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Regulating, joint bargaining, and the demise of precedent

Thomas Beard, George Ford, Lawrence J. Spiwak and Michael Stern ()

Managerial and Decision Economics, 2018, vol. 39, issue 6, 638-651

Abstract: Recent decades have seen a fundamental shift in the nature of economic regulation in the United States. Unauthorized by congress, and largely unnoted in legal and academic circles, regulatory agencies such as the Federal Communications Commission have changed the regulatory process by linking otherwise unrelated regulatory issues. Examples include tying merger approval to firm commitments to engage in conceptually unrelated build‐outs and other projects of political importance. This linking of issues has several effects, the most prominent being (a) tying regulatory issues changes the outcomes obtained, plausibly in predictable ways; (b) tying in some circumstances allows regulators to extend their authority to issues for which they have little or no legal authority; and (c) tied regulatory bargaining fails to produce valid legal precedent for firm decision making. We provide an analysis of these conclusions by examining the increasing use of consent decrees, voluntary merger commitments, and merger conditions by the Federal Communications Commission, referencing our discussion with a simple model of joint bargaining applicable to regulatory practice.

Date: 2018
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https://doi.org/10.1002/mde.2934

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