Story 1: Zuckerberg Meets President Trump and Senators — Regulating Big Tech Data Cartel: Internet Regulation, Data Privacy, Bias, Censorship, Filtering, Shadow Banning, Cryptocurrency, Control — Breakup The Big Tech Data CartelĀ or Threat of Changing Big Tech Platforms to Publishers — Internet Bill of Rights — Videos —
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Zuckerberg meets Trump, senators; nixes breaking up Facebook
PUBLISHED:Ā 19:32 EDT, 19 September 2019Ā |Ā UPDATED:Ā 20:57 EDT, 19 September 2019
Facebook chief executive Mark Zuckerberg held private meetings with US lawmakers in Washington to discuss technology regulations and social media issues, including concerns about the social network’s operations
Facebook chief executive Mark Zuckerberg met Thursday with US President Donald Trump and members of Congress on a political reconnaissance mission to Washington, where he rejected calls to break up the world’s biggest social network.
Zuckerberg’s visit comes as Facebook faces a myriad of regulatory and legal questions surrounding issues like competition, digital privacy, censorship and transparency in political advertising.
A Facebook spokesman said discussions were focusing in part on future internet regulation.
Senate Democrat Mark Warner, one of the lawmakers who has taken the lead in Washington on digital security, signalled they gave Zuckerberg an earful.
The visit, including a Wednesday night private dinner with Warner and other lawmakers, comes after his stormy appearance last year before Congress, where he was grilled on Facebook’s data protection and privacy missteps.
Senator Josh Hawley, a Republican freshman and one of the more outspoken critics of Facebook, said he had a “frank conversation” with Zuckerberg but remains concerned.
“Challenged him to do two things to show FB is serious about bias, privacy & competition. 1) Sell WhatsApp & Instagram 2) Submit to independent, third-party audit on censorship,” Hawley tweeted.
“He said no to both.”
Trump late Thursday posted a picture on Facebook and Twitter showing him shaking hands with Zuckerberg, but didn’t share details of their conversation.
“Nice meeting with Mark Zuckerberg of Facebook in the Oval Office today,” the president wrote.
Federal and state anti-trust enforcers are looking into potential anti-competitive actions by Facebook, and members of Congress are debating national privacy legislation.
The messaging product WhatsApp and picture-sharing giant Instagram are part of Facebook’s broad family of services that has made it a global online behemoth, but have also exposed the company to concerns about competition, data harvesting and sprawling digital control.
Warner said he was not prepared to call for Facebook’s dismantlement.
“I’m not yet with some of my friends who want to go straight to break up,” he told Fox Business Network.
“I am concerned. These are global companies, and I don’t want to transfer the leadership to Chinese companies,” he added.
“But I do think we need a lot more transparency. We need to have privacy rights protected. We need to increase competition with things like data portability and interoperability.”
Two months ago, the US Federal Trade Commission hit Facebook with a record $5 billion fine for data protection violations in a wide-ranging settlement that calls for revamping privacy controls and oversight at the social network.
Earlier Wednesday, executives from Facebook, Google and Twitter appeared before a Senate panel to answer questions on “digital responsibility” in the face of online violence and extremism.
Republicans in the Senate plan on striking a blow for online free speech ā by eradicating censorship of conservatives online.
Senator Josh Hawley (R-MO) introduced a new bill June 19, meant to tackle the problem of tech monopolies and their consistent censorship of conservatives and conservative ideology. The bill, called theĀ Ending Support for Internet Censorship Act, looks to remove the immunity enjoyed by Big Tech companies from Section 230 of the Communications Decency Act. The bill would target companies with more than 30 million monthly users, such as Facebook, Google, Twitter, and YouTube.
Hawley wrote that the companies could earn their immunity back through a series of third-party external audits that provided āconvincing evidence that their algorithms and content-removal practices are politically neutral.ā
The legislation would exclude smaller companies. Hawleyās bill is more interested in going after the ātech monopoliesā that present a greater threat through censorship. He stated in his press release:
āThereās a growing list of evidence that shows big tech companies making editorial decisions to censor viewpoints they disagree with. Even worse, the entire process is shrouded in secrecy because these companies refuse to make their protocols public. This legislation simply states that if the tech giants want to keep their government-granted immunity, they must bring transparency and accountability to their editorial processes and prove that they donāt discriminate.ā
In theĀ billĀ itself, all acts of business were permitted except for those that favored or were biased against a specific ideology, political candidates, or political opinions.
The Free Speech Alliance, a coalition of more than 50 conservative organizations led by theMedia Research Center, urged that tech companies āmirror the First Amendment.ā This bill, if passed, would require Big Tech to do just that.
So far,Ā major criticsĀ have gone after Hawley on Twitter. Americans for Prosperity called the bill āmisguided legislation.ā The group argued that the bill will prevent innovative startups from succeeding, even though it is clearly aimed at companies larger than 30 million monthly users.
Executive editor of Voxās tech magazine,Ā The Verge, Dieter Bohn, wrote that Hawley ādoesnāt understand section 230.ā
Facebook has faced months of scrutiny for a litany of ills, from spreading misinformation to not properly protecting its usersā data to allowing foreign meddling in elections.
Many at the Silicon Valley company now expect lawmakers and regulators to act to contain it ā so the social network is trying to set its own terms for what any regulations should look like.
That helps explain why Mark Zuckerberg, Facebookās chief executive, wrote an opinion piece forĀ The Washington PostĀ on Saturday laying out a case for how he believes his company should be treated.
In his post, Mr. Zuckerberg discussed four policy areas ā harmful content, election integrity, privacy and data portability ā which he said the government should focus attention on.
In an interview with WIRED, Mark Zuckerberg seemed to accept the idea of some US regulation. Other countries could provide the blueprint.
In an interview with WIRED, Mark Zuckberg seemed to accept the idea of some US regulation. Other countries could provide the blueprint .PHUC PHAM The drumbeat to regulate Big Tech began pounding long before theĀ Cambridge Analytica scandal rocked Facebookāsix long years ago, the Obama administrationĀ pushed a āPrivacy Bill of RightsāĀ that, like most other legislative attempts to safeguard your data online, went nowhere. But this time, as they say, feels different. Thanks to repeated lapses from not just Facebook but all corners of Silicon Valley, some sort of regulation seems not only plausible but imminent.
US politicians have called for Facebook CEO Mark Zuckerberg to appear in person before Congress. Some tech-focused legislation is currently wending its way through the Capitolās corridors. And regulators in other countries have already clamped down on tech.
‘I think what tends to work well is transparency, which I think is an area where we need to do a lot better and are working on.’
FACEBOOK CEO MARK ZUCKERBERG
InĀ an interview with WIRED editor-in-chief Nicholas ThompsonĀ Wednesday, Facebook CEO Mark Zuckberg seemed if not outright welcoming toward regulation, at least accepting of it. āThere are some really nuanced questions though about how to regulate, which I think are extremely interesting intellectually,ā says Zuckerberg, who points toĀ the bipartisan Honest Ads Act, cosponsored by senators Mark Warner, Amy Klobuchar, and John McCain, as an example of the sort of bill his company can get behind.
The Honest Ads Act, legislation that calls for increased transparency behind who pays for political ads online, makes for a convenient example, though, in part because Facebook has already implemented many of its provisions. The bill, introduced last October, also appears to have languished, making it a non-substantive threat. Meanwhile, critics say itĀ wouldnāt have stopped Russian propagandists from flooding FacebookĀ in the first place.
Besides, even the Honest Ads Actās sponsors have noted that it addresses a very small piece of a very large problem. And it does nothing to address the data privacy concerns that rightly create so much angst among anyone with any sort of presence online. Which is to say, everyone. For that, the US would need something much bigger.
āWe do not have an omnibus privacy legislation at the federal level,ā says David Vladeck, former director of the Federal Trade Commissionās Bureau of Consumer Protection. āWe donāt have a statute that recognizes generally that privacy is a right thatās secured by federal law. And that puts us at the opposite end of the spectrum from some of the other major economies in the world.ā
Itās not that living in the US puts you totally in the privacy hinterlands. The FTC has a modicum of authority, and has used it when companies grossly overreachāas it did against Facebook in 2011, when the companyĀ failed to keep its promisesĀ regarding how it treated their data. Facebook had made user information public, even if they’d previously had more restrictive privacy settings, and allowed third-party developers to mine the data not just of the Facebook users who downloaded their apps, but of all of those peoples’ friends. (If that sounds familiar, well,Ā it’s precisely what allowed the Cambridge Analytica fiasco.)
Even then, though, Facebook got off with a scolding. It had to sign a consent decree, essentially a promise that it wouldnāt stray again. That’s gone unchecked until this week, when the FTCĀ reportedlyĀ opened an investigation into the Cambridge Analytica scandal, and could fine Facebook up to $40,000 per violationāwith 50 million people impacted, the potential fine hypothetically stretches into the trillions.
But the threat of retroactive fines clearly hasn’t done the trick. The FTC, meanwhile, can only work with the legislative tools itās given. So what would it look like if Congress gave it better tools? Other countries might offer something like an outline, if not an outright blueprint.
In Finland,Ā officials feelĀ that their strong public education system and a coordinated government response have been enough to stave off Russiaās propaganda; Sri Lanka banned Facebook, WhatsApp, and Instagram entirely. Which is to say, it’s a wide gamut.
On the data privacy front, the most recent high-profile model comes from the European Union, whereĀ General Data Protection Regulation becomes the lawĀ of the land on May 25. GDPR focuses on ensuring that people who use online services know not only exactly what data those companies will take, but how they put it to use.
Zuckerberg, at least, seems supportive of those levels of transparencyāalthough theyāre also, since GDPRās passage, an inevitability. āI think what tends to work well is transparency, which I think is an area where we need to do a lot better and are working on,ā Zuckerberg tells WIRED. āI think guidelines are much better than dictating specific processes.ā
‘We do not have an omnibus privacy legislation at the federal level.’
DAVID VLADECK FORMER BUREAU OF CONSUMER PROTECTION DIRECTOR
Rough guidelines also seem like a more plausible approach in the US due to both precedent and practicality. The EU approach to privacy law has long been highly detailed and prescriptive, says Vladeck, which sounds good in theory but can create issues in practice. āThe implementation of it, in my view, is going to be ineffective, because it places an enormous regulatory burden on some parties, and worse, it places an enormous regulatory burden on the data protection authorities that need to enforce it,ā says Vladeck. āI donāt think we could simply take the European regulation and simply adopt it in the United States. But I think there are a lot of elements in it that could provide guidance.ā
One danger of an overly prescribed law is that technological solutions can outpace those mandates. Zuckerberg points to Germany, where hate speech laws require Facebook and other companies to remove offending posts within 24 hours. āThe German modelāyou have to handle hate speech in this wayāin some ways thatās actually backfired,ā Zuckerberg says. āBecause now we are handling hate speech in Germany in a specific way, for Germany, and our processes for the rest of the world have far surpassed our ability to handle that. But weāre still doing it in Germany the way that itās mandated that we do it there. So I think guidelines are probably going to be a lot better.ā
Zuckerberg also raises the question of the use of artificial intelligence in weeding out unwelcome uploads. āNow that companies increasingly over the next five to 10 years as AI tools get better and better will be able to proactively determine what might be offensive content or violate some rules, what therefore is the responsibility and legal responsibility of companies to do that,ā Zuckerberg says.
Here, too, Facebookās getting out ahead of any potential legal requirements; it already scans for nudity and terrorist content, and remains hard at work at AI that can spot what Zuckerberg calls āreally nuanced hate speech and bullying.ā
Eventually, though, Silicon Valley may run out of ways to appease regulators. By now there have been too many data breaches, too much negligence, whether by Facebook,Ā Equifax, orĀ the government itself. āI do think increasingly that thereās a sense that we need it,ā says Vladeck.
At the very least, when regulation does come, Facebook has an open invite to help inform what happens, albeit in gruff terms. āMr. Zuckerberg needs to testify before the Senate and answer some tough questions about Russian activity on the platform, and the way his company protectsāor doesnātāits usersā data,ā said Senator Mark Warner in a email to WIRED Wednesday.
And if it doesnāt pitch in, Congress has a model for privacy protection waiting for it, at least philosophically, just an ocean away.
Section 230Ā of theĀ Communications Decency ActĀ (CDA) of 1996 (a common name for Title V of theĀ Telecommunications Act of 1996) is a landmark piece ofĀ InternetĀ legislation in the United States, codified atĀ 47 U.S.C.Ā Ā§Ā 230. Section 230(c)(1) provides immunity from liability for providers and users of an “interactive computer service” who publish information provided by third-party users:
No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.
Section 230 was developed in response to a pair of lawsuits against Internet service providers in the early 1990s that had different interpretations of whether the services providers should be treated as publishers or distributors of content created by its users. It was also pushed by the tech industry and other experts that language in the proposed CDA making providers responsible for indecent content posted by users that could extend to other types of questionable free speech. After passage of the Telecommunications Act, the CDA was challenged in courts and ruled by the Supreme Court inĀ Reno v. American Civil Liberties UnionĀ (1997) to be partially unconstitutional, leaving the Section 230 provisions in place. Since then, several legal challenges have validated the constitutionality of Section 230. Section 230 protects are not limitless, requiring providers to remove criminal material such as copyright infringement; more recently, Section 230 was amended by theĀ Stop Enabling Sex Traffickers ActĀ in 2018 to require the removal of material violating federal and state sex trafficking laws.
Passed at a time where Internet use was just starting to take off, Section 230 has frequently been referred as a key law that has allowed the Internet to flourish, often referred to as “The Twenty-Six Words That Created the Internet”.
Contents
History
Prior to the Internet, case law was clear that a liability line was drawn between publishers of content and distributors of content; publishers would be expected to have awareness of material it was publishing and thus should be held liable for any illegal content it published, while distributors would likely not be aware and thus would be immune. This was established inĀ Smith v. CaliforniaĀ (1959), where the Supreme Court ruled that putting liability on the provider (a book store in this case) would have “a collateral effect of inhibiting the freedom of expression, by making the individual the more reluctant to exercise it.”[1]
In the early 1990s, the Internet became more widely adopted and created means for users to engage in forums and other user-generated content. While this helped to expand the use of the Internet, it also resulted in a number of legal cases putting service providers at fault for the content generated by its users. This concern was raised by legal challenges againstĀ CompuServeĀ andĀ Prodigy, early service providers at this time.[2]Ā CompuServe stated they would not attempt to regulate what users posted on their services, while Prodigy had employed a team of moderators to validate content. Both faced legal challenges related to content posted by their users. InĀ Cubby, Inc. v. CompuServe Inc., CompuServe was found not be at fault as, by its stance as allowing all content to go unmoderated, it was a distributor and thus not liable forĀ libelousĀ content posted by users. However,Ā Stratton Oakmont, Inc. v. Prodigy Services Co.Ā found that as Prodigy had taken anĀ editorialĀ role with regard to customer content, it was a publisher and legally responsible for libel committed by customers.[3][a]
Chris Cox (left) and Ron Wyden, the framers of Section 230
Service providers made their Congresspersons aware of these cases, believing that if upheld across the nation, it would stifle the growth of the Internet.Ā United States RepresentativeĀ Christopher CoxĀ (R-CA) had read an article about the two cases and felt the decisions were backwards. “It struck me that if that rule was going to take hold then the internet would become the Wild West and nobody would have any incentive to keep the internet civil”, Cox stated.[4]
At the time, Congress was preparing theĀ Communications Decency ActĀ (CDA), part of the omnibusĀ Telecommunications Act of 1996, which was designed to make knowingly sending indecent or obscene material to minors a criminal offense. A version of the CDA had passed through the Senate pushed by SenatorĀ J. James Exon.[5]Ā A grassroots effort in the tech industry reacted to try to convince the House of Representatives to challenge Exon’s bill. Based on theĀ Stratton OakmontĀ decision, Congress recognized that by requiring service providers to block indecent content would make them be treated as publishers in context of the First Amendment and thus become liable for other illegal content such as libel, not set out in the existing CDA.[2]Ā Cox and fellow RepresentativeĀ Ron WydenĀ (D-OR) wrote the House bill’s section 509, titled the Internet Freedom and Family Empowerment Act, designed to override the decision fromĀ Stratton Oakmont, so that services providers could moderate content as necessary and did not have to act as a wholly neutral conduit. The new Act was added the section while the CDA was in conference within the House.
The overall Telecommunications Act, with both Exon’s CDA and Cox/Wyden’s provision, passed both Houses by near-unanimous votes and signed into law by PresidentĀ Bill ClintonĀ by February 1996.[6]Ā Cox/Wyden’s section was codified as Section 230 in Title 47 of the US Code. The anti-indecency portion of the CDA was immediately challenged on passage, resulting in theĀ Supreme CourtĀ 1997 case,Ā Reno v. American Civil Liberties Union, that ruled all of the anti-indecency sections of the CDA were unconstitutional, but left Section 230.[7]
One of the first legal challenges to Section 230 was the 1997 caseĀ Zeran v. America Online, Inc., in which a Federal court affirmed that the purpose of Section 230 as passed by Congress was “to remove the disincentives to self-regulation created by theĀ Stratton OakmontĀ decision”.[8]Ā Under that court’s holding, computer service providers who regulated the dissemination of offensive material on their services risked subjecting themselves to liability, because such regulation cast the service provider in the role of a publisher. Fearing that the specter of liability would therefore deter service providers from blocking and screening offensive material, Congress enacted Ā§ 230’s broad immunity “to remove disincentives for the development and utilization of blocking and filtering technologies that empower parents to restrict their children’s access to objectionable or inappropriate online material.”[8]Ā In addition,Ā ZeranĀ notes “the amount of information communicated via interactive computer services is . . . staggering. The specter of tort liability in an area of such prolific speech would have an obviously chilling effect. It would be impossible for service providers to screen each of their millions of postings for possible problems. Faced with potential liability for each message republished by their services, interactive computer service providers might choose to severely restrict the number and type of messages posted. Congress considered the weight of the speech interests implicated and chose to immunize service providers to avoid any such restrictive effect.”[8]
Application and limits
In analyzing the availability of the immunity offered by Section 230, courts generally apply a three-prong test. A defendant must satisfy each of the three prongs to gain the benefit of the immunity:[9]
The defendant must be a “provider or user” of an “interactive computer service.”
The cause of action asserted by the plaintiff must treat the defendant as the “publisher or speaker” of the harmful information at issue.
The information must be “provided by another information content provider,” i.e., the defendant must not be the “information content provider” of the harmful information at issue.
Section 230 immunity is not unlimited. The statute specifically excepts federal criminal liability and intellectual property claims.[10]Ā However, state criminal laws have been held preempted in cases such asĀ Backpage.com, LLC v. McKenna[11]Ā andĀ Voicenet Commc’ns, Inc. v. Corbett[12]Ā (agreeing “[T]he plain language of the CDA provides … immunity from inconsistent state criminal laws.”).
As of mid-2016, courts have issued conflicting decisions regarding the scope of the intellectual property exclusion set forth in 47 U.S.C. Ā§ 230(e)(2). For example, inĀ Perfect 10, Inc. v. CCBill, LLC,[13]Ā theĀ 9th CircuitĀ Court of Appeals ruled that the exception for intellectual property law applies only toĀ federalĀ intellectual property claims such as copyright infringement, trademark infringement, and patents, reversing a district court ruling that the exception applies to state-law right of publicity claims.[14]Ā The 9th Circuit’s decision inĀ Perfect 10Ā conflicts with conclusions from other courts includingĀ Doe v. Friendfinder. TheĀ FriendfinderĀ court specifically discussed and rejected the lower court’s reading of “intellectual property law” inĀ CCBillĀ and held that the immunity does not reach state right of publicity claims.[15]
The first major challenge to Section 230 was inĀ Zeran v. AOL, a 1997 case decided at theĀ Fourth Circuit. The case involved a person that suedĀ America OnlineĀ (AOL) for failing to remove, in a timely manner, libelous ads posted by AOL users that inappropriately connected his home phone number to theĀ Oklahoma City bombing. The court found for AOL and upheld the constitutionality of Section 230, stating that Section 230 “creates a federal immunity to any cause of action that would make service providers liable for information originating with a third-party user of the service.”[17]Ā This rule, cementing Section 230’s liability protections, has been considered one of the most important case laws affecting the growth of the Internet, allowing websites to be able to incorporate user-generated content without fear of prosecution.[18]Ā However, at the same time, this has led to Section 230 being used as a shield for some website owners as courts have ruled Section 230 provides complete immunity for ISPs with regard to theĀ tortsĀ committed by their users over their systems.[19]
Sex trafficking
Around 2001, a University of Pennsylvania paper warned that “online sexual victimization of American children appears to have reached epidemic proportions” due to the allowances granted by Section 230.[20]Ā Over the next decade, advocates against such exploitation such as theĀ National Center for Missing and Exploited ChildrenĀ pressured major websites to block or remove content related to sex trafficking, leading to sites likeĀ Facebook,Ā MySpace, andĀ CraigslistĀ to pull such content. Because mainstream sites were blocking this content, those that engaged or profited from trafficking started to use more obscure sites, leading to the creation of sites likeĀ Backpage. In addition to removing these from the public eye, these new sites worked to obscure what trafficking was going on and who was behind it, limiting ability for law enforcement to take action.[20]Ā Backpage and similar sites quickly came under numerous lawsuits from victims of the sex traffickers and exploiters for enabling this crime, but the court continually found in favor of Backpage due to Section 230,[21]Ā and the Supreme Court let stand a Circuit Court decision in favor of Backpage due to Section 230 in January 2017.[22]
Due to numerous complaints from constituents, Congress began an investigation into Backpage and similar sites in January 2017, finding Backpage complicit in aiding and profiting from illegal sex trafficking.[23]Ā Subsequently, Congress introduced the FOSTA-SESTA bills: theĀ Allow States and Victims to Fight Online Sex Trafficking ActĀ (FOSTA) in the House of Representatives byĀ Ann WagnerĀ in April 2017, and theĀ Stop Enabling Sex Traffickers ActĀ (SESTA) U.S. Senate bill introduced by Rob Portman in August 2017. Combined, the FOSTA-SESTA bills modified Section 230 to exempt services providers from Section 230 immunity when dealing with civil or criminal crimes related to sex trafficking,[24]Ā which removes section 230 safe harbors for services that knowingly facilitate or support sex trafficking.[25]Ā The bill passed both Houses and was signed into law by PresidentĀ Donald TrumpĀ on April 11, 2018.[26][27]
The bills were criticized by pro-free speechĀ and pro-Internet groups as a “disguised internet censorship bill” that weakens the section 230 safe harbors, places unnecessary burdens on Internet companies and intermediaries that handle user-generated content or communications with service providers required to proactively take action against sex trafficking activities, and requires a “team of lawyers” to evaluate all possible scenarios under state and federal law (which may be financially unfeasible for smaller companies).[28][29][30][31][32]Ā Critics also argued that FOSTA-SESTA did not distinguish between consensual, legal sex offerings from non-consensual ones, and argued it would cause websites otherwise engaged in legal offerings of sex work would be threatened with liability charges.[23]Ā Online sex workers argued that the bill would harm their safety, as the platforms they utilize for offering and discussing sexual services in a legal manner (as an alternative toĀ street prostitution) had begun to reduce their services or shut down entirely due to the threat of liability under the bill.[33][34]
Social media
Many social media sites, notablyĀ FacebookĀ andĀ Twitter, came under scrutiny as a result of the allegedĀ Russian interference in the 2016 United States elections, where it was alleged that Russian agents used the sites to spread propaganda andĀ fake newsĀ to swing the election in favor ofĀ Donald Trump. These platforms also were criticized for not taking action against users that used the social media outlets for harassment and hate speech against others. Shortly after the passage of FOSTA-SESTA acts, some in Congress recognized that additional changes could be made to Section 230 to require service providers to deal with these bad actors, beyond what Section 230 already provided to them.[35]Ā During 2019, there have been renewed calls for changes in Section 230 to address what are seen as growing problems across social media and the protections given to tech companies.
Platform neutrality
Some politicians, including Republican senatorsĀ Ted CruzĀ andĀ Josh Hawley, have accused major social networks ofĀ displaying a biasĀ againstĀ conservativeĀ perspectives when moderating content (such asĀ Twitter suspensions).[36][36][37][38]Ā In aĀ Fox NewsĀ op-ed, Cruz argued that section 230 should only apply to providers that are politically “neutral”, suggesting that a provider “should be considered to be a [liable] ‘publisher or speaker’ of user content if they pick and choose what gets published or spoke.”[39]Ā Section 230 does not contain any requirements that moderation decisions be neutral.[39]Ā Hawley alleged that section 230 safe harbors were a “sweetheart deal betweenĀ big techĀ and big government”.[40][41]
In December 2018, RepublicanĀ house representativeĀ Louie GohmertĀ introduced the Biased Algorithm Deterrence Act (H.R.492), which would remove all section 230 protections for any provider that used filters or any other type of algorithms to display user content when otherwise not directed by a user.[42][43]
In June 2019, Hawley introduced the Ending Support for Internet Censorship Act (S. 1914), that would remove section 230 protections from companies whose services have more than 30 million active monthly users in the U.S. and more than 300 million worldwide, or have over $500 million in annual global revenue, unless they receive a certification from the majority of theĀ Federal Trade CommissionĀ that they do not moderate against any political viewpoint, and have not done so in the past 2 years.[44][45]
There has been criticismāand supportāof the proposed bill from various points on the political spectrum. A poll of more than 1,000 voters gave Senator Hawley’s bill a net favorability rating of 29 points among Republicans (53% favor, 24% oppose) and 26 points among Democrats (46% favor, 20% oppose).[46]Ā Some Republicans feared that by adding FTC oversight, the bill would continue to fuel fears of a big government with excessive oversight powers.[47]Ā Democrat Speaker Nancy Pelosi has indicated support for the same approach Hawley has taken.[48]Ā The chairman of the Senate Judiciary Committee, Senator Graham, has also indicated support for the same approach Hawley has taken, saying “he is considering legislation that would require companies to uphold ‘best business practices’ to maintain their liability shield, subject to periodic review by federal regulators.”Ā [49]
Legal experts have criticized the Republicans’ push to make Section 230 encompass platform neutrality. Wyden stated in response to potential law changes that “Section 230 is not about neutrality. Period. Full stop. 230 is all about letting private companies make their own decisions to leave up some content and take other content down.”[50]Ā Law professorĀ Jeff Kosseff, who has written extensively on Section 230, has stated that the Republican intentions are based on a “fundamental misunderstanding” of Section 230’s purpose, as platform neutrality was not one of the considerations made at the time of passage.[51]Ā Kosseff stated that political neutrality was not the intent of Section 230 according to the framers, but rather making sure providers had the ability to make content-removal judgement without fear of liability.[2]Ā There have been concerns that any attempt to weaken Section 230 could actually cause an increase in censorship when services lose their liability.[41][52]
Hate speech
In the wake of the 2019 shootings inĀ Christchurch, New Zealand,Ā El Paso, TexasĀ andĀ Dayton, Ohio, the impact on Section 230 and liability towards onlineĀ hate speechĀ has been raised. In both the Christchurch and El Paso shootings, the perpetrator posted hate speech manifestos toĀ 8chan, a moderatedĀ imageboardĀ known to be favorable for the posting of extreme views. Concerned politicians and citizens raised calls at large tech companies for the need for hate speech to be removed from the Internet; however, hate speech is generally protected speech under the First Amendment, and Section 230 removes the liability for these tech companies to moderate such content as long as it is not illegal. This has given the appearance that tech companies do not need to be proactive against hateful content, thus allowing the hate content to fester online and lead to such incidents.[53][5]
Notable articles on this concerns were published after the El Paso shooting byĀ The New York Times,[53]Ā The Wall Street Journal,[54]Ā andĀ Bloomberg Businessweek,[5]Ā among other outlets, but which were criticized by legal experts includingĀ Mike Godwin,Ā Mark Lemley, andĀ David Kaye, as the articles implied that hate speech was protected by Section 230, when it is in fact protected by the First Amendment. In the case ofĀ The New York Times, the paper issued a correction to affirm that the First Amendment protected hate speech, and not Section 230.[55][56][57]
Members of Congress have indicated they may pass a law that changes how Section 230 would apply to hate speed as to make tech companies liable for this. Wyden, now a Senator, stated that he intended for Section 230 to be both “a sword and a shield” for Internet companies, the “sword” allowing them to remove content they deem inappropriate for their service, and the shield to help keep offensive content their from sites without liability. However, Wyden argued that become tech companies have not been willing to use the sword to remove content, it is necessary to take away that shield.[53][5]Ā Some have compared Section 230 to theĀ Protection of Lawful Commerce in Arms Act, a law that grants gun manufacturers immunity from certain types of lawsuits when their weapons are used in criminal acts. According to law professorĀ Mary Anne Franks, “They have not only let a lot of bad stuff happen on their platforms, but theyāve actually decided to profit off of peopleās bad behavior.”[5]Ā RepresentativeĀ Beto OāRourkeĀ has stated his intent for hisĀ 2020 presidential campaignĀ to introduce sweeping changes to Section 230 to make Internet companies liable for not being proactive in taking down hate speech.[58]
Terrorism-related content
In the aftermath of the Backpage trial and subsequent passage of FOSTA-SESTA, others have found that Section 230 appears to protect tech companies from content that is otherwise illegal under United States law. ProfessorĀ Danielle CitronĀ and journalistĀ Benjamin WittesĀ found that as late as 2018, several groups deemed as terrorist organizations by the United States had been able to maintain social media accounts on services run by American companies, despite federal laws that make providing material support to terrorist groups subject to civil and criminal charges.[59]Ā However, case law from theĀ Second CircuitĀ has ruled that under Section 230, technology companies are not liable for civil claims based on terrorism-related content.[60]
Immunity wasĀ upheldĀ against claims thatĀ AOLĀ unreasonably delayed in removing defamatory messages posted by third party, failed to post retractions, and failed to screen for similar postings.
Blumenthal v.Ā Drudge, 992 F. Supp. 44, 49-53 (D.D.C. 1998).[62]
The courtĀ upheldĀ AOL’s immunity from liability for defamation. AOL’s agreement with the contractor allowing AOL to modify or remove such content did not make AOL the “information content provider” because the content was created by an independent contractor. The Court noted that Congress made a policy choice by “providing immunity even where the interactive service provider has an active, even aggressive role in making available content prepared by others.”
The courtĀ upheldĀ immunity for an Internet dating service provider from liability stemming from third party’s submission of a false profile. The plaintiff,Ā Carafano, claimed the false profile defamed her, but because the content was created by a third party, the website was immune, even though it had provided multiple choice selections to aid profile creation.
Batzel v. Smith, 333 F.3d 1018 (9th Cir. 2003).[64]
Immunity wasĀ upheldĀ for a website operator for distributing an email to a listserv where the plaintiff claimed the email was defamatory. Though there was a question as to whether the information provider intended to send the email to the listserv, the Court decided that for determining the liability of the service provider, “the focus should be not on the information provider’s intentions or knowledge when transmitting content but, instead, on the service provider’s or user’s reasonable perception of those intentions or knowledge.” The Court found immunity proper “under circumstances in which a reasonable person in the position of the service provider or user would conclude that the information was provided for publication on the Internet or other ‘interactive computer service’.”
The courtĀ upheldĀ immunity forĀ AOLĀ against allegations of negligence. Green claimed AOL failed to adequately police its services and allowed third parties to defame him and inflict intentional emotional distress. The court rejected these arguments because holding AOL negligent in promulgating harmful content would be equivalent to holding AOL “liable for decisions relating to the monitoring, screening, and deletion of content from its network — actions quintessentially related to a publisher’s role.”
Immunity wasĀ upheldĀ for an individual internet user from liability for republication of defamatory statements on a listserv. The court found the defendant to be a “user of interactive computer services” and thus immune from liability for posting information passed to her by the author.
MCW, Inc. v. badbusinessbureau.com(RipOff Report/Ed Magedson/XCENTRIC Ventures LLC)Ā 2004 WL 833595, No. Civ.A.3:02-CV-2727-G (N.D. Tex. April 19, 2004).[67]
The courtĀ rejectedĀ the defendant’s motion to dismiss on the grounds of Section 230 immunity, ruling that the plaintiff’s allegations that the defendants wrote disparaging report titles and headings, and themselves wrote disparaging editorial messages about the plaintiff, rendered them information content providers. The Web site, http://www.badbusinessbureau.com, allows users to upload “reports” containing complaints about businesses they have dealt with.
Hy Cite Corp. v. badbusinessbureau.com (RipOff Report/Ed Magedson/XCENTRIC Ventures LLC), 418 F. Supp. 2d 1142 (D. Ariz. 2005).[68]
The courtĀ rejectedĀ immunity and found the defendant was an “information content provider” under Section 230 using much of the same reasoning as theĀ MCWĀ case.
eBay‘s immunity wasĀ upheldĀ for claims based on forged autograph sports items purchased on the auction site.
Ben Ezra, Weinstein & Co. v. America Online, 206 F.3d 980, 984-985 (10th Cir. 2000), cert. denied, 531 U.S. 824 (2000).[70]
Immunity forĀ AOLĀ wasĀ upheldĀ against liability for a user’s posting of incorrect stock information.
Goddard v. Google, Inc., C 08-2738 JF (PVT), 2008 WL 5245490, 2008 U.S. Dist. LEXIS 101890 (N.D. Cal. Dec. 17, 2008).[71]
Immunity wasĀ upheldĀ against claims of fraud and money laundering.Ā GoogleĀ was not responsible for misleading advertising created by third parties who bought space on Google’s pages. The court found the creative pleading of money laundering did not cause the case to fall into the crime exception to Section 230 immunity.
Immunity forĀ OrbitzĀ andĀ CheapTicketsĀ wasĀ upheldĀ for claims based on fraudulent ticket listings entered by third parties on ticket resale marketplaces.
Herrick v. Grindr, 18-396
TheĀ Second CircuitĀ upheldĀ immunity for theĀ GrindrĀ dating app forĀ LGBTĀ persons under Section 230 in regards to the misuse of false profiles created in the names of a real person. The plaintiff had broken up with a boyfriend, who later went onto Grindr to create multiple false profiles that presented the real-life identity and address of the plaintiff and as being available for sexual encounters, as well as having illegal drugs for sale. The plaintiff reported that over a thousand men had come to his house for sex and drugs, based on the communications with the fake profile, and he began to fear for his safety. He sued Grindr for not taking actions to block the false profiles after multiple requests. Grindr asserted Section 230 did not make them liable for the actions of the ex-boyfriend. This was agreed by the district court and the Second Circuit.[73][74]
Sexually explicit content and minors
Doe v.Ā America Online, 783 So. 2d 1010, 1013-1017 (Fl. 2001),[75]Ā cert. denied, 122 S.Ct. 208 (2000).
The courtĀ upheldĀ immunity against state claims of negligence based on “chat room marketing” of obscene photographs of minor by a third party.
Kathleen R. v. City of Livermore, 87 Cal. App. 4th 684, 692 (2001).[76]
The California Court of AppealĀ upheldĀ the immunity of a city from claims of waste of public funds, nuisance, premises liability, and denial of substantive due process. The plaintiff’s child downloaded pornography from a public library’s computers, which did not restrict access to minors. The court found the library was not responsible for the content of the internet and explicitly found that section 230(c)(1) immunity covers governmental entities and taxpayer causes of action.
The courtĀ upheldĀ immunity for a social networking site from negligence and gross negligence liability for failing to institute safety measures to protect minors and failure to institute policies relating to age verification. The Does’ daughter had lied about her age and communicated overĀ MySpaceĀ with a man who later sexually assaulted her. In the court’s view, the Does’ allegations were “merely another way of claiming that MySpace was liable for publishing the communications.”
The courtĀ upheldĀ immunity forĀ CraigslistĀ against a county sheriff’s claims that its “erotic services” section constituted a public nuisance because it caused or induced prostitution.
Backpage.com v. McKenna, et al.,Ā CASE NO. C12-954-RSM[79]
Backpage.com LLC v Cooper, Case #: 12-cv-00654[SS1][80]
Backpage.com LLC v Hoffman et al.,Ā Civil Action No. 13-cv-03952 (DMC) (JAD)[81]
The courtĀ upheldĀ immunity forĀ BackpageĀ in contesting a Washington state law (SB6251)[82]Ā that would have made providers of third-party content online liable for any crimes related to a minor in Washington state.[83]Ā The states of Tennessee and New Jersey later passed similar legislation. Backpage argued that the laws violated Section 230, the Commerce Clause of the United States Constitution, and the First and Fifth Amendments.[82]Ā In all three cases the courts granted Backpage permanent injunctive relief and awarded them attorney’s fees.[80][84][85][86][87]
The courtĀ ruledĀ in favorĀ of Backpage after Sheriff Tom Dart of Cook County IL, a frequent critic of Backpage and its adult postings section, sent a letter on his official stationary to Visa and MasterCard demanding that these firms “immediately cease and desist” allowing the use of their credit cards to purchase ads on Backpage. Within two days both companies withdrew their services from Backpage.[89]Ā Backpage filed a lawsuit asking for a temporary restraining order and preliminary injunction against Dart granting Backpage relief and return to the status quo prior to Dart sending the letter. Backpage alleged that Dart’s actions were unconstitutional, violating the First and Fourteenth Amendments to the US Constitution as well as Section 230 of the CDA. Backpage asked for Dart to retract his “cease and desist” letters.[90]Ā After initially being denied the injunctive relief by a lower court,[91][92]Ā the Seventh Circuit U.S. Court of Appeals reversed that decision and directed that a permanent injunction be issued enjoining Dart and his office from taking any actions “to coerce or threaten credit card companiesā¦with sanctions intended to ban credit card or other financial services from being provided to Backpage.com.”[93]Ā The court cited section 230 as part of its decision.
The courtĀ upheldĀ immunity forĀ CraigslistĀ againstĀ Fair Housing ActĀ claims based on discriminatory statements in postings on the classifieds website by third party users.
TheĀ Ninth Circuit Court of AppealsĀ rejectedĀ immunity for the Roommates.com roommate matching service for claims brought under the federalĀ Fair Housing Act[96]Ā and California housing discrimination laws.[97]Ā The court concluded that the manner in which the service elicited information from users concerning their roommate preferences (by having dropdowns specifying gender, presence of children, and sexual orientation), and the manner in which it utilized that information in generating roommate matches (by eliminating profiles that did not match user specifications), the matching service created or developed the information claimed to violate the FHA, and thus was responsible for it as an “information content provider.” The courtĀ upheldĀ immunity for the descriptions posted by users in the “Additional Comments” section because these were entirely created by users.
A California Appellate Court unanimouslyĀ upheldĀ immunity from state tort claims arising from an employee’s use of the employer’s e-mail system to send threatening messages. The court concluded that an employer that provides Internet access to its employees qualifies as a “provider . . . of an interactive service.”
TheĀ Ninth Circuit Court of AppealsĀ rejectedĀ immunity for claims of negligence under California law. Doe filed a complaint against Internet Brands which alleged a “failure to warn” her of a known rape scheme, despite her relationship to them as a ModelMayhem.com member. They also had requisite knowledge to avoid future victimization of ModelMayhem.com users by warning users of online sexual predators. The Ninth Circuit Court of Appeals concluded that the Communications Decency Act did not bar the claim and remanded the case to the district court for further proceedings.
In February 2015, the Ninth Circuit panel set aside its 2014 opinion and set the case for reargument. In May 2016, the panel again held that Doe’s case could proceed.[98][99]
Terrorism
Force v. Facebook, Inc., No. 18-397 (2d Cir. July 31, 2019)
The Second CircuitĀ upheldĀ immunity in civil claims for service providers for hosting terrorism-related content created by users. Families, friends, and associates of several killed inĀ Hamas-attacks filed suit against Facebook under the United State’s Anti-Terrorism Act, asserting that since Hamas members used Facebook to coordinate activities, Facebook was liable for its content. While previous rules at federal District and Circuit level have generally ruled against such cases, this decision in the Second Circuit was first to assert that Section 230’s safe harbor provisions do apply even to acts related to terrorism that may be posted by users of service providers, thus dismissing the suit against Facebook. The Second Circuit ruled that the various algorithms Facebook uses to recommend content remains as part of the role of the distributor of the content and not the publisher, since these automated tools were essentially neutral.[60]
Article 14 establishes that hosting providers are not responsible for the content they host as long as (1) the acts in question are neutral intermediary acts of a mere technical, automatic and passive capacity; (2) they are not informed of its illegal character, and (3) they act promptly to remove or disable access to the material when informed of it.
Article 15 precludes member states from imposing general obligations to monitor hosted content for potential illegal activities.
The updatedĀ Directive on Copyright in the Digital Single MarketĀ (Directive 2019/790) Article 17 makes providers liable if they fail to take “effective and proportionate measures” to prevent users from uploading certain copyright violations and do not response immediately to takedown requests.[101]
Australia
InĀ Dow Jones & Company Inc v Gutnick,[102]Ā the High Court of Australia treated defamatory material on a server outside Australia as having been published in Australia when it is downloaded or read by someone in Australia.
