A History of the Ftc's Bureau of Economics

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A History of the Ftc's Bureau of Economics ! A HISTORY OF THE FTC’S BUREAU OF ECONOMICS BY PAUL A. PAUTLER ! ! ! ! ! ! ! ! ! ! ! Institute for Consumer Antitrust Studies American Antitrust Institute ! Loyola University Chicago School of Law 1730 Rhode Island Avenue NW 25 E. Pearson Suite 1100 Chicago, IL 60611 Washington DC 20036 LUC/edu/antitrust antitrustinstitute.org [email protected] [email protected] 312.975.8598 202•536•3408 © Paul A. Pautler ! A HISTORY OF THE FTC’S BUREAU OF ECONOMICS BY PAUL A. PAULTER ! ! ! ! ! ! ! ! ! ! ! Institute for Consumer Antitrust Studies American Antitrust Institute ! Loyola University Chicago School of Law 1730 Rhode Island Avenue NW 25 E. Pearson Suite 1100 Chicago, IL 60611 Washington DC 20036 LUC/edu/antitrust antitrustinstitute.org [email protected] [email protected] 312.975.8598 202•536•3408 © Paul A. Pautler AAI Working Paper No. 15-03 ICAS Working Paper 2015-3 Date: September 8, 2015 Title: A History of the FTC’s Bureau of Economics Author: Paul A. Pautler, former Deputy Director of the Bureau of Economics, Federal Trade Commission Author Contact: [email protected] Abstract The Bureau of Economics in the Federal Trade Commission has a three-part role in the Agency and the strength of its functions changed over time depending on the preferences and ideology of the FTC’s leaders, developments in the field of economics, and the tenor of the times. The over-riding current role is to provide well considered, unbiased economic advice regarding antitrust and consumer protection law enforcement cases to the legal staff and the Commission. The second role, which long ago was primary, is to provide reports on investigations of various industries to the public and public officials. This role was more recently called research or “policy R&D”. A third role is to advocate for competition and markets both domestically and internationally. As a practical matter, the provision of economic advice to the FTC and to the legal staff has required that the economists wear “two hats,” helping the legal staff investigate cases and provide evidence for support law enforcement cases while also providing advice to the legal bureaus and to the Commission on which cases to pursue (thus providing “a second set of eyes” to evaluate cases). There is sometimes a tension in those functions because one can help the attorney staff build a case that they want to pursue, but at the same time consider that case to be a poor choice for enforcement. Economists and the Bureau of Economics have provided such services to the FTC for over 100 years proving that a sub-organization can survive while playing roles that sometimes conflict. Such a life is not, however, always easy or fun. Key Words: Bureau of Economics, FTC, history, organization theory, antitrust, consumer protection AAI Working Papers are typically works in progress that will eventually be revised and published elsewhere. They do not necessarily represent the position of the American Antitrust Institute. This Working Paper represents the work of the author and does not necessarily represent the views of the American Antitrust Institute, the Federal Trade Commission, any Commissioner, or any organization or person within the FTC. ii A History of the FTC’s Bureau of Economics Paul A. Pautler Table of Contents Preface and Acknowledgements ............................................................................................................ v! I.! ! The Beginnings of the FTC and the Bureau of Economics ................................................ 1! II. General Investigations and Research at the FTC .................................................................. 3! A.! The General Investigation Period: Growth (1915-40) and Decline (1940-60) ... 3! B.! Resurgence of Economic Reporting (1965-2012) ................................................. 10! 1.! Competition Studies ..................................................................................... 12! 2.! Consumer Protection Studies ...................................................................... 16! 3.! Studies of Regulation and International Trade Restraints ...................... 19! C.! Bureau of Economics Working Papers (1977-2013) ............................................. 21! D.! Bureau of Economics Conferences and Roundtables .......................................... 23! E.! Decline in Economic Reporting During the 1990s ............................................... 25! F.! Use of Compulsory Process for General Investigations ...................................... 27! G.! Economic Support for Reports by the FTC Legal Organizations ...................... 28! III. The Rise and Fall of Systematic Data Collection and Reporting of Financial Statistics 1939-1984 ................................................................................................................................... 31! IV. The Role of Economists in Antitrust at the FTC ................................................................ 36! A.! Industry-wide Antitrust (Shared Monopoly and More) ........................................ 44! B.! Horizontal Merger Guidelines 1967-2010 .............................................................. 47! C.! Merger Investigations ................................................................................................. 49! D.! Narrow Markets .......................................................................................................... 50! E.! Empirical Analysis Takes Off ................................................................................... 51! F.! The Litigation Onslaught of Summer 2007 ............................................................ 53! G.! The Pace Slows and Activity Shifts to Non-Merger Areas .................................. 55! H.! Vertical Restraints and Mergers ................................................................................ 56! I.! Influence of Economists on Antitrust Cases ......................................................... 57! J.! The New Antitrust Transparency, 2001-2013 ........................................................ 58! K.! Expert Witness Work and Litigation Support in Antitrust .................................. 59! L.! Antitrust Case Generation and General Policy Analysis ...................................... 64! V.! ! The Role of Economists in Consumer Protection .............................................................. 66! A.! Economists and Trade Regulation Rules and Guides ........................................... 69! B.! Individual Case Reviews ............................................................................................ 73! C.! Influence of Economists in Consumer Protection ................................................ 78! D.! Expert Witness Work and Litigation Support in Consumer Protection ............ 80! E.! Consumer Protection Policy Analysis and Case Generation ............................... 81! VI.! ! The Role of Economists in Competition and Consumer Advocacy ................................ 82! A.! The Substance of the Advocacy Program ............................................................... 82! B.! Synergy between Research and Advocacy .............................................................. 85! C.! The Competition Advocacy Process and History ................................................. 87! VII.!! International Technical Assistance and Policy Coordination: Advice to Other Countries (1990-2013) ............................................................................................................. 93! iii VIII.!! Congressional Opprobrium and Other Criticism of the Agency and the Bureau .......... 98! A.! Criticism of the Agency or the Bureau .................................................................... 98! B.! Threats to the Bureau from Outside: Congress and the White House ............ 101! C.! Threats to the Bureau from within the Agency ................................................... 105! IX.! ! The Bureau of Economics’ Independent Voice and Influence on the FTC ................. 108! A.! Advice to Individual Commissioners ..................................................................... 116! B.! Conclusion ................................................................................................................. 117! X.! ! A Graphical History of the Economic Division and the Bureau of Economics 1915- 2013 ........................................................................................................................................... 117! XI.! ! Conclusion ............................................................................................................................... 122! Appendix A: The Bureau of Economics Organization over Time ............................................. 124! A.! The Bureau of Economics and Its Component Parts ......................................... 125! Appendix B: Changes in the Bureau’s Staff Mix and Skill Mix 1915 to 2013 ........................... 133! Appendix C: Francis Walker: The First FTC Chief Economist ................................................. 137! Appendix D: Bureau of Economics Chief Economists, recent FTC Chairmen, and U. S. Presidents ................................................................................................................................. 140! Appendix E: Historical Data Table on BE and FTC 1915-2012 ................................................ 145! Appendix F: Figures Displaying Changes in BE and the
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