Archive for December, 2006

FTC snares doctors in price fixing trap

The Federal Trade Commission ended its year by prosecuting a 1,900-member physician group in Chicago for price-fixing. Since 2001, the FTC and DOJ have coerced 29 physician groups—some with as few as six members—into signing consent orders that restrict the right of doctors to negotiate contracts.

The FTC and DOJ apply a double standard to doctors and third-party payers. Payers may represent thousands of individual consumers and present doctors with a “take it or leave it” contract offer. But if even a handful of doctors get together to present a counter-offer, it’s a “per se” antitrust violation.

Read On…

Update: Fountain Diet Coke class action

We mentioned the lawsuit over the absence of Nutrasweet in fountain versions of Diet Coke in 2004. In a typical “harm-less” class action, plaintiff Carol Oshana did not see any advertising for Nutrasweet in Diet Coke, knew that fountain Diet Coke tasted different than bottled Diet Coke, and continued to buy fountain Diet Coke after she learned it had saccharin, but demanded to be the representative of a class of all Diet Coke purchasers in Illinois on a “consumer fraud” claim. Via Howard Bashman, the Seventh Circuit affirmed federal jurisdiction and the district court’s refusal to certify a class. Oshana did get a $650 nuisance settlement, which would buy 1000 liters of Diet Coke at my local grocer.

Best of 2006: October

Best of 2006: September

Gross v. Industrial Commission of Ohio

Jonathan Adler beat me to talking about this Ohio Supreme Court case, but I think it presents an interesting example of “hard facts make bad law”—and, in this case, the plaintiff, an especially undeserving fellow, should have won, but didn’t.

David Gross, a teenager, was a callow sort who worked for the local KFC. Among his duties was cleaning out the pressure cooker, but Gross repeatedly ignored explicit instructions not to use water in cleaning it. This was no arbitrary command, for in November 2003, Gross did just that, and the cooker exploded, burning Gross and two co-workers. The franchise investigated and fired Gross in February 2004 for the safety violation, and sought to end their workers’ comp payments to Gross. Their theory: the egregious safety violation was a voluntary abandonment of employment. The administrative agency agreed, the court of appeals reversed, and the Ohio Supreme Court restored the original decision that the franchise didn’t have to pay workers’ comp after it fired Gross.

A Volokh commenter suggests that the fact that the franchise waited to fire Gross means that they’re on the hook. That seems like the wrong rule: it would punish the franchise for taking additional steps to ensure that it was acting fairly to its employees by investigating the incident before firing someone.

That said, it’s wrong to treat the firing, even the for-cause firing, as a “voluntary abandonment.” Workers’ comp is a no-fault regime. Raising the question of fault, even when the fault is as egregious as Gross’s here, inserts a complicating factor into the system. There’s a certain unfairness to assessing liability against the franchise: they told Gross not to do something dangerous on multiple occasions, he did it anyway, and Gross gets to recover. But the alternative is to create an ambiguous rule that gives other employers the incentive to turn workers’ comp hearings into a question of whether a worker’s negligence was really recklessness or intentional disregard for safety rules. One reduces Type I errors, while increasing Type II errors, and substantially decreasing administrative efficiency: straightforward proceedings now have uncertainty, raising expenses for everyone. Perhaps Gross should be criminally prosecuted for reckless endangerment; perhaps a penalty of a criminal conviction should include restitution to the employer. But in the civil proceeding, the legislature made a conscious decision of the tradeoffs here, and it’s not for the courts to decide that those tradeoffs should be recalibrated in individual cases.

Note that valuing efficiency here favors plaintiffs, rather than defendants, putting the lie to the argument of anti-reformers that reformers hide behind efficiency to mask a pro-defendant bias. This reformer favors efficiency because it makes all of us better off in the long run. Efficiency isn’t the only value—a society can rationally choose inefficient procedures because it believes the protected values are worth the additional cost—but the public policy debate shouldn’t ignore the questions of costs and benefits and act as if results can be achieved for free.

Best of 2006: August

Best of 2006: July

Hussein executed

Saddam Hussein has been executed, according to numerous media reports. A few hours ago, U.S. District Judge Colleen Kollar-Kotelly of Washington denied a last-minute application for a stay of execution filed by Hussein’s lawyers.

The application was filed at 1 p.m. this afternoon by the law firm of Gilman & Associates, who argued that a stay was justified because Hussein was a named defendant in a civil lawsuit before the D.C. district court, “but his incarceration has prevented him from receiving proper due process notice of his rights to defend himself and his estate.” Military officials said Hussein could not meet with his lawyers to discuss the civil suit until January 4, which obviously is a moot point now.

Read On…

U.S. v. Stolt-Nielsen: Unenforceable Contracts

Next week the Justice Department will file its response to a motion to dismiss made by Stolt-Nielsen Transportation Group and its two co-defendants in a criminal antitrust case now pending in Philadelphia. Four years ago, Stolt-Nielsen received amnesty from the DOJ in exchange for cooperating with the Antitrust Division’s price-fixing investigation of the parcel tanker industry. The amnesty was revoked less than three months later, however, after the Division accused Stolt-Nielsen of misrepresenting the timeline of the alleged conspiracy.

The Division had never revoked an amnesty granted under its 1993 Corporate Leniency Policy, and the unprecedented action against Stolt-Nielsen prompted the company to file a lawsuit to enjoin prosecutors from indicting the company. In January 2005, a judge granted the injunction, holding that Stolt-Nielsen did not breach the amnesty agreement. Specifically, the court said the terms of the amnesty agreement—which was drafted by the DOJ—made no reference to any specific timeline.

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Chicago foie gras update: “I’ll have the special lobster”

Did you think the city famed for Al Capone and the Prohibition speakeasies would roll over for an even sillier nanny-statism?

When the letter came from City Hall threatening punishment if he continued to serve foie gras at his North Side restaurant, Doug Sohn framed the warning and set it beside his cash register.

And he kept serving the fattened duck liver without a care. …

The city has sent warning letters to nine restaurants believed to have served foie gras but issued no citations, Chicago Department of Public Health spokesman Tim Hadac said. Letters are sent after a citizen complaint and are followed by a visit after a second complaint. Visits that turn up evidence of the banished dish can result in fines from $250 to $500.

But Mayor Richard Daley is no fan of the ban–just this week, he called it “the silliest law” the City Council has ever passed.

Perhaps that helps explain why the Health Department is in no rush to boost their compliance checks.

“In a world of very limited public health resources we’re being asked to drop some things so we can enforce a law like this,” Hadac said. “With HIV/AIDS, cancer, West Nile virus and some of the other things we deal with, foie gras is our lowest priority.” …

Some owners have tiptoed around the ban by serving the dish under alternate or code names (“I’ll have the special lobster” will supposedly score foie gras at one restaurant), but renegades say they’ll do what they must to fight City Hall. …

At first, [restauranteur David Richards] said, restaurant owners worried their access to foie gras would be limited, and they crafted plots to keep their supply flowing–like getting it mailed to a suburban address for weekly covert pickups. Such cunning turned out not to be necessary, he said. Richards still gets foie gras from the same distributor he always did, and no one seems to care that it is still on his menu.

“We look at it as a choice,” he said. “We live in a free-market society and if people are truly offended they won’t buy it. If they don’t buy it, I won’t buy it.”

Instead, he said, his foie gras sales have climbed, making him even less inclined to heed the law. …

Many of those most vocally opposed to the ban have coolly stepped away from the debate by ending their foie gras sales or at least coming up with names clever enough to obscure the issue. Available on the menu at Copperblue, for instance, is “`It Isn’t Foie Gras any Moore’ Duck Liver Terrine”–a testy nod to the alderman who sponsored the foie gras ban.

Though the $16 cost seems closer to the price of foie gras than simple duck liver, Copperblue chef and owner Michael Tsonton would not say whether he had merely renamed the illicit dish. In September, when still serving foie gras, he got a warning letter that he said he hung in his kitchen.

(Josh Noel, “Let ’em eat foie gras, they declare”, Chicago Tribune, Dec. 22 (via Noonan, who says he was thinking of opening a restaurant called “Foie Gras Fried In Trans Fat”)). The Tribune story lists the nine restaurants that have gotten warning letters, and I can personally vouch for one of my favorites, Bin 36, where a date and I had a fine meal during a January 2005 blizzard.