Gorton v Australian Broadcasting Commission & AnorĀ (1973) 1 ACTR 6
Under theĀ Defamation Act 2005Ā (NSW),[103]Ā s 32, a defence to defamation is that the defendant neither knew, nor ought reasonably to have known of the defamation, and the lack of knowledge was not due to the defendant’s negligence.
New Zealandcause of the material CompuServe’s network was carrying into Germany. He was convicted and sentenced to two years probation on May 28, 1998.[104][105]Ā He was cleared on appeal on November 17, 1999.[106][107]
The Oberlandesgericht (OLG) Cologne, an appellate court, found that an online auctioneer does not have an active duty to check for counterfeit goods (Az 6 U 12/01).[108]
In one example, the first-instance district court of Hamburg issued a temporary restraining order requiring message board operator Universal Boards to review all comments before they can be posted to prevent the publication of messages inciting others to download harmful files. The court reasoned that “the publishing house must be held liable for spreading such material in the forum, regardless of whether it was aware of the content.”[109]
The laws of libel and defamation will treat a disseminator of information as having “published” material posted by a user, and the onus will then be on a defendant to prove that it did not know the publication was defamatory and was not negligent in failing to know:Ā Goldsmith v Sperrings LtdĀ (1977) 2 All ER 566;Ā Vizetelly v Mudie’s Select Library LtdĀ (1900) 2 QB 170;Ā Emmens v Pottle & OrsĀ (1885) 16 QBD 354.
In an action against a website operator, on a statement posted on the website, it is a defence to show that it was not the operator who posted the statement on the website. The defence is defeated if it was not possible for the claimant to identify the person who posted the statement, or the claimant gave the operator a notice of complaint and the operator failed to respond in accordance with regulations.
Notes
^Ā The details of the Stratton Oakmont case would later serve as the basis for the book and its filmĀ The Wolf of Wall Street
“The Bosses of the Senate”, a cartoon byĀ Joseph KepplerĀ depicting corporate interestsāfrom steel, copper, oil, iron, sugar, tin, and coal to paper bags, envelopes, and saltāas giant money bags looming over the tiny senators at their desks in the Chamber of theĀ United States Senate.[1]
In the United States,Ā antitrust lawĀ is a collection of federal and state government laws that regulates the conduct and organization of business corporations, generally to promoteĀ competitionĀ for the benefit ofĀ consumers. (The concept is calledĀ competition lawĀ in other English-speaking countries.) The main statutes are theĀ Sherman Act of 1890, theĀ Clayton Act of 1914Ā and theĀ Federal Trade Commission Act of 1914. These Acts serve three major functions. First, Section 1 of the Sherman Act prohibits price-fixing and the operation ofĀ cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts theĀ mergers and acquisitionsĀ of organizations that would likely substantially lessen competition. Third, Section 2 of the Sherman Act prohibits the abuse of monopoly power.[2]
TheĀ Federal Trade Commission, theĀ U.S. Department of Justice, state governments and private parties who are sufficiently affected may all bring actions in the courts to enforce the antitrust laws. The scope of antitrust laws, and the degree to which they should interfere in an enterprise’s freedom to conduct business, or to protect smaller businesses, communities and consumers, are strongly debated. One view, mostly closely associated with the “Chicago School of economics” suggests that antitrust laws should focus solely on the benefits to consumers and overall efficiency, while a broad range of legal and economic theory sees the role of antitrust laws as also controllingĀ economic powerĀ in the public interest.[3]
Although “trust” has a specific legal meaning (where one person holds property for the benefit of another), in the late 19th century the word was commonly used to denote big business, because that legal instrument was frequently used to effect a combination of companies.[4]Ā Large manufacturing conglomerates emerged in great numbers in the 1880s and 1890s, and were perceived to have excessive economic power.[5]Ā TheĀ Interstate Commerce ActĀ of 1887 began a shift towards federal rather than state regulation of big business.[6]Ā It was followed by theĀ Sherman Antitrust ActĀ of 1890, theĀ Clayton Antitrust ActĀ of 1914 and theĀ Federal Trade Commission ActĀ of 1914, theĀ RobinsonāPatman ActĀ of 1936, and theĀ CellerāKefauver ActĀ of 1950.
In the 1880s, hundreds of small short-line railroads were being bought up and consolidated into giant systems. (Separate laws and policies emerged regarding railroads and financial concerns such as banks and insurance companies.) People for strong antitrust laws argued that, in order for the American economy to be successful, it would require free competition and the opportunity for individual Americans to build their own businesses. As SenatorĀ John ShermanĀ put it, “If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life.” Congress passed theĀ Sherman Antitrust ActĀ almost unanimously in 1890, and it remains the core of antitrust policy. The Act prohibits agreements in restraint of trade and abuse of monopoly power. It gives theĀ Justice DepartmentĀ the mandate to go to federal court for orders to stop illegal behavior or to impose remedies.[7][original research?]
Standard OilĀ (Refinery No. 1 inĀ Cleveland,Ā Ohio, pictured) was a major company broken up under United States antitrust laws.
One of the better-known trusts was theĀ Standard Oil Company;Ā John D. RockefellerĀ in the 1870s and 1880s had used economic threats against competitors and secret rebate deals with railroads to build what was called a monopoly in the oil business, though some minor competitors remained in business. In 1911 the Supreme Court agreed that in recent years (1900ā1904) Standard had violated the Sherman Act (seeĀ Standard Oil Co. of New Jersey v. United States). It broke the monopoly into three dozen separate companies that competed with one another, including Standard Oil of New Jersey (later known asĀ ExxonĀ and nowĀ ExxonMobil), Standard Oil of Indiana (Amoco), Standard Oil Company of New York (Mobil, again, later merged with Exxon to form ExxonMobil), of California (Chevron), and so on. In approving the breakup the Supreme Court added the “rule of reason”: not all big companies, and not all monopolies, are evil; and the courts (not the executive branch) are to make that decision. To be harmful, a trust had to somehow damage the economic environment of its competitors.[citation needed]
United States Steel Corporation, which was much larger than Standard Oil, won its antitrust suit in 1920 despite never having delivered the benefits to consumers that Standard Oil did.[citation needed]Ā In fact, it lobbied for tariff protection that reduced competition, and so contending that it was one of the “good trusts” that benefited the economy is somewhat doubtful.[citation needed]Ā LikewiseĀ International HarvesterĀ survived its court test, while other monopolies were broken up inĀ tobacco, meatpacking, and bathtub fixtures. Over the years hundreds of executives of competing companies who met together illegally to fix prices went to federal prison.[citation needed]
In 1914 Congress passed theĀ Clayton Act, which prohibited specific business actions (such asĀ price discriminationĀ andĀ tying) if they substantially lessened competition. At the same time Congress established theĀ Federal Trade CommissionĀ (FTC), whose legal and business experts could force business to agree to “consent decrees“, which provided an alternative mechanism to police antitrust.[citation needed]
American hostility to big business began to decrease after the Progressive Era.[citation needed]Ā For example,Ā Ford Motor CompanyĀ dominated auto manufacturing, built millions of cheap cars that put America on wheels, and at the same time lowered prices, raised wages, and promoted manufacturing efficiency.Ā Welfare capitalismĀ made large companies an attractive place to work; new career paths opened up in middle management; local suppliers discovered that big corporations were big purchasers.[citation needed]Ā Talk of trust busting faded away. Under the leadership ofĀ Herbert Hoover, the government in the 1920s promoted business cooperation, fostered the creation of self-policing trade associations, and made the FTC an ally of “respectable business”.[citation needed]
The printing equipment companyĀ ATFĀ explicitly states in its 1923 manual that its goal is to ‘discourage unhealthy competition’ in the printing industry.
During the New Deal, attempts were made to stop cutthroat competition. TheĀ National Industrial Recovery ActĀ (NIRA) was a short-lived program in 1933ā35 designed to strengthen trade associations, and raise prices, profits and wages at the same time. TheĀ Robinson-Patman ActĀ of 1936 sought to protect local retailers against the onslaught of the more efficient chain stores, by making it illegal to discount prices. To control big business, the New Deal policymakers preferred federal and state regulation ācontrolling the rates and telephone services provided by AT&T, for exampleā and by building up countervailing power in the form of labor unions.[citation needed]
The antitrust environment of the 70’s was dominated by the caseĀ United States v. IBM, which was filed by theĀ U.S. Justice DepartmentĀ in 1969.Ā IBMĀ at the time dominated the computer market through alleged bundling of software and hardware as well as sabotage at the sales level and false product announcements. It was one of the largest and certainly the lengthiest antitrust case the DoJ brought against a company. In 1982, theĀ Reagan administrationĀ dismissed the case, and the costs and wasted resources were heavily criticized. However, contemporary economists argue that the legal pressure on IBM during that period allowed for the development of an independent software and personal computer industry with major importance for the national economy.[8]
In 1982 the Reagan administration used the Sherman Act to break up AT&T into one long-distance company and seven regional “Baby Bells“, arguing that competition should replace monopoly for the benefit of consumers and the economy as a whole. The pace of business takeovers quickened in the 1990s, but whenever one large corporation sought to acquire another, it first had to obtain the approval of either the FTC or the Justice Department. Often the government demanded that certain subsidiaries be sold so that the new company would not monopolize a particular geographical market.[citation needed]
In 1999 a coalition of 19 states and the federal Justice Department suedĀ Microsoft.[9]Ā A highly publicized trial found that Microsoft had strong-armed many companies in an attempt to prevent competition from theĀ NetscapeĀ browser.[10]Ā In 2000, the trial court ordered Microsoft to split in two, preventing it from future misbehavior.[11][9]Ā The Court of Appeals affirmed in part and reversed in part. In addition, it removed the judge from the case for discussing the case with the media while it was still pending.[12]Ā With the case in front of a new judge, Microsoft and the government settled, with the government dropping the case in return for Microsoft agreeing to cease many of the practices the government challenged.[13]Ā In his defense, CEOĀ Bill GatesĀ argued that Microsoft always worked on behalf of the consumer and that splitting the company would diminish efficiency and slow the pace of software development.[citation needed]
EveryĀ contract, combination in the form ofĀ trustĀ or otherwise, or conspiracy, inĀ restraint of tradeĀ or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of aĀ felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if aĀ corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.
Preventing collusion and cartels that act inĀ restraint of tradeĀ is an essential task of antitrust law. It reflects the view that each business has a duty to act independently on the market, and so earn its profits solely by providing better priced and quality products than its competitors. The Sherman Act Ā§1 prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce.”[14]Ā This targets two or more distinct enterprises acting together in a way that harms third parties. It does not capture the decisions of a single enterprise, or a single economic entity, even though the form of an entity may be two or moreĀ separate legal personsĀ or companies. InĀ Copperweld Corp. v. Independence Tube Corp.[15]Ā it was held an agreement between a parent company and aĀ wholly owned subsidiaryĀ could not be subject to antitrust law, because the decision took place within a single economic entity.[16]Ā This reflects the view that if the enterprise (as an economic entity) has not acquired aĀ monopolyĀ position, or has significantĀ market power, then no harm is done. The same rationale has been extended toĀ joint ventures, where corporate shareholders make a decision through a new company they form. InĀ Texaco Inc. v. Dagher[17]Ā the Supreme Court held unanimously that a price set by a joint venture betweenĀ TexacoĀ andĀ Shell OilĀ did not count as making an unlawful agreement. Thus the law draws a “basic distinction between concerted and independent action”.[18]Ā Multi-firm conduct tends to be seen as more likely than single-firm conduct to have an unambiguously negative effect and “is judged more sternly”.[19]Ā Generally the law identifies four main categories of agreement. First, some agreements such as price fixing or sharing markets are automatically unlawful, or illegalĀ per se. Second, because the law does not seek to prohibit every kind of agreement that hindersĀ freedom of contract, it developed a “rule of reason” where a practice might restrict trade in a way that is seen as positive or beneficial for consumers or society. Third, significant problems of proof and identification of wrongdoing arise where businesses make no overt contact, or simply share information, but appear to act in concert.Ā Tacit collusion, particularly in concentrated markets with a small number of competitors orĀ oligopolists, have led to significant controversy over whether or not antitrust authorities should intervene. Fourth, vertical agreements between a business and a supplier or purchaser “up” or “downstream” raise concerns about the exercise ofĀ market power, however they are generally subject to a more relaxed standard under the “rule of reason”.
Some practices are deemed by the courts to be so obviously detrimental that they are categorized as being automatically unlawful, or illegalĀ per se. The simplest and central case of this isĀ price fixing. This involves an agreement by businesses to set the price orĀ considerationĀ of a good or service which they buy or sell from others at a specific level. If the agreement is durable, the general term for these businesses is aĀ cartel. It is irrelevant whether or not the businesses succeed in increasing their profits, or whether together they reach the level of havingĀ market powerĀ as might aĀ monopoly. Such collusion is illegalĀ per se.
Bid riggingĀ is a form of price fixing and market allocation that involves an agreement in which one party of a group of bidders will be designated to win the bid.Ā Geographic market allocationĀ is an agreement between competitors not to compete within each other’s geographic territories.
Addyston Pipe and Steel Co. v. United States[20]Ā pipe manufacturers had agreed among themselves to designate one lowest bidder for government contracts. This was held to be an unlawfulĀ restraint of tradeĀ contrary to the Sherman Act. However, following the reasoning of Justice Taft in the Court of Appeals, the Supreme Court held that implicit in the Sherman Act Ā§1 there was aĀ rule of reason, so that not every agreement which restrained theĀ freedom of contractĀ of the parties would count as an anti-competitive violation.
Hartford Fire Insurance Co. v. California, 113 S.Ct. 2891 (1993) 5 to 4, a group of reinsurance companies acting in London were successfully sued by California for conspiring to make U.S. insurance companies abandon policies beneficial to consumers, but costly to reinsure. The Sherman Act was held to have extraterritorial application, to agreements outside U.S. territory.
Group boycotts of competitors, customers or distributors
Fashion Originators’ Guild of America v. FTC, 312 U.S. 457 (1941) the FOGA, a combination of clothes designers, agreed not to sell their clothes to shops which stocked replicas of their designs, and employed their own inspectors. Held to violate the Sherman Act Ā§1
Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959) a group boycott is per se unlawful, even if it may be connected with a private dispute, and will have little effect upon the markets
Associated Press v. United States, 326 U.S. 1 (1945) 6 to 3, a prohibition on members selling “spontaneous news” violated the Sherman Act, as well as making membership difficult, andĀ freedom of speechĀ among newspapers was no defense, nor was the absence of a total monopoly
Northwest Wholesale Stationers v. Pacific Stationery, 472 U.S. 284 (1985) it was notĀ per seĀ unlawful for the Northwest Wholesale Stationers, a purchasing co-operative where Pacific Stationery had been a member, to expel Pacific Stationery without any procedure or hearing or reason. Whether there were competitive effects would have to be adjudged under the rule of reason.
NYNEX Corp. v. Discon, Inc., 525 U.S. 128 (1998) the per se group boycott prohibition does not apply to a buyer’s decision to purchase goods from one seller or another
If an antitrust claim does not fall within aĀ per seĀ illegal category, the plaintiff must show the conduct causes harm in “restraint of trade” under the Sherman Act Ā§1 according to “the facts peculiar to the business to which the restraint is applied”.[21]Ā This essentially means that unless a plaintiff can point to a clear precedent, to which the situation is analogous, proof of an anti-competitive effect is more difficult. The reason for this is that the courts have endeavoured to draw a line between practices that restrain trade in a “good” compared to a “bad” way. In the first case,Ā United States v. Trans-Missouri Freight Association,[22]Ā the Supreme Court found that railroad companies had acted unlawfully by setting up an organisation to fix transport prices. The railroads had protested that their intention was to keep prices low, not high. The court found that this was not true, but stated that not every “restraint of trade” in a literal sense could be unlawful. Just as under the common law, the restraint of trade had to be “unreasonable”. InĀ Chicago Board of Trade v. United StatesĀ the Supreme Court found a “good” restraint of trade.[23]Ā TheĀ Chicago Board of TradeĀ had a rule thatĀ commodities tradersĀ were not allowed to privately agree to sell or buy after the market’s closing time (and then finalise the deals when it opened the next day). The reason for the Board of Trade having this rule was to ensure that all traders had an equal chance to trade at a transparent market price. It plainly restricted trading, but the Chicago Board of Trade argued this was beneficial. Brandeis J., giving judgment for a unanimous Supreme Court, held the rule to be pro-competitive, and comply with the rule of reason. It did not violate the Sherman Act Ā§1. As he put it,
Every agreement concerning trade, every regulation of trade, restrains. To bind, to restrain, is of their very essence. The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition. To determine that question, the court must ordinarily consider the facts peculiar to the business to which the restraint is applied, its condition before and after the restraint was imposed, the nature of the restraint, and its effect, actual or probable.[24]
Arizona v. Maricopa County Medical Society, 457 U.S. 332 (1982) 4 to 3 held that a maximum price agreement for doctors was per se unlawful under the Sherman Act section 1.
Wilk v. American Medical Association, 895 F.2d 352 (7th Cir. 1990) the American Medical Association’s boycott ofĀ chiropractorsĀ violated the Sherman Act Ā§1 because there was insufficient proof that it was unscientific
NCAA v. Board of Regents of the University of Oklahoma, 468 U.S. 85 (1984) 7 to 2, held that the National College Athletics Association’s restriction of television of games, to encourage live attendance, was restricting supply, and therefore unlawful.
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) 5 to 2, while Bell Atlantic and other major telephone companies were alleged to have acted in concert to share markets, and not compete in each other’s territory to the detriment of small businesses, it was held that in absence of evidence of an agreement, parallel conduct is not enough to ground a case under the Sherman Act Ā§1
Theatre Enterprises v. Paramount Distributing, 346 U.S. 537 (1954), no evidence of illegal agreement, however film distributors gave first film releases to downtown Baltimore theatres, and suburban theatres were forced to wait longer. Held, there needed to be evidence of conspiracy to injure
American Tobacco Co. v. United States, 328 U.S. 781 (1946) after American Tobacco Co was broken up, the four entities were found to have achieved a collectively dominant position, which still amounted to monopolization of the market contrary to the Sherman Act Ā§2
Dr. Miles Medical Co. v. John D. Park and Sons, 220 U.S. 373 (1911) affirmed a lower court’s holding that a massive minimum resale price maintenance scheme was unreasonable and thus offended Section 1 of the Sherman Antitrust Act.
Kiefer-Stewart Co. v. Seagram & Sons, Inc., 340 U.S. 211 (1951) it was unlawful for private liquor dealers to require that their products only be resold up to a maximum price. It unduly restrained the freedom of businesses and was per se illegal.
Albrecht v. Herald Co., 390 U.S. 145 (1968) setting a fixed price, minimum or maximum, held to violate section 1 of the Sherman Act
State Oil Co. v. Khan, 522 U.S. 3 (1997) vertical maximum price fixing had to be adjudged according to a rule of reason
Leegin Creative Leather Products, Inc. v. PSKS, Inc.Ā 551 U.S. 877 (2007) 5 to 4 decision that vertical price restraints were notĀ per seĀ illegal. A leather manufacturer therefore did not violate the Sherman Act by stopping delivery of goods to a retailer after the retailer refused to raise its prices to the leather manufacturer’s standards.
Continental Television v. GTE Sylvania, 433 U.S. 36 (1977) 6 to 2, held that it was not an antitrust violation, and it fell within the rule of reason, for a seller to limit the number of franchises and require the franchisees only sell goods within its area
United States v. Colgate & Co.,Ā 250Ā U.S.Ā 300Ā (1919) there is no unlawful action by a manufacturer or seller, who publicly announces a price policy, and then refuses to deal with businesses who do not subsequently comply with the policy. This is in contrast to agreements to maintain a certain price.
Monsanto Co. v. Spray-Rite Service Corp.,Ā 465Ā U.S.Ā 752Ā (1984), stating that, “under Colgate, the manufacturer can announce its re-sale prices in advance and refuse to deal with those who fail to comply, and a distributor is free to acquiesce to the manufacturer’s demand in order to avoid termination”. Monsanto, an agricultural chemical, terminated its distributorship agreement with Spray-Rite on the ground that it failed to hire trained salesmen and promote sales to dealers adequately. Held, not per se illegal, because the restriction related to non-price matters, and so was to be judged under the rule of reason.
Business Electronics Corp. v. Sharp Electronics Corp.,Ā 485Ā U.S.Ā 717Ā (1988) electronic calculators; “a vertical restraint is not illegal per se unless it includes some agreement on price or price levels. … [T]here is a presumption in favor of a rule-of-reason standard; [and] departure from that standard must be justified by demonstrable economic effect, such as the facilitation of cartelizing … “
No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.
Although theĀ Sherman Act 1890Ā initially dealt, in general, with cartels (where businesses combined their activities to the detriment of others) and monopolies (where one business was so large it could use its power to the detriment of others alone) it was recognized that this left a gap. Instead of forming a cartel, businesses could simply merge into one entity. The period between 1895 and 1904 saw a “great merger movement” as business competitors combined into ever more giantĀ corporations.[25]Ā However upon a literal reading of Sherman Act, no remedy could be granted until a monopoly had already formed. TheĀ Clayton Act 1914Ā attempted to fill this gap by giving jurisdiction to prevent mergers in the first place if they would “substantially lessen competition”.
Dual antitrust enforcement by theĀ Department of JusticeĀ andĀ Federal Trade CommissionĀ has long elicited concerns about disparate treatment of mergers. In response, in September 2014, the House Judiciary Committee approved the Standard Merger and Acquisition Reviews Through Equal Rules Act (“SMARTER Act”).[26]
FTC v. Dean Foods Co, 384 U.S. 597 (1966) 5 to 4, the FTC was entitled to get an injunction to prevent the completion of a merger, between milk selling competitors in the Chicago area, before its competitive effects are determined by a court
United States v. Philadelphia National Bank,Ā 374Ā U.S.Ā 321Ā (1963) the second and third largest of 42 banks in the Philadelphia area would lead to a 30% market control in a concentrated market, and so violated the Clayton Act Ā§7. Banks were not exempt even though there was additional legislation under theĀ Bank Merger Act of 1960.
United States v. General Dynamics Corp., 415 U.S. 486 (1974) General Dynamics Corp had taken control over, by share purchase, United Electric Coal Companies, a strip-mining coal producer.
Brown Shoe Co., Inc. v. United States,Ā 370Ā U.S.Ā 294Ā (1962) there is not one single test for whether a merger substantially lessens competition, but a variety of economic and other factors may be considered. Two shoe retailers and manufacturers merging was held to substantially lessen competition, given the market in towns over 10,000 people for men’s, women’s and children’s shoes.
Every person who shallĀ monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of aĀ felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.
The law’s treatment of monopolies is potentially the strongest in the field of antitrust law. Judicial remedies can force large organizations to be broken up, be run subject toĀ positive obligations, massive penalties may be imposed, and/or the people involved can be sentenced to jail. Under Ā§2 of theĀ Sherman Act 1890Ā every “person who shall monopolize, or attempt to monopolize … any part of the trade or commerce among the several States” commits an offence.[27]Ā The courts have interpreted this to mean that monopoly is not unlawfulĀ per se, but only if acquired through prohibited conduct.[28]Ā Historically, where the ability ofĀ judicial remediesĀ to combatĀ market powerĀ have ended, the legislature of states or the Federal government have still intervened by takingĀ public ownershipĀ of an enterprise, or subjecting the industry to sector specific regulation (frequently done, for example, in the casesĀ water,Ā education,Ā energyĀ orĀ health care). The law onĀ public servicesĀ andĀ administrationĀ goes significantly beyond the realm of antitrust law’s treatment of monopolies. When enterprises are not under public ownership, and where regulation does not foreclose the application of antitrust law, two requirements must be shown for the offense of monopolization. First, the alleged monopolist must possess sufficientĀ powerĀ in an accurately definedĀ marketĀ for its products or services. Second, the monopolist must have used its power in a prohibited way. The categories of prohibited conduct are not closed, and are contested in theory. Historically they have been held to includeĀ exclusive dealing,Ā price discrimination, refusing to supply anĀ essential facility,Ā product tyingĀ andĀ predatory pricing.
Northern Securities Co. v. United States, 193 U.S. 197 (1904) 5 to 4, a railway monopoly, formed through a merger of 3 corporations was ordered to be dissolved. The owner,Ā James Jerome HillĀ was forced to manage his ownership stake in each independently.
Swift & Co. v. United States, 196 U.S. 375 (1905) the antitrust laws entitled the federal government to regulate monopolies that had a direct impact on commerce
United States v. Alcoa, 148 F.2d 416 (2d Cir. 1945) a monopoly can be deemed to exist depending on the size of the market. It was generally irrelevant how the monopoly was achieved since the fact of being dominant on the market was negative for competition. (Criticised by Alan Greenspan.)
United States v. E. I. du Pont de Nemours & Co., 351 U.S. 377 (1956), illustrates theĀ cellophane paradoxĀ of defining the relevant market. If a monopolist has set a price very high, there may now be many substitutable goods at similar prices, which could lead to a conclusion that the market share is small, and there is no monopoly. However, if a competitive price were charged, there would be a lower price, and so very few substitutes, whereupon the market share would be very high, and a monopoly established.
Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993) in order for monopolies to be found to have acted unlawfully, action must have actually been taken. The threat of abusive behavior is insufficient.
Fraser v. Major League Soccer, 284 F.3d 47 (1st Cir. 2002) there could be no unlawful monopolization of the soccer market by MLS where no market previously existed
United States v. GriffithĀ 334 U.S. 100 (1948) four cinema corporations secured exclusive rights from distributors, foreclosing competitors. Specific intent to monopolize is not required, violating the Sherman Act Ā§Ā§1 and 2.
United States v. Grinnell Corp., 384 U.S. 563 (1966) Grinnell made plumbing supplies and fire sprinklers, and with affiliates had 87% of the central station protective service market. From this predominant share there was no doubt of monopoly power.
Standard Oil Co. v. United States (Standard Stations), 337 U.S. 293 (1949): oil supply contracts affected a gross business of $58 million, comprising 6.7% of the total in a seven-state area, in the context of many similar arrangements, held to be contrary to Clayton Act Ā§3.
Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320 (1961): Tampa Electric Co contracted to buy coal for 20 years to provide power in Florida, and Nashville Coal Co later attempted to end the contract on the basis that it was an exclusive supply agreement contrary to the Clayton Act Ā§Ā 3 or the Sherman Act Ā§Ā§Ā 1 or 2. Held, no violation because foreclosed share of market was insignificant this did not affect competition sufficiently.
Eastman Kodak Company v. Image Technical Services, Inc., 504 U.S. 451 (1992) Kodak has refused to supply replacement parts to small businesses servicing Kodak equipment, which was alleged to violate the Sherman Act Ā§Ā§1 and 2. The Supreme Court held 6 to 3 that the small businesses were entitled to bring the case, and Kodak was not entitled to summary judgment.
It shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale orĀ contractĀ forĀ sale of goods, wares, merchandise, machinery, supplies, or other commodities, whether patented or unpatented, for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, or fix a price charged therefor, or discount from, or rebate upon, such price,Ā on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or otherĀ commoditiesĀ of aĀ competitorĀ or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessenĀ competitionĀ or tend to create a monopoly in any line of commerce.
International Salt Co. v. United States,Ā 332Ā U.S.Ā 392Ā (1947) it would be aĀ per seĀ infringement of the Sherman Act Ā§2 for a seller, who has a legal monopoly through a patent, to tie buyers to purchase products over which the seller does not have a patent
Times-Picayune Publishing Co. v. United States, 345 U.S. 594 (1953) 5 to 4, where there was no market dominance in a product market, tying the sale of a morning and an evening newspaper together was not unlawful
United States v. Loew’s Inc., 371 U.S. 38 (1962) product bundling and price discrimination. The existence of a tie was sufficient to create a presumption of market power.
In theory, which is hotly contested, predatory pricing happens when large companies with huge cash reserves and large lines ofĀ creditĀ stifle competition by selling their products and services at a loss for a time, to force their smaller competitors out of business. With no competition, they are then free to consolidate control of the industry and charge whatever prices they wish. At this point, there is also little motivation for investing in furtherĀ technologicalĀ research, since there are no competitors left to gain an advantage over. HighĀ barriers to entryĀ such as large upfront investment, notably namedĀ sunk costs, requirements in infrastructure and exclusive agreements with distributors, customers, and wholesalers ensure that it will be difficult for any new competitors to enter the market, and that if any do, the trust will have ample advance warning and time in which to either buy the competitor out, or engage in its own research and return toĀ predatory pricingĀ long enough to force the competitor out of business. Critics argue that the empirical evidence shows that “predatory pricing” does not work in practice and is better defeated by a trulyĀ free marketĀ than by antitrust laws (seeĀ Criticism of the theory of predatory pricing).
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) to prove predatory pricing the plaintiff must show that changes in market conditions are adverse to its interests, and that (1) prices are below an appropriate measure of its rival’s costs, and (2) the competitor had a reasonable prospect or a “dangerous probability” of recouping its investment in the alleged scheme.
Weyerhaeuser Company v. Ross-Simmons Hardwood Lumber Company, 549 U.S. 312 (2007) a plaintiff must prove that, to make a claim of predatory buying, the alleged violator is likely to recoup the cost of the alleged predatory activity. This involved the saw mill market.
Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405 (1908) 8 to 1, concerning a self opening paper bag, it was not an unlawful use of a monopoly position to refuse to license a patent’s use to others, since the essence of a patent was the freedom not to do so.
United States v. Univis Lens Co., 316 U.S. 241 (1942) once a business sold its patented lenses, it was not allowed to lawfully control the use of the lens, by fixing a price for resale. This was theĀ exhaustion doctrine.
International Salt Co. v. United States, 332 U.S. 392 (1947) it would be aĀ per seĀ infringement of the Sherman Act Ā§2 for a seller, who has a legal monopoly through a patent, to tie buyers to purchase products over which the seller does not have a patent
United States v. Glaxo Group Ltd., 410 U.S. 52 (1973) the government may challenge a patent where it is involved in a monopoly violation
Illinois Tool Works Inc. v. Independent Ink, Inc., 547 U.S. 28 (2006) there is no presumption of market power, in a case on an unlawful tying arrangement, from the mere fact that the defendant has a patented product
First, since theĀ Clayton Act 1914Ā Ā§6, there is no application of antitrust laws to agreements between employees to form or act inĀ labor unions. This was seen as the “Bill of Rights” for labor, as the Act laid down that the “labor of a human being is not aĀ commodityĀ or article of commerce”. The purpose was to ensure that employees withĀ unequal bargaining powerĀ were not prevented from combining in the same way that their employers could combine inĀ corporations,[30]Ā subject to the restrictions on mergers that the Clayton Act set out. However, sufficiently autonomous workers, such as professional sports players have been held to fall within antitrust provisions.[31]
Second, professional sports leagues enjoy a number of exemptions. Mergers and joint agreements of professional football, hockey, baseball, and basketball leagues are exempt.[32]Ā Major League BaseballĀ was held to be broadly exempt from antitrust law inĀ Federal Baseball Club v. National League.[33]Ā Holmes J held that the baseball league’s organization meant that there was no commerce between the states taking place, even though teams traveled across state lines to put on the games. That travel was merely incidental to a business which took place in each state. It was subsequently held in 1952 inĀ Toolson v. New York Yankees,[34]Ā and then again in 1972Ā Flood v. Kuhn,[35]Ā that the baseball league’s exemption was an “aberration”. However Congress had accepted it, and favored it, so retroactively overruling the exemption was no longer a matter for the courts, but the legislature. InĀ United States v. International Boxing Club of New York,[36]Ā it was held that, unlike baseball, boxing was not exempt, and inĀ Radovich v. National Football League (NFL),[37]Ā professional football is generally subject to antitrust laws. As a result of theĀ AFL-NFL merger, theĀ National Football LeagueĀ was also given exemptions in exchange for certain conditions, such as not directly competing with college or high school football.[38]Ā However, the 2010 Supreme Court ruling inĀ American Needle Inc. v. NFLĀ characterised the NFL as a “cartel” of 32 independent businesses subject to antitrust law, not a single entity.
Media
Third, antitrust laws are modified where they are perceived to encroach upon theĀ mediaĀ and free speech, or are not strong enough. Newspapers under joint operating agreements are allowed limited antitrust immunity under theĀ Newspaper Preservation Act of 1970.[39]Ā More generally, and partly because of concerns aboutĀ media cross-ownership in the United States, regulation of media is subject to specific statutes, chiefly theĀ Communications Act of 1934Ā and theĀ Telecommunications Act of 1996, under the guidance of theĀ Federal Communications Commission. The historical policy has been to use the state’s licensing powers over the airwaves to promote plurality. Antitrust laws do not prevent companies from using the legal system or political process to attempt to reduce competition. Most of these activities are considered legal under theĀ Noerr-Pennington doctrine. Also, regulations by states may be immune under theĀ Parker immunity doctrine.[40]
Professional Real Estate Investors, Inc., v. Columbia Pictures, 508 U.S. 49 (1993)
Allied Tube v. Indian Head, Inc., 486 U.S. 492 (1988)
FTC v. Superior Ct. TLA, 493 U.S. 411 (1990)
Other
Fourth, the government mayĀ grant monopoliesĀ in certain industries such asĀ utilitiesĀ and infrastructure where multiple players are seen as unfeasible or impractical.[41]
Parker v. Brown, 317 U.S. 341 (1943) actions by state governments were held to be exempt from antitrust law, given that there was no original legislative intent to cover anything other than business combinations.
Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) the Virginia State Bar, which was delegated power to set price schedules for lawyers fees, was an unlawful price fixing. It was no longer exempt from the Sherman Act, and constituted a per se infringement.
Rice v. Norman Williams Co., 458 U.S. 654 (1982) the Sherman Act did not prohibit a California law which prohibited the importation of goods that were not authorised to be imported by the manufacturer
United States v. Trans-Missouri Freight Association, 166 U.S. 290 (1897) the antitrust laws applied to the railroad industry, even though there was a comprehensive scheme of legislation applying to the railroads already. No specific exemption had been given.
The several district courts of the United States are invested with jurisdiction to prevent and restrain violations of sections 1 to 7 of this title; and it shall be the duty of the several United States attorneys, in their respective districts, under the direction of theĀ Attorney General, to institute proceedings inĀ equityĀ to prevent and restrain such violations. Such proceedings may be by way of petition setting forth the case and praying that such violation shall be enjoined or otherwise prohibited. When the parties complained of shall have been duly notified of such petition the court shall proceed, as soon as may be, to the hearing and determination of the case; and pending such petition and before final decree, the court may at any time make such temporary restraining order or prohibition as shall be deemedĀ justĀ in the premises.
The remedies for violations of U.S. antitrust laws are as broad as anyĀ equitable remedyĀ that a court has the power to make, as well as being able to impose penalties. When private parties have suffered an actionable loss, they may claim compensation. Under theĀ Sherman Act 1890Ā Ā§7, these may be trebled, a measure to encourage private litigation to enforce the laws and act as a deterrent. The courts may award penalties under Ā§Ā§1 and 2, which are measured according to the size of the company or the business. In their inherent jurisdiction to prevent violations in future, the courts have additionally exercised the power to break up businesses into competing parts under different owners, although this remedy has rarely been exercised (examples includeĀ Standard Oil,Ā Northern Securities Company,Ā American Tobacco Company,Ā AT&T CorporationĀ and, although reversed on appeal,Ā Microsoft). Three levels of enforcement come from the Federal government, primarily through the Department of Justice and the Federal Trade Commission, the governments of states, and private parties. Public enforcement of antitrust laws is seen as important, given the cost, complexity and daunting task for private parties to bring litigation, particularly against large corporations.
Additionally, the federal government alsoĀ reviews potential mergersĀ to attempt to preventĀ market concentration. As outlined by theĀ Hart-Scott-Rodino Antitrust Improvements Act, larger companies attempting to merge must first notify the Federal Trade Commission and the Department of Justice’s Antitrust Division prior to consummating a merger.[46]Ā These agencies then review the proposed merger first by defining what the market is and then determining theĀ market concentrationĀ using theĀ Herfindahl-Hirschman IndexĀ (HHI) and each company’sĀ market share.[46]Ā The government looks to avoid allowing a company to developĀ market power, which if left unchecked could lead to monopoly power.[46]
FTC v. Sperry & Hutchinson Trading Stamp Co., 405 U.S. 233 (1972). Case held that the FTC is entitled to bring enforcement action against businesses that act unfairly, as where supermarket trading stamps company injured consumers by prohibiting them from exchanging trading stamps. The FTC could prevent the restrictive practice asĀ unfair, even though there was no specific antitrust violation.
International cooperation
Despite considerable effort by theĀ Clinton administration, the Federal government attempted to extend antitrust cooperation with other countries for mutual detection, prosecution and enforcement. A bill was unanimously passed by theĀ US Congress;[48]Ā however by 2000 only oneĀ treatyĀ has been signed[49]Ā withĀ Australia.[50]Ā OnĀ 3 July 2017Ā theĀ Australian Competition and Consumer CommissionĀ announced it was seeking explanations from a US company,Ā Apple Inc.Ā In relation to potentially anticompetitive behaviour against an Australian bank in possible relation toĀ Apple Pay.[51]Ā It is not known whether the treaty could influence the enquiry or outcome.
In many cases large US companies tend to deal with overseas antitrust within the overseas jurisdiction, autonomous of US laws, such as inĀ Microsoft Corp v CommissionĀ and more recently,Ā GoogleĀ vĀ European UnionĀ where the companies were heavily fined.[52]Ā Questions have been raised with regards to the consistency of antitrust between jurisdictions where the same antitrust corporate behaviour, and similar antitrust legal environment, is prosecuted in one jurisdiction but not another.[53]
Hawaii v. Standard Oil Co. of Cal., 405 U.S. 251 (1972) state governments do not have a cause of action to sue for consequential loss for damage to their general economies after an antitrust violation is found.
Private suits]
Private civil suits may be brought, in both state and federal court, against violators of state and federal antitrust law. Federal antitrust laws, as well as most state laws, provide for triple damages against antitrust violators in order to encourage private lawsuit enforcement of antitrust law. Thus, if a company is sued for monopolizing a market and the jury concludes the conduct resulted in consumers’ being overcharged $200,000, that amount will automatically be tripled, so the injured consumers will receive $600,000. The United States Supreme Court summarized why Congress authorized private antitrust lawsuits in the caseĀ Hawaii v. Standard Oil Co. of Cal., 405 U.S. 251, 262 (1972):
Every violation of the antitrust laws is a blow to the free-enterprise system envisaged by Congress. This system depends on strong competition for its health and vigor, and strong competition depends, in turn, on compliance with antitrust legislation. In enacting these laws, Congress had many means at its disposal to penalize violators. It could have, for example, required violators to compensate federal, state, and local governments for the estimated damage to their respective economies caused by the violations. But, this remedy was not selected. Instead, Congress chose to permit all persons to sue to recover three times their actual damages every time they were injured in their business or property by an antitrust violation. By offering potential litigants the prospect of a recovery in three times the amount of their damages, Congress encouraged these persons to serve as “private attorneys general”.
Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251 (1946) treble damages awarded under the Clayton Act Ā§4 needed not to be mathematically precise, but based on a reasonable estimate of loss, and not speculative. This meant a jury could set a higher estimate of how much movie theaters lost, when the film distributors conspired with other theaters to let them show films first.
Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) indirect purchasers of goods where prices have been raised have no standing to sue. Only the direct contractors of cartel members may, to avoid double or multiple recovery.
The Supreme Court calls the Sherman Antitrust Act a “charter of freedom”, designed to protect free enterprise in America.[54]Ā One view of the statutory purpose, urged for example by Justice Douglas, was that the goal was not only to protect consumers, but at least as importantly to prohibit the use of power to control the marketplace.[55]
We have here the problem of bigness. Its lesson should by now have been burned into our memory by Brandeis. The Curse of Bigness shows how size can become a menace–both industrial and social. It can be an industrial menace because it creates gross inequalities against existing or putative competitors. It can be a social menace … In final analysis, size in steel is the measure of the power of a handful of men over our economy … The philosophy of the Sherman Act is that it should not exist … Industrial power should be decentralized. It should be scattered into many hands so that the fortunes of the people will not be dependent on the whim or caprice, the political prejudices, the emotional stability of a few self-appointed men … That is the philosophy and the command of the Sherman Act. It is founded on a theory of hostility to the concentration in private hands of power so great that only a government of the people should have it.
