JetBlue and Spirit announced their merger in 2022, even as JetBlue defends its partnership with behemoth American Airlines in litigation with the Justice Department (DOJ). Fewer carriers never results in improved transparency or lower prices for customers. Anti-competitive conglomeration is a natural market tendency, and healthy to a point, but it must be counterbalanced by thoughtful and vigorous antitrust regulation.

Even if DOJ is successful in the present antitrust litigation, the success will be a drop in the bucket of an industry that already is far too monopolized. The United States has nothing like the peanut airlines that blanket Europe. There are legitimate reasons for that deficiency, for example, our larger land mass. But there are plenty of illegitimate reasons, too, including monopoly by air carriers and monopoly in secondary markets, such as airports, baggage handling, and the transportation infrastructure that supports transfers.

The proposed rule announced by the Biden Administration is better than nothing, if it is promulgated intact. But the rule barely scratches the surface of what's needed to move the airline industry into a truly free market, in which consumers have a fighting chance. Extrapolating from past efforts to compel the disclosure of bag-check fees, it's safe to predict that the airlines already are one step ahead, and little will change for the consumer's experience.

A free market is a transparent market with manageable entry barriers. Consumers should be able to compare prices head to head for the same services. The internet should have facilitated the free market and leveled the playing field for buyers. Instead, weak regulation has let industry run amuck and obfuscate pricing. Absolutist laissez-faire capitalism is otherwise known as corporatocracy.

 —

Presently, I'm using two different modalities to try to pursue penalty fees from airlines for flight delays I experienced in the summer under European Union regulatory jurisdiction. When I have outcomes to report, I'll blog about it.

Saturday, January 22, 2022

Schneider proposes (more) insider trading reform for Congress; background guarantees to outrage

Ever feel like it's harder and harder to pay higher and higher bills, even while the news raves about low unemployment, a rising stock market, and the rich get richer?  Feel like our members of Congress are out of touch and only working to line their own pockets?

Not all paranoia is delusional.  Fuel your outrage with Money, Power, and Radical Honesty: A Look at Members of Congress' Use of Information for Financial Gain, an article published by attorney Spencer K. Schneider, once my teaching and research assistant, in the Pepperdine Journal of Business, Entrepreneurship & The Law in November.  Here is the abstract.

Cleared of wrongdoing due to lack of evidence, Senators Kelley Loeffler and David Perdue continued their bids for re-election, and control of the Senate, in the Georgia run-off. Both Senators Loeffler and Perdue traded stocks in the run-up to the COVID-19 crisis after receiving classified briefings. These are just two of many instances of members of Congress profiting after receiving classified information. While the American public remained uninformed as to the true crisis looming as COVID-19 spread, members of Congress received private briefings and quietly sold securities such as travel and hotel related interests, and purchased other securities, such as remote-work software and medical equipment related interests.

Many members of Congress also profit from federal money earmarked to increase the value of their personal land deals, from access to IPOs, and from corporate board seats. While corporate executives, members of the executive branch, and ordinary citizens are subject to strict insider trading laws, members of Congress sail through loopholes and exceptions that are hand-crafted for their benefit. This article reviews proposals for fixing the problem before proposing a comprehensive solution focused on limiting the financial opportunities for members of Congress and strict reporting requirements.

While many proposals to address this problem exist, none come close to preventing members of Congress from profiting in these often nefarious ways. To ensure that members of Congress work on behalf of the American Public—and not their own pocketbooks—the comprehensive and drastic reform articulated in this article is required.

Spencer K. Schneider
Mr. Schneider worked on a piece of this article when he was still a law student under my tutelage.  I remember being flabbergasted by the background section, and then, in January 2021, thinking that we all should be at the Capitol ramparts, but for different reasons.  What's perhaps most disheartening is that past purported reform efforts in Congress have been devoid of will or insincere in execution. I know that Schneider worked hard on his reform proposal and sought advice from skeptical experts. Whether meaningful reform will precede frustration-fueled revolution in this country is anyone's guess.

The article is Spencer K. Schneider, Money, Power, and Radical Honesty: A Look at Members of Congress' Use of Information for Financial Gain, 14 J. Bus. Entrepreneurship & L. 296 (2021).  Schneider is licensed in Massachusetts and bar pending in his present home state of California.

UPDATE, Jan. 28: Less than a week after I posted this item, The Daily Show with Trevor Noah published a nice exposé on congressional insider trading, incorporating some of the same data that fueled Schneider's article and my ire: