Tomorrow eyes all over the country will be watching Ohio to see if voters vote in favor of Issue 3, an amendment to the state’s constitution that would make smoking and eating marijuana edibles legal in the state for everyone 21 and older, and for patients of any age with qualifying medical conditions. If it’s approved, Ohio will become the first state to legalize marijuana for recreational use without first legalizing it only for medicinal use.

However, the state’s odd legalization plan has some serious drawbacks that have some pro-pot voters vowing to vote against legalizing their drug of choice. So before the votes are cast, here are some reasons why residents should feel conflicted over the upcoming vote.

1.) It could be the beginning of a marijuana oligopoly

This marijuana campaign is highly unusual, because it is the first of its kind to be almost entirely funded by the “investors,” who will profit from it. Modeled after Ohio’s restrictive casino measure, Issue 3 would restrict commercial rights to grow marijuana to the 10 investment facilities owned by major investors who spent millions to back the initiative. This feature would effectively create an oligopoly in the state, where only a few major players reap the production rewards.

According to Issue 3’s website, 1,100 business licenses will be available to the public, but only for retail, dispensary, and manufacturing purposes.

2.) Issue 2 hopes to undercut Issue 3

The General Assembly proposed Issue 2 or the “antimonopoly amendment” in an attempt to thwart Issue’s 3’s restrictive growth clauses. According to the Columbus Dispatch, Issue 2 “would prohibit a monopoly, oligopoly or cartel from getting on the statewide ballot without having to pass two public votes at the same election.”

The problem is the legislators who framed Issue 2 made it so that it would undermine all of Issue 3, and not just its oligopoly provision. Unfortunately there is no third option for voters on the ballot that would legalize marijuana without the commercial growth stipulations.

3.) No ones knows what will happen if both issues pass

There are four potential outcomes for Tuesday’s ballot: (1) neither Issue passes and nothing changes, (2) Issue 3 passes and Issue 2 fails making marijuana legal in the influential swing state, (3) Issue 2 passes and Issue 3 fails making commercial monopolies illegal, or (4) both pass, meaning there’s no clear victor. If option four happens, both issues will likely end up before the Ohio Supreme Court, which will decide the next step.

4.) BTW…Nick Lachey could get rich off Ohio’s pot

Many people were surprised when former Mr. Jessica Simpson and semi-famous singing heartthrob Nick Lachey voiced his support for Issue 3 in a 30 second ad.

Even though Lachey says “Ohio is my home” in the ad, he’s not even registered to vote in Ohio. As it turns out, he’s actually one of the 10 financial backers who would benefit from the passing of the proposition.

It’s unclear which way Ohioans will swing tomorrow, but their decision could have a huge impact on the rest of the country. Negatives and all, the approval of recreational marijuana in Ohio could be a crucial step in convincing the rest of the country to follow suit.

Alexis Evans

Alexis Evans is an Assistant Editor at Law Street and a Buckeye State native. She has a Bachelor’s Degree in Journalism and a minor in Business from Ohio University. Contact Alexis at aevans@LawStreetMedia.com.

The post Why You Should Feel Conflicted Over Ohio’s Upcoming Marijuana Legalization Vote appeared first on Law Street.

On Wednesday the European Union’s antitrust chief hit Google with a double whammy. The EU formally accusing the multinational company of abusing its web dominance to the detriment of its competitors, as well as announcing it would begin officially investigating whether Google’s Android smartphone software forces phone makers to favor the company’s own services and applications.

In a press release issued by the EU, Google was accused of diverting web traffic in the European Economic Area from its rivals to favor its own products and services, particularly when it came to shopping websites. The statement warns that this kind of business practice hinders its competitors‘ “ability to compete, to the detriment of consumers, as well as stifling innovation.”

Anti-trust laws are meant as an economic safeguard to promote fair competition which benefits all consumers, while also preventing any one business from getting too big and becoming a monopoly. If the EU finds Google in violation of the anti-trust laws, the internet search giant will be forced to completely change the way it does business overseas and could also face a fine up to $6 billion.

According to the New York Times, the European Commision will also be launching an alternate investigation into Google’s “monopolistic” mobile business practices. The EU is trying to see if phone makers who want to use Google’s Android operating software–including Google owned applications like Youtube–are in fact contractually obligated to give those applications prominent features on their mobile devices.

Margrethe Vestager, the European Union competition commissioner, was quoted in the New York Times saying:

Smartphones, tablets and similar devices play an increasing role in many people’s daily lives, and I want to make sure the markets in this area can flourish without anticompetitive constraints imposed by any company.

Google responded to the investigation in a blog post Wednesday writing:

While Google may be the most-used search engine, people can now find and access information in numerous different ways — and allegations of harm, for consumers and competitors, have proved to be wide off the mark.

In 2013, the United States’ Federal Trade Commission investigated Google for similar complaints but closed its investigation, deciding not to take any action against the company even though the investigation found similar issues of search bias.

This time around the EU will have to prove that Google deliberately buries better search results, expanding beyond just e-commerce, in favor of its own company sourced content, although defining what qualifies as “better” could be tough. Subjectively speaking, Google’s actions may not actually be anti-competitive, but rather a better optimization for what consumers actually want.

Google now has 10 weeks to officially respond to the EU’s complaint, where they could settle the matter. If not, a lengthy court battle is an almost guarantee.

Alexis Evans

Alexis Evans is an Assistant Editor at Law Street and a Buckeye State native. She has a Bachelor’s Degree in Journalism and a minor in Business from Ohio University. Contact Alexis at aevans@LawStreetMedia.com.

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For a few months now, retail giant Amazon.com, and book publisher Hachette have been feuding. The most recent development in their fight came on July 30, 2014, when Amazon pushed for Hachette to allow the sale of e-books at a cheaper price of $9.99. The math behind Amazon’s reasoning is laid out clearly on their website. For every book priced at $14.99, Amazon would sell 1.74 more copies if the book was priced at $9.99.  As the saga stretches onward, Hachette’s bargaining power continues to erode, and it’s looking like this will turn into a clear win for Amazon.

The Background

The battle began earlier this year when readers logged on to Amazon only to discover the pre-order button for certain Hachette books, like J.K. Rowling’s “The Silkworm,” had disappeared. Amazon began understocking Hachette books. Customers reported the books they ordered took extra time to arrive. The website recommended users buy a non-Hachette book instead.

Some observers cite these tactics as instances of bullying by the retail giant. Many saw it as a new low, since the company was actively damaging the customer experience. More than 900 prominent authors have staked their positions against Amazon. Stephen Colbert, carried by Hachette, is not just mad, but “mad prime.”

E-book pricing disputes are nothing new. Book publishers have long pushed for an “agency” model of pricing, where the publishers dictate pricing. Amazon instead advocates a “wholesale” model, where retailers set the retail price and can offer discounts. Publishers aren’t fans of these hefty discounts which can give one retailer–like Amazon–a huge advantage.

The “big five” publishers–Hachette, HarperCollins, MacMillan, Penguin Random House, and Simon and Schuster–thought they found a way out of the issue when they signed contracts with Apple in 2010 to ensure an agency pricing model for e-books. Amazon was not happy. The Department of Justice’s Antitrust Division rushed to Amazon’s aid and brought a suit against these companies for price fixing. The publishers all settled out of court, but Apple was found guilty of price-fixing–a decision it is still appealing. Since the settlement, Amazon has been allowed to discount e-books up to 30 percent. But any discount by Amazon comes from their own pocket, which obviously isn’t preferable for the company.

A Lawsuit in the Works?

With the 2012 settlement set to expire this year, it is likely the recent dispute is Amazon’s attempt to open a new window for pricing negotiations. Amazon wants to buffer its own earnings rather than taking a hit from out-pricing competitors. Publishers are fearful Amazon will dominate the market even further, demand lower wholesale prices, and squeeze profit margins to zero.

Despite Amazon’s questionable tactics, it is difficult to see how Hachette could win in an antitrust suit against Amazon. First, Amazon is not a classic monopoly. If anything, Amazon would be a monopsony. While a monopoly occurs when a dominant seller can raise prices of what it sells, a monopsony occurs when the buyer of goods can unlawfully lower the price of what is buys. Both can distort the market, and both can violate antitrust laws.

Amazon controls more than 60 percent of the e-book market and more than 40 percent of new book sales. But simply dominating the market is not an antitrust violation. The precedent for pushing a monopsony case against Amazon does not look promising. There has never been a case in U.S. competition law where a single company was declared a monopsonist. Most scholars today agree the Amazon and Hachette dispute is just that–a typical business dispute–rather than an antitrust violation.

“Dominant Power”

Section Two of the Sherman Antitrust Act, the 1890 Act which regulates anti-competitive business practices, outlaws monopolistic power in the relevant market acquired or maintained through exclusionary or anti-competitive behavior.

By bringing a lawsuit, Hachette would first have to prove Amazon is the dominant buyer in the “relevant market.” It is unclear if the market would be defined as the market for e-books, for Hachette books in general, or for Hachette books online. For Amazon to be the dominant power in the market, Hachette must have no other viable options to sell their e-books. Since publishers do have the freedom to sell e-books through other websites, many argue Amazon cannot be considered a monopsony.

“Anticompetitive Practices”

Secondly, Amazon must have engaged in “exclusionary or anticompetitive practices,” such as refusal to deal or predatory pricing. “Refusal to deal” involves restricting the supply of goods or the methods of buying or selling goods. By partially cutting off Hachette from the market in recent months, the argument could be made that Amazon is refusing to deal. However, courts narrowly interpret “refusal to deal” and are unlikely to see Amazon’s acts as an antitrust violation.

A lawsuit could be brought on the grounds that Amazon is engaged in predatory pricing practices by setting low prices to drive out all other competition. However, the bar to prove predatory pricing is very high. It would be hard to prove Amazon is not simply engaged in legitimate price competition. Since antitrust suits aim to help consumers, low prices are not typically seen as a problem.

Proving predatory pricing usually means proving that suppliers are forced to sell books at such a loss that there is decrease in the overall supply of books for consumers. So far this has not been the case. There has been no reduction in the variety of new books, nor has Amazon driven out all competitors to later jack up prices themselves.

The Upshot

Book publishers realize how little power they have against Amazon, so the recent trend in the industry has been to merge for greater bargaining power. Penguin recently merged with Random House, and HarperCollins bought Harlequin. Bigger publishers mean greater power plays and a better chance for even pricing negotiations with Amazon.

Ultimately it isn’t likely that Hachette has a case against Amazon on its own. If anything, the legal battle may be whether Amazon engaged in deceptive sales practices by saying certain Hachette titles were unavailable. For now, Amazon’s market power itself isn’t hurting consumers’ wallets, and Hachette can still sell e-books through other vendors. The pricing wars will continue, but don’t expect Hachette to win an antitrust suit anytime soon.

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Alexandra Stembaugh is a senior at the University of Notre Dame studying Economics and English. She plans to go on to law school in the future. Her interests include economic policy, criminal justice, and political dramas. Contact Alexandra at staff@LawStreetMedia.com.

Featured image courtesy of [Karin Lizana via Flickr]

Alexandra Stembaugh

Alexandra Stembaugh graduated from the University of Notre Dame studying Economics and English. She plans to go on to law school in the future. Her interests include economic policy, criminal justice, and political dramas. Contact Alexandra at staff@LawStreetMedia.com.

The post Hachette v. Amazon: The Feud That’s Going Nowhere appeared first on Law Street.

Do you guys remember the Occupy Wall Street movement?  Do you remember how annoying they were? I’m glad that’s over!

They made (some) salient points, though. Chief among their complaints was the fact that, according to various financial reports, more than one-third of the nation’s wealth was controlled by one percent of the population. “Impossible!” we all screamed, “America is built on the potential of financial success through hard work!”. The OWS movement came and went, but many of the problems remain unresolved. The one percent remains the one percent, and those of us in the 99 percent maintain hope that we’ll invent the next Instagram, Microsoft, or Kardashian-esque empire to join their ranks. We all aspire to one day work for ourselves, join the upper echelon of American wealth, and vacation with Jay-Z and Beyoncè.

The distribution of wealth and prosperity is not just uneven for individuals- the same rules apply for corporations.  A recent Policymic post has exposed a fact about which I was previously unaware: many of the most popular brands in America are actually owned, in some capacity, by ten companies. These ownerships are not outright; many of the business arrangements arise as part of majority stock ownership, distribution deals, and mergers.  The same article shows that there are six companies responsible for the majority of media output in this country, and that four financial institutions control our banks.