āāDissenting opinion of Justice Douglas inĀ United States v. Columbia Steel Co.[55]
By contrast, efficiency argue that antitrust legislation should be changed to primarily benefit consumers, and have no other purpose.Ā Free marketĀ economistĀ Milton FriedmanĀ states that he initially agreed with the underlying principles of antitrust laws (breaking upĀ monopoliesĀ andĀ oligopoliesĀ and promoting more competition), but that he came to the conclusion that they do more harm than good.[56]Ā Thomas SowellĀ argues that, even if a superior business drives out a competitor, it does not follow that competition has ended:
In short, the financial demise of a competitor is not the same as getting rid of competition. The courts have long paid lip service to the distinction that economists make between competitionāa set of economic conditionsāand existing competitors, though it is hard to see how much difference that has made in judicial decisions. Too often, it seems, if you have hurt competitors, then you have hurt competition, as far as the judges are concerned.[57]
Alan GreenspanĀ argues that the very existence of antitrust laws discourages businessmen from some activities that might be socially useful out of fear that their business actions will be determined illegal and dismantled by government. In his essay entitledĀ Antitrust,Ā he says: “No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible.” Those, like Greenspan, who oppose antitrust tend not to support competition as an end in itself but for its resultsālow prices. As long as a monopoly is not aĀ coercive monopolyĀ where a firm is securely insulated fromĀ potentialĀ competition, it is argued that the firm must keep prices low in order to discourage competition from arising. Hence, legal action is uncalled for and wrongly harms the firm and consumers.[58]
Thomas DiLorenzo, an adherent of theĀ Austrian SchoolĀ of economics, found that the “trusts” of the late 19th century were dropping their prices faster than the rest of the economy, and he holds that they were not monopolists at all.[59]Ā Ayn Rand, the American writer, provides a moral argument against antitrust laws. She holds that these laws in principle criminalize any person engaged in making a business successful, and, thus, are gross violations of their individual expectations.[60]Ā Such laissez faire advocates suggest that only aĀ coercive monopolyĀ should be broken up, that is the persistent, exclusive control of a vitally needed resource, good, or service such that the community is at the mercy of the controller, and where there are no suppliers of the same or substitute goods to which the consumer can turn. In such a monopoly, the monopolist is able to make pricing and production decisions without an eye on competitive market forces and is able to curtail production toĀ price-gougeĀ consumers. Laissez-faire advocates argue that such a monopoly can only come about through the use of physical coercion or fraudulent means by the corporation or by government intervention and that there is no case of a coercive monopoly ever existing that was not the result of government policies.
JudgeĀ Robert Bork‘s writings on antitrust law (particularlyĀ The Antitrust Paradox), along with those ofĀ Richard PosnerĀ and otherĀ law and economicsĀ thinkers, were heavily influential in causing a shift in the U.S. Supreme Court’s approach to antitrust laws since the 1970s, to be focused solely on what is best for the consumer rather than the company’s practices.[45]
ā Industrial concentrationā refers to a structural characteristic of the business sector. It is the degree to which production in an industryāor in the economy as a wholeāis dominated by a few large firms. Once assumed to be a symptom of āmarket failure,ā concentration is, for the most part, seen nowadays as an indicator of superior economic performance. In the early 1970s, Yale Brozen, a key contributor to the new thinking, called the professionās about-face on this issue āa revolution in economics.ā Industrial concentration remains a matter of public policy concern even so.
The Measurement of Industrial Concentration
Industrial concentration was traditionally summarized by the concentration ratio, which simply adds the market shares of an industryās four, eight, twenty, or fifty largest companies. In 1982, when new federal merger guidelines were issued, the Herfindahl-Hirschman Index (HHI) became the standard measure of industrial concentration. Suppose that an industry contains ten firms that individually account for 25, 15, 12, 10, 10, 8, 7, 5, 5, and 3 percent of total sales. The four-firm concentration ratio for this industryāthe most widely used numberāis 25 + 15 + 12 + 10 = 62, meaning that the top four firms account for 62 percent of the industryās sales. The HHI, by contrast, is calculated by summing the squared market shares of all of the firms in the industry: 252Ā + 152Ā + 122Ā + 102Ā + 102Ā + 82Ā + 72Ā + 52Ā + 52Ā + 32Ā = 1,366. The HHI has two distinct advantages over the concentration ratio. It usesĀ informationĀ about the relative sizes of all of an industryās members, not just some arbitrary subset of the leading companies, and it weights the market shares of the largest enterprises more heavily.
In general, the fewer the firms and the more unequal the distribution of market shares among them, the larger the HHI. Two four-firm industries, one containing equalsized firms each accounting for 25 percent of total sales, the other with market shares of 97, 1, 1, and 1, have the same four-firm concentration ratio (100) but very different HHIs (2,500 versus 9,412). An industry controlled by a single firm has an HHI of 1002Ā = 10,000, while the HHI for an industry populated by a very large number of very small firms would approach the indexās theoretical minimum value of zero.
Concentration in the U.S. Economy
According to the U.S. Department of Justiceās merger guidelines, an industry is considered āconcentratedā if the HHI exceeds 1,800; it is āunconcentratedā if the HHI is below 1,000. Since 1982, HHIs based on the value of shipments of the fifty largest companies have been calculated and reported in the manufacturing series of the Economic Census.1Ā Concentration levels exceeding 1,800 are rare. The exceptions include glass containers (HHI = 2,959.9 in 1997), motor vehicles (2,505.8), and breakfast cereals (2,445.9). Cigarette manufacturing also is highly concentrated, but its HHI is not reported owing to the small number of firms in that industry, the largest four of which accounted for 89 percent of shipments in 1997. At the other extreme, the HHI for machine shops was 1.9 the same year.
Whether an industry is concentrated hinges on how narrowly or broadly it is defined, both in terms of the product it produces and the extent of the geographic area it serves. The U.S. footwear manufacturing industry as a whole is very unconcentrated (HHI = 317 in 1997); the level of concentration among house slipper manufacturers is considerably higher, though (HHI = 2,053.4). Similarly, althoughĀ the national ready-mix concrete industry is unconcentrated (HHI = 29.4), concentration in that industry undoubtedly is much higher in specific cities and towns that typically are served by only a handful of such firms.
These examples suggest that concentration varies substantially across U.S. industries. Trends in concentration vary from industry to industry, but most changes in concentration proceed at a glacial pace. So, too, does aggregate concentration: the fifty largest U.S. companies accounted for 24 percent of manufacturing value added (revenue minus the costs of fuel, power, and raw materials) in 1997, the same percentage as in 1992 (and as in 1954, for that matter). On some measuresāthe percentages of total employment and total assets controlled by the nationās 50, 100, or 200 largest firmsāindustrial concentration in the United States actually has declined since World War II.
Concentration indexes calculated for a particular year conceal the identities of the industryās members. In reality, turnover among the nationās leading firms is fairly regular over long time horizons, averaging between 2 and 5 percent annually. Success at one point in time does not guarantee survival: only three of the ten largest U.S. companies in 1909 made the top one hundred list in 1987. Available concentration indexes, which are based solely on domestic manufacturing data, also ignore the global dimensions of industrial production.
The Causes and Consequences of Industrial Concentration
Some industries are more concentrated than others because of technical properties of their production technologies or unique characteristics of the markets they serve. Economies of scale, which allow firms to reduce their average costs as they increase their rates of output, favor large-scale production over small-scale production. Thus, industries for which scale economies are important (e.g., auto manufacturing and petroleum refining) are expected to be more concentrated than others in which costs do not fall as rapidly as output expands (e.g., cut-and-sew apparel manufacturing). Similarly, concentration tends to be higher in industries, such as aircraft and semiconductor manufacturing, where learning curves generate substantial production-cost savings as additional units of the original model or design are made.
Owing to so-called network effects, some goods increase in value as more people use them. Computer operating systems, word-processing software, and video recorder-players are examples of such goods, as are literal networks such as railroads, commercial air transportation, and wire line telephony. Because standard technologies and protocols that provide compatible interconnections are critical to the realization of network effectsā allowing faxes to be sent and received or computer users easily to exchange filesāconsumers rationally favor large networks over small ones. The necessity of building networks that accommodate critical masses of users means that only a few providers will achieve dominant positions, and therefore the industry will tend to be highly concentrated. Such domination is likely to be temporary, however, since consumers will switch networks when benefits outweigh costs, as illustrated by the replacement of Betaformatted video tapes by VHS formatted ones, which in turn are being replaced by DVDs.
Industrial concentration also is promoted by barriers to entry, which make it difficult for new firms to displace established firms. Barriers to entry are erected by government-conferred privileges such as patents, copyrights and trademarks, exclusive franchises, and licensing requirements. Existing firms may possess other advantages over newcomers, including lower costs and brand loyalty, which make entry more difficult.
The fundamental public policy question posed by industrial concentration is this: Are concentrated industries somehow less competitive than unconcentrated ones? Concentration would have adverse effects if it bred market powerāthe ability to charge prices in excess of costsāthereby increasing industryĀ profitsĀ at consumersā expense. In theory, industrial concentration can facilitate the exercise of market power if the members of the industry agree to cooperate rather than compete, or if the industryās dominant firm takes the lead in setting prices that rivals follow. And, indeed, the evidence generated by hundreds of econometric studies suggests that concentrated industries are more profitable than unconcentrated ones. But that evidence begs the question. It does not tell us whether profits are higher in concentrated industries because of market power effects or because the firms in those industries use resources more efficiently (i.e., have lower costs).
Some economists have found that concentration leads to higher prices, but the link observed typically is both small (prices elevated by 1ā5 percent) and statistically weak. A detailed econometric study by Sam Peltzman (1977) reaches the opposite conclusion. He reports that profits are higher in concentrated industries not because prices are higher, but because they do not decline as much as costs do as efficient firms expand their scales of operation. Analyses by Yale Brozen (1982), Harold Demsetz (1974), and others have found that the positive relation between industrial concentration and profits disappears altogether when firm size is taken into account. These results are consistent with the hypothesis that some industries areĀ more concentrated than others because large firms have significant cost advantages over small firms. There is, in short, little unequivocal evidence that industrial concentration per se is worrisome. Just the reverse seems to be true.
Public Policies Toward Industrial Concentration
Consolidating production in the hands of fewer firms through mergers and acquisitions obviously is the most direct route to industrial concentration. Preventing transactions that, by eliminating one or more competitors, would lead to undue increases in concentration and the possible exercise of market power by the remaining firms is the mandate of the two federalĀ antitrustĀ agenciesāthe U.S. Department of Justice and the Federal Trade Commissionāunder section 7 of the Clayton Act (1914). That mandate was strengthened considerably by the Hart-Scott-Rodino Act (1978), which requires firms to notify the antitrust authorities of their intention to merge and then to hold the transaction in abeyance until it has been reviewed. Most transactions with summed firm values of fifteen million dollars or more had to file premerger notifications initially; in February 2001 that threshold was raised to fifty million dollars and indexed forĀ inflation.
Two important factors that antitrust authorities consider in deciding whether to allow a proposed merger to proceed are the level of market concentration if the merger is consummated and the change in market concentration from its premerger level. (Note that the āmarketā considered relevant for merger analysis hardly ever corresponds to the āindustryā defined by the Economic Census; antitrust markets may be defined more broadly or more narrowly; in practice, the definition of the relevant market usually is the key to whether a merger is lawful or not.) Concentration thresholds are laid out in the Justice Departmentās merger guidelines, first promulgated in 1968, revised substantially in 1982, and amended several times since.
The guidelines state that proposed mergers are unlikely to be challenged if the postmerger market is unconcentrated (HHI remains below 1,000). However, mergers generally will not be approved if, following consummation, market concentration falls within the 1,000ā1,800 range, and the HHI increases by more than 100 points or, if the postmerger HHI is 1,800 or more, concentration increases by more than 50 points.2Ā Exceptions are provided when the merging firms can demonstrate significant cost savings, when barriers to entry are low, or when one of the mergerās partners would fail otherwise. (In theĀ European Union, by contrast,Ā competitionĀ policy, including merger law enforcement, is shaped principally by fears of possible āabuses of dominant market positionsā by large firms.)
Studies examining the enforcement of section 7 under the merger guidelines have found that they are not always followed closely. Mergers are, indeed, more likely to be challenged the greater the level of market concentration and the higher the barriers to entry are thought to be. But law enforcement also is found to be influenced significantly by political pressures on the antitrust authorities from groups that stand to lose if a merger is approved, including rivals worried that the transaction will create a more effective competitor. In fact, studies of stock-market reactions to news that a merger is likely to be challenged typically find competitors to be the main beneficiaries of such decisions.
About the Author
William F. Shughart II is F. A. P. Barnard Distinguished Professor of Economics at the University of Mississippi. He was special assistant to the director of the Federal Trade Commissionās Bureau of Economics during the Reagan administration and currently is editor in chief ofĀ Public ChoiceĀ and associate editor of theĀ Southern Economic Journal.
Further Reading
Introductory
Adams, Walter, and James Brock.Ā The Structure of American Industry.Ā 11th ed. Upper Saddle River, N.J.: Pearson/Prentice Hall, 2005.
Cabral, LuĆs M. B.Ā Introduction to Industrial Organization.Ā Cambridge: MIT Press, 2000.
Kwoka, John E. Jr., and Lawrence J. White.Ā The Antitrust Revolution: Economics, Competition, and Policy.Ā 4th ed. New York: Oxford University Press, 2004.
Pautler, Paul A. āEvidence on Mergers and Acquisitions.āĀ Antitrust BulletinĀ 48 (Spring 2003): 119ā221.
Shughart, William F. II.Ā Antitrust Policy and Interest-Group Politics.Ā New York: Quorum Books, 1990.
Shughart, William F. II. āRegulation and Antitrust.ā In Charles K. Rowley and Friedrich Schneider, eds.,Ā The Encyclopedia of Public Choice.Ā Vol. 1. Boston: Kluwer, 2004. Pp. 263ā283.
Advanced
Brozen, Yale.Ā Concentration, Mergers, and Public Policy.Ā New York: Macmillan, 1982.
Carlton, Dennis W., and Jeffrey M. Perloff.Ā Modern Industrial Organization.Ā 3d ed. Reading, Mass.: Addison-Wesley, 2000.
Coate, Malcolm B., Richard S. Higgins, and Fred S. Mc-Chesney. āBureaucracy and Politics in FTC Merger Challenges.āĀ Journal of Law and EconomicsĀ 33 (October 1990): 463ā482.
Demsetz, Harold. āTwo Systems of Belief About Monopoly.ā In Harvey J. Goldschmid, H. Michael Mann, and J. Fred Weston, eds.,Ā Industrial Concentration: The New Learning.Ā Boston: Little, Brown, 1974.
Goldschmid, Harvey J., H. Michael Mann, and J. Fred Weston, eds.Ā Industrial Concentration: The New Learning.Ā Boston: Little, Brown, 1974.
McChesney, Fred S., and William F. Shughart II, eds.Ā The Causes and Consequences of Antitrust: The Public-Choice Perspective.Ā Chicago: University of Chicago Press, 1995.
Peltzman, Sam. āThe Gains and Losses from Industrial Concentration.āĀ Journal of Law and EconomicsĀ 20 (April 1977): 229ā263.
Shy, Oz.Ā The Economics of Network Industries.Ā Cambridge: Cambridge University Press, 2001.
Stiglitz, Joseph E., and G. Frank Mathewson, eds.Ā New Developments in the Analysis of Market Structure.Ā Cambridge: MIT Press, 1986.
The Economic Census has been conducted every five years since 1967, and before that for 1954, 1958, and 1963. Prior to 1997, it was known as the Census of Manufactures. That same year, industries began being categorized according to the North American Industry Classification System (NAICS), which replaced the Standard Industrial Classification (SIC) codes used until 1992. Industrial concentration also is reported by the Economic Census on the basis of value added. Industry concentration ratios and HHIs for the 1992 and 1997 economic censuses can be accessed online at:Ā http://www.census.gov/epcd/www/concentration.html. Information on industrial concentration is not readily available for sectors of the economy other than manufacturing.
When firms with market shares ofĀ s1Ā andĀ s2Ā merge, the HHI increases by (s1Ā +Ā s2)2Ā āĀ s12Ā āĀ s22Ā = 2s1s2. So, for example, if a merger is proposed between the two largest firms in the hypothetical ten-firm industry described earlier, the HHI would increase by 2 Ć 25 Ć 15 = 750 points (from 1,366 to 2,116). According to the guidelines, that merger would in all likelihood be challenged.
The decentralized control of each cryptocurrency works throughĀ distributed ledgerĀ technology, typically aĀ blockchain, that serves as a public financial transaction database.[5]
Bitcoin, first released as open-source software in 2009, is generally considered the first decentralized cryptocurrency.[6]Ā Since the release of bitcoin, over 4,000Ā altcoinsĀ (alternative variants of bitcoin, or other cryptocurrencies) have been created.
In 1983, the American cryptographerĀ David ChaumĀ conceived an anonymous cryptographicĀ electronic moneyĀ calledĀ ecash.[7][8]Ā Later, in 1995, he implemented it throughĀ Digicash,[9]Ā an early form of cryptographic electronic payments which required user software in order to withdraw notes from a bank and designate specific encrypted keys before it can be sent to a recipient. This allowed the digital currency to be untraceable by the issuing bank, the government, or any third party.
In 1996, theĀ NSAĀ published a paper entitledĀ How to Make a Mint: the Cryptography of Anonymous Electronic Cash, describing a Cryptocurrency system first publishing it in a MIT mailing list[10]Ā and later in 1997, inĀ The American Law ReviewĀ (Vol. 46, Issue 4).[11]
In 1998,Ā Wei DaiĀ published a description of “b-money”, characterized as an anonymous, distributed electronic cash system.[12]Ā Shortly thereafter,Ā Nick SzaboĀ describedĀ bit gold.[13]Ā LikeĀ bitcoinĀ and other cryptocurrencies that would follow it, bit gold (not to be confused with the later gold-based exchange,Ā BitGold) was described as an electronic currency system which required users to complete aĀ proof of workĀ function with solutions being cryptographically put together and published. A currency system based on aĀ reusable proof of workĀ was later created by Hal Finney who followed the work of Dai and Szabo.[citation needed]
The first decentralized cryptocurrency, bitcoin, was created in 2009 byĀ pseudonymousĀ developerĀ Satoshi Nakamoto. It usedĀ SHA-256, a cryptographic hash function, as itsĀ proof-of-workĀ scheme.[14][15]Ā In April 2011,Ā NamecoinĀ was created as an attempt at forming a decentralizedĀ DNS, which would makeĀ internet censorshipĀ very difficult. Soon after, in October 2011,Ā LitecoinĀ was released. It was the first successful cryptocurrency to useĀ scryptĀ as its hash function instead of SHA-256. Another notable cryptocurrency,Ā PeercoinĀ was the first to use a proof-of-work/proof-of-stake hybrid.[16]
On 6 August 2014, the UK announced itsĀ TreasuryĀ had been commissioned to do a study of cryptocurrencies, and what role, if any, they can play in the UK economy. The study was also to report on whether regulation should be considered.[17]
Formal definition
According to Jan Lansky, a cryptocurrency is a system that meets six conditions:[18]
The system does not require a central authority, its state is maintained through distributed consensus.
The system keeps an overview of cryptocurrency units and their ownership.
The system defines whether new cryptocurrency units can be created. If new cryptocurrency units can be created, the system defines the circumstances of their origin and how to determine the ownership of these new units.
Ownership of cryptocurrency units can be proved exclusivelyĀ cryptographically.
The system allows transactions to be performed in which ownership of the cryptographic units is changed. A transaction statement can only be issued by an entity proving the current ownership of these units.
If two different instructions for changing the ownership of the same cryptographic units areĀ simultaneouslyĀ entered, the system performs at most one of them.
The term altcoin has various similar definitions. Stephanie Yang ofĀ The Wall Street JournalĀ defined altcoins as “alternative digital currencies,”[20]Ā while Paul Vigna, also ofĀ The Wall Street Journal, described altcoins as alternative versions of bitcoin.[21]Ā Aaron Hankins of theĀ MarketWatchĀ refers to any cryptocurrencies other than bitcoin as altcoins.[22]
Crypto token
AĀ blockchainĀ account can provide functions other than making payments, for example inĀ decentralized applicationsĀ orĀ smart contracts. In this case, the units or coins are sometimes referred to as crypto tokens (or cryptotokens).
Architecture
Decentralized cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is defined when the system is created and which is publicly known. In centralized banking and economic systems such as theĀ Federal Reserve System, corporate boards or governments control the supply of currency by printing units ofĀ fiat moneyĀ or demanding additions to digital banking ledgers. In case of decentralized cryptocurrency, companies or governments cannot produce new units, and have not so far provided backing for other firms, banks or corporate entities which hold asset value measured in it. The underlying technical system upon which decentralized cryptocurrencies are based was created by the group or individual known asĀ Satoshi Nakamoto.[23]
As of May 2018, over 1,800 cryptocurrency specifications existed.[24]Ā Within a cryptocurrency system, the safety, integrity and balance ofĀ ledgersĀ is maintained by a community of mutually distrustful parties referred to asĀ miners: who use their computers to help validate and timestamp transactions, adding them to the ledger in accordance with a particular timestamping scheme.[14]
Most cryptocurrencies are designed to gradually decrease production of that currency, placing a cap on the total amount of that currency that will ever be in circulation.[25]Ā Compared with ordinary currencies held by financial institutions or kept asĀ cashĀ on hand, cryptocurrencies can be more difficult forĀ seizureĀ by law enforcement.[1]Ā This difficulty is derived from leveraging cryptographic technologies.
The validity of each cryptocurrency’s coins is provided by aĀ blockchain. A blockchain is a continuously growing list ofĀ records, calledĀ blocks, which are linked and secured usingĀ cryptography.[23][26]Ā Each block typically contains aĀ hashĀ pointer as a link to a previous block,[26]Ā aĀ timestampĀ and transaction data.[27]Ā By design, blockchains are inherently resistant to modification of the data. It is “an open,Ā distributed ledgerĀ that can record transactions between two parties efficiently and in a verifiable and permanent way”.[28]Ā For use as a distributed ledger, a blockchain is typically managed by aĀ peer-to-peerĀ network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.
Blockchains areĀ secure by designĀ and are an example of a distributed computing system with highĀ Byzantine fault tolerance.Ā DecentralizedĀ consensus has therefore been achieved with a blockchain.[29]Ā Blockchains solve theĀ double-spendingĀ problem without the need of a trusted authority or centralĀ server, assuming noĀ 51% attackĀ (that has worked against several cryptocurrencies).
Timestamping
Cryptocurrencies use various timestamping schemes to “prove” the validity of transactions added to the blockchain ledger without the need for a trusted third party.
The first timestamping scheme invented was theĀ proof-of-workĀ scheme. The most widely used proof-of-work schemes are based on SHA-256 andĀ scrypt.[16]
Some other hashing algorithms that are used for proof-of-work includeĀ CryptoNight,Ā Blake,Ā SHA-3, andĀ X11.
The proof-of-stake is a method of securing a cryptocurrency network and achieving distributed consensus through requesting users to show ownership of a certain amount of currency. It is different from proof-of-work systems that run difficult hashing algorithms to validate electronic transactions. The scheme is largely dependent on the coin, and there’s currently no standard form of it. Some cryptocurrencies use a combinedĀ proof-of-work/proof-of-stakeĀ scheme.[16]
In cryptocurrency networks,Ā miningĀ is a validation of transactions. For this effort, successful miners obtain new cryptocurrency as a reward. The reward decreasesĀ transaction feesĀ by creating a complementary incentive to contribute to the processing power of the network. The rate of generating hashes, which validate any transaction, has been increased by the use of specialized machines such asĀ FPGAsĀ andĀ ASICsĀ running complex hashing algorithms like SHA-256 and Scrypt.[30]Ā This arms race for cheaper-yet-efficient machines has been on since the day the first cryptocurrency, bitcoin, was introduced in 2009.[30]Ā With more people venturing into the world of virtual currency, generating hashes for this validation has become far more complex over the years, with miners having to invest large sums of money on employing multiple high performance ASICs. Thus the value of the currency obtained for finding a hash often does not justify the amount of money spent on setting up the machines, the cooling facilities to overcome the enormous amount of heat they produce, and the electricity required to run them.[30][31]
SomeĀ miners pool resources, sharing theirĀ processing powerĀ over a network to split the reward equally, according to the amount of work they contributed to the probability of finding aĀ block. A “share” is awarded to members of the mining pool who present a valid partialĀ proof-of-work.
As of FebruaryĀ 2018, the Chinese Government halted trading of virtual currency, banned initial coin offerings and shut down mining. Some Chinese miners have since relocated to Canada.[32]Ā One company is operating data centers for mining operations at Canadian oil and gas field sites, due to low gas prices.[33]Ā In June 2018,Ā Hydro QuebecĀ proposed to the provincial government to allocate 500 MW to crypto companies for mining.[34]Ā According to a February 2018 report fromĀ Fortune,[35]Ā Iceland has become a haven for cryptocurrency miners in part because of its cheap electricity. Prices are contained because nearly all of the country’s energy comes from renewable sources, prompting more mining companies to consider opening operations in Iceland.[citation needed]
In March 2018, a town in Upstate New York put an 18-month moratorium on all cryptocurrency mining in an effort to preserve natural resources and the “character and direction” of the city.[36]
GPU price rise
An increase in cryptocurrency mining increased the demand ofĀ graphics cardsĀ (GPU) in 2017.[37]Ā Popular favorites of cryptocurrency miners such as Nvidia’sĀ GTX 1060Ā andĀ GTX 1070Ā graphics cards, as well as AMD’s RX 570 and RX 580 GPUs, doubled or tripled in priceĀ ā or were out of stock.[38]Ā A GTX 1070 Ti which was released at a price of $450 sold for as much as $1100. Another popular card GTX 1060’s 6 GB model was released at an MSRP of $250, sold for almost $500. RX 570 and RX 580 cards fromĀ AMDĀ were out of stock for almost a year. Miners regularly buy up the entire stock of new GPU’s as soon as they are available.[39]
Nvidia has asked retailers to do what they can when it comes to selling GPUs to gamers instead of miners. “Gamers come first forĀ Nvidia,” said Boris Bƶhles, PR manager forĀ NvidiaĀ in the German region.[40]
Wallets
An example paper printable bitcoin wallet consisting of one bitcoin address for receiving and the corresponding private key for spending
AĀ cryptocurrency walletĀ stores theĀ public and private “keys”Ā or “addresses” which can be used to receive or spend the cryptocurrency. With the private key, it is possible to write in the public ledger, effectively spending the associated cryptocurrency. With the public key, it is possible for others to send currency to the wallet.
Anonymity
Bitcoin is pseudonymous rather than anonymous in that the cryptocurrency within a wallet is not tied to people, but rather to one or more specific keys (or “addresses”).[41]Ā Thereby, bitcoin owners are not identifiable, but all transactions are publicly available in the blockchain. Still,Ā cryptocurrency exchangesĀ are often required by law to collect the personal information of their users.[citation needed]
Additions such asĀ Zerocoin, Zerocash andĀ CryptoNoteĀ have been suggested, which would allow for additionalĀ anonymityĀ and fungibility.[42][43]
Most cryptocurrency tokens are fungible and interchangeable. However, uniqueĀ non-fungible tokensĀ also exist. Such tokens can serve as assets in games likeĀ CryptoKitties.
Economics
Cryptocurrencies are used primarily outside existing banking and governmental institutions and are exchanged over the Internet.
Transaction fees
Transaction fees for cryptocurrency depend mainly on theĀ supplyĀ of network capacity at the time, versus theĀ demandĀ from the currency holder for a faster transaction. The currency holder can choose a specific transaction fee, while network entities process transactions in order of highest offered fee to lowest. Cryptocurrency exchanges can simplify the process for currency holders by offering priority alternatives and thereby determine which fee will likely cause the transaction to be processed in the requested time.
ForĀ ether, transaction fees differ by computational complexity, bandwidth use, and storage needs, while bitcoin transaction fees differ by transaction size and whether the transaction usesĀ SegWit. In September 2018, the median transaction fee for ether corresponded to $0.017,[44]Ā while for bitcoin it corresponded to $0.55.[45]
Cryptocurrency exchangesĀ allow customers to trade cryptocurrencies for other assets, such as conventionalĀ fiat money, or to trade between different digital currencies.
Atomic swaps
Atomic swaps are a mechanism where one cryptocurrency can be exchanged directly for another cryptocurrency, without the need for a trusted third party such as an exchange.
Jordan Kelley, founder ofĀ Robocoin, launched the firstĀ bitcoin ATMĀ in the United States on 20 February 2014. The kiosk installed in Austin, Texas is similar to bank ATMs but has scanners to read government-issued identification such as a driver’s license or a passport to confirm users’ identities.[46]
Initial coin offerings
AnĀ initial coin offeringĀ (ICO) is a controversial means of raising funds for a new cryptocurrency venture. An ICO may be used by startups with the intention of avoiding regulation. However, securities regulators in many jurisdictions, including in the U.S., and Canada have indicated that if a coin or token is an “investment contract” (e.g., under the Howey test, i.e., an investment of money with a reasonable expectation of profit based significantly on the entrepreneurial or managerial efforts of others), it is a security and is subject to securities regulation. In an ICO campaign, a percentage of the cryptocurrency (usually in the form of “tokens”) is sold to early backers of the project in exchange for legal tender or other cryptocurrencies, often bitcoin or ether.[47][48][49]
According toĀ PricewaterhouseCoopers, four of the 10 biggest proposed initial coin offerings have usedĀ SwitzerlandĀ as a base, where they are frequently registered as non-profit foundations. The Swiss regulatory agencyĀ FINMAĀ stated that it would take a “balanced approach” to ICO projects and would allow “legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with national laws protecting investors and the integrity of the financial system.” In response to numerous requests by industry representatives, a legislative ICO working group began to issue legal guidelines in 2018, which are intended to remove uncertainty from cryptocurrency offerings and to establish sustainable business practices.[50]
The legal status of cryptocurrencies varies substantially from country to country and is still undefined or changing in many of them. While some countries have explicitly allowed their use and trade,[51]Ā others have banned or restricted it. According to theĀ Library of Congress, an “absolute ban” on trading or using cryptocurrencies applies in eight countries: Algeria, Bolivia, Egypt, Iraq, Morocco, Nepal, Pakistan, and the United Arab Emirates. An “implicit ban” applies in another 15 countries, which include Bahrain, Bangladesh, China, Colombia, the Dominican Republic, Indonesia, Iran, Kuwait, Lesotho, Lithuania, Macau, Oman, Qatar, Saudi Arabia and Taiwan.[52]Ā In the United States and Canada, state and provincial securities regulators, coordinated through theĀ North American Securities Administrators Association, are investigating “bitcoin scams” andĀ ICOsĀ in 40 jurisdictions.[53]
Various government agencies, departments, and courts have classified bitcoin differently.Ā China Central BankĀ banned the handling of bitcoins by financial institutions inĀ ChinaĀ in early 2014.
In Russia, though cryptocurrencies are legal, it is illegal to actually purchase goods with any currency other than theĀ Russian ruble.[54]Ā Regulations and bans that apply to bitcoin probably extend to similar cryptocurrency systems.[55]
Cryptocurrencies are a potential tool to evade economic sanctions for example againstĀ Russia,Ā Iran, orĀ Venezuela. Russia also secretly supported Venezuela with the creation of theĀ petroĀ (El Petro), a national cryptocurrency initiated by theĀ MaduroĀ government to obtain valuable oil revenues by circumventing US sanctions.[citation needed]
In August 2018, theĀ Bank of ThailandĀ announced its plans to create its own cryptocurrency, the Central Bank Digital Currency (CBDC).[56]
On 25 March 2014, the United StatesĀ Internal Revenue ServiceĀ (IRS) ruled that bitcoin will be treated as property for tax purposes. This means bitcoin will be subject toĀ capital gains tax.[62]Ā In a paper published by researchers from Oxford and Warwick, it was shown that bitcoin has some characteristics more like the precious metals market than traditional currencies, hence in agreement with the IRS decision even if based on different reasons.[63]
In July 2019, the IRS started sending letters to cryptocurrency owners warning them to amend their returns and pay taxes.[64]
The legal concern of an unregulated global economy
As the popularity of and demand for online currencies has increased since the inception of bitcoin in 2009,[65]Ā so have concerns that such an unregulated person to person global economy that cryptocurrencies offer may become a threat to society. Concerns abound that altcoins may become tools for anonymous web criminals.[66]
Cryptocurrency networks display a lack of regulation that has been criticized as enabling criminals who seek to evade taxes andĀ launder money.
Transactions that occur through the use and exchange of these altcoins are independent from formal banking systems, and therefore can make tax evasion simpler for individuals. Since charting taxable income is based upon what a recipient reports to the revenue service, it becomes extremely difficult to account for transactions made using existing cryptocurrencies, a mode of exchange that is complex and difficult to track.[66]
Systems of anonymity that most cryptocurrencies offer can also serve as a simpler means to launder money. Rather than laundering money through an intricate net of financial actors and offshore bank accounts, laundering money through altcoins can be achieved through anonymous transactions.[66]
In February 2014 the world’s largest bitcoin exchange,Ā Mt. Gox, declaredĀ bankruptcy. The company stated that it had lost nearly $473 million of their customers’ bitcoins likely due to theft. This was equivalent to approximately 750,000 bitcoins, or about 7% of all the bitcoins in existence. The price of a bitcoin fell from a high of about $1,160 in December to under $400 in February.[67]
Two members of the Silk Road Task Forceāa multi-agency federal task force that carried out the U.S. investigation ofĀ Silk Roadāseized bitcoins for their own use in the course of the investigation.[68]Ā DEAĀ agent Carl Mark Force IV, who attempted to extort Silk Road founderĀ Ross UlbrichtĀ (“Dread Pirate Roberts”), pleaded guilty to money laundering,Ā obstruction of justice, and extortion under color of official right, and was sentenced to 6.5 years in federal prison.[68]Ā U.S. Secret ServiceĀ agent Shaun Bridges pleaded guilty to crimes relating to his diversion of $800,000 worth of bitcoins to his personal account during the investigation, and also separately pleaded guilty to money laundering in connection with another cryptocurrency theft; he was sentenced to nearly eight years in federal prison.[69]
Homero Josh Garza, who founded the cryptocurrency startups GAW Miners and ZenMiner in 2014, acknowledged in aĀ plea agreementĀ that the companies were part of aĀ pyramid scheme, and pleaded guilty toĀ wire fraudĀ in 2015. The U.S.Ā Securities and Exchange CommissionĀ separately brought a civil enforcement action against Garza, who was eventually ordered to pay a judgment of $9.1 million plus $700,000 in interest. The SEC’s complaint stated that Garza, through his companies, had fraudulently sold “investment contracts representing shares in the profits they claimed would be generated” from mining.[70]
On 21 November 2017, theĀ Tether cryptocurrencyĀ announced they were hacked, losing $31 million in USDT from their primary wallet.[71]Ā The company has ‘tagged’ the stolen currency, hoping to ‘lock’ them in the hacker’s wallet (making them unspendable). Tether indicates that it is building a new core for its primary wallet in response to the attack in order to prevent the stolen coins from being used.
In May 2018,Ā Bitcoin GoldĀ (and two other cryptocurrencies) were hit by a successful 51% hashing attack by an unknown actor, in which exchanges lost estimated $18m.[citation needed]Ā In June 2018, Korean exchangeĀ Coinrail was hacked, losing US$37 million worth of altcoin. Fear surrounding the hack was blamed for a $42 billion cryptocurrency market selloff.[72]Ā On 9 July 2018 the exchange Bancor had $23.5 million in cryptocurrency stolen.[73]
Properties of cryptocurrencies gave them popularity in applications such as a safe haven in banking crises and means of payment, which also led to the cryptocurrency use in controversial settings in the form ofĀ online black markets, such asĀ Silk Road.[66]Ā The original Silk Road was shut down in October 2013 and there have been two more versions in use since then. In the year following the initial shutdown of Silk Road, the number of prominent dark markets increased from four to twelve, while the amount of drug listings increased from 18,000 to 32,000.[66]
Darknet markets present challenges in regard to legality. Bitcoins and other forms of cryptocurrency used in dark markets are not clearly or legally classified in almost all parts of the world. In the U.S., bitcoins are labelled as “virtual assets”. This type of ambiguous classification puts pressure on law enforcement agencies around the world to adapt to the shifting drug trade of dark markets.[75]
Reception
Cryptocurrencies have been compared toĀ Ponzi schemes,Ā pyramid schemes[76]Ā andĀ economic bubbles,[77]Ā such asĀ housing market bubbles.[78]Ā Howard MarksĀ ofĀ Oaktree Capital ManagementĀ stated in 2017 that digital currencies were “nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it”, and compared them to theĀ tulip maniaĀ (1637),Ā South Sea BubbleĀ (1720), andĀ dot-com bubbleĀ (1999).[79]Ā The New YorkerĀ has explained the debate based on interviews with blockchain founders in an article about the āargument over whether Bitcoin, Ethereum, and the blockchain are transforming the worldā.[80]
While cryptocurrencies are digital currencies that are managed through advanced encryption techniques, many governments have taken a cautious approach toward them, fearing their lack of central control and the effects they could have on financial security.[81]Ā Regulators in several countries have warned against cryptocurrency and some have taken concrete regulatory measures to dissuade users.[82]Ā Additionally, many banks do not offer services for cryptocurrencies and can refuse to offer services to virtual-currency companies.[83]Ā Gareth Murphy, a senior central banking officer has stated “widespread use [of cryptocurrency] would also make it more difficult for statistical agencies to gather data on economic activity, which are used by governments to steer the economy”. He cautioned that virtual currencies pose a new challenge to central banks’ control over the important functions of monetary and exchange rate policy.[84]Ā While traditional financial products have strong consumer protections in place, there is no intermediary with the power to limit consumer losses if bitcoins are lost or stolen.[85]Ā One of the features cryptocurrency lacks in comparison to credit cards, for example, is consumer protection against fraud, such asĀ chargebacks.
An enormous amount of energy goes intoĀ proof-of-workĀ cryptocurrency mining, although cryptocurrency proponents claim it is important to compare it to the consumption of the traditional financial system.[86]
There are also purely technical elements to consider. For example, technological advancement in cryptocurrencies such as bitcoin result in high up-front costs to miners in the form of specializedĀ hardwareĀ andĀ software.[87]Ā Cryptocurrency transactions are normally irreversible after a number of blocks confirm the transaction. Additionally, cryptocurrency private keys can be permanently lost from local storage due to malware, data loss or the destruction of the physical media. This prevents the cryptocurrency from being spent, resulting in its effective removal from the markets.[88]
The cryptocurrency community refers to pre-mining, hidden launches,Ā ICOĀ or extreme rewards for the altcoin founders as a deceptive practice.[89]Ā It can also be used as an inherent part of a cryptocurrency’s design.[90]Ā Pre-mining means currency is generated by the currency’s founders prior to being released to the public.[91]
The journal encourages authors toĀ digitally signĀ aĀ file hashĀ of submitted papers, which will then beĀ timestampedĀ into the bitcoinĀ blockchain. Authors are also asked to include a personal bitcoin address in the first page of their papers.[97][98]
Texas Health Care Fraud and Opioid Takedown Results in Charges Against 58
HOUSTON – The Justice Department has announced a coordinated health care fraud enforcement operation across the state of Texas involving charges against a total of 58 individuals, several of which are charged in Houston. They were allegedly involved in Medicare fraud schemes and networks of āpill millā clinics resulting in $66 million in loss and 6.2 million pills. Of those charged, 16 were doctors or medical professionals, while 20 were charged for their role in diverting opioids.
The Health Care Fraud Unit of the Criminal Divisionās Fraud Section in conjunction with its Medicare Fraud Strike Force (MFSF) partners led the enforcement actions. The MFSF is a partnership among the Criminal Division, U.S. Attorneyās Offices, FBI, Department of Health and Human Services ā Office of Inspector General (HHS-OIG) and Drug Enforcement Administration. In addition, the operation includes the participation of the Veterans Affairs ā OIG and the Department of Labor (DOL), various other federal law enforcement agencies and Texas State Medicaid Fraud Control Units.
The charges announced today aggressively target schemes billing Medicare, Medicaid, TRICARE (a health insurance program for members and veterans of the armed forces and their families), DOL – Office of Workerās Compensation Programs and private insurance companies for medically unnecessary prescription drugs and compounded medications that often were never even purchased and/or distributed to beneficiaries. The charges also involve individuals contributing to the opioid epidemic, with a particular focus on medical professionals allegedly involved in the unlawful distribution of opioids and other prescription narcotics, a particular focus for the Department.
According to the Centers for Disease Control, approximately 115 Americans die every day of an opioid-related overdose.
Todayās arrests come three weeks after the Department announced that the Health Care Fraud Unitās Houston Strike Force coordinated the filing of charges against dozens in a trafficking network responsible for diverting over 23 million oxycodone, hydrocodone and carisoprodol pills.
āSadly, opioid proliferation is nothing new to Americans,ā said U.S. Attorney Ryan K. Patrick of the Southern District of Texas. āWhat is new, is the reinforced fight being taken to dirty doctors and shady pharmacists. Texas may have four U.S. Attorneys, but we are focused on one health care mission: shutting down pills mills and rooting out corruption in health care. From Lufkin to Laredo and Dallas to Del Rio, one of us will shut these operations down.ā
āTodayās charges highlight the amazing work being done by the Departmentās Medicare Fraud Strike Force and our partners in Texas,ā said Assistant Attorney General Brian A. Benczkowski of the Justice Departmentās Criminal Division.Ā āAs we continue to dedicate resources to battle healthcare and opioid fraud schemes in Texas and elsewhere, we are shining an inescapable light on dirty doctors, clinic owners, pharmacists and others who may have long believed they could perpetrate their frauds behind closed doors.ā
āThese arrests across multiple investigations and jurisdictions is further proof that successful teamwork exemplifies Texas law enforcement,ā said DEA Houston Special Agent in Charge Will R. Glaspy. āTodayās operation affirms both our commitment to targeting those individuals who illegally divert opioids in our communities, and our collective will to bring those individuals to justice.ā
āHealth care fraud undermines our country by driving up medical costs, wasting taxpayer dollars, and often harming patients,ā said Special Agent in Charge C.J. Porter of HHS-OIG. āTodayās takedown shows that we are fighting hard to protect Medicare and Medicaid and the patients served by those programs. Working closely with our law enforcement partners, our agents are determined to ensure fraudsters pay for their crimes.ā
āTodayās announcement demonstrates the close collaboration between the FBI and its law enforcement partners in North Texas,ā said Special Agent in Charge Matthew J. DeSarno of the FBIās Dallas Field Office. āThe enormous economic damage caused by those who defraud crucial public health programs, as well as the ever-increasing loss of life caused by illicit and illegitimate pill schemes cannot be overstated. The public can rest assured the FBI will continue to make these investigations a top priority moving forward.ā
Among those charged in the Southern District of Texas are:
Diana Hernandez, Kathy Hernandez, Hieu Troung R.P.H., Clint Randall, Prince White, Charles Walton and Cedric Milbrurn were charged for their alleged participation in a scheme to unlawfully distribute and dispense controlled substance without a legitimate medical purpose through S&S Pharmacy of Houston.
Franklin Nwabugwu R.P.H. was charged for their alleged participation in a scheme to unlawfully distribute and dispense controlled substance without a legitimate medical purpose through Golden Pharmacy of Houston.
Steven Inbody M.D. and Hoai-Huong Truong were charged for their alleged participation in a scheme to unlawfully distribute and dispense controlled substance without a legitimate medical purpose.
Ashley McCain, John Sims, Gregory Comer, Kesia Banks and Jacqueline Hill were charged for their alleged participation in a scheme to unlawfully distribute and dispense a controlled substance without a legitimate medical purpose through Continuous Medical Care and Rehabilitation.
Trial Attorneys Devon Helfmeyer and Catherine Wagner and Assistant Deputy Chief Aleza Remi, all of the Fraud Section, are prosecuting the respective cases.
Several others were also charged inĀ the Northern District of Texas (NDTX), Eastern District of Texas (EDTX) and Eastern District of Texas (EDTX).
āHealthcare should revolve around patientsā well-being ā not providersā personal interests,ā said NDTX U.S. Attorney Erin Nealy Cox.Ā āWhen medical professionals line their own pockets by submitting false insurance claims or prescribing unnecessary medications, equipment or treatments, it not only drains taxpayer coffers ā but it makes healthcare more expensive for everyone else. We cannot allow the healthcare industry to become bloated by fraud.ā
āEvery dollar stolen from Medicare through fraud comes out of the pocket of taxpayers,ā said EDTXU.S. Attorney Joseph D. Brown of the āThese are real costs that help drive up the cost of medical services for everyone. It is important that there be real consequences for those who cheat the system.ā
āI am proud to fight healthcare fraud in Texas alongside Ryan Patrick, Erin Nealy Cox and Joe Brown,ā said WDTX U.S. Attorney John Bash.Ā āThese crimes drive up the cost of health insurance, waste tax revenue and threaten the well-being of Texans.ā
The Fraud Section leads the MFSF, which is part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. MFSF maintains 15 strike forces operating in 24 districts. Since its inception in March 2007, MFSF has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion. In addition, HHS Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
An indictment is a formal accusation of criminal conduct, not evidence.
A defendant is presumed innocent unless convicted through due process of law.
Medicaid Fraud and Abuse
Overview
Fraud, abuse and waste in Medicaid cost states billions of dollars every year, diverting funds that could otherwise be used for legitimate health care services.Ā Not only do fraudulent and abusive practices increase the cost of Medicaid without adding value ā they increase risk and potential harm to patients who are exposed to unnecessary procedures.Ā In 2015, improper payments aloneāwhich include things like payment for non-covered services or for services that were billed but not providedātotaledĀ more than $29 billion according to the Government Accountability Office.
While Medicaid fraud involves knowingly misrepresenting the truth to obtain unauthorized benefit, abuse includes any practice that is inconsistent with acceptable fiscal, business or medical practices that unnecessarily increase costs.Ā Waste encompasses overutilization of resources and inaccurate payments for services, such as unintentional duplicate payments.Ā As states look for innovative ways to contain burgeoning Medicaid costs and promote the programās integrity, fighting fraud and abuse offers one approach that everyone can support.
Program Integrity Initiatives. The federal government and states have adopted aĀ varietyĀ of steps to combat Medicaid fraud, waste and abuse and to ensure that public funds are used to promote Medicaid enrolleesā health. According to the Medicaid and CHIP Payment Access Commission (MACPAC), these include data mining, audits, investigations, enforcement actions, technical assistance to help state agencies detect fraud and abuse, and provider and enrollee outreach and education. Well-designed program integrity initiatives ensure that:
Eligibility decisions are made correctly;
Prospective and enrolled providers meet federal and state participation requirements;
Delivered services are medically necessary and appropriate; and
Provider payments are made in the right amount and for appropriate services.
A 2013 Pew Charitable Trustsā report found that states utilized three types of Medicaid fraud prevention strategies, including: provider screening; prior authorization and pre-payment reviews; and post-payment review and recovery. While states have traditionally relied upon the latter, āpay and chaseā model in which they pay Medicaid claims and then try to recover improper payments, they are increasingly focusing on preventing and detecting fraudulent activities early on. New York, for example has integrated targeted data mining and risk analysis into its fraud-fighting tool box.Ā In Texas, a few simple process changes and new pattern analysis and recognition efforts moved the state closer to ārealātime analysisā and significantly increased the amount of fraud identified. Ā For more on what these states have done to fight Medicaid fraud and abuse, check out thisĀ WebinarĀ archive.
Federal Medicaid Integrity Provisions.Ā The Affordable Care Act (ACA) introducedĀ various requirements aimed at improving Medicaid program integrity.Ā For example, the law created a web-based portal, enabling states to compare information on providers that have been terminated (and whose billing privileges have been revoked). An overview of the lawās provisions related to improving Medicaid program integrity is availableĀ here.
Common Examples ofĀ Medicaid Fraud
Provider Fraud
Patient Fraud
Insurer Fraud
Billing for services not performed
Billing duplicate times for one service
Falsifying a diagnosis
Billing for a more costly service than performed
Accepting kickbacks for patient referrals
Billing for a covered service when a noncovered service was provided
Ordering excessive or inappropriate tests
Ā Prescribing medicines that are not medicallyĀ necessary or for use by people other than the patient
Filing a claim for services or products not received
Forging or altering receipts
Obtaining medications or products that are not needed and selling them on the black market
Providing false information to apply for services
Doctor shopping to get multiple prescriptions
Using someone else’s insurance coverage for services
Overstating the insurer’s cost in paying claims
Misleading enrollees about health plan benefits
Undervaluing the amount owed by the insurer to a health care provider under the terms of its contract
Story 1: United States Concludes The Attack on Saudi Arabia’s Oil Refinery and Oil Fields Was By Iranian Drones and Missiles (Ya Ali land-attack missiles) Fired From Iranian Base Near Southern Iraq Ruling Out Yemen As Launch Site– Iran Denies Attack — Cold War To Become Hot War? — Videos —
Iran is trying to pressure US into removing sanctions: Gen. Keane
Saudi Oil Field Attack Originated From Iran, Used Cruise Missiles And Drones | NBC Nightly News
Saudi Arabia to Reportedly Resume 70% of Lost Oil Output
Trump says itās ālooking likeā Iran responsible for drone attack | Nine News Australia
Trump Says Tehran Likely Behind Aramco Attack
Would be difficult for Saudi Aramco to list now after oil attack, analyst says | Squawk Box Europe
Saudi Aramco CEO: Oil attack was huge, but we managed to restore capacity
Attack on Saudi Arabia ‘caught us all by surprise’: Strategist | Street Signs Asia
USA: Lethal attack on Iran ‘proportionate’ after Saudi Arabia oil strike – Trump
Sankey: A potential response by Saudi Arabia against Iran would be ‘horrific’ for oil prices
Attack on Saudi oil plant WAS launched from Iranian base near Iraq, US investigators conclude ā as experts study images of missile wreckage and video of ‘drones flying south towards their target’
Saudi Arabian oil supply blown up in what Yemen’s Houthis called a drone attackĀ
US investigators have concluded that drones and missiles were fired from an Iranian air base near the border with Iraq, source said
Officials believe the missiles flew over southern Iraq and Kuwaiti airspace to avoid powerful radar in Persian Gulf, before striking their targetsĀ
Experts are studying video from Kuwait which seems to record sound of missiles overhead, and image of what appears to be missile wreck in Saudi desertĀ Ā
AnalystsĀ say the missile appears to be a Quds-1, which would rule out Yemen as a launch site and strongly suggest Iraq, Iran or a boat in the Persian Gulf
Saudi has also blamed Iran, and says it is ready to ‘forcefully respond’ to attack
Iran’s foreign minister said that Washington was ‘in denial’ by blaming TehranĀ
PUBLISHED:Ā 09:52 EDT, 17 September 2019Ā |Ā UPDATED:Ā 14:29 EDT, 17 September 2019
America has concluded that weekend attacks on two Saudi oil facilities were launched from Iranian soil and cruise missiles were involved, an official said today.
The official, who declined to be identified, said the United States was gathering evidence about the attack to present to the international community, notably European allies, at the UN General Assembly next week.
Another source, who spoke toĀ CNN, said the attack involved a mixture of drones and missiles launched from an Iranian base near Iraq, flying at low altitude through Iraqi and Kuwaiti airspace to avoid radar detection, before striking the Abqaiq refinery and Khurais oil field in Saudi Arabia.
Kuwaiti officials have already launched an investigation into two videos that seemed to record the sound of projectiles flying over their territory shortly before the Saudi targets were struck.
The source also told CNN that investigators are studying wreckage of at least one missile that failed to hit its target that was recovered from the Saudi desert.
An image which appears to show that missile has been circulating on Saudi social media, and has been examined by weapon analysts who say its design could rule out Yemen as a launch site, with either Iraq or Iran as more likely possibilities.
If it can be proven that the attack originated in Iran, there are fears it could spark a new Gulf War.
Donald Trump has refused to rule out military action once the source of the attack has been proven, while Saudi Arabia has said it is ready to ‘forcefully respond’.
US officials believe missiles and drones were launched from an Iranian air base near the border with Iraq (possible launch site centre), flew over southern Iran and Kuwait to avoid powerful radar in the Persian Gulf, then hit targets at Khurais and Abqaiq (right). If the image is of the missile wreckage is genuine, then it is likely a Quds-1 missile, a Houthi weapon with an estimated range of 435 miles, based on similar Iranian designs. Experts say this shows it could not have been fired from Houthi territory in Yemen (bottom)
US investigators say they have concluded that an attack on Saudi oil facilities was launched from Iran. As part of their investigation, they have been studying the wreckage of a missile recovered from the desert that failed to hit its target. Pictured is the wreckage of a missile that was posted on Saudi social media shortly after the attack
An image of the Quds-1 missile which was released by the Houthi group in July, when they unveiled the weapon. It is similar to two Iranian designs – the Soumar and Ya Ali
Vice President Mike Pence said Tuesday that the United States is evaluating evidence on the attacks on Saudi oil facilities and stands read to defend its interests and allies in the Middle East.
In other developments…
The Saudi ministry of foreign affairs insisted it ‘has the capability and resolve to defend its land and people, and to forcefully respond to these aggressions’Ā
Saudi Arabia also called on nations to ‘shoulder their responsibility in condemning the perpetrators’ and ‘clearly confronting’ those behind an attackĀ
The kingdom said its oil production could be fully online again within two to three weeksĀ
Trump said it ‘looks like’ Iran was behind the attacks but stressed that military retaliation was not yet on the tableĀ
Washington confirmed it is exchanging intelligence with Saudi Arabia which it says points to Iran being responsibleĀ
Iran’s Supreme Leader Ayatollah Ali Khamenei said Tehran will never hold talks with US, killing off hopes of discussions between Trump and Hassan Rouhani
The chair of the UN Security Council said the attack was ‘unanimously and unequivocally condemned’ by all 15 members
Iran’s President Hassan Rouhani said the attack was a ‘legitimate defense and counterattack’ against the Saudi-led war in Yemen
The Islamic Republic’s foreign minister said Washington was ‘in denial’ by pointing the finger of blame at Tehran.Ā Ā
Officially,Ā Iran-backed Houthi rebels fighting against Saudi Arabia in Yemen have claimed responsibility for the blasts – which knocked out 5 per cent of the world’s oil supply – saying they used drones.
But Fabian Hinz, of theĀ James Martin Center for Nonproliferation Studies,Ā analysedĀ an image of the wreckage and says it clearly shows a cruise missile, not a drone.
He added that the weapon shown is likely a short-range Quds-1 missile, a Houthi weapon which was unveiled by the group in July this year.
The missile is based on the Iranian Soumar design, which has a range of some 840 miles, but the Houthi version has a smaller body – meaning less space for fuel – and is fitted with a less-efficient engine.
Because of this, Mr Hinz writes, it is unlikely the missile could have reached either the Abqaiq refinery or the Khurais oil field if it had been fired from Houthi-controlled territory in Yemen.
‘If the pictures showing the Quds-1 wreckage in Saudi Arabia are indeed connected to the recent Abqaiq attack, it would seem more likely that the attack originated from a place closer to Eastern Saudi Arabia than Northern Yemen ā potentially Iraq, Iran or perhaps even from ships,’ he says.
However, he stressed that information around the attack is still emerging, that the image has not been independently verified, and his analysis is purely speculation based on that image.
He did say that the image appears to be new and does not appear to have been digitally altered.
When a Quds-1 was used to attack Saudi Arabia’s Abha Airport in June, the SaudisĀ initially mistook it for an Iranian Ya Ali cruise missile, suggesting it could have similar specifications.
The Ya Ali missile has a estimated range of 435 miles, which would also rule out Yemen as a launch site, with Iran and Iraq also likely launch sites.
Washington has released satellite images which it claims shows damage on the Saudi oil refinery which is consistent with an attack from the north or northwest, in the direction of Iran and Iraq, rather than Yemen to the south
Analysts also said that the pattern of precision damage on the facility is consistent with guided missile attacks, rather than drones
Damage is shown at the Khurais oil field, which was also struck in Saturday’s attacks
He also notes that, while the Quds-1 is thought to have been developed with help from Iran, it is a Houthi weapon and has never be seen in Iran itself, raising doubts over whether it could have been fired from there.
The Houthis have used the Quds-1 in combat themselves, most recently in an attack onĀ Abha Airport in southern Saudi Arabia which wounded 26.
In that instance, the Houthis claimed responsibility and admitted using the missile, begging the question of why they would omit that detail this time around.
Quds-1 missile
Unveiled by Houthi rebels in July, the Quds-1 is a cruise missile which appears to be based on the Iranian Soumar design.
While we know nothing of its specifications, we do know it was used in an attack on Saudi Arabia’s Abha Airport in June.
Pieces of the missile recovered by Saudi Arabia showed it uses aĀ TJ-100 jet engine or near-replica, which uses up more fuel than its Iranian equivalent.
The Quds-1 fuselage is also significantly smaller than the Iranian Soumar missile, meaning it has less space for fuel.
Because of this, it almost certainly has a smaller range, though how much smaller is unclear.
But even a small reduction in the Soumar’s 840mile range would put the Saudi oil facilities attacked at the weekend outside of its capabilities, meaning – if the image is genuine – then the launch site would have to be outside Yemen.
On Monday, the White House released satellite imagery which it said indicated the attack came from either Iran or Iraq – where Iran has been training militia groups – because the position of blast marks was located on the north or northwest of the structures, in the direction of those two countries and away from Yemen.
American officials also told the Wall Street Journal that they have shared intelligence with Riyadh indicating that Iran was the staging ground for devastating drone attacks on Saudi Arabia’s oil installations.
The US assessment determined that ‘Iran launched more than 20 drones and at least a dozen missiles,’ according to unnamed sources.
‘But Saudi officials said the US didn’t provide enough to conclude that the attack was launched from Iran, indicating the US information wasn’t definitive,’ the WSJ added.
‘US officials said they planned to share more information with the Saudis in the coming days.’
However, an analysis by theĀ New York TimesĀ shows at least some of the blast marks faced west, which is not in the direction of any of those countries.
Experts also said cruise missiles and drones can be directed to turn around on their targets, hitting them in the opposite direction from which they were fired.
The near-symmetrical pattern of blast-marks on the buildings do appear consistent with guided missiles rather than drones, they noted, which tallies with Washington’s account of the attacks.
Meanwhile, a former US diplomat said Saudi Arabia has ‘great deal of explaining to do’ over how its oilfields were hit, disrupting global supplies, despite it possessing state-of-the-art military technology, much of it bought from America.
The attacks have knocked out half of Saudi Arabia’s oil supply and 5 per cent of global supplies, leading to fear of fuel price rises
Donald Trump tweeted Sunday to say that US is ‘locked and loaded depending on verification’, suggesting he was waiting for Riyadh’s confirmation before acting
Gary Grappo, former US ambassador to Oman, toldĀ CNBC:Ā I think the Saudi leadership has a great deal of explaining to do.
‘A country that ranks third in terms of total defence spending… was not able to defend its most critical oil facility from these kinds of attacks.
‘They had to be able to see that this was a strong possibility given the previous attacks they’ve experienced in previous oil facility, airports and elsewhere.’
Saudi Arabia says its initial investigations indicate that Iranian weapons were used in attacks on key oil installations and it ‘will invite U.N. and international experts to view the situation on the ground and to participate in the investigations.’
A statement from the Saudi Ministry of Foreign Affairs on Monday says, ‘The kingdom will take the appropriate measures based on the results of the investigation, to ensure its security and stability.’
Saudi Arabia’sĀ Colonel Turki al-Malki said drone strikes against two of his country’s oil facilities at the weekend did not come from Yemen, and pointed the finger directly at Tehran
Russia’s U.N. ambassador, who currently chairs the U.N. Security Council, says the attacks on key Saudi oil installations were ‘unanimously and unequivocally condemned’ by all 15 council members.
Vassily Nebenzia said after a council meeting on Yemen on Monday that ‘it is inadmissible that civil objects and socio-economic infrastructure are being targeted.’Iran’s president says weekend drone attacks claimed by Yemeni rebels on major oil sites in Saudi Arabia were a ‘legitimate defense and counterattack’ against the Saudi-led war in Yemen.
Iranian state TV broadcast Hassan Rouhani’s comments to reporters Monday during a summit in Turkey to discuss the war in Syria with the Russian and Turkish leaders.
Rouhani said: ‘Regarding the drones attack, this problem has its root in invading Yemen. They (the Saudi-led coalition) are bombing Yemen on a daily basis.’
The attack has led to fears that action on any side could rapidly escalate a confrontation that has been raging just below the surface in the wider Persian Gulf in recent months.
Just last week there were hopes of deescalation following the departure of National Security Adviser John Bolton and the suggestion of talks between Trump and Hassan Rouhani on the sidelines of an upcoming UN summit.
But Washington has now rubbished the idea of talks and put the option of military action firmly back on the table.
It comes after a summer which saw attacks on oil tankers that Washington blames on Tehran, at least one suspected Israeli strike on Shiite forces in Iraq, and the downing of a US military surveillance drone by Iran.
Stalling 5.7million barrels of oil per day marks the single largest disruption to global oil supplies in history, topping the start of the Iranian revolution in 1979
Those tensions have increased ever since Mr Trump pulled the US out of Iran’s 2015 agreement with world powers that curtailed its nuclear activities and the US re-imposed sanctions on the country that sent its economy into freefall.
Benchmark Brent crude gained nearly 20 per cent in the first moments of trading Monday before settling down to over 10 per cent higher as trading continued.
That spike represented the biggest percentage value jump in Brent crude since the run-up to the 1991 Gulf War that saw a US-led coalition expel Iraqi dictator Saddam Hussein’s forces from Kuwait.
The attack halted production of 5.7 million barrels of crude a day, more than half of Saudi Arabia’s global daily exports and more than 5% of the world’s daily crude oil production. Most of that output goes to Asia.
At 5.7 million barrels of crude oil a day, the Saudi disruption would be the greatest on record for world markets, according to figures from the Paris-based International Energy Agency (IEA).
It just edges out the 5.6 million-barrels-a-day disruption around the time of Iran’s 1979 Islamic Revolution, according to the IEA.
Saudi Arabia has pledged that its stockpiles would keep global markets supplied as it rushes to repair damage at the Abqaiq facility and its Khurais oil field.
However, Saudi Aramco has not responded publicly to questions about its facilities.
Yemen’s Houthi rebels, who have been targeted by a Saudi-led coalition since March 2015 in a vicious war in the Arab world’s poorest country, maintain they launched 10 drones that caused the extensive damage.
Iraqi premier Adel Abdel-Mahdi said he received a call on Monday from US Secretary of State Mike Pompeo, who confirmed that the attack did not come from Iraq.
The State Department did not immediately acknowledge what was discussed.
Iranian Foreign Ministry spokesman Abbas Mousavi again denied the US claims on Monday, telling journalists the accusation was ‘condemned, unacceptable and categorically baseless’.
Military stops short of explicitly accusing Tehran of carrying out strikes
By
Rory JonesĀ in Riyadh, Saudi Arabia,
Jared MalsinĀ in Cairo and
Summer SaidĀ in Dubai
Saudi Arabia said it holds Iran responsible for attacks that debilitated Saudi oil facilities, directly implicating Tehran for the first time but stopping short of explicitly accusing it of conducting the strikes.
Saudi officials have concluded that Iran or one of its proxies launched a complex assault involving drones and cruise missiles from a location north of Saudi Arabia, Col. Turki al-Maliki, spokesman for the Saudi-led military coalition fighting in Yemen, told reporters in Riyadh on Wednesday.
He said Saudi Arabia made its judgment based on the direction of the cruise missiles when they struck the facilities and the maximum distance of 435 miles they could travel. The weapons found at the two attack sites also could be traced back to Iran, he said.
Iran has denied it carried out the attacks.
At the press briefing, Col. Maliki displayed debris from the attacks, including what the Ministry of Defense described as Iranian drones and cruise missiles. He said Saudi Arabia was still working to determine the launch site and didnāt explicitly say the attacks had been mounted by Iran or from Iranian territory.
The ministry on Wednesday also displayed debris from what it said was an earlier attack on an oil facility in Afif in May.
Col. Maliki said the ministry knew the range of the cruise missiles, which he said were Iranian-made Ya Ali land-attack missiles, based on its military assessments and the range of previous attacks.
Cruise missiles have vastly different ranges, with some traveling a couple hundred miles while the U.S.-made Tomahawk missile has a range of more than 1,000 miles. Iranās Tasnim News Agency, affiliated with the Islamic Revolutionary Guard Corps, in 2015 quoted then-Deputy Defense Minister Mohammad Eslami as saying the Ya Ali outstripped other Iranian cruise missiles with a range of 435 miles.
Saudi Arabia has largely faced ballistic-missile attacks. Col. Maliki said about 230 ballistic missiles had been fired on the kingdom in recent years, demonstrating the strength of Saudi aerial-defense systems.
The Saudi claims escalate tensions in the region, although Col. Maliki didnāt say whether or how the kingdom would respond against Iran.
Firing Range
Saudi Arabia estimates the range of the missiles that targeted its oil facilities is 435 miles. The range would exclude Yemen, where Iran says Houthi rebels conducted the strikes, as a launch point.
Saudi Arabian targets attacked Saturday
SYRIA
Tehran
435-MILE RANGE
FROM TARGETS
IRAN
IRAQ
SAUDI
ARABIA
Abqaiq facility
Persian
Gulf
Riyadh
U.A.E.
Khurais oil field
Red
Sea
OMAN
YEMEN
Sanaāa
300 miles
300 km
Source: Saudi Ministry of Defense
The display of debris instead indicated that Saudi Arabia is trying to build a credible case against Iran that it was behind the attacks, and at the same time, leave room for diplomacy. It called on the international community to hold Iran responsible for its aggressive posture in the region.
āThis attack was not against Aramco or Saudi Arabia,ā he said. āIt was an assault on the international community.ā
President Trump said on Twitter on Wednesday that he has ordered Treasury Secretary Steven Mnuchin to āsubstantially increaseā sanctions on Iran in the wake of the attacks on Saudi oil facilities.
Later, in comments to reporters in California, Mr. Trump said further details on sanctions would be released in the next 48 hours and he is looking at various other options in responding to the strike.
āThereās the ultimate option and there are options a lot less than that,ā he said.
Secretary of State Mike Pompeo was more explicit than Mr. Trump in blaming Iran. Landing in Jeddah ahead of a meeting with Crown Prince Mohammed bin Salman, the U.S. diplomat said Iran had conducted the attack, not its Yemeni proxy, known as the Houthis.
āThe intelligence community has high confidence thatā¦these were not weapons that would have been in the possession of the Houthis,ā Mr. Pompeo said. Additionally, the flight patterns required to have inflicted the level of damage to the Saudi facilities rule out Yemen as a point of origin, he added.
Mr. Pompeo called the attack an act of war. āWeāre blessed that there were no Americans killed in this attack, but any time you have an act of war of this nature, thereās always risk that that could happen.ā
Tehran on Wednesday continued to say Iran-aligned Houthi rebels in Yemen were behind the strikes on the Aramco facilities. President Hassan Rouhani after a cabinet meeting in Tehran told state media that the U.S. was falsely accusing Iran of the attack to pressure it. The attack was a warning from the Houthis to Saudi Arabia, which has been waging a bloody war against the rebels for nearly five years, he said.
Addressing Saudi Arabia, Mr. Rouhani added: āLearn lessons from this warning and consider that there could be a war in the region.ā
Saturdayās twin attacks on the Abqaiq and Khurais oil facilities knocked out 5.7 million barrels a day of production at Saudi Arabian Oil Co., known as Aramco, sending global oil prices higher.
On Tuesday,Ā Saudi officials saidĀ they would use reserves to return production to normal levels within weeks and had restored 50% of lost output.
The price of Brent crudeāthe global benchmarkājumped 15% to $69.02 a barrel on Monday, its largest one-day climb since 1988. It was trading at $64.44 a barrel on Wednesday.
Some Saudi officials were skeptical of the defense ministryās claims of aerial robustness. The strikes demonstrated a vulnerability in Saudi Arabiaās overstretched air systems, which have been taxed by months of attacks throughout the country, said the officials, who werenāt authorized to speak to the media.
āThey hit us where we are weak,ā one Saudi official said.
The kingdomās air defenses never had a chance to activate becauseĀ neither Saudi nor American systems detectedĀ the launch of the airstrike on Saturday morning, U.S. officials said on Tuesday.
The Saudi government recently moved the position of some air-defense systems, Saudi officials said, in order to cope with recent strikes that have hit airports, oil installations, and a desalination plant. Houthi rebels claimed the bombings.
The failure of Saudi and American air defenses to stop Saturdayās attack has raised alarms about the security of facilities that are a key component of the worldās oil supply. The combination of cruise missiles and drones represents a complex attack that would have challenged even the most sophisticated air-defense systems in the world, experts said.
āIt looks like the attack was very carefully and thoroughly planned and that great care was taken to construct the attack plan in such a way to evade the air defenses that the Saudis are known to have,ā said Bradley Boyer, a defense and energy analyst and retired U.S. Navy intelligence officer.
Saudi Arabiaās air defenses include the American Patriot and Hawk missile systems, which are better suited to shoot down mid- and long-range ballistic missiles, rather than the lighter and lower-flying cruise missiles and drones used in Saturdayās attack. The country also possesses short-range defense systems.
Saudi Arabia has a mixed record in defending itself from missile attacks. In one well-documented case, the country activated its Patriot missile defenses during an attack on the Riyadh airport in November 2017. The government said it shot down the incoming missile. Video footage and other evidence showed the defenses fell short of their targets.
āVivian Salama, Ian Talley, Sune Engel Rasmussen and Courtney McBride
contributed to this article.
DUBAI, United Arab Emirates ā A weekend drone attack on Saudi Arabia that cut into global energy supplies and halved the kingdomās oil production threatened Sunday to fuel a regional crisis, as the U.S. released new evidence to back up its allegation that Iran was responsible for the assault amid heightened tensions over Tehranās collapsing nuclear deal.
U.S. Secretary of State Mike Pompeo has blamed Iran for the attack Saturday on key Saudi oil infrastructure. On Sunday, senior U.S. officials again said the American government believes there is no doubt Iran was responsible, saying satellite imagery and other intelligence, show the strike was inconsistent with one launched from Yemen, where Iranian-backed Houthi rebels had claimed responsibility.
Iran, meanwhile, called the U.S. claims āmaximum lies,ā while a commander in its paramilitary Revolutionary Guard reiterated its forces could strike U.S. military bases across the Mideast with their arsenal of ballistic missiles.
The U.S. government produced satellite photos showing what officials said were at least 19 points of impact at two Saudi energy facilities, including damage at the heart of the kingdomās crucial oil processing plant at Abqaiq. Officials said the photos show impacts consistent with the attack coming from the direction of Iran or Iraq, rather than from Yemen to the south.
Iraq denied Sunday that its territory was used for an attack on the Kingdom and U.S. officials said a strike from there would be a violation of Iraqās sovereignty.
The U.S. officials said additional devices, which apparently didnāt reach their targets, were recovered northwest of the facilities and are being jointly analyzed by Saudi and American intelligence. The officials, who spoke on condition of anonymity to discuss intelligence matters, did not address whether the drone could have been fired from Yemen, then taken a round-about path, but did not explicitly rule it out.
The attacks and recriminations are increasing already heightened fears of an escalation in the region, after a prominent U.S. senator suggested striking Iranian oil refineries in response to the assault, and Iran warned of the potential of more violence.
āBecause of the tension and sensitive situation, our region is like a powder keg,ā said Iranian Brig. Gen. Amir Ali Hajizadeh. āWhen these contacts come too close, when forces come into contact with one another, it is possible a conflict happens because of a misunderstanding.
Actions on any side could break into the open a twilight war thatās been raging just below the surface of the wider Persian Gulf in recent months. Already, there have been mysterious attacks on oil tankers that America blames on Tehran, at least one suspected Israeli strike on Shiite forces in Iraq, and Iran shooting down a U.S. military surveillance drone.
The attack Saturday on Saudi Arabiaās Abqaiq plant and its Khurais oil field led to the interruption of an estimated 5.7 million barrels of the kingdomās crude oil production per day, equivalent to more than 5% of the worldās daily supply. It remains unclear how King Salman and his assertive son, Crown Prince Mohammed bin Salman, will respond to an attack targeting the heart of the Saudi oil industry.
Crude oil futures shot up 9.5% to $60 as trading opened Sunday evening in New York, a dramatic increase.
Saudi Arabia has promised to fill in the cut in production with its reserves, but has not said how long it will take to repair the damage. The Wall Street Journal cited Saudi officials as saying a third of output would be restored on Monday, but a return to full production may take weeks.
In Washington, President Donald Trump said Sunday evening that he had approved the release of U.S. strategic petroleum reserves āif neededā to stabilize energy markets. The president said the final amount of the release, if any, would be āsufficient to keep the markets well-supplied.ā The announcement followed a National Security Council meeting at the White House that included Pompeo, Vice President Mike Pence and Defense Secretary Mark Esper.
Images from the European Commissionās Sentinel-2 satellite examined by the AP showed black char marks at the heart of the Abqaiq plant on Sunday, marks not seen over the prior month. Identical marks are visible on the U.S. imagery. The Washington-based Center for Strategic and International Studies in August identified the area with the char marks as the plantās stabilization area. The center said the area includes āstorage tanks and processing and compressor trains ā which greatly increases the likelihood of a strike successfully disrupting or destroying its operations.ā
The state-run oil giant Saudi Aramco, which the kingdom hopes to offer a sliver of in a public stock offering, did not respond to a request for comment.
Pompeo directly blamed Iran for the Saudi attack on Twitter late Saturday, and officials worked to provide evidence for his claim the following day.
āAmid all the calls for de-escalation, Iran has now launched an unprecedented attack on the worldās energy supply,ā Pompeo wrote. āThere is no evidence the attacks came from Yemen.ā
The U.S., Western nations, their Gulf Arab allies and U.N. experts say Iran supplies the Houthis with weapons and drones ā a charge that Tehran denies.
U.S. officials previously alleged at least one recent drone attack on Saudi Arabia came from Iraq, where Iran backs Shiite militias. Those militias in recent weeks have been targeted themselves by mysterious airstrikes, with at least one believed to have been carried out by Israel.
Iranian Foreign Ministry spokesman Abbas Mousavi on Sunday dismissed Pompeoās remarks as āblind and futile comments.ā
āThe Americans adopted the āmaximum pressureā policy against Iran, which, due to its failure, is leaning toward āmaximum lies,āā Mousavi said in a statement.
Separately, Iraqi Prime Minister Adel Abdul-Mahdiās office issued a statement on Sunday denying the drone attack came from there. Oil-rich Kuwait also said it would increase security around the countryās āvital sitesā over the attacks.
Houthi leader Muhammad al-Bukhaiti reiterated his groupās claim of responsibility, telling The Associated Press on Sunday it exploited āvulnerabilitiesā in Saudi air defenses to strike the targets. He did not elaborate.
Iran, meanwhile, kept up its own threats.
Hajizadeh, the brigadier general who leads the countryās aerospace program, said in an interview published across Iranian media Sunday that Revolutionary Guard forces were ready for a counterattack if America responded, naming the Al-Udeid Air Base in Qatar and Al-Dhafra Air Base near Abu Dhabi in the United Arab Emirates as immediate targets, as well as U.S. Navy ships in the Persian Gulf and the Arabian Sea.
āWherever they are, it only takes one spark and we hit their vessels, their air bases, their troops,ā he said in a video published online with English subtitles.
It wasnāt just Iran making threats. U.S. Sen. Lindsey Graham, a South Carolina Republican close to Trump, suggested retaliatory strikes targeting Iran. āIran will not stop their misbehavior until the consequences become more real, like attacking their refineries, which will break the regimeās back,ā Graham wrote on Twitter.
All this comes before the United Nations General Assembly in a little over a week. Thereās been speculation of a potential meeting between Trump and Iranian President Hassan Rouhani on the summitās sidelines, possibly in exchange for the lifting of some economic sanctions the American leader imposed on Tehran after unilaterally withdrawing from the nuclear accord over a year ago.
If Iran had a hand in Saturdayās attack, it could be to bolster their position ahead of any talks, analysts say.
āThe main point for Iran, in my opinion, is not necessarily to derail a meeting between Trump and Rouhani but to increase its leverage ahead of it,ā said Michael Horowitz, the head of intelligence at the Bahrain-based risk management firm Le Beck International. āBy carrying out such a major attack, Iran wants to send the message that the only way to decrease tensions is to comply with its demands regarding sanctions relief.ā
However, he warned there could be a danger of Iran āoverplayingā its hand.
āThere will be no political benefit for Trump in a meeting with Rouhani if this meeting sends the message that the U.S. simply surrendered to Iranian demands,ā he said.
Attacks on Saudi oil fields: US-Iran blame game as fuel prices set to rocket
SoCal Gas Prices Could Jump Following Attack On Saudi Refinery
USA: ‘We donāt want to panic’ after Saudi Arabia oil attacks ā Trump
Story 3: Congress Subpoenaed Corey Lewandowski in Impeachment Probe — No Collusion With Russia — Same Conclusion as Mueller Report — VideosĀ
Lewandowski becomes first witness to testify in impeachment probe
Lewandowski fires off after grueling 5-hour House testimony
Collins: House Dems trashed procedure to try and get Trump
Jordan, Meadows blast House Dems after Lewandowski hearing
Democrats threaten Donald Trump’s campaign manager Corey Lewandowski with CONTEMPT as he mocks and stonewalls them at first House impeachment hearing – before attorney confronts him with his own words and he admits he is ‘not honest with the media’
Corey Lewandowski stonewalled Democrats who were questioning him about possible obstruction of justice charges against Donald TrumpĀ
‘I think that this fake Russia collusion narrative is the greatest crime committed against the American people in our generation if not ever,’ he saidĀ Ā
Lewandowski took a combative and aggressive stance from the start of his testimony before the House Judiciary CommitteeĀ
Trump praised Lewandowski’s opening statement, calling it ‘beautiful’Ā
Judiciary Chairman Jerry Nadler charged the president with obstructing House Democrats’ investigation into his administration
‘President Trump now appears to be using the powers of his office to obstruct all investigations by the only branch of the federal government currently capable of holding him accountable,’ Nadler wrote to the White House counselĀ Ā Ā
White House counsel told committee LewandowskiĀ would not to discuss conversations he had with Trump about government matters
White House forbid former aides Rob Porter and Rick Dearborn from testifyingĀ
Lewandowski is mulling a New Hampshire Senate bidĀ
Committee counsel Barry Berke tore into his past statements during a late-hearing grillingĀ
PUBLISHED:Ā 13:40 EDT, 17 September 2019Ā |Ā UPDATED:Ā 21:41 EDT, 17 September 2019
Tuesday’s House hearing with Corey Lewandowksi culminated with angry threats by the Democratic majority to hold him in contempt ā and damaging admissions by the former Donald Trump campaign manager that he has been untruthful in national TV interviews.
The fireworks came after a full day of testimony, after House Democrats armed with new rules they pushed through allowed an outside consultant to grill Trump’s combative former campaign head for 30 consecutive minutes.
Lewandowski was for the first time confronted with his past statements on Fox and MSNBC interviews, as well as statements he made in his own book about his interactions with the president.
‘I have no obligation to be candid with the media whatsoever,’ Lewandowski said at one point.
I’m a truth teller every time I stand before Congress,’ he said under questioning by majority counsel Barry Berke, saying he was truthful ‘every time I raised my right hand to God.’
Scroll down for videoĀ
Former Trump campaign manager Corey Lewandowski was aggressive and combative in his testimony before the House Judiciary Committee
Lewandowski was confronted with a clip of himself saying on MSNBC he didn’t ever remember the president ‘ever asking me to get involved with [former attorney general] Jeff Sessions or the Department of Justice in any way shape, or form, ever.’
It was a key moment of alleged obstruction from the Mueller report ā where Trump dictated to Lewandowski, a private citizen, a statement he wanted the former attorney general to give while curtailing the special counsel’s investigation.
‘That was not true, was it?’ the Harvard law grad and white collar defense attorney Berke asked him.
Outside lawyer Barry Berke tore into Lewandowski on behalf of the majority
The Trump loyalist was forced to defend public statements about the special counsel and his relationship with the president
‘I have no obligation to be honest with the media because they are just as dishonest as everybody else,’ Lewandowski responded.
Judiciary Chairman Jerold Nadler, who during the hearing shut down fellow Democrats efforts to bring maximum pressure on the witness, came down on the witness at the end of the hearing.
‘Mr. Lewandowski, your behavior in this hearing room has been completely unacceptable. It is part of a pattern of a White House desperate for the American people not to hear the truth,’ the New York Democrat fumed.
‘Iāve been asked several times today whether the committee will hold you in contempt. It is certainly under consideration,’ he warned.
Republicans howled in protest when the Democrats brought in their ringer to conduct intensive questioning at the end of the hearing. Previously, individual members tried to get the former New Hampshire police officer to buckle during five-minute increments of questioning.
In another tense moment with Berke, the lawyer asked him: ‘On national television did you lie about your relationship with the special counsel and whether they sought your interview?’
‘I don’t know,’ he replied.
Lewandowski tweeted out a message about the launch of his campaign for senator from New Hampshire during the hearing, irking one Democratic lawmaker who mentioned it.
He got accolades from the president for his early loyal performance, but cracks soon developed in his testimony as the day wore on.
Lewandowski has stonewalled Democrats who were questioning him about possible obstruction of justice charges against Donald Trump as the president praised his former campaign manager’s tough stance.
Lewandowski took a combative and aggressive stance from the start of his testimony before the House Judiciary Committee, which he could also use as a launch pad for a Senate bid.
The former Trump campaign manager offered a strong defense of the president, claiming he was a victim of ‘haters’ and resisted Democrats’ efforts to ask him about his conversations with the president.
The hearing is part of the Democrats’ strategy to prove there is enough evidence to impeach President Trump and they’ve issued a round of subpoena to witnesses from special counsel Robert Mueller’s report to help make their case to the American people.