That sh-t cray.

It’s an interesting, and even insane, premise to consider: so few people actually control so much.  In theory, there are twenty-ish CEOs that have the American economy under marionette strings. They’re the business illuminati, if you will. This statement is even scarier when you consider how much corporate money controls politics.  Many of the people that we elect to represent our interests are eventually bought and sold by private interests that do not always directly align with the desires of their constituents.  It’s hard to stick to your political promises and not become a Washington insider when your reelection campaign coffers are empty. Money wins elections, after all. NRA, anyone?

The power struggles in this country are real.  There is no problem with capitalism, and for many the drive for financial and professional success is the fuel they need to continue to work hard. That drive is premised on the possibility of one day being the boss.  It’s tougher to become the boss when there are only twenty open positions.  So much money and power in so little hands is scary.

An Antitrust Primer

Antitrust is an area of law that seeks to guarantee competition between businesses for the benefit of the public.  Antitrust law also endeavors to regulate mergers and acquisitions of businesses so that mega-corporations are not formed to unfairly dominate their respective industries.  The premise of antitrust is basically that competition is a good and necessary component of running a business, and attempts to lessen competition in an unapproved manner are illegal.

There are various reasons why a lack of competition is problematic in modern business.

The first goes back to the old phrase of “absolute power corrupts absolutely.”  Let’s take a moment to remember the history of our dear nation, shall we?  This country was founded by people who were escaping monarchies and a government where the power was vested in one person; they understood what too much power can potentially do to a country. If we subject those who govern our country to these standards, why would our businesses be treated differently?

They’re not.

When it comes to these businesses, the same premise applies.  If one company controls everything, we all lose. How else would their business practices be regulated?  Concerns from consumer prices to employee wages wouldn’t be countered by an industry standard, because the one company is the industry.

Second, competition spurs economic growth. If Samsung didn’t exist, Apple wouldn’t be a powerhouse.  There wouldn’t be a Magic Johnson without a Larry Bird, a Britney without a Christina, and a Starbucks without a Dunkin’ Donuts. You get where I’m going with this, right? Additionally, this country is still experiencing the effects of an economic downturn, and the last thing on the agenda of any political party is the slowing down of financial recovery.

This is especially true because America has been down the mega-corporation road before, and it didn’t end well.

The Lessons of Bell Atlantic

In 1974, the U.S. Department of Justice filed an antitrust lawsuit against AT&T.  In U.S. v. AT&T, 552. F.Supp.131 (D.D.C. 1983), the government sued AT&T to stop what they believed were monopoly-like business practices. The allegations were that the corporate structure created unnecessary barriers to competition, which is in direct contravention of the Sherman Act. The main goal of the Sherman Act is to establish and protect unobstructed competition between businesses as a national standard. Specifically, the complaint stated that 6conspiracies sought to “restrain trade in the manufacture, distribution, sale, and installation of telephones, telephone apparatus, equipment, materials, and supplies…”. The D.C. Circuit found that, at the time, AT&T was the largest corporation in the world. The resolution of the case created twenty-two smaller “operating” companies, mostly allocated by region.  The forming of these operating companies divests and divides the power from one major body, thus creating competition and reinforcing the tenets of the Sherman Act.

Why It Matters

Obviously this situation is significantly different, but it is sure to raise some red flags.  It’s a slippery slope, no?  With U.S. v. AT&T, there was one company dominating an industry.  The same result would not occur in the current scenario.  Here, there are ten companies controlling hundreds of consumer goods, six companies running the entertainment industry, and four banks commanding our financial institutions.  We are a merger away from a mega company stomping away at the competition. In other words, we’re monopoly-adjacent. These companies need to be closely scrutinized.  It’s the same reason that the proposed merger between US Airways and American Airlines has been scrutinized so closely as of late.  A superpower is not beneficial for the expansion of business, and it’s not in the best interests of the country.

[Policy Mic]  [Case Text] [New York Times] [Deal Book]

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Featured image courtesy of [FamZoo Staff via Flickr]

Peter Davidson II

Peter Davidson is a recent law school graduate who rants about news & politics and raves over the ups & downs of FUNemployment in the current legal economy. Contact Peter at staff@LawStreetMedia.com.

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