Corey Lewandowski testifies before the House Judiciary Committee
Lewandowski’s more than four hours before the panel had its share of made-for-TV moments as he resisted their efforts to implicate Trump and snapped back at many of their questions.
In one of those moments, he mocked Democratic Representative Eric Swalwell, who suggestedĀ Lewandowski was ‘ashamed’ to read his own words from Mueller’s report that were projected on a screen in the room.
‘Why donāt you want to read it Mr. Lewandowski?ā the congressman for California asked.
āI think you should afford me the same privilege you gave Mr. Mueller,’ he responded, referring to Mueller’s June testimony before the committee, where he did not have to read from his report.
‘Are you ashamed of the words you wrote down,’ Swalwell asked.
Lewandowski then called him ‘President Swalwell,’ in his response, alluding to the congressman’s failed presidential bid.
‘President Swalwell – I’m very happy with what I’ve written but you’re welcome to read it if you like,’ he said.
And when Swalwell pressed him if he was ashamed of what he wrote, Lewandowski pushed back: ‘Iām not ashamed of anything in my life. Are you?’
Swalwell also asked about Lewandowski’s testimony to Mueller, where he stated he kept notes from his conversations with President Trump in a safe.
‘Itās a big safe congressman. Thereās a lot of guns in there,’ Lewandowski said.
But Democratic CongresswomanĀ Pramila Jayapal got in a shot at her own at Lewandowski during her questioning period.
‘You are not yet in the Senate. You are a witness before the Judiciary Committee. Please act like it,’ she told him, referring to speculation he may run for New Hampshire’s Senate seat next year.
The lawmaker from Washington state appeared to rattle Lewandowski when she asked him if he lied to Mueller’s investigators or to the president.
‘Not to the best of my recollection, no,’ he told her.
She then asked him about a tweet from Trump in April, after the Mueller report came out, when the president wrote: ‘Statements are made about me by certain people in the Crazy Mueller Report, in itself written by 18 Angry Democrat Trump Haters, which are fabricated & totally untrue.’
‘So the president is wrong that the report is fabricated and totally untrue?,’Ā Jayapal asked Lewandowski.
‘Thatās a question for the president,’ he replied.
‘Did you lie to the president and is the president correct that everything in the report is fabricated?,’ she asked.
‘I wonāt comment on private conversations but I donāt appreciate the insinuation that I lied about anything. And Iāve answered it multiple times. Iāve answered your question multiple times,’ Lewandowski replied.
Rep. Pramila Jayapa appeared to rattle Corey Lewandowski with her questions
Corey Lewandowski confers with his personal attorney Peter Chavkin during his testimony
Lewandowski mocked Rep. Eric Swalwell’s failed presidential bid
The former Trump campaign manager also made some head-scratching comments in his testimony, claiming he never read Mueller’s report and arguing the ‘fake Russian collusion narrative’ is the ‘greatest crime committed’ against the American people.
‘I think that this fake Russia collusion narrative is the greatest crime committed against the American people in our generation if not ever,’ he said.
Lewandowski also had a contentiousĀ back-and-forth with Congresswoman Shelia Jackson Lee.
‘Don’t ask me a question I won’t answer,’ he told her when she pressed him on his conversations with the president.
‘This is House Judiciary – not a house party,’ she shot back.
And when Jackson Lee pressed him to answer a question about a section of Mueller’s report, which was projected on a screen in the hearing room, Lewandowski snapped back: ‘ You’re welcome to read it, congresswoman.’
‘You’re welcome to be stalling, and I’m not going to stall. Either answer the question yes or no,’ Jackson Lee responded.
‘I will not disclose any conversation I’ve had with the president,’ Lewandowski said. ‘The White House has directed me that I not disclose the substance of any conversation with the president.’
With Jackson Lee’s five minutes of question time expired, Chairman Jerry Nadler said Lewandowski could answer her last question.
‘I don’t believe there was a question, congressman,’ Lewandowski responded. ‘Just a rant.’
PUBLISHED:Ā 17:27 EDT, 17 September 2019Ā |Ā UPDATED:Ā 19:43 EDT, 17 September 2019
New York became the first state to ban the sale of flavored e-cigarettes Tuesday, a move that comes as federal health officials investigate a mysterious surge of severe breathing illnesses linked to vaping.
The vote by the state Public Health and Health Planning Council means the prohibition, which covers flavored e-cigarettes and other vaping products except for menthol and tobacco flavors, goes into effect immediately. Retailers will have two weeks to remove merchandise from store shelves.
Gov. Andrew Cuomo, a Democrat, had proposed the emergency ban Sunday , citing surging use among young people.
According to data from the state health department, nearly 40% of high school seniors and 27% of high school students overall in the state use e-cigarettes. Use among high-school students went from 10.5% in 2014 to 27.4% in 2018.
Andy Ramkumar, who works at Gotham Vape in Queens, vapes at the store on Tuesday as a new ban on flavored vaping products goes into effect
Vaping products, including flavored vape liquids and pods, are displayed at Gotham Vape
Cuomo pointed to vaping flavors like bubblegum and cotton candy that he said seemed aimed at young people.
‘We don’t really know the health consequences of these devices,’ he said on public radio Monday.
Vape shop owners say they’re considering a legal challenge to the new regulation, which they say should have gone before lawmakers for hearings, debate and a vote. Several spoke at the meeting to urge council members to reject the ban.
Mike Kruger owns two vape shops in the Albany region and said the ban could force hundreds of businesses like his to close. He said smokers looking to quit will have fewer options under the ban, potentially leading to an increase in the use of traditional tobacco products. As for the breathing illnesses, Kruger said he believes they are the result of people buying black market vape liquid, not the items he sells.
‘We are bypassing the legislative process,’ he said of the ban. Kruger added that many adults seek out the flavored versions. He himself prefers blue raspberry. ‘Vaping has been around for 12 years. And now this.’
Keith Mautner, who owns a vape store in Queens and uses the products himself, estimates that flavored e-cigarettes make up 95% percent of his business. He said state leaders should have cracked down on manufacturers if they were concerned about the products being used by teens.
‘That’s the problem, the manufacturers. It’s not us,’ he said.
Vaping, which many Americans have taken up as an alternative to smoking, has come under increased federal scrutiny following a rash of deaths related to vaping cannabis. Seen above are flavored vaping products in Queens that are now forbidden under the rule
Gov. Andrew Cuomo, a Democrat, had proposed the emergency ban Sunday , citing surging use among young people
The exemption for menthol was criticized by some health groups, who worried young people would switch to that variety. It includes all types of flavored vaping products, including disposable and refillable devices.
Juul Labs, Inc., the company with the biggest footprint in the industry, has said it agrees with the need for action in the flavored e-cigarette sector and will comply with any final state and federal regulations.
Nationwide, health officials are investigating hundreds of cases of serious breathing illnesses in people who use e-cigarettes and other vaping devices. They have identified 380 confirmed and probable cases in 36 states and one territory, including six deaths. President Donald Trump has proposed a federal ban on flavored e-cigarettes and vaping products.
New York becomes the first state to enact the ban. Michigan approved a ban that includes menthol, but not tobacco flavor, but rules for enactment have not yet been put into place. Other states are also considering bans.
The statewide smoking age is going up to 21, after Cuomo signed legislation earlier this year. He also recently signed a mandate that requires state anti-tobacco campaigns to also include vaping.
The emergency regulation enacted Tuesday will expire in 90 days unless it’s renewed. Cuomo has proposed legislation that would put the ban in state law, eliminating the need to renew the ban.
The FDA has been able to ban vaping flavors since 2016 but has yet to take the step.
The global market is estimated to have a value of as much as $11 billion.
Last year, the Food and Drug Administration (FDA) declared that teen vaping (and Juuling) had reached “epidemic proportions.” A year later? It doesn’t seem as if the obsession among teens has slowed down.
Case in point: This month,Ā eight Wisconsin teenagers were taken to the hospitalĀ with extreme coughs, shortness of breath, and fatigue,Ā per CBS News. Doctors suspected that vaping was the cause of these teenagersā respiratory problems, some of whom were unable to breathe on their own when they were hospitalized.
While it’s unclear what the kids were inhaling that may have caused their lung and breathing issues, some of the teens said that they may have been vaping nicotine and THC (the psychoactive compound in marijuana), asĀ Women’s HealthĀ reported previously.
Those kids are certainly not the only ones hooked on vaping. Per the FDA report released last year, there was a 75 percent increase in use among teens in 2018 compared to 2017.
But the agency isn’t slowing down when it comes to cracking down on retailers to prevent kids from wanting to vape and getting their hands on Juuls and other vape products. And we’ll get to that.
But first: Why are young adults so into Juuls, and vaping in general? And just how bad is it really for teens’ health? Here, a primer on the controversy.
What is Juuling exactly?
First off, it’s important to note that vaping and Juuling are the same thing. Juuls are a type of vaporizer or e-cigarette, designed so discreetly that most people donāt even recognize them as anĀ e-cig. Juul devices (and other vaporizers) work by heating up a cartridge that contains oils and make a vapor that can be inhaled.
According to theĀ company’s website, they were designed to help cigarette smokers transition off of smoking. “We envision a world where fewer people use cigarettes, and where people who smoke cigarettes have the tools to reduce or eliminate their consumption entirely, should they so desire,” the website says. It also says in itsĀ marketing and social media codeĀ that Juul products are “not appropriate or intended for youth.”
However, the vaporizers are small enough to fit in the palm of your hand, and they can be charged when plugged into a laptopās USB slotāmaking it easy for students to pass them off as flash drives in class.
Why is Juuling so popular?
Between those two design elements, and the fact that the Juul pods come in flavors like crĆØme brulee, cool cucumber, and mango, these e-cigs have become insanely popular with kids. But they’re also popular among adults, given that they were originally designed to help smokers quit, as mentioned.
Just how widespread is the Juul fad, you’re wondering? The Juul vaping device was invented by two Stanford grads in 2007, and has since become the best-selling e-cigarette on the market, capturing 32 percent of the market share,Ā according to Nielsen data. And according to not-yet published data from the FDA, there was a 75 percent increase in overall e-cigarette use (vaping and juuling) among high schoolers in 2018 compared to 2017, per theĀ Washington Post.
In addition to convenience stores, Juul products are sold through their website where you need to verify that you are at least 21 years old by providing your date of birth, legal name, and permanent address, which are then checked against public records, before you can purchase.
However, one Boston doctorĀ told WFXTĀ that teenagers are still buying Juuls online by lying about their age and using a prepaid debit card.
Why is vaping (or Juuling) bad?
Many people use e-cigarettes, like Juuls, because they arenāt made with tar and all the cancer-causing chemicals you’ll find in aĀ tobacco cigarette. Still, a 2018 study published in the journalĀ PediatricsĀ found that teenagers who smoked e-cigarettes had higher levels of cancer-causing chemicals in their bodies than non-smokers.
Although theyāre marketed as safer than regular cigarettes, vapes are certainly not risk-free. āThis is not a safe alternative,ā says Michael Blaiss, MD, the executive medical director of the American College of Allergy, Asthma and Immunology. āIs it safer than a tobacco cigarette? Yes. The problem is thatĀ nicotineĀ itself can have major effects.ā
When it comes to nicotine levels, one Juul pod contains the same amount of nicotine as a pack of cigarettes, according to the companyās website. With about 200 āpuffsā in each Juul pod and roughly 20 cigarettes in a pack, that actually means that the amount of nicotine in each puff is significantly less than the nicotine in one cigarette, which is one reason why e-cigarettes like this can be helpful for adults trying to quit smoking. For children who havenāt yet gotten addicted to nicotine, though, vaping is far from a good thing.
āThink of it this way: In comparing e-cigarettes to traditional cigarettes, we are comparing e-cigarettes to the deadliest consumer product on the market,ā saysĀ Christy Sadreameli, MD, a pediatric pulmonologist at Johns Hopkins and spokesperson for the American Lung Association.
Is Juuling more dangerous for kids than for adults?
Vaping can be particularly harmful for children and teenagers. The human lung develops rapidly within a childās first two years, Dr. Sadreameli says, but it continues to grow until a child is 15 years old, on average.
Exposure to e-cigarette vapor during periods of lung growth and development may be more harmful to the lungs compared to when they’re fully developed, she says. āTeens who are using e-cigarettes themselves may be getting exposed to very high doses of these products,” she says. “We know that e-cigarettes contain extremely dangerous compounds, such as formaldehyde, heavy metals, acrolein (which causes irreversible lung damage), and sometimes harmful substances such as menthol and diacetyl (which can cause a dangerous lung disease called āpopcorn lungā).ā
Juuling: The Addictive New Vaping Trend Teens Are Hiding
Hereās what you need to know about Juul, the e-cigarette brand that contains double the nicotine and is vaped from a device that looks like a USB drive.
Forty years ago, nearly 29 percent of high school seniors reported smoking cigarettes daily, according to theĀ U.S. Department of Health and Human Services. By 2018, less than 1 in 25 high schoolers smokes daily.TheĀ Centers for Disease Control and Prevention (CDC)Trusted SourceĀ reports a similar decline, with 4.3 percent fewer middle schoolers and 15.8 percent fewer high schoolers admitting to smoking cigarettes between 2011 and 2018.However, as cigarette smoking seems to be on the decline, another method of nicotine use has managed to hook todayās youth.
The same CDC report that discussed the decline of cigarette use revealed an increase in vaping.
In 2018, 4.9 percent of middle schoolers reported using electronic cigarettes, and 20.8 percent of high schoolers reported the same.
What parents need to know about Juuling, the vaping device in disguise
When it comes to tobacco use, cigarettes are considered a combusted or burned product. The cigarette has to be lit, the tobacco burned, and the smoke inhaled.
Vaping, on the other hand, involves no combustion or burning. Instead, vaping products release an aerosol that is inhaled.
While many people make the mistake of assuming this aerosol is as harmless as water vapor, it actually consists of fine particles containing toxic chemicals, many of which have been linked to cancer, as well as respiratory and heart diseases.
Vaping devices, which include e-cigarettes and vape pens, were first introduced to the commercial market in 2007. They typically have to be plugged in or powered by battery so a heating component can warm an e-liquid cartridge that then releases the aerosol to be inhaled in the lungs.
āA lot of these cartridges are actually marketed as health products,ā Winickoff explained. āThey have āhealthyā flavors, things like mango and berry that are associated with high antioxidants. But theyāre just flavors. There are no actual health benefits.ā
TheĀ CDCTrusted SourceĀ has found that these flavors are a big part of the reason teens are latching onto these products. Even worse, Winickoff told Healthline about aĀ studyĀ where 60 percent of kids believed that pods used in Juuls (a specific brand of e-cigarette) were nicotine-free ā when the reality is that 99 percent of these products contain nicotine.
In 2018, Juuls accounted for aboutĀ 40 percentĀ of the e-cigarette market, grossing 150 million in retail sales the last quarter alone. The appeal of this product specifically is that they donāt look like e-cigarettes. Juuls are small, can be mistaken for a USB drive, and are easily concealed in a personās hand.
In other words, this is a product teens are able to use more discreetly, without drawing as much attention from their parents and teachers.
With the introduction of Juuling, e-cigarette use among teens is on the rise. So much so that both TimeĀ andĀ The Washington PostĀ reported on Juuling and what parents need to be aware of.
The risks of e-cigarettes
A large number of people believe e-cigarettes are simply a safer way to consume nicotine, and that nicotine isnāt harmful by itself. But thatās not true.
ResearchTrusted SourceĀ has found numerous negative impacts of nicotine alone: on metabolism, increased cancer risks and respiratory problems, as well as moreĀ asthma attacks and symptomsĀ experienced by those who vape.
āWe know based on Juulās own published testing that these products contain carcinogens. Group 1 carcinogens ā the most potent carcinogens known,ā Winickoff revealed.
Thereās also another risk that parents should be aware of when it comes to teens and e-cigarette use ā the addiction may be harder to kick.
According to AAP, Juul pods contain nearly double the concentration of nicotine compared to other e-cigarette cartridges. This is especially concerning because the risk for addiction is already higher among teens.
Winickoff explained, āThe younger the developing brain is exposed to nicotine, the stronger and more rapid the addiction. The earlier you become addicted, the harder it is to quit.ā
But thatās not all. According to Winickoff, addiction to nicotine at a young age actually causes brain remodeling, changing the threshold for addiction to other substances.
In other words, kids who use nicotine earlier are more likely to fall in love with other drugs later on.
Tips for talking to kids before they start vaping
The risks of Juuling and vaping for kids are real, making it all the more important for parents to begin addressing these issues before their children decide to try these products.
A licensed clinical psychologist from Connecticut, Dr. Elaine Ducharme, PhD, told Heathline, āParents really need to start talking to their kids in elementary school about this issue.ā
She offered these tips for engaging in those discussions:
Educate yourself first. Get the facts on these products so you know what youāre talking about when you approach the discussion with your kids.
Be a role model. Parents are responsible for shaping many of their childrenās ideas and behaviors, so set the tone with your own actions.
Establish a safe environment where your kids can talk about their feelings and opinions without feeling judged.
Really listen and let them tell you what they know.
It can sometimes be helpful to give them something to read that you can then discuss together.
Help them figure out ways to handle situations where they may be pressured to engage in these behaviors.
Create a plan, even specific things for them to say like, āI have asthma and my doctor says I could become very ill if I try this,ā or, āI just donāt think it looks cool.ā
Help them understand that using willpower to stand up to peers is really hard, but willpower is like a muscle ā the more you use it, the stronger it gets.
Winickoff had this to add, āWhat the research says about tobacco use, which we can apply to Juuling and vaping, is that parents expressing how they feel about these products ā their strong negative opinions ā actually can make a difference. Kids may protest, but they do internalize their parentās belief system.ā
Winickoff says this is true even if a parent uses the product themselves. Talking about the negatives of that product, and about how the addiction has taken hold and why parents canāt quit (even though they want to) can still send a strong message to teens about why they shouldnāt start.
How teens purchase and hide Juuls
While the legal age for purchasing these products is 18 in some states and 21 in others, Winickoff explained that many kids are ordering them online ā simply checking a box to verify they are of legal age. For this reason, parents should pay attention to their teenās online purchases and packages that may arrive in the mail.
Juul pods also look very similar to an average USB flash drive. Examine any questionable device closely.
Addressing the nicotine addiction
If you discover that your teen is already Juuling, Winickoff is clear that itās important to recognize this as more than just a ābad habit.ā Itās a medical problem that requires a major response from the family, the childās pediatrician, and possibly a therapist to help get that teen out from under the nicotine addiction.
āItās not easy to get kids to stop. Their body craves it. They need it just to get through the day. I can tell you from anecdotal experience just from my office, Iāve had a terrible time getting kids to give up electronic cigarettes. Itās that young brain and extra susceptibility. Theyāre locked in.ā
Ducharme added, āIf the situation seems out of control, itās time to speak with a psychologist or other mental health professional trained in working with teens and addictions.ā
Currently, there arenāt any addiction programs specifically geared toward teens and nicotine use, which makes prevention and enforcement of existing rules all the more important.
Winickoff recommends advocating for zero-tolerance policies in schools and tobacco-free zones around every school, middle grade through college. He also recommends parents get involved in the Tobacco 21 movement, which aims to increase the legal age for purchasing tobacco products to 21. So far, six states have adopted such laws.
With the help of active and informed parents, yours could be next.
Editorās note: This piece was originally reported on August 17, 2018. Its current publication date reflects an update, which includes a medical review by Alana Biggers, MD, MPH.
President Donald Trump gained four pounds over the last year, according to a new assessment from his doctor, a weight increase that makes him technically obese.
But Trump’s doctor, Sean Conley, nonetheless determined that the president “remains in very good health overall” in a memorandum released by the White House on Thursday.
Conley recorded Trump’s height as 6’3″ and his weight as 243 pounds. Last year, the president clocked in at 239 pounds, according to an assessment by his former doctor, Ronny Jackson.
The Centers for Disease Control and PreventionĀ says that a body mass index of 30.0 or higher falls into the obese range. Based on his current height and weight, Trump’s body mass index is 30.4, putting him across the obesity threshold. Obese people are at increased risk of a slew of health problems, including diabetes, heart disease and stroke.
The White House did not immediately respond to a request for comment about the president’s weight.
Jackson recommended last year that the president lose 10-15 pounds and put him on a diet and exercise plan. The White House acknowledged last week that the president has not followed the plan closely.
Trump, the oldest U.S. president in history, has a reputation for guzzling diet coke and eating steak and fried food. His diet is a contrast from that of former President Barack Obama, who exercised regularly and promoted healthy eating habits with his wife, former First Lady Michelle Obama.
The president underwent a four-hour physical exam last week at Walter Reed National Military Medical Center. Conley declared Trump was in “very good health” after the exam, which included assessments from 11 specialists. But the White House did not release any results until Thursday.
Some Trump critics wondered why it took so long, but it often takes days to receive medical test results. The White House nonetheless released the memo on a busy day, shortly after news broke that the president planned to sign a government funding deal and issue a national emergency to ensure the construction of his border wall along the U.S.-Mexico border.
In his memo, Conley recorded Trump’s LDL cholesterol, commonly referred to as “bad” cholesterol, at 122 milligrams per deciliter. The CDCĀ recommendsĀ that a person’s LDL cholesterol be under 100. Trump has struggled with high cholesterol in the past, and Conley said he had increased the president’s dosage of cholesterol medicine. Trump’s blood pressure is considered normal, though, at 118/80 mmHg. Conley’s measurement is at the high end of the CDC’sĀ recommended range.
Conley said Trump’s, liver, kidney and thyroid functions, as well as his electrolytes and blood counts, were all normal.
President Donald Trump weighed 243 pounds at his physical on Feb. 8, meaning he is now considered obese.
He has gained four pounds since his previous official checkup 13 months ago, giving him a body mass index of 30.4. A personĀ with a BMI of 30 or aboveĀ is defined as obese.
Obesity, which affects more than 90 million U.S. adults, is associated with a higher risk of heart disease, stroke, and type 2 diabetes, according to the U.S. Centers for Disease Control and Prevention.
That does not mean Trump is suddenly at much higher risk for those conditions. They also are associated with being overweight, which he was at his previous checkup in January 2018. The presidentās BMI then was 29.9, at the upper end of being considered overweight for a man of his height, listed at 6 feet 3 inches.
The president was examined by physician Sean P. Conley this month at Walter Reed National Military Medical Center, the White House said Thursday. Conley, a Navy commander, said he was assisted by a panel of 11 board-certified specialists.
āAfter taking into account all the laboratory results, examinations and specialist recommendations, it is my determination that the president remains in very good health overall,ā Conley said, inĀ a memo released by the White House.
The presidentās blood pressure was measured at 118 over 80. The lower of those two numbers, called diastolic blood pressure, is considered borderline high, according toĀ the most recent guidelines from the American Heart Association. Conley described the presidentās liver, kidney, and thyroid function as normal.
During his physical, Trump received theĀ Shingrix vaccine, which protects against the debilitating disease of shingles. He also got the Pneumovax 23 vaccine, which reduces a personās risk of pneumococcal infection and isĀ recommended by the CDC for all adults age 65 or older.
According toĀ Lori Lieberman, who performed the original recording in 1971, the song was born of aĀ poemĀ she wrote after experiencing a strong reaction to theĀ Don McLeanĀ song “Empty Chairs“,[1][2]Ā writing some poetic ideas on a napkin at theĀ Troubadour ClubĀ after seeing him perform the song,[3]Ā and then relating this information toĀ Norman Gimbel, who took her feelings and converted them into song lyrics. Gimbel passed his lyrics toĀ Charles Fox, who set them to music.[4]
According to Gimbel, he was introduced to theĀ Argentinian-born composerĀ Lalo SchifrinĀ (then ofĀ Mission: ImpossibleĀ fame) and began writing songs to a number of Schifrin’s films.[5]Ā Both Gimbel and Schifrin made a suggestion to write aĀ BroadwayĀ musicalĀ together, and Schifrin gave Gimbel an Argentinean novelāHopscotchĀ byĀ Julio CortĆ”zarāto read as a possible idea. The book was never made into a musical, but in chapter two, the narrator describes himself as sitting in a bar listening to an American pianist friend “kill us softly with someĀ blues“.[5][6]Ā Gimbel put the phrase in his “idea book” for use at a future time with a parenthesis around the word “blues” and substituted the word “song” instead.[7]
Don McLean said he had not known that the song described his singing and, when asked about it, said “I’m absolutely amazed. I’ve heard both Lori’s and Roberta’s version and I must say I’m very humbled about the whole thing. You can’t help but feel that way about a song written and performed as well as this one is.”[8]
Nevertheless, Fox repudiated Lieberman’s role in the song’s creation, saying: “We [Gimbel and Fox] wrote the song and [Lieberman] heard it and said it reminded her of how she felt at [a Don McLean] concert. Don McLean didn’t inspire Norman or me to write the song but even Don McLean thinks he’s the inspiration for the song.”[9]
McLean supported Lieberman, both on his website and from the stage of a concert which he invited her to attend in 2010 and in an April 5, 1973 article in theĀ New York Daily News, Norman Gimbel was quoted as agreeing with Lieberman: “She [Lori Lieberman] told us about this strong experience she had listening to McLean (‘I felt all flushed with fever / Embarrassed by the crowd / I felt he had found my letters / And read each one out loud / I prayed that he would finish / But he just kept right on’). I had a notion this might make a good song so the three of us discussed it. We talked it over several times, just as we did for the rest of the numbers we wrote for this album and we all felt it had possibilities.”[10]
When Dan MacIntosh (Songfacts) spoke with Charles Fox in 2010, he refuted this story: “I think it’s called an urban legend. It really didn’t happen that way. Norman Gimbel and I wrote that song for a young artist whose name was Lori Lieberman. Norman had a book that he would put titles of songs, song ideas and lyrics or something that struck him at different times. And he pulled out the book and he was looking through it, and he says, ‘Hey, what about a song title, ‘Killing Me Softly With His Blues’?’ Well, the ‘killing me softly’ part sounded very interesting, ‘with his blues’ sounded old fashioned in 1972 when we wrote it. So he thought for a while and he said, ‘What about ‘killing me softly with his song’? That has a unique twist to it.’ So we discussed what it could be, and obviously it’s about a song – listening to the song and being moved by the words. It’s like the words are speaking to what that person’s life is. Anyway, Norman went home and wrote an extraordinary lyric and called me later in the afternoon. I jotted it down over the phone. I sat down and the music just flowed right along with the words. And we got together the next morning and made a couple of adjustments with it and we played it for Lori, and she loved it, she said it reminds her of being at a Don McLean concert. So in her act, when she would appear, she would say that. And somehow the words got changed around so that we wrote it based on Don McLean, and even Don McLean I think has it on his Web site. But he doesn’t know. You know, he only knows what the legend is.”[11]Ā In the New York Daily News articleĀ [8], Patricia O’Haire asked Lori Lieberman about how the song came about ā what or more specifically who was the inspiration for it:
āDon McLean,ā she said simply. āI saw him at the Troubadour in LA last year. (āAnd there he was this young boy / A stranger to my eyesā) I had heard about him from some friends but up to then all I knew about him really was what others had told me. But I was moved by his performance, by the way he developed his numbers, he got right through to me. (āStrumming my pain with his fingers / Killing me softly with his song/ Telling my whole life with his words.ā)
Norman Gimbel picked up the story. āLori is only 20 and she really is a very private person,ā he said. āShe told us about this strong experience she had listening to McLeanā (āI felt all flushed with fever / Embarassed by the crowd / I felt he had found my letters / And read each one out loud / I prayed that he would finish / But he kept just right onā¦ā) āI had a notion this might make a good song so the three of us discussed it. We talked it over several times, just as we did with the rest of the numbers we wrote for the album and we all felt it had possibilities.ā āNorman had a phrase he liked, ākilling me softly with his blues’ā, Lori went on to explain. āBut I didnāt feel the word ābluesā was quite what the effect was. It wasnāt contemporary enough, somehow. We talked about it a while and finally decided on the word āsongā instead. It seemed right then when we did it.ā
Lieberman was the first to record the song in late 1971, releasing it in early 1972.[13]Ā Helen ReddyĀ has said she was sent the song, but “theĀ demo… sat on my turntable for months without being played because I didn’t like the title”.[14]
Roberta Flack first heard the song on an airline, when the Lieberman original was featured on the in-flight audio program. After scanning the listing of available audio selections, Flack would recall: “The title, of course, smacked me in the face. I immediately pulled out some scratch paper, madeĀ musical stavesĀ [then] play[ed] the song at least eight to ten times jotting down the melody that I heard. When I landed, I immediately calledĀ Quincy [Jones]Ā at his house and asked him how to meet Charles Fox. Two days later I had the music.” Shortly afterwards Flack rehearsed the song with her band in theĀ Tuff GongĀ Studios inĀ Kingston, Jamaica, but did not then record it.[15]
In September 1972, Flack was opening forĀ Marvin GayeĀ at theĀ Greek Theater; after performing her preparedĀ encoreĀ song, Flack was advised by Gaye to sing an additional song. Flack later said, “I said well, I got this song I’ve been working on called ‘Killing Me Softly…’ and he said ‘Do it, baby.’ And I did it and the audience went crazy, and he walked over to me and put his arm around me and said, ‘Baby, don’t ever do that song again live until you record it.'”[16]
Released in January 1973, Flack’s version spent a total of five non-consecutive weeks at #1 in February and March, more weeks than any other record in 1973, being bumped to number 2 byĀ The O’Jays‘ “Love Train” after four straight weeks atop theĀ BillboardĀ Hot 100.Ā BillboardĀ ranked it as the No. 3 song for 1973.[17]Ā In April of 1973, Canadian singerĀ Anne MurrayĀ included her version of “Killing Me Softly” on her album titledĀ Danny’s Song.
Charles Fox suggested that Flack’s version was more successful than Lieberman’s because Flack’s “version was faster and she gave it a strong backbeat that wasn’t in the original”.[9]Ā According to Flack: “MyĀ classicalbackgroundĀ made it possible for me to try a number of things with [the song’s arrangement]. I changed parts of the chord structure and chose to end on a major chord. [The song] wasn’t written that way.”.[18]Ā In actual fact the only chord changed by Flack was the chorus chord under “Fingers” which was changed from Major to Minor. Flack playsĀ electric pianoĀ on the track. The bass is played byĀ Ron Carter, the guitar byĀ Hugh McCrackenĀ and the drums by Ray Lucas.[citation needed]Ā The single appeared as the opening track of theĀ album of the same name, issued in August 1973.
This version sampled the 90ās song “Bonita Applebum” byĀ A Tribe Called QuestĀ (ATCQ) from their debut albumĀ People’s Instinctive Travels and the Paths of Rhythm. ATCQ themselves had sampled the riff from the song “Memory Band” fromĀ psychedelic soulĀ bandĀ Rotary Connection‘s 1967Ā eponymous debut album. The Fugees single was so successful that the track was “deleted” and thus no longer supplied to retailers whilst the track was still in the top 20 so that attention could be drawn to the next single, “Ready or Not“. Propelled by the success of the Fugees track, the 1972 recording by Roberta Flack wasĀ remixedĀ in 1998 with the vocalist adding some new vocal flourishes: this version topped theĀ Hot Dance Club PlayĀ chart. Flack and the Fugees have performed the song together since then.[35]Ā In 2008, “Killing Me Softly” was ranked number 25 onĀ VH1‘s 100 Greatest Songs of Hip Hop and number 44 on its list of the “100 Greatest Songs of the ’90s”.
Background
“Killing Me Softly” was the last song the Fugees recorded forĀ The Score, after memberĀ Pras MichaelĀ made the suggestion to cover it. They wanted to “see how we can create break beats. And of course, we all loveĀ A Tribe Called QuestĀ and we went in like ‘Okay, letās cut that sample.'” They then added a bass reggae drop.[36]Ā Initially, the Fugees wanted to change the lyrics of the song to make it anti-drugs and anti-poverty but the songwriters, Norman Gimbel and Charles Fox, refused.[37]
Composition
The Fugees’ version features “percussive rhythms” with “a synth sitar sound, Wyclef’s blurted chants, Hill’s vocal melisma on the scatted bridge, and a bombastic drum-loop track”.[38]
Critical reception
In January 1997,Ā SpinĀ called the song “an instant classic, pumped out of every passing car from coast to coast, with Lauryn Hill’s timeless voice never losing its poignant kick”.[39]Ā Celebrating the album’s 20th anniversary in February 2016,Ā BillboardĀ reviewed the song, saying: “It’s a lovely cover that maintains the spirit of the original while taking the material in new directions.”[40]
Music video
The video, directed by Aswad Ayinde[41]Ā and based on Lauryn Hill’s ideas, never came out commercially in America.[42]Ā It features Roberta Flack.[38][43]
Bounty Killer remix
The Fugees recorded aĀ dancehallĀ version withĀ Bounty KillerĀ rapping and Hill singing a rewritten chorus. However, they did not receive permission to release it onĀ The Score.[35]
Track listing
UK CD1
“Killing Me Softly”Ā (Album Version W/Out Intro)Ā ā 4:03
“Killing Me Softly”Ā (Album Instrumental)Ā ā 4:03
Don McLean – Empty Chairs (for Lori Lieberman / August 2011)
Lori Lieberman sings “Killing Me Softly” on Mike Douglas Show, 1973
Lori Lieberman comes to terms with Killing Me Softly
Roberta Flack – Killing me softly with his song 1973 Original MV stereo)
[Chorus]
Strumming my pain with his fingers
Singing my life with his words
Killing me softly with his song
Killing me softly with his song
Telling my whole life with his words
Killing me softly with his song
[Verse 1]
I heard he sang a good song
I heard he had a style
And so I came to see him
To listen for a while
And there he was this young boy
A stranger to my eyes
[Chorus]
Strumming my pain with his fingers
Singing my life with his words
Killing me softly with his song
Killing me softly with his song
Telling my whole life with his words
Killing me softly with his song
[Verse 2]
I felt all flushed with fever
Embarassed by the crowd
I felt he found my letters
And read each one out loud
I prayed that he would finish
But he just kept right on
[Chorus]
Strumming my pain with his fingers
Singing my life with his words
Killing me softly with his song
Killing me softly with his song
Telling my whole life with his words
Killing me softly with his song
[Verse 4]
He sang as if he knew me
In all my dark despair
And then he looked right through me
As if I wasn’t there
And he just kept on singing
Singing clear and strong
[Chorus]
Strumming my pain with his fingers
Singing my life with his words
Killing me softly with his song
Killing me softly with his song
Telling my whole life with his words
Killing me softly with his song
[Bridge]
Ohhhh ohhhh ohhhh
Ohh ohh ohh ohh ohh ohh ohh
La la la, la la la
Ohh ohh ohh, ohh ohh ohh
La ahh ahhhhhh haaaaaaaaaaaaaa
Ha ahh ahh, ahh ahh ahh ahh
[Chorus]
Strumming my pain with his fingers
Singing my life with his words
Killing me softly with his song
Killing me softly with his song
Telling my whole life with his words
Killing me (softly)
[Outro]
He was strumming my pain
Yeah, he was singing my life
Killing me softly with his song
Killing me softly with his song
Telling my whole life with his words
Killing me softly
With his song
Story 2: Consumer Spending Surging — U.S. Stock Market Hits New Record Highs — Videos
U.S. consumer spending roars back, but inflation tame
Lucia Mutikani
Ā U.S. consumer spending increased by the most in more than 9-1/2 years in March as households stepped up purchases of motor vehicles, but price pressures remained muted, with a key inflation measure posting its smallest annual gain in 14 months.
The surge in consumer spending reported by the Commerce Department on Monday sets a stronger base for growth in consumption heading into the second quarter after it slowed sharply in the first three months of the year.
It further allayed concerns about the economyās health, which had been brought to the fore by a temporary inversion of the U.S. Treasury yield curve last month. Tame inflation, however, supported the Federal Reserveās recent decision to suspend further interest rate increases this year.
Fed officials are scheduled to meet on Tuesday and Wednesday to assess the economy and deliberate on the future course of monetary policy. The U.S. central bank in March dropped forecasts for any interest rate increases this year, halting a three-year policy tightening campaign. The Fed raised borrowing costs four times in 2018.
āThe economy is in a sweet spot for now with not enough inflation to cause the Fed to raise rates, and with inflation not low enough to worry Fed officials that economic demand is weakening, which could require rate cuts,ā said Chris Rupkey, chief economist at MUFG in New York.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, surged 0.9 percent. That was the biggest rise since August 2009 and was also driven by increased healthcare expenditures. Spending rose 0.1 percent in February.
Data for January was revised up to show consumer spending rising 0.3 percent instead of the previously reported 0.1 percent gain. The release of the February spending data was delayed by a five-week partial shutdown of the federal government that ended on Jan. 25. Economists polled by Reuters had forecast consumer spending jumping 0.7 percent in March.
When adjusted for inflation, consumer spending increased 0.7 percent in March. This so-called real consumer spending was unchanged in February. The data was included in last Fridayās first-quarter gross domestic product report.
Marchās surge in real consumer spending suggested an acceleration in consumption was likely in the second quarter. Consumer spending increased at a 1.2 percent annualized rate in the first quarter, the slowest in a year. The overall economy grew at a 3.2 percent rate last quarter.
The dollar was little changed against a basket of currencies, while U.S. Treasury prices fell. Stocks on wall Street rose, lifting the S&P 500 and the Nasdaq Composite to record highs.
INFLATION BELOW TARGET
In March, spending on goods rebounded 1.7 percent, with outlays on long-lasting manufactured goods such as cars shooting up 2.3 percent. Spending on goods fell 0.5 percent in February. Outlays on services increased 0.5 percent last month, driven by healthcare spending, after rising 0.4 percent in February.
Inflation was benign, with the personal consumption expenditures (PCE) price index excluding the volatile food and energy components unchanged in March after edging up 0.1 percent in February. That lowered the year-on-year increase in the so-called core PCE price index to 1.6 percent, the smallest increase since January 2018, from 1.7 percent in February.
The core PCE index is the Fedās preferred inflation measure. It hit the central bankās 2 percent inflation target in March last year for the first time since April 2012.
The low inflation readings caught the attention of the White House, where President Donald Trump has railed against the Fed for tightening monetary policy. Trump has called for rate cuts, tweeting earlier this month that there was āalmost no inflation.ā The Trump administration blamed the economyās stumble at the turn of the year on the rate hikes.
On Monday, White House economic adviser Larry Kudlow said slowing inflation opened the door for possible rate cuts. Economists, however, are not convinced.
āThese below-target rates of inflation will likely be acknowledged by the Fed at this weekās meeting, but we still think it unlikely that the Fed would be prompted into rate cuts by weak inflation readings alone,ā said Jesse Edgerton, an economist at JPMorgan in New York.
With personal income ticking up 0.1 percent in March after rising 0.2 percent in February, there are concerns that the current pace of consumer spending might be unsustainable. Incomes have been almost flat since surging last December.
But a strong labor market and still very high savings are seen underpinning spending. Wages rose 0.4 percent in March after advancing 0.3 percent in the prior month. Savings fell to $1.03 trillion in March from $1.16 trillion in February.
S&P 500 hits intraday record as Wall Street braces for big week of earnings and economic data
Ā Ā
The S&P reached an all-time high on Monday, adding to last weekās gains, as investors braced for a busy week including a flurry of corporate earnings reports, economic data and an announcement from the Federal Reserve.
The broad index gained 0.3% to break above 2,940.91, the previous record high set in September. Financials led the gains in the S&P 500, climbing 1.3%. Bank of New York Mellon, Citigroup and Bank of America were the best performers in the sector, rising more than 2% each.
The tech-heavy Nasdaq Composite also hit an all-time high, rising 0.2%. The Dow Jones Industrial AverageĀ traded 33 points higher as Goldman Sachs outperformed.
āThis may be the busiest week of everything in terms of catalysts,ā said Art Hogan, chief market strategist at National Securities. āIt makes sense for us to be sideways heading into that at best.ā
About 150 S&P 500 companies are scheduled to release their quarterly results this week, including Apple, General Electric and Qualcomm.Ā AlphabetĀ and Western Digital will release their first-quarter numbers after the bell on Monday.
Earlier on Monday, Restaurant Brands reported weaker-than-expected earnings after a surprise drop in Tim Hortons sales, sending its shares down 22%. Spotify Technology posted a bigger-than-forecast loss, offsetting news that it reached 100 million subscribers for its premium service. Shares of Spotify fell 0.8%.
Through Monday morning, 231 companies in the S&P 500 have reported quarterly results. Of those companies, 77.5% have topped analyst expectations, according to data from FactSet. The reported earnings growth rate, meanwhile, is around 1%, well above the expected 4.2% drop.
āEveryone has forgotten the term earnings recession,ā Hogan of National Securities said. āIt was a bad case of premature extrapolation to think we were going to have an earnings recession.ā
Strong corporate reports helped push the S&P 500 and Nasdaq Composite to record closing highs last week. The two indexes rose 0.9% and 1.9%, respectively, last week.
āFrom a technical perspective, the SPX is back in record high territory after closing above its September ā18 high,ā Craig Johnson, chief market technician at Piper Jaffray, said in a note. āHowever, for a record high week, volume was lackluster and only a relatively small percentage of constituents registered new highs.ā
āImproving fundamentals and FOMO sentiment have pushed stocks back into record high territory,ā Johnson said. āOverbought conditions have now developed and market breadth has not confirmed the recent breakout. We believe some consolidation is likely and advise investors to consider realizing some gains at this juncture.ā
On the data front, Aprilās nonfarm payrolls report is scheduled for release Friday along with international trade numbers. Factory orders, construction spending and consumer confidence data are all due for release this week.
The core personal consumption expenditures index ā the Federal Reserveās preferred measure of inflation ā remained unchanged in March, data released Monday showed. Economists polled by Refinitiv expected a gain of 1.7%.
The Federal Reserve is also set to hold a monetary policy meeting this week. Investors will be looking for clues about the central bankās plan for its balance sheet moving forward, as well as hints on where Fed officials think the economy is headed.
Market expectations for a Fed rate hike are zero, while expectations for no change in the overnight rate are at 97%, according to the CME GroupāsĀ FedWatchĀ tool.
Story 3: U.S Recession or Boom in 2020? Flip A Coin — Videos
What Will Cause The Next Recession – Robert Shiller On Human Behavior
What Will Cause The Next Recession – Mark Zandi Says Corporate Debt
Steve Keen Says U.S. Heading for 2020 Recession
Warren Buffetās Financial Crisis Warning (HBO)
Why Warren Buffett Said No to Lehman and AIG in 2008
Keiser Report: Germans Stacking Gold (E1376)
Keiser Report: Will Interest Rates Ever Rise Again? (E1373)
When is a recession coming? By 2021, most economists predict in new survey.
Taylor TelfordWashington Post
Most business economists predict the U.S. will fall into a recession within the next two years, a new survey finds.
About half of the 280 business economists polled said they expect a downturn by the end of next year. Roughly 75 percent say it will happen by 2021. Only 11 percent anticipate the U.S. avoiding a recession during that two-year window, according to a February survey from the National Association for Business Economics released Monday.
The U.S. is deep into an economic expansion, which began in summer 2009, after the financial crisis. If the expansion lasts until June, it would be the nation’s longest. Though the economy has been robust ā marked by strong consumer spending, climbing markets and the lowest unemployment rates in decades ā signs of a slowdown have surfaced. Recent months have seen dizzying volatility in the markets and a sudden drop-off in consumer confidence. Trade tensions between the U.S. and China have taken a toll on economic growth in the U.S. and abroad.
Shadows of a slowdown have put pressure on theĀ Federal ReserveĀ as it tries to price out interest rate increases. In January, Federal Reserve ChairmanĀ Jerome PowellĀ said the economy has “good momentum” and that he didn’t foresee a recession in 2019. But he signaled the Fed would be “patient” about raising rates, as economic growth is expected to fall from the roughly 3 percent of last year to 2.3 percent this year. The Fed raised rates four times in 2018.
Story 4: Wait Until 2021 At Earliest For Any Trade Agreement To Be Passed By House of Representatives — Videos
rumpās New Nafta Faces Mounting Resistance in Democratic House
Pelosi and other leaders signal they wonāt allow a vote without certain changes to labor rules
Soybeans were unloaded last fall onto a truck in Illinois. Farm crops are among myriad products covered by the new trade agreement involving the U.S., Mexico and Canada.Ā PHOTO:Ā DANIEL ACKER/BLOOMBERG NEWS
By William Mauldin
WASHINGTONāPresident Trumpās push to revamp North Americaās trade rules is hitting a roadblock in Washington as Democrats and labor groups demand changes, dimming its chances of passage before next yearās presidential election.
Democrats said they want to make it easier to enforce new rules designed to strengthen labor rights in Mexico, saying a lack of worker protections there is hurting wages and job prospects for U.S. workers. Trump administration officials said these concerns can be handled in follow-up legislation that would implement the U.S.-Mexico-Canada-Agreement, or USMCA.
The deal must still be ratified by all three countries, and there is no deadline for that to happen. But with the U.S. election season approaching, some Republicans and trade experts said Democrats may be seeking in part to deny Mr. Trump a political wināor at least to exact a heavy price for advancing the deal.
āThere are always political motives,ā with lawmakers focused on who will get credit or blame on such a comprehensive trade overhaul, said Phil Cox, former executive director of the Republican Governors Association and current co-chairman of a bipartisan group seeking to build national support for USMCA.
How could the Democrats and the Trump administration resolve their differences over labor protections in the new Nafta? Join the conversation below.
The agreement has yet to get through the ratification process in Canada and Mexico, but it is the prospect of resistance in the U.S. that now stands as the biggest question mark, according to people following the talks.
In an interview with Canadaās Global Television Network on Sunday, Bank of Canada Gov. Stephen Poloz said business confidence in that country remains uncertain.
āWe were watching for signs that people would react positively to the signing of USMCA. That seems to have fallen off a little bit lately because [of] the issue of ratification,ā Mr. Poloz said.
Mr. Trump, a Republican, made revising the North American Free Trade Agreement, or Nafta, a central plank of his 2016 campaign. In the past, he has threatened to pull the U.S. out of the original deal, and some trade experts said he could renew those threats. For now, however, the administration appears focused on promoting the benefits of the new Nafta, which Vice President Mike Pence pushed at appearances in the auto industry stronghold of Michigan last week.
āThe USMCA will actually impact more than two million American manufacturing jobs that depend on exports to Canada and Mexico,ā Mr. Pence said. āItās absolutely essential because the USMCA will finally give workers the level playing field and be able to compete and win on a global stage as never before.ā
Mrs. Pelosi and other Democrats who voted for Nafta in 1993 believe its labor provisions werenāt effective and they want to make sure the U.S. has special tools to ensure enforcement under USMCA, congressional aides said.
USMCA includes provisionsĀ that labor unions requested, such as a rule requiring an increased share of automotive content to be produced in high-wage factories. But some Democrats said the agreement doesnāt give the U.S. theĀ needed enforcement tools.
Democrats said they have long been focused on raising labor standards in Mexico, meant to raise wages for workers there and reduce the incentive for U.S. firms to move production to Mexico.
āReflecting on the history of our concerns with Nafta, we question whether there is reason to believe that the new agreement will lead to meaningful change and real improvements for labor standards in Mexico,ā House Democrats, led by Rep. Richard Neal of Massachusetts, chairman of the Ways and Means Committee, wrote in aĀ letterĀ to U.S. Trade Representative Robert Lighthizer this month.
The White House had hoped to reach a deal on the revised Nafta and push it through Congress in 2017, when the Senate and House were both under Republican control. But Mr. Lighthizer wasnāt able to strike a deal with both Mexico and Canada until a few weeks before the 2018 elections, which shifted House control to the Democrats. Free-trade agreements require majority support in the House and Senate.
In recent weeks, Sens. Ron Wyden of Oregon and Sherrod Brown of Ohio, both Democrats, have made a labor-enforcement proposal that has been welcomed by House Democrats, aides said. U.S. and Mexican officials would together audit and inspect facilities suspected of breaching labor standards in USMCA, and the U.S. would be allowed to reinstate tariffs on goods from factories in violation.
Mexican Ambassador Martha BĆ”rcena said last week that she discussed the proposal with Mr. Brown but would insist any labor changes works the same way for all three countries. āI said, āPerfect, senator, we agree: Will assume the U.S. will receive a team of labor inspectors from Mexico to see if tomato farmers in Florida are complying.ā ā
Why New Nafta’s Approval Faces Long Odds
Vice President Mike Pence was in Michigan on Wednesday to sell the virtues of the new Nafta, or the U.S.-Mexico-Canada Agreement. But is Congress ever going to approve the agreement? WSJ’s Gerald F. Seib explains. Photo: Getty
A spokeswoman for Mr. Brown said he is āabsolutely open to the provision being bilateral, and he looks forward to continued work with both administrations.ā
In general, Mexico is reluctant to reopen USMCA to changes, fearing a āPandoraās boxā of demands from businesses and interest groups in all three countries, Ms. BĆ”rcena said at a Georgetown University Law Center conference.
The Trump administration also has sought to avoid changes to USMCA. Instead, Trump officials have told Congress the U.S. could use domestic lawāincluding the tariff provision known as Section 301āto penalize Mexico for any labor violations.
A spokesman for Mr. Lighthizer declined to comment on the push to make changes on labor enforcement.
Labor leaders and allied Democrats worry the changes wonāt be effective unless they have the agreement of Canada and Mexico. Asked by The Wall Street Journal about USMCAās prospects in Congress this year, AFL-CIO President Richard Trumka said he could guarantee it wonāt pass without changes to the underlying international deal.
The 2020 presidential election could further drive Democratic opposition to the trade deal. In 2016, opposition from candidates and party activists was so strong that Hillary Clinton dropped her support for theĀ Trans-Pacific PartnershipĀ deal that President Obama had negotiated.
Democratic presidential candidates Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont, who are also sitting senators, have said they would oppose the deal unless it is renegotiated with stronger environmental protections and with changes to intellectual-property rules that, they said, are too favorable to the pharmaceutical industry.
Mr. Trump has strong support in the business community and farm groups for USMCA. AĀ report from the bipartisan U.S. International Trade CommissionĀ said USMCA would result in 29,700 new U.S. jobs in engine and transmission production, while car-assembly jobs would likely fall slightly. Detroit auto makers back passage of the deal and expect assembly jobs to increase.
Meanwhile, Mexico is working to pass a labor-law overhaul mandated by USMCA. That move could assuage some Democratic concerns as the U.S. Congress returns this week from a recess and looks toward holding hearings on USMCA.
Is Trump’s New Nafta in Trouble?
The Trump administration negotiated the USMCA trade deal as a replacement to Nafta. Will President Trump’s new deal be ratified in the near future, or are there roadblocks ahead? WSJ’s Gerald F. Seib explains. Photo: Getty
Under trade law known as āfast track,ā Mr. Trump could submit USMCA to the House and Senate for an up-or-down vote with no amendments allowed. Still, in 2008 Mrs. Pelosi changed House rules to prevent such a vote on a free-trade agreement with Colombia, and aides said she likely would do that again if the Trump administration doesnāt address Democratic concerns on USMCA.
Threats by Mr. Trump to withdraw from Nafta could lead to a deal on USMCA with the Democrats, former officials say, but such tactics could also threaten the very existence of North Americaās free-trade zone.
āI take the president at his word,ā said Mr. Cox, the Republican political operative. āHe said heāll tear it up.ā
āPaul Vieira and Josh Zumbrun contributed to this article.
Story 1: President Trump Rising In Polls Hits 50 Percent Approval for Job Performance — Party Affiliation of Voters: Independents 41 Percent — Democrats 30 Percent and Republican 26 Percent — Videos —
The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 50% of Likely U.S. Voters approve of President Trumpās job performance. Forty-nine percent (49%) disapprove.
The latest figures include 35% who Strongly Approve of the way Trump is performing and 41% who Strongly Disapprove. This gives him a Presidential Approval Index rating of -6. (see trends).
Regular updates are posted Monday through Friday at 9:30 a.m.Ā EasternĀ (sign up for freeĀ daily email update).
Rasmussen Reports invites you to be a part of our first-ever Citizen-Sourced National Midterm Election Polling Project.Learn more about how you can contribute.
Now that Gallup has quit the field, Rasmussen Reports is the only nationally recognized public opinion firm that still tracks President Trump’s job approval ratings on a daily basis. If your organization is interested in a weekly or longer sponsorship of Rasmussen Reports’ Daily Presidential Tracking Poll, pleaseĀ send e-mail toĀ Ā beth@rasmussenreports.comĀ .
President Trump in a tweet yesterday reiterated that the Justice Department should end the Special Counselās investigation into whether there were ālinks and/or coordinationā between the Russian Government and his 2016 campaign.
Stemming from that investigation, the trial of former Trump campaign manager and business associate Paul Manafort enters its third day in U.S. District Court in Alexandria, Virginia. Will the trial lead to criminal charges against the president? Weāll tell you at 10:30 what voters say.
Nearly half of voters donāt believe Special Counsel Robert Muellerās probe is worth what it has spent (more than $22 million as of July, according to one report) investigating allegations of Russian collusion in the 2016 election, andĀ few believe the outcome will benefit the United States.Ā Ā
Vice President Mike Pence yesterday led a ceremony in Honolulu to receive the remains of U.S. servicemen killed during the Korean War. Their return resulted from President Trumpās June summit in Singapore with North Korean dictator Kim Jong Un.
To get a sense of longer-term job approval trends for the president, Rasmussen Reports compiles our tracking data on a fullĀ month-by-month basis.
Rasmussen Reports has been a pioneer in the use of automated telephone polling techniques, but many other firms still utilize their own operator-assisted technology (see methodology).
Daily tracking results are collected via telephone surveys of 500 likely voters per night and reported on a three-day rolling average basis. To reach those who have abandoned traditional landline telephones, Rasmussen Reports uses an online survey tool to interview randomly selected participants from a demographically diverse panel.Ā The margin of sampling error for the full sample of 1,500 Likely Voters is +/- 2.5 percentage points with a 95% level of confidence. Results are also compiled on a full-week basis and crosstabs forĀ full-week resultsĀ are available forĀ Platinum Members.
Trump got a dynamite GDP number last quarter ā and early signs point to the next one being even better
President Donald Trump took a victory lap Friday after second quarter GDP came in at 4.1%, the strongest since the third quarter of 2014.
Trump said the GDP reading proved that his policies were working and that the country was on track to fulfill his promise of sustained 4% annual GDP growth.
Many economists doubted the strong growth would continue, since transitory factors help boost the second quarter number.
But early estimates for third quarter GDP look potentially even stronger.
President Donald Trump took a victory lap Friday after the release of a strong second-quarter GDP number, and early signs point to the celebration continuing in the third quarter.
While Friday’s release was substantial, many economists pointed to short-term factors that could fade in future quarters ā like a huge boost in soybean exports ahead of Trump’s tariffs and fiscal stimulus from the federal budget.
But early indications from third-quarter economic data show that Trump may have reason to boast about the third quarter, too.
TheĀ Atlanta Federal Reserve’s GDPNowĀ measure, which uses available data to predict the current quarter’s GDP growth, stands at 5% as of Thursday ā up slightly from an initial estimate of 4.7%.
The estimate has a strong track record of prediction. But GDPNow isn’t perfect, especially so early in a quarter, and it is subject to updates as more data emerges.
But Neil Dutta, head of US economics at research firm Renaissance Macro, pointed to data that shows the strong initial reading from the Atlanta Fed is likely to hold up.
While Dutta said it’s “unlikely that we’ll get 5% for the third quarter,” the economist noted that the average move for the GDPNow reading over the course of a quarter since its inception is a 0.6-percentage point drop. Given the initial reading, that would put the final third quarter GDPNow estimate at 4.1%, which would be on par second quarter and one of the highest post-recession readings.
The biggest downward move in the GDPNow’s estimate over the course of a quarter was 2.2 percentage points, per Dutta’s breakdown, which would still leave GDP growth at a respectable 2.5%.
On the other end, the largest upward move was 1.5 percentage points, so an equal move from this quarter’s reading would put the third quarter at 6.5%. That would be the highest quarterly GDP print since the third quarter of 2003.
“Anything in that range is consistent with strong, above-trend growth and would be a reasonably solid number coming after a 4% GDP print,” Dutta said.
In the second quarter, the 4.1% GDP reading was also above the Atlanta Fed’s final estimate of 3.8%.
Trump, for his part, is already banking on a big third-quarter reading, which is set to be released October 26.
“I happen to think we’re going to do extraordinarily well in our next report,” Trump said at the press conference Friday.
Story 3: Less Than 40 Million Americans on Food Stamps or Supplemental Nutrition Assistance Program (SNAP) and Declining As U.S. Federal Budget For SNAP Cut — Trump Proposed America’s Harvest Box — Less Money More Food — People Want Choice Not Preselected Boxes of Food –Little Boxes — Walk Off The EarthĀ — Videos
Little Boxes – Walk off the Earth
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SNAP EBT Food Stamps CUT! true or not true REPLACED By Food Delivery! DO SOME RESEARCH FOR U
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Food Stamp Cuts Will Affect You Whether You Get Them Or Not
President Donald Trump Wants To Cut SNAP And Give Poor Boxes Of Food | AM Joy | MSNBC
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Little Boxes – Walk off the Earth
Overview
The Program Data site provides selected statistical information on activity in all major Food and Nutrition Service Programs (FNS). These include the Supplemental Nutrition Assistance Program (SNAP); the Special Supplemental Nutrition Program for Women, Infants and Children (WIC); Child Nutrition Programs (National School Lunch, School Breakfast, Child and Adult Care, Summer Food Service and Special Milk); and Food Distribution Programs (Schools, Emergency Food Assistance, Indian Reservations, Commodity Supplemental, Nutrition for the Elderly, and Charitable Institutions).
Four types of tables are provided: historical summaries, annual state level data for selected elements, monthly national level data for major programs, and the latest available month for state-level participation in major programs. The summaries begin with 1969, the year that FNS was established to administer the Department of Agriculture’s nutrition assistance programs. Data are provided by federal fiscal year rather than calendar or school year. This includes the months of October through September (prior to FY 1977, it covered July through June). Annual state-level tables include data for the five most recent complete years (2013-2017). The latest month for state-level activity is April 2018. Data are as of July 06, 2018; FY 2017 and 2018 numbers are preliminary and are subject to significant revision.
If you need additional information or have any questions, please e-mail us. The following program area pages provide detailed program explanations and information:Ā SNAP,Ā Child Nutrition,Ā WICĀ andĀ Food Distribution.
Military service members are among the millions of Americans who would be affected by proposed budget cuts to federal food stamps, also known as the Supplemental Nutrition Assistance Program (SNAP).
In February, President Donald Trump released a fiscal-year 2019Ā budget proposalĀ that included a new approach to the program that ācombines traditional SNAP benefits with 100-percent American grown foods provided directly to households.ā The change would cut SNAP funding byĀ $213 billion dollars over 10 years.
According to aĀ 2016 reportĀ from the US Government Accountability Office (GAO), approximately 23,000 active duty military service members were SNAP recipients in 2013.
Brenda Farrell, director of defense capabilities and management at GAO, oversaw development of the report.
āDonāt assume that service members donāt need help,ā Farrell said. āWe all know that over the years the pay has increased and bonuses have been there to attract the right people, but you still have pockets where the need is still there.ā
The San Antonio Food Bank provides food for 58,000 people a week, and one in seven active or former military service members use similar services across the U.S., according to food bank President and CEO Eric Cooper.Ā
āWe know from our work that many active enlisted servicemen and women call our center,ā Cooper said. āSometimes they might not want to share with people they are closest to that they are in need, so they reach out to the food bank as a neutral place so they donāt have to ask for help from those who are closest to them.ā
According to Cooper, the House proposal increases some barriers and the program’s cost while cutting some benefits for low-income families.
āOur current farm bill has a strong nutrition title,ā Cooper said. āItās not perfect, but it helps to ensure that 42 million Americans have access to good nutrition. ā¦ It just never seems to make sense to me that we would increase cost and bureaucracy while decreasing services and benefits to someone in need.ā
The San Antonio Food Bank and its partner agencies have been discussing how to move forward if the budget cuts are approved, Cooper said, but their ability to meet peopleās needs is heavily dependent on farmers, donorsĀ andĀ food industry partners.
āIf the proposed SNAP cuts go through, it will literally take food off the table,ā Cooper said. āFor that need to be met, we feel that we will see longer lines at our food pantries and the demand for services will be even greater for us at the San Antonio Food Bank.ā
Cooper said there are some challenges unique to service members that frequently result in them turning to the food-stamp program. Often they have children and a spouse who’s unable to build a career due to the constant mobility of active-duty life.Ā The military’sĀ Basic Allowance for Housing (BAH)Ā benefit can also present a challenge since it can make a person ineligible for food-stamp assistance.
San Antonioās Director of Military Affairs Juan Ayala said there has been a shift in the people who volunteer for service.
āIf you take a look at the average service member that joins today, a lot of them are married and have dependent children,ā Ayala said. āThat is different than when I came into the Marine Corps inĀ 1976,Ā when almost everybody that came in was single. ā¦ Less than one percent of the population in the United States think about joining the military, and a small number actually join so sometimes the pool for recruiting is challenging so sometimes we get older recruits.ā
Ayala said lower-ranking service members are the most likely to need food assistance services because they make theĀ lowest salaries, and with aĀ familythey could easily become eligible for SNAP.
Lower ranking troops stationed inĀ high costĀ areas such as California and Washington D.C. will be the most directly affected by the SNAP budget cuts, according to Ayala.
āIt is going to affect those that are in uniform, a lot of those that are deployed and canāt get a second job,ā Ayala said. āIf youāre in uniform performing a service to the country I think that it should be taken into consideration ā for anybody that really deserves [SNAP] and really needs it ā but especially for the troops.ā
WASHINGTON ā The Supplemental Nutrition Assistance Program offers about 46 million low-income Americans both sustenance and economic choice by providing an allowance to buy the fruit, meat, fresh vegetables, soda, ice cream and kind of bread they want to eat.
But on Monday, the Trump administration sprung a surprise: Under a proposal in the presidentās budget many participants in the program would be given half their benefits in the form of a āHarvest Boxā full of food preselected for nutritional value and economic benefit to American farmers. The cache of cheaper peanut butter, canned goods, pasta, cereal, āshelf stableā milk and other products would now be selected by the federal government, not by the people actually eating it.
The proposal seemed like a radical overhaul of the countryās core food assistance program ā once called food stamps but now commonly known as SNAP. The idea was to shave about $21 billion a year from the federal deficit over the next 10 years. But the reaction was immediate, and largely negative.
Democrats claimed the plan shackled the poor while business groups, led by big food retailers, would stand to lose billions of dollars in lost SNAP business. The head of one trade association typically supportive of President Trumpās economic policies accused the administration of reneging on its pledge to cut āred tape and regulations.ā
In reality, administration officials on Tuesday admitted that the food-box plan ā which the presidentās budget director Mick Mulvaney compared to the Blue Apron grocery delivery service ā had virtually no chance of being implemented anytime soon.
Instead, the idea, according to two administration officials who worked on the proposal, was a political gambit by fiscal hawks in the administration aimed at outraging liberals and stirring up members of the presidentās own party working on the latest version of the farm bill. The move, they said, was intended to lay down a marker that the administration is serious about pressing for about $85 billion in other cuts to food assistance programs that will be achieved, in part, by imposing strict new work requirements on recipients.
āI donāt think thereās really any support for their box plan. And, I worry that itās a distraction from the budgetās proposal to cut SNAP by some 30 percent. Thatās the real battle,ā said Stacy Dean, vice president for food assistance policy at the Center on Budget and Policy Priorities, a progressive Washington think tank. āThe dangers are these other proposals to cut benefits. But all anyone is talking about today are the boxes.ā
Senator Debbie Stabenow, the ranking Democrat on the agriculture committee, doubted the motives behind the plan.
āThis isnāt a serious proposal and is clearly meant to be a distraction,ā Ms. Stabenow said.
Agriculture Secretary Sonny Perdue stealthily pitched the idea over the last few weeks to the White Houseās Domestic Policy Council as a novel way to reach the administrationās self-imposed goal of slashing federal food assistance programs by $214 billion over the next decade. It was quickly embraced by Mr. Mulvaney, a fiscal hawk who is seeking to steer a debate increasingly dominated by free-spending Republicans and Mr. Trump, who has insisted on major budget increases for the Pentagon and Homeland Security.
Neither man had any illusions that the plan would be immediately embraced by congressional Republicans, who were not given advance notice of the proposal, the officials said.
That the food-box approach has been tried only in small demonstration projects and never been seriously discussed during dozens of congressional hearings on the SNAP program in recent years did not stop administration officials from putting the force of Mr. Trumpās presidency behind it.
The budget documents released on Monday omitted other important details, including the real costs of creating a nationwide distribution network for the boxes, especially in rural areas hard hit by the economic downturn and the opioid crisis.
āWe have had like 25 hearings on SNAP. The witness list was controlled by Republicans and this idea was never, ever broached,ā said Representative Jim McGovern of Massachusetts, ranking Democrat on the House subcommittee that oversees federal food assistance programs. āI think itās dead on arrival ā I hope it is ā but either way itās a cruel joke. My God, these people are awful. In addition to being totally misinformed on policy, they are really just not nice people.ā
In a statement, Mr. Perdue defended the proposal as humane and cost effective, saying his plan offered the āsame level of food valueā provided by the SNAP program, which replaced the food stamp program in the late 1990s.
He described the boxes as āa bold, innovative approach to providing nutritious food to people who need assistance feeding themselves and their families ā and all of it is grown by American farmers and producers.ā
Still, the idea landed with a thud. It was quickly dismissed by two Republican committee chairmen, Senator Pat Roberts of Kansas, who leads the Senate agriculture committee, and his counterpart in the House, Representative K. Michael Conaway of Texas.
Mr. Conaway is drafting a farm bill that is expected to slash billions in spending in the SNAP program through the tightening of some eligibility requirements. Mr. Roberts is overseeing an effort to craft a version of the bill that is expected to include fewer cuts in hopes of gaining the bipartisan support needed to push the measure through the Senate.
SNAP, like many other safety net programs, is designed to expand during hard economic times and contract when the economy improves. Nonetheless, the programās rolls have remained at historically elevated levels, reaching a peak of 47.8 million recipients in 2012 before edging down to 45.6 million last year, according to federal estimates.
Mr. Perdue, in particular, has been outspoken in his call to reduce its rolls, criticizing what he calls a culture of dependency among SNAP recipients.
But Mr. McGovern said the administration was painting āa distorted pictureā of the poor and ignoring the fact that most SNAP recipients are employed and more than a quarter are disabled and unable to seek work.
āThey have to stop playing to the cheap seats,ā he said. āThe majority of people in the program are children and seniors and people working in jobs that pay too little to feed their families.ā
Supplemental Nutrition Assistance Program (SNAP)
Am I Eligible for SNAP?
To get SNAP benefits, you must apply in the State in which you currently live and you must meet certain requirements, including resource and income limits, which are described on this page. SNAP income and resource limits are updated annually. The information on this page is forĀ October 1, 2017, through September 30, 2018.
Your household must meet certain requirements to be eligible for SNAP and receive benefits. If your State agency determines that you are eligible to receive SNAP benefits, you will receive benefits back to the date you submitted your application.
To see if you might be eligible for Supplemental Nutrition Assistance Program (SNAP) benefits, visit ourĀ pre-screening tool.
Note: The FNS SNAP pre-screening eligibility tool is an interactive site with general information about eligibility requirements and how benefits are determined. Sharing your information in that form does not mean you filed an application for benefits. You will still need to submit an application through your State SNAP agency or local SNAP office.
How do I apply for SNAP?
You must apply for SNAP in the State where you currently live. Because each State has a different application form and process, a member of your household must contact your State agency directly to apply.
You canĀ contact your State agencyĀ by visiting your local SNAP office, visiting your State agencyās website, or calling your Stateās toll-free SNAP Information hotline. Some States have online applications that can be completed from the State agency website.
Where can I get my State information?
If you are unable to go to your local SNAP office or do not have access to the internet, you may have another person act as an authorized representative by applying and being interviewed on your behalf. You must designate the authorized representative in writing.
Note: Please contactĀ your SNAP State agencyĀ directly to apply and to request information about the status of your application. FNS does not process applications or have access to case information.
What happens when I apply for SNAP?
In most cases, once you submit your application, your State agency or local SNAP office will process it and send you a notice telling you whether or not you are eligible for benefits within 30 days.
During the 30 days, you will need to complete an eligibility interview and give proof (verification) of the information you provided. The interview is typically completed over the telephone or in-person. If you are found eligible, you will receive benefits based on the date you submitted your application.
You may be eligible to receive SNAP benefits within 7 days of your application date if you meet additional requirements. For example, if your household has less than $100 in liquid resources and $150 in monthly gross income, or if your householdās combined monthly gross income and liquid resources are less than what you pay each month for rent or mortgage and utilities expenses.Ā Contact your State agencyĀ for additional details.
How do I receive SNAP benefits?
If you are found eligible, you will receive SNAP benefits on an Electronic Benefit Transfer (EBT) card, which works like a debit card. Benefits are automatically loaded into your account each month. You can use your EBT card to buy groceries at authorized food stores and retailers.
If you are found eligible, you will receive a notice that tells you how long you will receive SNAP benefits for; this is called your certification period. Before your certification period ends, you will receive another notice that says you must recertify to continue receiving benefits. Your local SNAP office will provide you with information about how to recertify.
Who is in a SNAP household?
Everyone who lives together and purchases and prepares meals together is grouped together as one SNAP household.
Some people who live together, such as spouses and most children under age 22, are included in the same SNAP household, even if they purchase and prepare meals separately.
If a person is 60 years of age or older and unable to purchase and prepare meals separately because of a permanent disability, the person and the person’s spouse may be a separate SNAP household if the others they live with do not have very much income (no more than 165 percent of theĀ poverty level).
Normally you are not eligible for SNAP benefits if an institution gives you most of your meals. There are exceptions forĀ elderly persons and disabled persons.
What resources can I have (and still get SNAP benefits)?
Resources
Households may have $2,250 in countable resources (such as cash or money in a bank account) or $3,500 in countable resources if at least one member of the household is age 60 or older, or is disabled.
However, certain resources are NOT counted when determining eligibility for SNAP:
A home and lot;
Resources of people who receive Supplemental Security Income (SSI);
Resources of people who receive Temporary Assistance for Needy Families (TANF; also known as welfare); and
Most retirement and pension plans (withdrawals from these accounts may count as either income or resources depending on how often they occur).
Vehicles
Vehicles count as a resource for SNAP purposes. States determine how vehicles may count toward household resources.
Licensed vehicles are NOT counted if they are:
Used for income-producing purposes (e.g., taxi, truck or delivery vehicle);
Annually producing income consistent with their fair market value;
Needed for long distance travel for work (other than daily commute);
Used as the home;
Needed to transport a physically disabled household member;
Needed to carry most of the household’s fuel or water;Ā or
If the sale of the vehicle would result in less than $1500.
For non-excluded licensed vehicles, the fair market value over $4,650 counts as a resource.
Licensed vehicles are also subject to an equity test, which is the fair market value less any amount owed on the vehicle. The following vehicles are excluded from the equity test:
One vehicle per adult household member; and
Any other vehicle used by a household member under 18 to drive to work, school, job training, or to look for work.
For vehicles with both a fair market value over $4,650 and an equity value, the greater of the two amounts is counted as a resource.
Additionally, the equity value of unlicensed vehicles generally counts as a resource, with some exceptions.
What are the SNAP income limits?
In most cases, your household must meet both the gross and net income limits described below or you are not eligible for SNAP and cannot receive benefits.
Gross incomeĀ means a household’s total, non-excluded income, before any deductions have been made.
Net incomeĀ means gross income minus allowable deductions.
A household with an elderly or disabled person only has to meet the net income limit, as described on theĀ elderly and disabled page.
If all members of your household are receiving Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), or in some places other general assistance, your household may be deemed ācategorically eligibleā for SNAP because you have already been determined eligible for another means-tested program.
The information provided in the table below applies to households in the 48 contiguous States and the District of Columbia that apply for SNAP betweenĀ October 1, 2017, through September 30, 2018.
Table 1: SNAP Income Eligibility Limits – October 1, 2017, through September 30, 2018
Household Size
Gross monthly income
(130 percent of poverty)
Net monthly income
(100 percent of poverty)
1
$1,307
$ 1,005
2
$1,760
$1,354
3
$2,213
$1,702
4
$2,665
$2,050
5
$3,118
$2,399
6
$3,571
$2,747
7
$4,024
$3,095
8
$4,477
$3,444
Each additional member
+$453
+$349
* SNAP gross and net income limits are higher inĀ Alaska and Hawaii.
What deductions are allowed in SNAP?
The following deductions are allowed for SNAP:
A 20-percent deduction from earned income.
A standard deduction of $160 for household sizes of 1 to 3 people and $170 for a household size of 4 (higher for some larger households and for households in Alaska, Hawaii, and Guam).
A dependent care deduction when needed for work, training, or education.
Medical expenses for elderly or disabled members that are more than $35 for the month if they are not paid by insurance or someone else. This is described on theĀ elderly and disabled page.
In some States, legally owed child support payments.
In some States, a standard shelter deduction for homeless households of $143.
Excess shelter costs as described below.
SNAP Excess Shelter Costs Deduction
The shelter deduction is for shelter costs that are more than half of the household’s income after other deductions.
Allowable shelter costs include:
Fuel to heat and cook with.
Electricity.
Water.
The basic fee for one telephone.
Rent or mortgage payments and interest.
Taxes on the home.
Some States allow a set amount for utility costs instead of actual costs.
The amount of the shelter deduction is capped at (or limited to) $535 unless one person in the household is elderly or disabled. The limit is higher inĀ Alaska, Hawaii, and Guam. For a household with an elderly or disabled memberĀ allĀ shelter costs over half of the household’s income may be deducted.
Table 2: How to Calculate SNAP Gross Income
Gross Income Calculation
Example
Determine household size . . .
4 people with no elderly or disabled members.
Add gross monthly income . . .
$1,500 earned income + $550 social security = Ā $2,050 gross income.
If gross monthly income is less than the limit for household size, determine net income.
$2,050 is less than the $2,665 allowed for a 4-person household, so determine net income.
Table 3: How to Calculate SNAP Net Income
Net Income Calculation
Example
Subtract 20% earned income deduction . . .
$2,050 gross income
$1,500 earned income x 20% = $300. $2,050 – $300 = $1,750
Subtract standard deduction . . .
$1,750 – $170 standard deduction for a 4-person household = $1,580
Subtract dependent care deductionĀ . . .
$1,580 – $361 dependent care = $1,219
Subtract child support deduction . . .
0
Subtract medical costs over $35 for elderly and disabled . . .
0
Excess shelter deduction . . .
Determine half of adjusted income . . .
$1,219 adjusted income/2 = $609.50
Determine if shelter costs are more than half of adjusted income . . .
$700 total shelter – $609 (half of income) = $90 excess shelter cost
Subtract excess amount, but not more than the limit, from adjusted income . . .
$1,219 – $90.50 = $1,128.50 Net monthly income
Apply the net income test . . .
Since the net monthly income is less than $2,050 allowed for 4-person household, the household has met the income test.
How much could I receive in SNAP benefits?
The total amount of SNAP benefits your household gets each month is called an allotment.
Because SNAP households are expected to spend about 30 percent of their own resources on food, your allotment is calculated by multiplying your householdās net monthly income by 0.3, and subtracting the result from the maximum monthly allotment for your household size.
Table 4: SNAP Maximum Monthly Allotment Based on Household Size
People in Household
Maximum Monthly Allotment
1
$Ā Ā 192
2
$Ā Ā 352
3
$Ā Ā 504
4
$Ā Ā 640
5
$Ā Ā 760
6
$Ā Ā 913
7
$ 1,009
8
$ 1,153
Each additional person
$ 144
Note:Ā The allotments described here are for households in the 48 contiguous States and the District of Columbia. The allotments are different inĀ Alaska, Hawaii, Guam, and the U.S. Virgin Islands.
Table 5: Example of SNAP Benefit Calculation
Benefit Calculation
Example
Multiply net income by 30%… Ā (Round up)
$1,128.50 net monthly income Ā x 0.3 = 338.55 (round up to $339)
Subtract 30% of net income from the maximum allotment for the household size…
$640 maximum allotment for 4-person household – $339 (30% ofĀ Ā net income) = $301,Ā SNAP AllotmentĀ for a full month
What are the SNAP work requirements?
In general, people must meet work requirements to be eligible for SNAP. These work requirements include:
Failure to comply with these requirements can result in disqualification from the Program.
In addition,Ā able bodied adults without dependentsĀ are required to work or participate in a work program for at least 20 hours per week in order to receive SNAP benefits for more than 3 months in a 36-month period.
Some special groups may not be subject to these requirements including:
Children;
Seniors;
Pregnant women; and
People who are exempt for physical or mental health reasons.
Are non-citizens eligible for SNAP?
SNAP eligibility has never been extended to undocumented non-citizens. Specific requirements for non-citizens who may be eligible have changed substantially over the years and become more complicated in certain areas. The Food and Nutrition Act of 2008 limits eligibility for SNAP benefits to U.S. citizens and certain lawfully present non-citizens.
Generally, to qualify for SNAP, non-citizens must meet one of the following criteria:
Have lived in the United States for at least 5 years.
Be receiving disability-related assistance or benefits.
Be children under 18.
Additionally, these individuals must also satisfy other SNAP eligibility requirements such as income and resource limits in order to qualify for benefits.
If certain members of a household are ineligible for SNAP, State agencies must still determine eligibility for SNAP for any remaining household members who are seeking assistance.
What if I disagree with a decision made on my SNAP case?
If you disagree with a decision in your case, you may request a fair hearing with an official who is required by law to review the facts of your case in a fair and objective manner.
Note: You must request a fair hearing within 90 days of the day your local SNAP office made the decision in your case that you disagree with.
You can request a fair hearing over the phone, in writing, or in person at the local SNAP office.
Although a fair hearing cannot change the laws or regulations governing SNAP, it can ensure that decisions on your case have been made correctly.
Nondiscrimination in SNAP
SNAP benefits are available to all eligible households regardless of race, sex, religious creed, national origin, or political beliefs.
The USDA prohibits discrimination in all its programs and activities on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, or marital and family status. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA’s TARGET Center at (202) 720-2600 (voice and TDD).
To file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326- W, Whitten Building, 14th and Independence Avenue, SW, Washington, D.C. 20250-9410 or call (202) 720-5964 (voice and TDD). USDA is an equal opportunity provider and employer.
Where can I get additional information about SNAP?
For additional information about SNAP in your State, to file an application for SNAP benefits, or to get information about your SNAP case, you must contact your local SNAP office.Ā Ā Where Can I Get My State Information?
SNAP benefits cost $70.9 billion inĀ fiscal yearĀ 2016 and supplied roughly 44.2 million Americans (14% of the population)[2]Ā with an average of $125.51 for each person per month in food assistance. Beneficiaries and costs increased sharply with theĀ Great Recession, peaked in 2013 and have declined through 2016 as the economy recovered.[3]Ā It is the largest nutrition program of theĀ 15 administered by FNSĀ and is a component of the federalĀ social safety netfor low-income Americans.[4]
The amount of SNAP benefits received by a household depends on the household’s size, income, and expenses. For most of its history, the program used paper-denominated “stamps” orĀ couponsĀ ā worthĀ US$1 (brown), $5 (blue), and $10 (green) ā bound into booklets of various denominations, to be torn out individually and used in single-use exchange. Because of their 1:1 value ratio with actual currency, the coupons were printed by theĀ Bureau of Engraving and Printing. Their rectangular shape resembled aĀ U.S. dollar billĀ (although about one-half the size), includingĀ intaglioĀ printing on high-quality paper withĀ watermarks. In the late 1990s, the Food Stamp Program was revamped, with some states phasing out actual stamps in favor of a specialized debit card system known asĀ Electronic Benefit TransferĀ (EBT), provided by privateĀ contractors. EBT has been implemented in all states since June 2004. Each month, SNAP food stamp benefits are directly deposited into the household’s EBT card account. Households may use EBT to pay for food at supermarkets, convenience stores, and other food retailers, including certainĀ farmers’ markets.[5]
History
First Food Stamp Program (FSP) (May 16, 1939 ā Spring 1943)[edit]
Orange stamps were good for any grocery item the purchaser chose, except drugs, liquor and items consumed on the premises.
Blue stamps bought only surplus foodsādairy products, eggs, citrus fruits, prunes and fresh vegetables.
The idea for the first food stamp program has been credited to various people, most notably U.S.Ā Secretary of AgricultureĀ Henry WallaceĀ and the program’s first administrator, Milo Perkins.[6]Ā Of the program, Perkins said, “We got a picture of a gorge, with farm surpluses on one cliff and under-nourished city folks with outstretched hands on the other. We set out to find a practical way to build a bridge across that chasm.”[7]Ā The program operated by permitting people onĀ reliefĀ to buy orange stamps equal to their normal food expenditures; for every $1 of orange stamps purchased, 50 cents’ worth of blue stamps were received. Orange stamps could be used to buy any food; blue stamps could be used only to buy food determined by the department to be surplus.
Over the course of nearly four years, the first FSP reached approximately 20 million people in nearly half of the counties in the U.S., at a total cost of $262 million. At its peak, the program assisted an estimated four million people. The first recipient was Mabel McFiggin ofĀ Rochester, New York; the first retailer to redeem the stamps was Joseph Mutolo; and the first retailer caught violating program rules was Nick Salzano in October 1939. The program ended when the conditions that brought the program into beingāunmarketable food surpluses and widespreadĀ unemploymentāceased to exist.[8]
On September 21, 1959,Ā P.L.Ā 86-341 authorized the Secretary of Agriculture to operate a food-stamp system through January 31, 1962. TheĀ EisenhowerĀ Administration never used the authority. However, in fulfillment of a campaign promise made inĀ West Virginia, PresidentĀ John F. Kennedy‘s first Executive Order called for expanded food distribution and, on February 2, 1961, he announced that food stamp pilot programs would be initiated. The pilot programs would retain the requirement that the food stamps be purchased, but eliminated the concept of special stamps for surplus foods. A Department spokesman indicated the emphasis would be on increasing the consumption of perishables.
Of the program,Ā U.S. RepresentativeĀ Leonor K. SullivanĀ ofĀ MissouriĀ asserted, “…the Department of Agriculture seemed bent on outlining a possible food stamp plan of such scope and magnitude, involving some 25 million persons, as to make the whole idea seem ridiculous and tear food stamp plans to smithereens.”[9][10]
Food Stamp Act of 1964
TheĀ Food Stamp Act of 1964Ā appropriatedĀ $75 million to 350,000 individuals in 40 counties and three cities. The measure drew overwhelming support fromĀ HouseĀ Democrats, 90 percent from urban areas, 96 percent from the suburbs, and 87 percent from rural areas. Republican lawmakers opposed the initial measure: only 12 percent of urban Republicans, 11 percent from the suburbs, and 5 percent from rural areas voted affirmatively. PresidentĀ Lyndon B. JohnsonĀ hailed food stamps as “a realistic and responsible step toward the fuller and wiser use of an agricultural abundance”.[11]
Rooted in congressionalĀ logrolling, the act was part of a larger appropriation that raised price supports for cotton and wheat. Rural lawmakers supported the program so that their urban colleagues would not dismantle farm subsidies. Food stamps, along withĀ Medicaid,Ā Head Start, and theĀ Job CorpsĀ were foremost among the growingĀ anti-poverty programs.
President Johnson called for a permanent food-stamp program on January 31, 1964, as part of his “War on Poverty” platform introduced at the State of the Union a few weeks earlier. Agriculture SecretaryĀ Orville Freemansubmitted the legislation on April 17, 1964. The bill eventually passed byĀ CongressĀ was H.R. 10222, introduced by Congresswoman Sullivan. One of the members on theĀ House Committee on AgricultureĀ who voted against the FSP in Committee was then RepresentativeĀ Bob Dole.
As a Senator, Dole became a staunch supporter of the program, after he worked with George McGovern to produce a bipartisan solution to two of the main problems associated with food stamps: cumbersome purchase requirements and lax eligibility standards. Dole told Congress regarding the new provisions, āI am confident that this bill eliminates the greedy and feeds the needy.ā[citation needed]Ā The law was intended to strengthen the agricultural economy and provide improved levels of nutrition among low-income households; however, the practical purpose was to bring the pilot FSP under congressional control and to enact the regulations into law.
The major provisions were:
The State Plan of Operation requirement and development of eligibility standards by States;
They required that the recipients should purchase their food stamps, while paying the average money spent on food then receiving an amount of food stamps representing an opportunity more nearly to obtain a low-cost nutritionally adequate diet;
The eligibility for purchase with food stamps of all items intended for human consumption except alcoholic beverages and imported foods (the House version would have prohibited the purchase of soft drinks, luxury foods, and luxury frozen foods);
Prohibitions against discrimination on basis of race, religious creed, national origin, or political beliefs;
The division of responsibilities between States (certification and issuance) and the Federal Government (funding of benefits and authorization of retailers and wholesalers), with shared responsibility for funding costs of administration; and
Appropriations for the first year limited to $75 million; for the second year, to $100 million; and, for the third year, to $200 million.
The Agriculture Department estimated that participation in a national FSP would eventually reach 4 million, at a cost of $360 million annually, far below the actual numbers.
Program expansion: participation milestones in the 1960s and early 1970s
In April 1965, participation topped half a million. (Actual participation was 561,261 people.) Participation topped 1 million in March 1966, 2 million in October 1967, 3 million in February 1969, 4 million in February 1970, 5 million one month later in March 1970, 6 million two months later in May 1970, 10 million in February 1971, and 15 million in October 1974. Rapid increases in participation during this period were primarily due to geographic expansion.
Major legislative changes (early 1970s)
The early 1970s were a period of growth in participation, concern about the cost of providing food stamp benefits, and questions about administration, primarily timely certification. During this time, the issue was framed that would dominate food stamp legislation ever after: how to balance program access with program accountability. Three major pieces of legislation shaped this period, leading up to massive reform to follow:
P.L. 91-671 (January 11, 1971) established uniform national standards of eligibility and work requirements; required that allotments be equivalent to the cost of a nutritionally adequate diet; limited households’ purchase requirements to 30 percent of their income; instituted an outreach requirement; authorized the Agriculture Department to pay 62.5 percent of specific administrative costs incurred by States; expanded the FSP toĀ Guam,Ā Puerto Rico, and theĀ Virgin IslandsĀ of the United States; and provided $1.75 billion appropriations for Fiscal Year 1971.
Agriculture and Consumer Protection Act of 1973 (P.L. 93-86, August 10, 1973) required States to expand the program to every political jurisdiction before July 1, 1974; expanded the program to drug addicts and alcoholics in treatment and rehabilitation centers; established semi-annual allotment adjustments, bi-monthly issuance, andĀ Supplemental Security IncomeĀ (SSI) ācash-outā (which gave the option to states to issue Food Stamp benefits to SSI recipients in the form of their estimated cash value consolidated within the SSI grant, in order to reduce administrative costs); introduced statutory complexity in the income definition (by including in-kind payments and providing an accompanying exception); and required the Department to establish temporary eligibility standards for disasters.
P.L. 93-347 (July 12, 1974) authorized the Department to pay 50 percent of all states’ costs for administering the program and established the requirement for efficient and effective administration by the States.
1974 nationwide program
In accordance with P.L. 93-86, the FSP began operating nationwide on July 1, 1974. (The program was not fully implemented in Puerto Rico until November 1, 1974.) Participation for July 1974 was almost 14 million.
Eligible access to Supplemental Security Income beneficiaries[edit]
Once a person is a beneficiary of theĀ Supplemental Security IncomeĀ (SSI) Program he (or she) may be automatically eligible for Food Stamps depending on his (or her) stateās laws. How much money in food stamps they receive also varies by state. Supplemental Security Income was created in 1974.[12]
Food Stamp Act of 1977
Both the outgoing Republican Administration and the new Democratic Administration offered Congress proposed legislation to reform the FSP in 1977. The Republican bill stressed targeting benefits to the neediest, simplifying administration, and tightening controls on the program; the Democratic bill focused on increasing access to those most in need and simplifying and streamlining a complicated and cumbersome process that delayed benefit delivery as well as reducing errors, and curbing abuse. The chief force for the Democratic Administration was Robert Greenstein, Administrator of theĀ Food and Nutrition Service (FNS).
In Congress, major players were SenatorsĀ George McGovern,Ā Jacob Javits, Humphrey, and Dole and Congressmen Foley and Richmond. Amid all the themes, the one that became the rallying cry for FSP reform was “EPR”āeliminate the purchase requirementābecause of the barrier to participation the purchase requirement represented.[citation needed]Ā The bill that became the law (S. 275) did eliminate the purchase requirement. It also:[citation needed]
eliminated categorical eligibility;
established statutory income eligibility guidelines at the poverty line;
established 10 categories of excluded income;
reduced the number of deductions used to calculate net income and established a standard deduction to take the place of eliminated deductions;
raised the general resource limit to $1,750;
established the fair market value (FMV) test for evaluating vehicles as resources;
notice, recertification, and retroactive benefit protections; and
a requirement for States to develop a disaster plan.
The integrity provisions of the new program included fraud disqualifications, enhanced Federal funding for States’ anti-fraud activities, and financial incentives for low error rates.
The House Report for the 1977 legislation points out that the changes in the Food Stamp Program are needed without reference to upcomingĀ welfare reformĀ since “the path to welfare reform is, indeed, rocky….”[citation needed]
EPR was implemented January 1, 1979. Participation that month increased 1.5 million over the preceding month.
Cutbacks of the early 1980s[
The large and expensive FSP proved to be a favorite subject of close scrutiny from both the Executive Branch and Congress in the early 1980s. Major legislation in 1981 and 1982 enacted cutbacks including:
addition of a gross income eligibility test in addition to the net income test for most households;
temporary freeze on adjustments of the shelter deduction cap and the standard deduction and constraints on future adjustments;
annual adjustments in food stamp allotments rather than semi-annual;
consideration of non-elderly parents who live with their children and non-elderly siblings who live together as one household;
required periodic reporting and retrospective budgeting;
prohibition against using Federal funds for outreach;
replacing the FSP in Puerto Rico with a block grant for nutrition assistance;
counting retirement accounts as resources;
state option to require job search of applicants as well as participants; and
increased disqualification periods for voluntary quitters.
Electronic Benefits Transfer (EBT) began inĀ Reading,Ā Pennsylvania, in 1984.
Mid-to-late 1980s
Recognition of the severe domestic hunger problem in the latter half of the 1980s led to incremental expansions of the FSP in 1985 and 1987, such as elimination ofĀ sales taxĀ on food stamp purchases, reinstitution of categorical eligibility, increased resource limit for most households ($2,000), eligibility for the homeless, and expandedĀ nutrition education. The Hunger Prevention Act of 1988 and the Mickey Leland Memorial Domestic Hunger Relief Act in 1990 foretold the improvements that would be coming. The 1988 and 1990 legislation accomplished the following:
increasing benefits by applying a multiplication factor to Thrifty Food Plan costs;
making outreach an optional activity for States;
excluding advance earned income tax credits as income;
simplifying procedures for calculating medical deductions;
instituting periodic adjustments of the minimum benefit;
authorizing nutrition education grants;
establishing severe penalties for violations by individuals or participating firms; and
establishing EBT as an issuance alternative.
Throughout this era, significant players were principally various committee chairmen: Congressmen Leland, Hall, Foley,Ā Leon Panetta, and, de la Garza and SenatorĀ Patrick Leahy.
1993 Mickey Leland Childhood Hunger Relief Act
By 1993, major changes in food stamp benefits had arrived. The final legislation provided for $2.8 billion in benefit increases over Fiscal Years 1984-1988. Leon Panetta, in his new role as OMB Director, played a major role as did Senator Leahy. Substantive changes included:
eliminating the shelter deduction cap beginning January 1, 1997;
providing a deduction for legally binding child support payments made to nonhousehold members;
raising the cap on the dependent care deduction from $160 to $200 for children under 2 years old and $175 for all other dependents;
improving employment and training (E&T) dependent care reimbursements;
increasing the FMV test for vehicles to $4,550 on September 1, 1994 and $4,600 on October 1, 1995, then annually adjusting the value from $5,000 on October 1, 1996;
mandating asset accumulation demonstration projects; and
simplifying the household definition.
Later participation milestones
In December 1979, participation finally surpassed 20 million. In March 1994, participation hit a new high of 28 million.
Although the Food Stamp Program was reauthorized in theĀ 1996 Farm Bill, the 1996 welfare reform made several changes to the program, including:
eliminating eligibility to food stamps of most legal immigrants who had been in the country less than five years;
placing a time limit on food stamp receipt of three out of 36 months forĀ Able-bodied Adults Without DependentsĀ (ABAWDs), who are not working at least 20 hours a week or participating in a work program;
reducing the maximum allotments to 100 percent of the change in theĀ Thrifty Food PlanĀ (TFP) from 103 percent of the change in the TFP;
freezing the standard deduction, the vehicle limit, and the minimum benefit;
setting the shelter cap at graduated specified levels up to $300 by fiscal year 2001, and allowing states to mandate the use of the standard utility allowance;
revising provisions for disqualification, including comparable disqualification with other means-tested programs; and
requiring states to implement EBT before October 1, 2002.
As a result of all these changes, “participation rates plummeted” in the late 1990s, according toĀ SlateĀ online magazine.[13][quantify]
The Balanced Budget Act of 1997 (BBA) and the Agricultural Research, Education and Extension Act of 1998 (AREERA) made some changes to these provisions, most significantly:
using additional Employment and Training (E&T) funds to providing work program opportunities for able-bodied adults without dependents;
allowing states to exempt up to 15 percent of the able-bodied adults without dependents who would otherwise be ineligible;
restoring eligibility for certain elderly, disabled, and minor immigrants who resided in the United States when the 1996 welfare reform act was enacted; and
cutting administrative funding for states to account for certain administrative costs that previously had been allocated to the AFDC program and now were required to be allocated to the Food Stamp Program.
The fiscal year 2001 agriculture appropriations bill included two significant changes. The legislation increased the excess shelter cap to $340 in fiscal year 2001 and then indexed the cap to changes in theĀ Consumer Price IndexĀ for All Consumers each year beginning in fiscal year 2002. The legislation also allowed states to use the vehicle limit they use in a TANF assistance program, if it would be result in a lower attribution of resources for the household.
Electronic Benefits Transfer
In the late 1990s, the Food Stamp Program was revamped, with some states phasing out actual stamps in favor of a specialized debit card system known asĀ Electronic Benefit TransferĀ (EBT), provided by privateĀ contractors. Many states merged the use of the EBT card for publicĀ welfareĀ programs as well, such as cash assistance. The move was designed to save the government money by not printing the coupons, make benefits available immediately instead of requiring the recipient to wait for mailing or picking up the booklets in person, and reduce theft and diversion.[5]
Renaming the Food Stamp Program
TheĀ 2008 farm billĀ renamed the Food Stamp Program as the Supplemental Nutrition Assistance Program (beginning October 2008) and replaced all references to “stamp” or “coupon” in federal law with “card” or “EBT.”[14][15]
Temporary benefits increase from April 2009 to November 2013
SNAP benefits temporarily increased with the passage of theĀ American Recovery and Reinvestment Act of 2009Ā (ARRA), a federalĀ stimulus packageĀ to help Americans affected by theĀ Great RecessionĀ of 2007.[16]Ā Beginning in April 2009 and continuing through the expansion’s expiration on November 1, 2013, the ARRA appropriated $45.2 billion to increase monthly benefit levels to an average of $133.[16][17]Ā This amounted to a 13.6 percent funding increase for SNAP recipients.[17]
This temporary expansion expired on November 1, 2013, resulting in a relative benefit decrease for SNAP households; on average, benefits decreased by 5 percent.[16]Ā According to aĀ Center on Budget and Policy PrioritiesĀ report, the maximum monthly benefit for a family of four dropped from $668 to $632, while the maximum monthly benefit for an individual dropped from $200 to $189.[16]
Our business operations are subject to numerous risks, factors, and uncertainties, domestically and internationally, which are outside our control. These factors include… changes in the amount of payments made under the Supplemental Nutrition Assistance Plan and other public assistance plans, [and] changes in the eligibility requirements of public assistance plans.[18]
Companies that have lobbied on behalf of SNAP includeĀ PepsiCo,Ā Coca-Cola, and the grocery chainĀ Kroger.Ā Kraft Foods, which receives “One-sixth [of its] revenues … from food stamp purchases” also opposes food stamp cuts.[18]
Eligibility
Because SNAP is a means-tested program, recipients must meet all eligibility criteria in order to receive benefits. There are income and resource requirements for SNAP, as well as specific requirements for immigrants, elderly persons and persons with disabilities.[19][20]
Income requirements
For income, individuals and households may qualify for benefits if they earn a gross monthly income that is 130% (or less) of theĀ federal poverty levelĀ for a specific household size. For example: the SNAP-eligible gross monthly income is $1,245 or less for an individual. For a household of 4, the SNAP eligible gross monthly income is $2,552 or less. Gross monthly income is the amount an individual makes each month before any deductions, i.e. taxes, insurance, pensions, etc.[19]
Resource requirements
There is also a resource requirement for SNAP, although eligibility requirements vary slightly from state to state. Generally speaking, households may have up to $2,250 in a bank account or other countable sources. If at least one person is age 60 or older and/or has disabilities, households may have $3,500 in countable resources.[19]
Housing expenditure
The lack ofĀ affordable housingĀ in urban areas means that money that could have been spent on food is spent on housing expenses. Housing is generally considered affordable when it costs 30% or less of total household income; rising housing costs have made this ideal difficult to attain.
This is especially true inĀ New York City, where 28% of rent stabilized tenants spend more than half their income on rent.[21]Ā Among lower income families the percentage is much higher. According to an estimate by theĀ Community Service Society, 65% of New York City families living below the federal poverty line are paying more than half of their income toward rent.[22]
The current eligibility criteria attempt to address this, by including a deduction for “excess shelter costs”. This applies only to households that spend more than half of their net income on rent. For the purpose of this calculation, a household’s net income is obtained by subtracting certain deductions from their gross (before deductions) income. If the household’s total expenditures on rent exceed 50% of that net income, then the net income is further reduced by the amount of rent that exceeds 50% of net income. For 2007, this deduction can be no more than $417, except in households that include an elderly or disabled person.[23]Ā Deductions include:
a standard deduction that is subtracted from income for all recipients,
an earned income deduction reflecting taxes and work expenses,
a deduction for dependent care expenses related to work or training (up to certain limits),
a deduction for child support payments,
a deduction for medical expenses above a set amount per month (only available to elderly and disabled recipients), and
a deduction for excessively high shelter expenses.[24]
The adjusted net income, including the deduction for excess shelter costs, is used to determine whether a household is eligible for food stamps.
Immigrant status and eligibility
The 2002 Farm Bill restores SNAP eligibility to most legal immigrants that:
Have lived in the country for 5 years; or
Are receiving disability-related assistance or benefits; or
Have children under 18
Certain non-citizens, such as those admitted for humanitarian reasons and those admitted for permanent residence, may also be eligible for SNAP. Eligible household members can get SNAP benefits even if there are other members of the household that are not eligible.[19]
Applying for SNAP benefits
To apply for SNAP benefits, an applicant must first fill out a program application and return it to the state or local SNAP office. Each state has a different application, which is usually available online. There is more information about various state applications processes, including locations of SNAP offices in various state, displayed on an interactive Outreach Map found on the FNS website.[25]Ā Individuals who believe they may be eligible for SNAP benefits may use the Food and Nutrition Servicesā SNAP Screening Tool, which can help gauge eligibility.
Eligible food items under SNAP
As per USDA rules, households can use SNAP benefits to purchase:
Foods for the household to eat, such as:
fruits and vegetables;
breads and cereals;
dairy products;
meats, fish and;
poultry
Plants and seeds which are fit for household consumption.
Additionally, restaurants operating in certain areas may be permitted to accept SNAP benefits from eligible candidates like elderly, homeless or disabled people in return for affordable meals.
However, the USDA clearly mentions that households cannot use SNAP benefits to purchase the following:
Soft drinks, candy, cookies, snack crackers, and ice cream are classified as food items and are therefore eligible items. Seafood, steak, and bakery cakes are also food items and are therefore eligible items.[26]
Energy drinks which have aĀ nutrition facts labelĀ are eligible foods, but energy drinks which have a supplement facts label are classified by the FDA as supplements, and are therefore not eligible.[26]
Live animals and birds may not be purchased; but live fish and shellfish are eligible foods.[26]Ā Pumpkins are eligible, but inedible gourds and solelyĀ ornamentalĀ pumpkins are not.[26]
Gift basketsĀ containing both food and non-food items “are not eligible for purchase with SNAP benefits if the value of the non-food items exceeds 50 percent of the purchase price. Items such asĀ birthdayĀ and other special occasion cakes are eligible as long as the value of non-edible decorations does not exceed 50 percent of the price.”[26]
State options
States are allowed under federal law to administer SNAP in different ways. As of April 2015, the USDA had published eleven periodic State Options Reports outlining variations in how states have administered the program.[27]Ā The USDA’s most recent State Options Report, published in April 2015, summarizes:
SNAP’s statutes, regulations, and waivers provide State agencies with various policy options. State agencies use this flexibility to adapt their programs to meet the needs of eligible, lowāincome people in their States. Modernization and technology have provided States with new opportunities and options in administering the program. Certain options may facilitate program design goals, such as removing or reducing barriers to access for low-income families and individuals, or providing better support for those working or looking for work. This flexibility helps States better target benefits to those most in need, streamline program administration and field operations, and coordinate SNAP activities with those of other programs.[28]
Some areas of differences among states include: when and how frequently SNAP recipients must report household circumstances; on whether the state agency acts on all reported changes or only some changes; whether the state uses a simplified method for determining the cost of doing business in cases where an applicant is self-employed; and whether legally obligatedĀ child supportĀ payments made to non-household members are counted as an income exclusion rather than a deduction.[28]
State agencies also have an option to call their program SNAP; whether to continue to refer to their program under its former name, the Food Stamp Program; or whether to choose an alternate name.[28]Ā Among the 50 states plus the District of Columbia, 32 call their program SNAP; five continue to call the program the Food Stamp Program; and 16 have adopted their own name.[28]Ā For example, California calls its SNAP implementation “CalFresh“, while Arizona calls its program “Nutrition Assistance”.[28]
States and counties with highest use of SNAP per capita
According to January 2015 figures reported by the Census Bureau and USDA and compiled byĀ USA Today, the states and district with the most food stamp recipients per capita are:[29]
According to June 2009 figures reported by the state agencies, the USDA, and Census Bureau, and compiled by theĀ New York Times, the individual counties with the highest levels of SNAP usage were:
During theĀ recession of 2008, SNAP participation hit an all-time high. Arguing in support for SNAP, the Food Research and Action Center argued that āputting more resources quickly into the hands of the people most likely to turn around and spend it can both boost the economy and cushion the hardships on vulnerable people who face a constant struggle againstĀ hunger.ā[30]Ā Researchers have found that every $1 that is spent from SNAP results in $1.73 of economic activity. In California, the cost-benefit ratio is even higher: for every $1 spent from SNAP between $3.67 to $8.34 is saved in health care costs.[31][32][33]Ā TheĀ Congressional Budget OfficeĀ also rated an increase in SNAP benefits as one of the two most cost-effective of all spending and tax options it examined for boosting growth and jobs in a weak economy.[33]
Participants
A summary statistical report indicated that an average of 44.2 million people used the program in FY 2016, down from 45.8 million in 2015 and below the 2013 peak of 47.6 million.[34]Ā SNAP is able to support 75% of those eligible for the program. Nearly 72 percent of SNAP participants are in families with children; more than one-quarter of participants are in households with seniors or people with disabilities.[35]
As of 2013, more than 15% of the U.S. population receive food assistance, and more than 20% inĀ Georgia,Ā Kentucky,Ā Louisiana,Ā New Mexico,Ā OregonĀ andĀ Tennessee. Washington D.C. was the highest share of the population to receive food assistance at over 23%.[36]
Average number of persons participating in the SNAP, 2000ā2016. The number of participants increased due to theĀ Great Recession, peaking in 2013, and has since fallen.
According to theĀ United States Department of AgricultureĀ (based on a study of data gathered in Fiscal Year 2010), statistics for the food stamp program are as follows:[37]
49% of all participant households have children (17 or younger), and 55% of those are single-parent households.
15% of all participant households have elderly (age 60 or over) members.
20% of all participant households have non-elderly disabled members.
The average gross monthly income per food stamp household is $731; The average net income is $336.
37% of participants are White, 22% are African-American, 10% are Hispanic, 2% are Asian, 4% are Native American, and 19% are of unknown race or ethnicity.[37]
Costs
Total program costs from 2000 to 2016. The amount increased sharply after 2008 due to theĀ Great Recession, and has fallen since 2013 as the economy recovers.
SNAP benefits cost since the 1960s
Amounts paid to program beneficiaries rose from $28.6 billion in 2005 to $76.1 billion in 2013, falling back to $66.6 billion by 2016. This increase was due to the high unemployment rate (leading to higher SNAP participation) and the increased benefit per person with the passing ofĀ ARRA. SNAP average monthly benefits increased from $96.18 per person to $133.08 per person. Other program costs, which include the Federal share of State administrative expenses, Nutrition Education, and Employment and Training, amounted to roughly $3.7 million in 2013.[5]Ā There were cuts into the program’s budget introduced in 2014 that were estimated to save $8.6 billion over 10 years. Some of the states are looking for measures within the states to balance the cuts, so they would not affect the recipients of the federal aid program.[38]
Food security and insecurity
While SNAP participants and other low-income nonparticipants spend similar amounts on food spending, SNAP participants tend to still experience greaterĀ food insecurityĀ than nonparticipants. This is believed to be a reflection of the welfare of individuals who take the time to apply for SNAP benefits rather than the shortcomings of SNAP. Households facing the greatest hardships are the most likely to bear the burden of applying for program benefits.[39]Therefore, SNAP participants tend to be, on average, less food secure than other low-income nonparticipants.[39]
Self-selectionĀ by more food-needy households into SNAP makes it difficult to observe positive effects onĀ food securityĀ from survey data.[40]Ā Statistical models that control for this endogeneity suggest that SNAP receipt reduces the likelihood of being food insecure and very food insecure by roughly 30 percent and 20 percent, respectively.[41]
Poverty
Because SNAP is a means-tested entitlement program, participation rates are closely related to the number of individuals living inĀ povertyĀ in a given period. In periods of economicĀ recession, SNAP enrollment tends to increase and in periods of prosperity, SNAP participation tends to be lower.[39]Ā Unemployment is therefore also related to SNAP participation. However,Ā ERSĀ data shows that poverty and SNAP participation levels have continued to rise following the 2008 recession, even though unemployment rates have leveled off. Poverty levels are the strongest correlates for program participation.
A 2016 study found that SNAP benefits lead to greater expenditures on housing, transportation, and education by beneficiaries.[42]
SNAP is closely related to poverty and unemployment
Income maintenance
The purpose of the Food Stamp Program as laid out in its implementation was to assist low-income households in obtaining adequate and nutritious diets. According toĀ Peter H. Rossi, a sociologist whose work involved evaluation of social programs, “the program rests on the assumption that households with restricted incomes may skimp on food purchases and live on diets that are inadequate in quantity and quality, or, alternatively skimp on other necessities to maintain an adequate diet”.[43]Ā Food stamps, as many like Rossi, MacDonald, and Eisinger contend, are used not only for increasing food but also as income maintenance. Income maintenance is money that households are able to spend on other things because they no longer have to spend it on food. According to various studies shown by Rossi, because of income maintenance only about $0.17ā$0.47 more is being spent on food for every food stamp dollar than was spent prior to individuals receiving food stamps.[44]
Diet quality
Studies are inconclusive as to whether SNAP has a direct effect on the nutritional quality of food choices made by participants. Unlike other federal programs that provide food subsidies, i.e. the Supplemental Nutrition Assistance Program for Women, Infants and Children (WIC), SNAP does not have nutritional standards for purchases. Critics of the program suggest that this lack of structure represents a missed opportunity for public health advancement and cost containment.[45][46]Ā In April 2013, the USDA research body, theĀ Economic Research ServiceĀ (ERS), published a study that examined diet quality in SNAP participants compared to low-income nonparticipants. The study revealed a difference in diet quality between SNAP participants and low-income nonparticipants, finding that SNAP participants score slightly lower on the Healthy Eating Index[47]Ā (HEI) than nonparticipants. The study also concluded that SNAP increases the likelihood that participants will consume whole fruit by 23 percentage points. However, the analysis also suggests that SNAP participation decreases participants’ intake of dark green and orange vegetables by a modest amount.[48]
A 2016 study found no evidence that SNAP increased expenditures on tobacco by beneficiaries.[42]
Macroeconomic effect
The USDA’sĀ Economic Research ServiceĀ explains: “SNAP is aĀ counter-cyclicalĀ government assistance programāit provides assistance to more low-income households during an economic downturn or recession and to fewer households during an economic expansion. The rise in SNAP participation during an economic downturn results in greater SNAP expenditures which, in turn, stimulate the economy.”[49]
In 2011,Ā Secretary of AgricultureĀ Tom VilsackĀ gave a statement regarding SNAP benefits: “Every dollar of SNAP benefits generates $1.84 in the economy in terms of economic activity.”[50]Ā Vilsack’s estimate was based on a 2002 USDA study which found that “ultimately, the additional $5 billion of FSP (Food Stamp Program) expenditures triggered an increase in total economic activity (production, sales, and value of shipments) of $9.2 billion and an increase in jobs of 82,100,” or $1.84 stimulus for every dollar spent.[51]
A January 2008 report byĀ Moody’s AnalyticsĀ chief economistĀ Mark ZandiĀ analyzed measures of theĀ Economic Stimulus Act of 2008Ā and found that in a weak economy, every $1 in SNAP expenditures generates $1.73 in real GDP increase, making it the most effective stimulus among all the provisions of the act, including both tax cuts and spending increases.[52][53]
A 2010 report by Kenneth Hanson published by the USDA’s Economic Research Service estimated that a $1 billion increase in SNAP expenditures increases economic activity (GDP) by $1.79 billion (i.e., the GDPĀ multiplierĀ is 1.79).[54]Ā The same report also estimated that the “preferred jobs impact … are the 8,900 full-time equivalent jobs plus self-employed or the 9,800 full-time and part-time jobs plus self-employed from $1 billion of SNAP benefits.”[54]
Local economic effects
In March 2013, theĀ Washington PostĀ reported that one-third ofĀ Woonsocket, Rhode Island‘s population used food stamps, putting local merchants on a “boom or bust” cycle each month whenĀ EBT paymentsĀ were deposited. The Post stated that “a federal program that began as a last resort for a few million hungry people has grown into an economic lifeline for entire towns.”[55]Ā And this growth “has been especially swift in once-prosperous places hit by the housing bust”.[56]
In addition to local town merchants, national retailers are starting to take in an increasing large percentage of SNAP benefits. For example, “WalmartĀ estimates it takes in about 18% of total U.S. outlays on food stamps.”[57]
Fraud and abuse
In March 2012, the USDA published its fifth report in a series of periodic analyses to estimate the extent of trafficking in SNAP; that is, selling or otherwise converting SNAP benefits for cash payouts. Although trafficking does not directly increase costs to the Federal Government,[58][59][60]Ā it diverts benefits from their intended purpose of helping low-income families access a nutritious diet. Also trafficking may indirectly increase costs by encouraging participants to stay in the program longer than intended, or by incentivizing new participants seeking to profit from trafficking. The FNS aggressively acts to control trafficking by using SNAP purchase data to identify suspicious transaction patterns, conducting undercover investigations, and collaborating with other investigative agencies.
Trafficking diverted an estimated one cent of each SNAP dollar ($330 million annually) from SNAP benefits between 2006 and 2008. Trafficking has declined over time from nearly 4 percent in the 1990s. About 8.2 percent of all stores trafficked from 2006 to 2008 compared to the 10.5 percent of SNAP authorized stores involved in trafficking in 2011.[61]Ā A variety of store characteristics and settings were related to the level of trafficking. Although large stores accounted for 87.3 percent of all SNAP redemptions, they only accounted for about 5.4 percent of trafficking redemptions. Trafficking was much less likely to occur among publicly owned than privately owned stores and was much less likely among stores in areas with less poverty rather than more. The total annual value of trafficked benefits increased at about the same rate as overall program growth. The current estimate of total SNAP dollars trafficked is higher than observed in the previous 2002ā2005 period. This increase is consistent, however, with the almost 37 percent growths in average annual SNAP benefits from the 2002ā2005 study periods to the most recent one. The methodology used to generate these estimates has known limitations. However, given variable data and resources, it is the most practical approach available to FNS. Further improvements to SNAP trafficking estimates would require new resources to assess the prevalence of trafficking among a random sample of stores.[62]
The USDA report released in August 2013 says the dollar value of trafficking increased to 1.3 percent, up from 1 percent in the USDA’s 2006ā2008 survey,[61]Ā and “About 18 percent of those stores classified as convenience stores or small groceries were estimated to have trafficked. For larger stores (supermarkets and large groceries), only 0.32 percent were estimated to have trafficked. In terms of redemptions, about 17 percent of small groceries redemptions and 14 percent of convenience store redemptions were estimated to have been trafficked. This compares with a rate of 0.2 percent for large stores.”[63]
The USDA, in December 2011, announced new policies to attempt to curb waste, fraud, and abuse. These changes will include stiffer penalties for retailers who are caught participating in illegal or fraudulent activities.[64]Ā āThe department is proposing increasing penalties for retailers and providing states with access to large federal databases they would be required to use to verify information from applicants. SNAP benefit fraud, generally in the form of store employees buying EBT cards from recipients is widespread in urban areas, with one in seven corner stores engaging in such behavior, according to a recent government estimate. There are in excess of 200,000 stores, and we have 100 agents spread across the country. Some do undercover work, but the principal way we track fraud is through analyzing electronic transactionsā for suspicious patterns,Ā USDA Under SecretaryĀ Kevin Concannon toldĀ The Washington Times.[65]Ā Also, states will be given additional guidance that will help develop a tighter policy for those seeking to effectively investigate fraud and clarifying the definition of trafficking.
According to theĀ Government Accountability Office, at a 2009 count, there was a payment error rate of 4.36% of SNAP benefits down from 9.86% in 1999.[66]Ā A 2003 analysis found that two-thirds of all improper payments were the fault of the caseworker, not the participant.[66]Ā There are also instances of fraud involving exchange of SNAP benefits for cash and/or for items not eligible for purchase with EBT cards.[67]Ā In 2011, the Michigan program raised eligibility requirements for full-time college students, to save taxpayer money and to end student use of monthly SNAP benefits.[68]
In Maine, incidents of recycling fraud have occurred in the past where individuals once committed fraud by using their EBT cards to buy canned or bottled beverages (requiring a deposit to be paid at the point of purchase for each beverage container), dump the contents out so the empty beverage container could be returned for deposit redemption, and thereby, allowed these individuals to eventually purchase non-EBT authorized products with cash from the beverage container deposits.[69]
The State of Utah developed a system called “eFind” to monitor, evaluate and cross-examine qualifying and reporting data of recipients assets. Utahās eFind system is a āback endā, web-based system that gathers, filters, and organizes information from various federal, state, and local databases. The data in eFind is used to help state eligibility workers determine applicantsā eligibility for public assistance programs, including Medicaid, CHIP, the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), and child care assistance.[70]Ā When information is changed in one database, the reported changes become available to other departments utilizing the system. This system was developed with federal funds and it is available to other states free of charge.
The USDA only reports direct fraud and trafficking in benefits, which was officially estimated at $858 million in 2012. TheĀ Cato InstituteĀ reports that there was another $2.2 billion in erroneous payouts in 2009.[citation needed]Ā Cato also reported that the erroneous payout rate dropped significantly from 5.6 percent in 2007 to 3.8 percent in 2011.[citation needed]
TheĀ 2008 Farm BillĀ authorized $20 million to be spent on pilot projects to determine whether incentives provided to SNAP recipients at the point-of-sale would increase the purchase of fruits, vegetables, or other healthful foods.[71]Ā Fifteen states expressed interest in having the pilot program and, ultimately, five states submitted applications to be considered for HIP.Ā Hampden County, MassachusettsĀ was selected as the Healthy Incentives Pilot (HIP) site. HIP is designed to take place from August 2010 to April 2013 with the actual operation phase of the pilot program scheduled to last 15 months, from November 2011 to January 2013.[72]
HIP offers select SNAP recipients a 30% subsidy on produce, which is credited to the participantās EBT card, for 15 months. 7,500 households will participate HIP and an equal number will not; the differences between the two groups will be analyzed to see the effects of the program.[73]Ā Produce, under the HIP, is defined as fresh, frozen, canned, or dried fruits and vegetables that do not have any added sugar, salt, fat, or oil.
The Massachusetts Department of Transitional Assistance (DTA) is the state agency responsible for SNAP. DTA has recruited retailers to take part in HIP and sell more produce, planned for the EBT system change with the state EBT vendor, and hired six new staff members dedicated to HIP. DTA has agreed to provide FNS with monthly reports, data collection and evaluation.
Proposals to restrict “junk food” or “luxury items”
Periodically, proposals have been raised to restrict SNAP benefits from being used to purchase various categories or types of food which have been criticized as “junk food” or “luxury items”. However, Congress and the Department of Agriculture have repeatedly rejected such proposals on both administrative burden and personal freedom grounds. The Food and Nutrition Service noted in 2007 that no federal standards exist to determine which foods should be considered “healthy” or not, that “vegetables, fruits, grain products, meat and meat alternatives account for nearly three-quarters of the money value of food used by food stamp households” and that “food stamp recipients are no more likely to consume soft drinks than are higher-income individuals, and are less likely to consume sweets and salty snacks.”[74]Ā Thomas Farley and Russell Sykes argued that the USDA should reconsider the possibility of restricting “junk food” purchases with SNAP in order to encourage healthy eating, along with incentivizing the purchase of healthy items through a credit or rebate program that makes foods such as fresh vegetables and meats cheaper. They also noted that many urban food stores do a poor job of stocking healthy foods and instead favor high-profit processed items.[75]
Obesity-related conditions include heart disease, stroke, type 2 diabetes and certain types of cancer, some of the leading causes of preventable death. [Read guidelines]
The estimated annual medical cost of obesity in the U.S. was $147 billion in 2008 U.S. dollars; the medical cost for people who have obesity was $1,429 higher than those of normal weight. [Read paper]
Hispanics (47.0%) and non-Hispanic blacks (46.8%) had the highest age-adjusted prevalence of obesity, followed by non-Hispanic whites (37.9%) and non-Hispanic Asians (12.7%).
The prevalence of obesity was 35.7% among young adults age 20ā39 years, 42.8% among middle-aged adults age 40-59 years, and 41.0% among older adults age 60 and over.
The association between obesity and income or educational level is complex and differs by sex, and race/ethnicity.
Overall, men and women with college degrees had lower obesity prevalence compared with those with less education.
By race/ethnicity, the same obesity and education pattern was seen among non-Hispanic white, non-Hispanic black, and Hispanic women, and also among non-Hispanic white men, although the differences were not all statistically significant. Although the difference was not statistically significant among non-Hispanic black men, obesity prevalence increased with educational attainment. Among non-Hispanic Asian women and men and Hispanic men there were no differences in obesity prevalence by education level.
Among men, obesity prevalence was lower in the lowest and highest income groups compared with the middle income group. This pattern was seen among non-Hispanic white and Hispanic men. Obesity prevalence was higher in the highest income group than in the lowest income group among non-Hispanic black men.
Among women, obesity prevalence was lower in the highest income group than in the middle and lowest income groups. This pattern was observed among non-Hispanic white, non-Hispanic Asian, and Hispanic women. Among non-Hispanic black women, there was no difference in obesity prevalence by income.
Obesity Prevalence Maps
State-specific data on adult obesity prevalence using self-reported information from the Behavioral Risk Factor Surveillance System (BRFSS) shows that obesity prevalence remains high in the United States.
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Our Fat Pets
Sixty percent of cats tip the scales at unhealthy weights, slightly more than the 56 percent of dogs. Itās not good for them.
ByĀ Susan Jenks
Like most cats, Max had a swagger in his walk. But because he was slightly overweight, the 15-year-old Maine coon began having trouble ājumping up on things,ā his owner says, the extra pounds worsening his arthritis.
So his owner, Jaime Wilson, decided her pet needed to go on a diet ā barely two tablespoons of dry food in the morning and again at night, along with a larger portion of canned wet food once a day and a supervisedĀ exercise programĀ that included treadmill work and running through stationary poles.
āHe was ravenous all the time,ā his owner concedes. But after six months, āheās very sleek and thin,ā saysĀ Mrs. Wilson, who works at the University of Floridaās Small Animal Hospital in Gainesville, Fla. āNot having the extra pounds has been great for his joints.ā
The Association for Pet Obesity Prevention estimates that in the United States, veterinarians now classify more thanĀ 100 million dogs and catsĀ as overweight or obese, up from 80 million five years ago. Sixty percent of cats tip the scales at unhealthy weights, slightly more than the 56 percent of dogs.
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Worse yet, many pet owners fail to recognize the potential severity of the problem, finding their petsā weight gain of little concern or even ācute,ā says Dr. Justin Schmalberg, service chief of integrative medicine at the University of Floridaās College of Veterinary Medicine in Gainesville. And show animals, often held up as exemplary models, he says, sometimes tend toward the pudgy side.
āIn part, itās an issue of perception,ā Dr. Schmalberg says. āGenerally, the public is more tolerant of obese animals than they are of thin ones. Thereās not as much stigma with animals being overweight as with people.ā
Obesity and the inflammatory effects of excess fat can bring a host of health problems. Maxās six-month journey to a healthier weight reduced his risk for insulin-dependent diabetes, the most common health problem veterinarians see in overweight or obese cats. Overweight dogs rarely develop this form of diabetes, veterinarians say, though large breeds often face joint injuries from excess weight, while smaller ones can have breathing difficulties if airways collapse.
Along with diabetes and arthritis, extra heft puts pets at increased risk for liver and kidney diseases, high blood pressure, heart failure and even some cancers. And at least one widely cited study in Labrador retrievers found that even moderately overweight dogs have shorter life spans than their lean counterparts.
Veterinarians assess a petās overall body health using a system similar to the body mass index, or B.M.I., used in people. Emaciated dogs or cats get the lowest score on a nine-point scale, obese ones the highest, with a desirable weight usually in the four to five range, says Dr. Deborah Linder, head of Tufts Universityās obesity clinic for animals in Boston. An animal at six is considered clinically overweight, with a score of seven or more, obese.
Veterinarians also complete a physical exam to assess obesity, feeling over the rib cage by the animalās armpit, āwhere tissue should be no thicker than the back of your hand,ā Dr. Linder says. Another sign of healthy girth, she says, is a tuck in the belly, similar to an āhourglass figure.ā
Although some pets are genetically vulnerable to unwanted pounds, others may have diseases like hyperthyroidism or Cushingās disease, in which the adrenal glands pump out too much of a stress hormone,Ā stimulatingĀ appetite. Once these conditions are ruled out, veterinarians say, aging itself poses an ongoing risk as metabolism slows ā the pet version of middle-age spread.
Neutering or spaying also decreases an animalās energy needs by a third, Dr. Schmalberg says, so ācalories in, calories out,ā takes on greater importance in maintaining a petās proper weight.
Researchers have recently identified another risk factor for pet obesity: rapid growth in early life, though the reasons for this remain poorly understood. āDogs and cats that grow quickly are highly likely to become obese later in life,ā says Dr. Alex German, a professor at the University of Liverpool in England.
But veterinarians single out overfeeding as the greatest contributor to pet obesity. Giving pets easy access to food around the house, or āfree feeding,ā can quickly add unwanted pounds, they say, as can an overindulgence in high-calorie treats. Throw small children into the household mix with āsneak feedingā and the situation becomes worse, says Dr. Sarah Nord, a staff veterinarian at Trupanion, a Seattle-based pet insurer. āItās definitely not uncommon,ā she says with a laugh.
Whether pets, like some owners, āstress eatā is difficult to measure. āIn my experience, when animals are stressed, they tend to go off feeding,ā Dr. Nord says. āBut we donāt know.ā
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Story 1: Dallas Cowboys Win 24 -20 Over Detroit, Dallas Citizens Pockets Picked By City five-cent environmental fee for each single-use bag — plastic and paper bags! — It Is A Tax Stupid Ā — Vote Out of Office All Representatives Who Passed This Tax — Videos
Ā
An Inconvenient tax: picking peopleās pockets
By Raymond Thomas Pronk
Warning, when you check out, be on the lookout for pickpockets.
The latest green movement cause du jour is the banning or taxing of disposable plastic and paper bags. These laws or city ordinances are designed to nudge or coerce customers to bring their own reusable tote bag when they shop for groceries and other merchandise.
A number of United States cities including Washington, D.C., Los Angeles, San Francisco, Portland, Seattle, Boulder, Austin and now unfortunately Dallas have either banned or taxed disposable plastic and/or paper bags or so-called āsingle-use carryout bags.ā According to the Earth Policy Institute, over 20 million people are currently covered by 132 city and county plastic bag bans or fee ordinances in the U.S.
For decades most American and European businesses have provided their customers bags, at no additional charge, to carryout and transport their purchase. In the 1980s businesses began to give their customers a choice of paper or plastic.
On March 26, 2014, the Dallas City Council passed an 8 to 6 City Ordinance No. 29307. It requires business establishments that provide their customers āsingle-use carryout bagsā to register with the city annually each location providing these bags and charge their customers an āenvironment feeā of 5 cents per bag to promote a āculture of cleanā andĀ āto protect the natural environment, the economy and the health of its residences.ā
Give me a break. It is a new tax to raise millions in new tax revenue for the City of Dallas. Who are the elected Dallas-8 council member watermelons (green on the outside, red on the inside) that ordained this tax on the people and businesses of Dallas? The names of the Dallas-8 are Tennell Atkins, Carolyn R. Davis, Scott Griggs, Adam Medrano, Dwaine R. Caraway, Sandy Greyson, Philip T. Kingston, and Mayor Mike Rawlings.
The Dallas-8 are led by council member Caraway, who wanted to completely ban plastic and paper single-use carryout bags. Instead they decided to shake down Dallas businesses and their customers with a new highly regressive tax. Caraway refuses to call it a tax and claims the new ordinance which went in effect on January 1 is āa ban with a fee, such as other cities are doing across the United States.ā
The eight-page ordinance includes the definition and standards that reusable carryout bags must satisfy: āA reusable carryout bag must meet the minimum reuse testing standard of 100 reuses carrying 16 pound.ā Reusable bags may be made of cloth, washable fabric, durable materials, recyclable plastic with a minimum thickness of 4.0 mil or recyclable paper that contains a minimum of 40 percent recycled content.
All of the above reusable bags must have handles with the exception of small bags with a height of less than 14 inches and a width of less than 8 inches.
Business establishments can either provide or sell reusable carryout bags to its customer or to any person.
The city ordinance exempts some bags from the single-use carryout definition including:
Plastic bags used for produce, meats, nuts, grains and other bulk items inside grocery or other retail stores,
Single-use plastic bags used by restaurants to take away prepared food only where necessary to prevent moisture damage from soups, sauces, gravies or dressings,
Recyclable paper bags used by restaurants to take away prepared food,
Recyclable paper bags from pharmacies or veterinarians for prescription drugs,
Laundry, dry cleaning or garment bags,
Biodegradable door-hanger and newspaper bags, and
Bags for trash, yard debris and pet waste.
The Dallas 5 cent paper and plastic bag tax or environment fee applies only to single-use carryout bags defined as bags not meeting the requirements of a reusable bag.
Businesses that violate the ordinance can be fined up to a maximum of $500 per day.
Lee Califf, executive director of the American Progressive Bag Alliance, a bag manufacturing group, said āThis legislation applies to a product that is less than 0.5 percent of municipal waste in the United States and typically less than 1 percent of litter in studies conducted across the country;ā āPlacing a fee on a product with such a minuscule contribution to the waste and litter streams will not help the environment: but it will cost Dallas consumers millions more per year on their grocery bills, while hurting small business and threatening the livelihoods of the 4,500 Texans who work in the plastic bag and recycling industry.ā
Stop the shakedown of Dallas businesses and their customers. Repeal the inconvenient tax on paper and plastic disposable bags by voting out of office the Dallas-8 city council members who voted for this tax, Dwaine Caraway. Support your Texas state representatives in passing a new law that would prohibit cities such as Dallas and Austin from banning or taxing paper and plastic carryout bags.
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Register ELECTRONICALLYHERE; works best on Chrome or Firefox (if you need to register using a paper formĀ via USPS, clickhere)
Assess a five-cent environmental fee for each single-use bag; the environmental fee is not subject to sales tax
Print total number of bags and fee on each receipt
Keep records available for inspectors
Post signs in controlled parking lots reminding customers to bring their bags
Post signs in the store, within six feet of each register, per the ordinance SAMPLE HEREĀ
The full link to the Code Compliance carryout bag website, with forms andĀ additional information,Ā is here
Retailers offering only reusable bags, as defined by the ordinance, have different requirements.
All retailersĀ should look at their operations and determine if their bags are single-use, reusable, or exempted from the single-use definition. Consult the full ordinance for all details pertaining to the ordinance and what is expected for each type of bag including thickness, language on the bag, durability, signage, and other considerations.
Customers, you are encouraged to bring your bagand keep your change.Single-use carryout bags have a five-cent per bag environmental fee.Ā A single-use bag can be paper or plastic.Reusable bags do not have the environmental fee, though stores may charge you to offset costs.Ā Reusable bags stores offer can be made from cloth or other washable woven materials, recyclable paper, or recyclable plastic so long as they meet certain requirements.Ā However,Ā any bag you bring with youĀ to use is considered reusable since you are reusing it.There are some bags that are exempted from the single-use bag definition:
Laundry, dry cleaning or garment bags;
Biodegradable door-hanger and newspaper bags;
Bags for trash, yard debris or pet waste;
Plastic bags used for produce, meats, nuts, grains and other bulk items inside grocery or other retail stores;
Recyclable paper bags from pharmacies or veterinarians for prescription drugs; and,
Recyclable paper bags used by restaurants to take away prepared food.
Single-use plastic bags used by restaurants to take away prepared food only where necessary to prevent moisture damage from soups, sauces, gravies or dressings.
Remember to recycle the bags you can recycle appropriately.
Many wonder why the City passed this ordinance.Ā Ā The Dallas City Council passed theĀ ordinance to helpĀ improve the environment and keep our city clean.Ā The City is currently spending nearly $4 million dollars to remove litter from our community to keep it beautiful and thriving.
The Carryout Bag ordinance is intended to encourage shoppers to use reusable bags to carry goods from stores, restaurants,Ā and other locations to reduce the number of bags that can end up loose in the environment as litter.Ā
To help you understand, we have created this list of frequently asked question.
The carryout bag ordinance outlines the Cityās ādesire to protect the natural environment, the economy and the health of its residents,ā and the ānegative impact on the environment caused by improper disposal of single-use carryout bags.ā The Dallas City Council approved the ordinance on March 26, 2014.
The ordinance takes effect on January 1, 2015.
Retailers andĀ customers should be ready and know all the details.Ā This website and the Cityās Code Compliance Services website have details to help retailers prepare.Ā The links to the Code website on DallasCityHall.com are below.
Some are still unclear how the ordinance may impact them.
Businesses will have to register each location with the City in order to offer single-use bags.Ā No registration is necessary if a business is only offering reusable bags or bags that are exempted from the single-use bag definition in the ordinance.Ā Businesses must be registered before distributing single-use carryout bagsĀ starting January 1, 2015.Ā Businesses are required to collect a five-cent environmentalĀ fee for every single-use bag used by a customer.
Customers will be chargedĀ a five-cent environmental feeĀ for each single-use bag, paper or plastic, they receive from retailers.Ā Again, reusable bags and bags exempted from the definition of single-use bags do not carry the environmental fee.Ā You can avoid the environmental fee by bringing your own bags with you.Ā Ā The five cent fee assessed for the single-use bag is not subject to sales tax.
Will I still be able toĀ get plastic carryout bags?
Yes, provided your retailer chooses toĀ offer them and collect the environmental fee.
Can I bring my own reusable bags to carry out items I purchased?
Yes. Customers are encouraged to bring their own reusable bags to carry out their items instead of paying the five-cent environmental fee per single-use plastic or paper bag.
If I reuse a single-use carryout bag, will I have to pay the fee again?
Whatever bag you bring ā tote bag, golf bag, diaper bag, satchel, purse, or produce bag ā if you bring it with you to reuse, you do not have to pay the environmental fee.
Where does the money go?
A portion of the fees will be used to pay for enforcement of the ordinance and for public education efforts.Ā Stores keep 10 percent of the five-cent fee to help offset administrative costs.
Does this ordinance apply to all businesses?
All retailers that offer single-use carryout bags in Dallas are subject to this ordinance.
What about non-profits or charities?
If the non-profit or charity offers food, groceries, clothing, or other household items free of charge to clients, they may still use single-use carryout bags for the specific function of distributing those items.Ā However, the ordinance will apply to any bags used at the point of sale for any goods sold through the non-profit or charity.
Additionally, any non-profit or charity that collects goods for donation from the public or which leaves informational material for the public must be sure any door-hanger bags left for collecting those goods or providing that informational material are biodegradable.
Does the ordinance include all bags?
The ordinance applies toĀ single-use paper or plastic carryout bags used byĀ businesses as defined in the ordinance language.
What if businesses donāt follow the ordinance?
Businesses that violate the ordinance could face fines of up to $500 per day.
How will the ordinance be enforced?
City Code Compliance inspectors will respond to complaints and provide proactive enforcement.
How can the City know if businessesĀ arenātĀ complying with the law? WillĀ they be doing more inspections?
There will be proactive enforcement and periodic audits.Ā Additionally, the City will respond to complaints from residents.
Will the ban on single-use bags at city facilities apply to retailers at American Airlines Center, city museums, the Omni Dallas Hotel, and Fair Park?
Yes.Ā The City Attorneyās Office will work with Code Enforcement to determine which facilities are affected and how.
Whom should I contact if I have additional questions?
Call 3-1-1, the Office of Environmental Quality, Code Compliance or email us atgreendallas@dallascityhall.com.
NEWā Where can I find the forms? Forms and more information are available on the Code Compliance website dedicated to the Carryout Bag Ordinance here.
But beginning January 1 retailers will have to charge customers who want them āan environmental feeā of five cents per bag, and they will get to keep 10 percent of that money. The ordinance also says retailers who want to keep handing out plastic and paper bags will have to register with the city and keep track of bags sold.
The city says the money raised from the bag fees will help go toward funding enforcement and education efforts that assistant city manager Jill Jordan told the council could cost around $250,000 and necessitate the hiring of up to 12 additional staff members.
Wednesdayās vote came a year after council member Dwaine Caraway asked the city attorney to draft an ordinance that completely banned the bag. The council member says the ordinance passed today was a compromise born out of āa fair processā that included environmentalists, bag manufactures and retailers. Several of his colleagues wanted to send the proposed ordinances back to committee for further debate. But Caraway wanted a vote now.
āYou get to a point where itās time to make decisions, decisions that will have a great impact on the city of Dallas and our environmental status ā¦ and the beautification of our city,ā he said. The process has ābeen pretty tough. itās been back and forth. We listened and listened fairly.ā
But six of his colleagues disagreed: Sheffie Kadane said the fee-based ban will result in a lawsuit from retailers and manufacturers. Rick Callahan called it a āgovernment intrusion.ā Jennifer Staubach Gates said it wouldnāt do any good, because in five years the reusable bags supported by the environmentalists will end up in landfills too. And Jerry Allen said the three options being considered by council, including a full-out ban, represented āa lack of clear conviction,ā which he found disappointing.
And then there was Lee Kleinman, who on Friday indicated he supported the fee-based ordinance. Five days later heād changed his mind and said he no longer cared what happened in his colleaguesā districts.
āI would personally probably stay more focused on my own district, which does not have the same trash problems as others,ā he said, to the amazement of some of his southern sector colleagues. āWhy should I care if someone is shopping like at Southwest Center Mall and they want a plastic bag? If people in that community are satisfied with the conditions around that mall, why should I utilize my position in North Dallas to improve those conditions? I should just focus my energies on North Dallas redevelopment projects and not help another improve quality of life in other areas of the city.ā
That entire speech is above, thanks to my colleague Scott Goldstein.
Vonciel Jones Hill, who has said in the past she opposes any ban or bag tax, was no present for todayās vote. Monica Alonzo also voted against it, but said nothing.
In a statement released following the vote, the American Progressive Bag Alliance said itās āa move that will fail to accomplish any environmental goals while jeopardizing 4,500 Texas jobs and hurting consumers.ā
Its executive director, Lee Califf, said in a statement that āthe vote to approve a 5-cent plastic and paper grocery bag fee in Dallas is another example of environmental myths and junk science driving poor policy in the plastic bag debate.ā
But itās not clear if the state will allow Dallasā new bag ābanā ā or bag tax, more appropriately.
Attorney General Greg Abbott is going to weigh in on the legality of bag bans, following a request by state Rep. Dan Flynn of Canton on behalf of the Texas Retailers Association. Jerry Allen asked Dallas City Attorney Warren Ernst if the state allows bag bans.
āWe are ready to defend that position,ā Ernst said. āIf itās the will of the council to pass the ordinance, weāll defend that as a legal action by the city.ā
Allen was not convinced, insisting āthereās a tremendous amount of uncertainty.ā Ernst appeared to agree.
Those council members opposed to the ordinance said Dallas needs to do a better job of enforcing its litter laws. Jordan told the council that the city spends $4 million annually on trash pick-up, āand we still have litter.ā
In the end, said council member Scott Griggs, āthis is just one step. We tackle the bags then we can move on to Styrofoam and other issues that cause trash. This is a large elephant weāll have to take on as a city and a council.ā
Kroger’s Gary Huddleston, also of the Texas Retailers Association, shared a hug with Dwaine Caraway following today’s council vote.
Following the vote, Gary Huddleston, head of the Texas Retailers Association, said he wasnāt sure whether his organization would sue the city. He noted that they are awaiting the attorney generalās ruling on the legality of a fee.
āIt will affect the retailers in the city of Dallas and it will affect our customers,ā Huddleston said. āTheyāll have to pay for their paper and plastic bags or they bring in their reusable bags.ā
āWe personally believe the solution to litter in the city of Dallas is a strong recycling program and also punishing the people that litter and not punishing the retailer,ā Huddleston said.
The fee means that businesses will have to institute additional programming and training in order to enforce ordinance and track the fees. Customers will āhave to pay a nickel a bag, whereas maybe they use that nickel to buy more product in my store.ā
But Huddlestonās concerns didnāt stop him from hugging Caraway outside chambers. The two men smiled and embraced in front of television cameras.
The council member said he was pleased with the result of more than a year of work. He refused to call the fee a ātax.ā
āItās a ban with a fee, such as other cities are doing across the United States,ā Caraway said.
He said itās important for residents to know the ban does not cover a variety of bags, such as those in the produce section of grocery stores or at restaurants
āFolks need to understand that these are single-use carryout bags,ā Caraway said. āThese are simply those thin, flimsy bags that take flight and that are undesirable and bad for the environment.ā
Staff writer Scott Goldstein contributed to this report.
Dallas Will Charge Fees for Plastic Bag Use
By Josh Ault and Ken Kalthoff
The City of Dallas has implemented new rules for plastic grocery bags, imposing a 5 cent fee on single-use plastic or paper grocery bags. The rules go into effect in January. (Published Wednesday, Mar 26, 2014)
Thursday, Mar 27, 2014 ā¢ Updated at 5:56 AM CST
The Dallas City Council has passed a proposal ordering retailers to charge a fee for one-time use plastic bags while partially banning them from city-owned facilities.
In a 8-6 vote, the council passed the ordinance requiring retailers to charge customers a $0.05 fee if they request single-use plastic or paper bags.
Dallas Plastic Bag Ban Vote Wednesday[DFW] Dallas Plastic Bag Ban Vote Wednesday
The Dallas City Council is expected to vote on plastic bag ban issue on Wednesday. (Published Monday, Mar 24, 2014)
Dallas City Councilman Dwaine Caraway accepted the compromise of a bag fee after spending a year fighting for a ban on single-use bags.
“This is an opportunity for us to clean our city, to clean our environment and to move forward, and to be like the other cities across the country and around the world,” Caraway said.
Zac Trahan with Texas Campaign for The Environment said Austin and eight smaller Texas cities have taken stronger action by banning single-use bags, but he still supported the Dallas regulations.
“Itās still a step in the right direction because it will still result in a huge reduction in the number of bags that will be distributed,” he said.
The ordinance also requires those retailers to register with the city and track the number of single-use bags sold.
The retailer would keep 10 percent of the environmental fee with the remainder going to the city to fund enforcement and education efforts.
Lee Califf, the executive director of the bag manufacturers’ group American Progressive Bag Alliance, released the following statement after the ordinance was passed.
āThe vote to approve a 5-cent plastic and paper grocery bag fee in Dallas is another example of environmental myths and junk science driving poor policy in the plastic bag debate. This legislation applies to a product that is less than 0.5% of municipal waste in the United States and typically less than 1% of litter in studies conducted across the country. The City Council rushed through a flawed bill to appease its misguided sponsor, despite the fact that 70% of Dallas residents opposed this legislation in a recent poll.
āPlacing a fee on a product with such a minuscule contribution to the waste and litter streams will not help the environment; but it will cost Dallas consumers millions more per year on their grocery bills, while hurting small businesses and threatening the livelihoods of the 4,500 Texans who work in the plastic bag manufacturing and recycling industry. Councilman Caraway may view this vote as a victory for his political career, but there are no winners with todayās outcome.ā
Several Council Members opposed any new restrictions.
Rick Callahan said grocery bags are only a small part of the Dallas litter problem and better recycling education is needed.
“Banning something or adding a fee, putting more regulation on business is not the answer,” Callahan said.
The ordinance does ban single-use plastic or paper bags at city-owned facilities and events.
It still allows distributing multi-use, or stronger, paper or plastic bags for free so stores can get around charging the fee by offering better bags.
The ordinance goes into effect Jan. 1, 2015.
After more than a year of considering a ban on disposable shopping bags, the Dallas City Council voted instead last week to impose a 5-cent āenvironmental feeā on each bag.
In previous columns, Steve Blow had opposed a ban, while Jacquielynn Floyd had supported it. Today, they debate the councilās new approach.
Steve: Leave it to the Dallas City Council to take a bad idea and find a way to make it worse. I thought a ban on shopping bags was a bad idea, but slapping a new tax on Dallas shoppers is even more pointless.
This isnāt just a new tax, itās a new mini-bureaucracy at City Hall. Thereās talk of hiring 12 new people to run the program. And Iām sure someone is already writing a job description for a Deputy Junior Assistant City Manager for Retail Packaging Assessment and Oversight.
Good grief. I had little faith that a ban would accomplish much. Iām even more dubious about a bag tax ā except as a tool of government growth.
Jacquielynn: Dude, itās a nickel. Nobodyās getting taxed into bankruptcy here.
I hope, in fact, that this modest 5 cents is enough to assign at least minimal value to these awful bags. The reason they end up on fences, in fields and as tree garbage is that theyāre so free and plentiful.
Almost everybody collects them every day ā yet they have virtually no value. Itās human nature to take something for free, then toss it or lose track if you donāt need it.
Like it or not, this is the direction cities are headed. Los Angeles has had a ban in effect for more than a year. New York and Chicago are talking about either banning or limiting plastic bags.
I donāt think this is a case of forcing people to bow to the authoritarian rule of government overlords ā weāre asking for a very minor change in their habits. It makes environmental sense, like other conservation and recycling measures that have become routine.
Steve: They donāt end up as litter because theyāre free and plentiful. They end up as litter because a few dopes among us litter. A nickel is not going to transform those dopes into responsible citizens. Anyone careless with trash is not going to suddenly become careful with 5-cent trash.
On a fundamental level, this issue chaps my inner libertarian. I donāt think āgovernment regulationā is automatically a dirty word. But I firmly believe the need must be obvious and compelling before we add more regulation.
Jack, you may be fixated on plastic bags as you drive around, but I promise they make up a small percentage of the litter thatās out there. I see more cups than anything. Will we be required to carry around reusable cups next? Or pay a cups tax?
Jacquielynn: Steve, I agree that clueless dolts dump all kinds of garbage, from burger wrappers to moldy old sofas.
Plastic bags are a particular problem, though, for the very qualities that make them such a successful consumer product: Theyāre cheap, durable, lightweight and water-resistant. Theyāre mobile, easily blown into trees, creeks, fences and even for miles out into rural areas. A farmer who lives outside Dallas told me this week he hates plastic bags because when they land on his property, baby calves can choke on them.
Most of us donāt have calf problems, but the bagsā weightlessness makes them vulnerable to any breeze. Even if theyāre responsibly discarded, theyāll blow out of open trash cans, trucks, you name it.
Theyāre not just a blight ā theyāre a highly contagious blight.
Steve: Oh, cāmon. How am I supposed to rebut choking baby calves?
I will point out that Washington, D.C., has a real paradox on its hands. It implemented a 5-cent fee on disposable bags in 2010. And in a survey last year, residents reported using 60 percent fewer bags.
But get this: Tax revenue from the bags has been going up, not down as was expected. The city had originally projected to collect $1.05 million in fiscal 2013. Instead, bag fees topped $2 million.
The dollars donāt lie. More bags are being used after four years. Sure, some people will switch to reusable bags. But this sure isnāt going to make plastic bags disappear. Is a regressive new tax really worth it?
Jacquielynn: Iād be happy to sidestep the entire ātaxā issue by banning bags outright. If you want groceries, make sure you have a way to get them home.
But if cities arenāt ready to take that step, and they actually see a windfall out of bag taxes, maybe that should be dedicated to cleanup efforts.
Ideally, though, stores wouldnāt have the things at all. They can make boxes available (a la Costco). They can sell heavier plastic multiple-use bags for 25 or 50 cents. Shoppers buying just one or two items could learn to use the flexible appendages at the ends of their arms to carry stuff away.
The mail Iāve received from angry readers makes it plain that a lot of people loathe this plan, whether you call it a ban or a tax.
But I just donāt think weāre asking for a dramatic change in the way we live our lives. If we donāt stop assuming that everything we send to the landfill magically disappears, the landfill is going to start coming to us. Do you really want to live in a city that has garbage in the trees?
Steve: No, itās not a drastic change. Just a needless one. And Iām looking out my office window at six or seven trees with nary a bag in sight. Except for a few spots, the litter problem has been overblown.
I just wish we had tried a major public-awareness campaign before imposing more taxes and more regulation. 1. Recycle bags where you get them. 2. Try reusable bags. 3. Donāt litter, you dope.
Jacquielynn: On those points, weāre in wholehearted agreement.
Don’t bag it. Butt out. That’s the message Wednesday to Attorney General Greg Abbott from supporters of efforts to ban the use of plastic bags in Texas. The Attorney General has been asked to determine whether or not city ordinances like the one in Austin go too far and violate state law. While Abbott was told to back off, the state lawmaker who asked the Attorney General to get involved explained why he made the request.
It’s no longer legal in Austin for a retailer to provide customers with plastic bags. Wednesday, those who want to keep the bag ban on the books gathered at the state capitol to send a message.
“We call on the Attorney General today to keep his nose out of local government’s business of protecting the health of their residents and local communities, and leave well enough alone,” said Robin Schneider who is the Executive Director of Texas Campaign for the Environment.
The group is filing a legal brief to convince the Attorney General that cities in Texas have the Home-Rule authority to out-law plastic bags. Austin is among nearly a dozen towns that have passed bag ban ordinances. Wednesday is the deadline to weigh in before the Attorney General issues an opinion. The question is whether or not a municipal ban violates the state health and safety code.
The state lawmaker who requested the legal opinion, state Rep. Dan Flynn (R) Vann said his concern is not necessarily about the use of plastic bags but about the perceived abuse of power.
“The last this particular law was looked at was about 20 years ago,” said Rep. Flynn.
The Republican from Van heads up a House Committee created to make government more transparent. According to Flynn, he made the request for a legal opinion after getting several calls asking for clarification.
“It’s not about Austin, it’s all about state authority and the power grab by some cities over state law, that’s just about the easiest way to say it.”
When a ban on plastic bags was approved in Austin, the lack of a similar, free, option spurred much of the opposition. Shoppers are required to buy their own reusable cloth of thick plastic bags. Some stores in Austin do provide paper bags but typically charge for them,” said Flynn.
“They’re not charging in Fort Stockton,” said Darren Hodges, Mayor Pro Tem of that west Texas town.
The Fort Stockton city council worked with local retailers before being one of the first to pass a ban. According to Hodges, free biodegradable bags are offered to Fort Stockton shoppers. That kind of option, he agreed, could help reduce back lash in communities considering similar action.
“It’s best to get with your big bag people and work with them on something that they can live with, at least get everyone involved in the process and see if you can move forward,” said Hodges.
An A.G. ruling against bag bans will not strike down any ordinance. It could provide a legal foot-hold for any group that takes a city to court.
The Dallas city council, earlier Wednesday, considered its own bag ban. Instead of out-lawing them, in a close vote, the Dallas council passed an environmental fee ordinance, which is essentially a new tax.
Starting next year shoppers in Dallas will be charged 5-cents for every plastic and paper bag that they use.
In reaction to the Dallas council vote, the American Progressive Bag Alliance issued the following statement:
“The vote to approve a 5-cent plastic and paper grocery bag fee in Dallas is another example of environmental myths and junk science driving poor policy in the plastic bag debate. This legislation applies to a product that is less than 0.5% of municipal waste in the United States and typically less than 1% of litter in studies conducted across the country. The City Council rushed through a flawed bill to appease its misguided sponsor, despite the fact that 70% of Dallas residents opposed this legislation in a recent poll.”
Los Angeles rang in the 2014 New Year with a ban on the distribution of plastic bags at the checkout counter of big retailers, making it the largest of the 132 cities and counties around the United States with anti-plastic bag legislation. And a movement that gained momentum in California is going national. More than 20 million Americans live in communities with plastic bag bans or fees. Currently 100 billion plastic bags pass through the hands of U.S. consumers every yearāalmost one bag per person each day. Laid end-to-end, they could circle the equator 1,330 times. But this number will soon fall as more communities, including large cities like New York and Chicago, look for ways to reduce the plastic litter that blights landscapes and clogs up sewers and streams.
While now ubiquitous, the plastic bag has a relatively short history. Invented in Sweden in 1962, the single-use plastic shopping bag was first popularized by Mobil Oil in the 1970s in an attempt to increase its market for polyethylene, a fossil-fuel-derived compound. Many American customers disliked the plastic bag when it was introduced in 1976, disgusted by the checkout clerks having to lick their fingers when pulling the bags from the rack and infuriated when a bag full of groceries would break or spill over. But retailers continued to push for plastic because it was cheaper and took up less space than paper, and now a generation of people can hardly conceive of shopping without being offered a plastic bag at the checkout counter.
The popularity of plastic grocery bags stems from their light weight and their perceived low cost, but it is these very qualities that make them unpleasant, difficult, and expensive to manage. Over one third of all plastic production is for packaging, designed for short-term use. Plastic bags are made from natural gas or petroleum that formed over millions of years, yet they are often used for mere minutes before being discarded to make their way to a dump or incineratorāif they donāt blow away and end up as litter first. The amount of energy required to make 12 plastic bags could drive a car for a mile.
In landfills and waterways, plastic is persistent, lasting for hundreds of years, breaking into smaller pieces and leaching out chemical components as it ages, but never fully disappearing. Animals that confuse plastic bags with food can end up entangled, injured, or dead. Recent studies have shown that plastic from discarded bags actually soaks up additional pollutants like pesticides and industrial waste that are in the ocean and delivers them in large doses to sea life. The harmful substances then can move up the food chain to the food people eat. Plastics and the various additives that they contain have been tied to a number of human health concerns, including disruption of the endocrine and reproductive systems, infertility, and a possible link to some cancers.
Californiaāwith its long coastline and abundant beaches where plastic trash is all too commonāhas been the epicenter of the U.S. movement against plastic bags. San Francisco was the first American city to regulate their use, starting with a ban on non-compostable plastic bags from large supermarkets and chain pharmacies in 2007. As part of its overall strategy to reach āzero wasteā by 2020 (the city now diverts 80 percent of its trash to recyclers or composters instead of landfills), it extended the plastic bag ban to other stores and restaurants in 2012 and 2013. Recipients of recycled paper or compostable bags are charged at least 10Č¼, butāas is common in cities with plastic bag bansābags for produce or other bulk items are still allowed at no cost. San Francisco also is one of a number of Californian cities banning the use of polystyrene (commonly referred to as Styrofoam) food containers, and it has gone a step further against disposable plastic packaging by banning sales of water in plastic bottles in city property.
All told, plastic bag bans cover one-third of Californiaās population. Plastic bag purchases by retailers have reportedly fallen from 107 million pounds in 2008 to 62 million pounds in 2012, and bag producers and plastics manufacturers have taken note. Most of the ordinances have faced lawsuits from plastics industry groups like the American Chemistry Council (ACC). Even though the laws have largely held up in the courts, the threat of legal action has deterred additional communities from taking action and delayed the process for others.
Ironically, were it not for the intervention of the plastics industry in the first place, California would likely have far fewer outright plastic bag bans. Instead, more communities might have opted for charging a fee per bag, but this option was prohibited as part of industry-supported state-wide legislation in 2006 requiring Californian grocery stores to institute plastic bag recycling programs. Since a first attempt in 2010, California has come close to introducing a statewide ban on plastic bags, but well-funded industry lobbyists have gotten in the way. A new bill will likely go up for a vote in 2014 with the support of the California Grocers Association as well as state senators who had opposed an earlier iteration.
Seattleās story is similar. In 2008 the city council passed legislation requiring groceries, convenience stores, and pharmacies to charge 20Č¼ for each one-time-use bag handed out at the cash register. A $1.4 million campaign headed by the ACC stopped the measure via a ballot initiative before it went into effect, and voters rejected the ordinance in August 2009. But the city did not give up. In 2012 it banned plastic bags and added a 5Č¼ fee for paper bags. Attempts to gather signatures to repeal this have been unsuccessful. Eleven other Washington jurisdictions have also banned plastic bags, including the state capital, Olympia. (See database of U.S. plastic bag initiatives and a timeline history.)
A number of state governments have entertained proposals for anti-plastic bag legislation, but not one has successfully applied a statewide charge or banned the bags. Hawaii has a virtual state prohibition, as its four populated counties have gotten rid of plastic bags at grocery checkouts, with the last one beginning enforcement in July 2015. Florida, another state renowned for its beaches, legally preempts cities from enacting anti-bag legislation. The latest attempt to remove this barrier was scrapped in April 2014, although state lawmakers say they will revisit the proposal later in the year.
Opposition to plastic bags has emerged in Texas, despite the state accounting for 44 percent of the U.S. plastics market and serving as the home to several important bag manufacturers, including Superbag, one of Americaās largest. Eight cities and towns in the state have active plastic bag bans, and others, like San Antonio, have considered jumping on the bandwagon. Austin banned plastic bags in 2013, hoping to reduce the more than $2,300 it was spending each day to deal with plastic bag trash and litter. The smaller cities of Fort Stockton and Kermit banned plastic bags in 2011 and 2013, respectively, after ranchers complained that cattle had died from ingesting them. Plastic bags have also been known to contaminate cotton fields, getting caught up in balers and harming the quality of the final product. Plastic pollution in the Trinity River Basin, which provides water to over half of all Texans, was a compelling reason for Dallas to pass a 5Č¼ fee on plastic bags that will go into effect in 2015.
Washington, D.C., was the first U.S. city to require food and alcohol retailers to charge customers 5Č¼ for each plastic or paper bag. Part of the revenue from this goes to the stores to help them with the costs of implementation, and part is designated for cleanup of the Anacostia River. Most D.C. shoppers now routinely bring their own reusable bags on outings; one survey found that 80 percent of consumers were using fewer bags and that over 90 percent of businesses viewed the law positively or neutrally.
Montgomery County in Maryland followed Washington’s example and passed a 5Č¼ charge for bags in 2011. A recent study that compared shoppers in this county with those in neighboring Prince Georgeās County, where anti-bag legislation has not gone through, found that reusable bags were seven times more popular in Montgomery County stores. When bags became a product rather than a freebie, shoppers thought about whether the product was worth the extra nickel and quickly got into the habit of bringing their own bags.
One strategy of the plastics industryāconcerned about declining demand for its productsāis an attempt to change public perception of plastic bags by promoting recycling. Recycling, however, is also not a good long-term solution. The vast majority of plastic bagsā97 percent or more in some localesānever make it that far. Even when users have good intentions, bags blow out of outdoor collection bins at grocery stores or off of recycling trucks. The bags that reach recycling facilities are the bane of the programs: when mixed in with other recyclables they jam and damage sorting machines, which are very costly to repair. In San Jose, California, where fewer than 4 percent of plastic bags are recycled, repairs to bag-jammed equipment cost the city about $1 million a year before the plastic bag ban went into effect in 2012.
Proposed plastic bag restrictions have been shelved in a number of jurisdictions, including New York City, Philadelphia, and Chicago, in favor of bag recycling programs. New York City may, however, move ahead with a bill proposed in March 2014 to place a city-wide 10Č¼ fee on single-use bags. Chicago is weighing a plastic bag ban.
In their less than 60 years of existence, plastic bags have had far-reaching effects. Enforcing legislation to limit their use challenges the throwaway consumerism that has become pervasive in a world of artificially cheap energy. As U.S. natural gas production has surged and prices have fallen, the plastics industry is looking to ramp up domestic production. Yet using this fossil fuel endowment to make something so short-lived, which can blow away at the slightest breeze and pollutes indefinitely, is illogicalāparticularly when there is a ready alternative: the reusable bag.
A Short History of the Plastic Bag: Selected Dates of Note in the United States and Internationally
1933
Polyethylene is discovered by scientists at Imperial Chemical Industries, a British company.
1950
Total global plastics production stands at less than 2 million metric tons.
1965
Sten Thulinās 1962 invention of the T-shirt bag, another name for the common single-use plastic shopping bag, is patented by Swedish company Celloplast.
1976
Mobil Oil introduces the plastic bag to the United States. To recognize the U.S. Bicentennial, the bagās designs are in red, white, and blue.
1982
Safeway and Kroger, two of the biggest U.S. grocery chains, start to switch from paper to plastic bags.
1986
Plastic bags already account for over 80 percent of the market in much of Europe, with paper holding on to the remainder. In the United States, the percentages are reversed.
June 1986
The half-million-member-strong General Federation of Womenās Clubs starts a U.S.-wide letter writing campaign to grocers raising concerns about the negative environmental effects of plastic bags.
Late 1980s
Plastic bag usage estimated to catch up to paper in U.S. groceries.
1989
Maine passes a law requiring retailers to only hand out plastic bags if specifically requested; this is replaced in 1991 by a statewide recycling initiative.
1990
The small Massachusetts island of Nantucket bans retail plastic bags.
1994
Denmark begins taxing retailers for plastic bags.
1996
Four of every five grocery bags used in the United States are made of plastic.
1997
Captain Charles Moore discovers the āGreat Pacific Garbage Patchā in the remote North Pacific, where plastic is estimated to outweigh zooplankton six to one, drawing global attention to the accumulation of plastics in the ocean.
2000
Mumbai, India, bans plastic bags, with limited enforcement.
2002
Global plastics production tops 200 million metric tons.
March 2002
Ireland becomes the first country to tax consumers’ use of plastic bags directly.
March 2002
Bangladesh becomes the first country to ban plastic bags. Bags had been blamed for exacerbating flooding.
2006
Italy begins efforts to pass a national ban on plastic bags; due to industry complaints and legal issues, these efforts are ongoing.
April 2007
San Francisco becomes the first U.S. city to ban plastic grocery bags, later expanding to all retailers and restaurants.
2007-2008
The ACC spends $5.7 million on lobbying in California, much of it to oppose regulations on plastic bags.
June 2008
China’s plastic bag ban takes effect before Beijing hosts the Olympic Games.
September 2008
Rwanda passes a national ban on plastic bags.
2009
Plastics overtake paper and paperboard to become the number one discarded material in the U.S. waste stream.
July 2009
Hong Kong’s levy on plastic bags takes effect in chains, large groceries, and other more sizable stores; it is later expanded to all retailers.
August 2009
Seattleās attempt to impose a 20Č¼ fee on both paper and plastic bags is defeated before it can take effect by a referendum financed largely by the American Chemistry Council (ACC).
December 2009
Madison, Wisconsin, mandates that households recycle plastic bags rather than disposing of them with their trash.
January 2010
Washington, D.C., begins requiring all stores that sell food or alcohol to charge 5Č¼ for plastic and paper checkout bags.
2010
Major bag producer Hilex Poly spends over $1 million in opposition to a proposed statewide plastic bag ban in California.
2010
Plastic bags appear in the Guinness World Records as the worldās āmost ubiquitous consumer item.ā
October 2011
In Oregon, Portland’s ban on plastic bags at major groceries and certain big-box stores begins.
May 2012
Honolulu County approves a plastic bag ban (to go into effect in July 2015), completing a de facto state-wide ban in Hawaii.
July 2012
Seattle’s plastic bag ban takes effect nearly three years after the first tax attempt failed.
March 2013
A bag ban takes effect in Austin, TX.
September-October 2013
During the Ocean Conservancyās 2013 Coastal Cleanup event, more than 1 million plastic bags were picked up from coasts and waterways around the world.
January 2014
Los Angeles becomes the largest U.S. city to ban plastic bags.
April 2014
Members of the European Parliament back new rules requiring member countries to cut plastic bag use 50 percent by 2017 and 80 percent by 2019.
April 2014
Over 20 million people are covered under 132 city and county plastic bag bans or fee ordinances in the United States.
Selected Plastic Bag Regulations in the United States
Boulder, CO
Boulder grocery stores charge 10Č¼ for plastic and paper bags. The cityās reasons for applying the fee to both were that plastic bags are difficult to recycle and paper bag production is also energy- and water-intensive. Stores keep 4Č¼ and the rest of the money goes to the city to cover administrative costs, to provide residents with free reusable bags, and to otherwise minimize the impacts of bag waste. Just six months after the fee began in 2013, the city announced that bag use had dropped by 68 percent.
Chicago, IL
The Chicago City Council has visited the idea of limiting plastic bags giveaways several times over the last six years. In 2008 a proposed bag ban was rejected in favor of a bag recycling program. A bill banning plastic bags at most retailers is under consideration.
Dallas, TX
Plastic bags and bottles make up about 40 percent of all the trash in the Trinity River that provides water to over half of all Texans, including those living in Dallas-Fort Worth and Houston, according to estimates by Peter Payton, Executive Director of Groundwork Dallas, a group that does monthly cleanups in the watershed. In March 2014, a 5Č¼ fee on plastic and paper bags at all grocery and retail stores, along with a ban on plastic bags at all city events, facilities, and properties, was approved by the City Council. It will go into effect in January 2015. Nine tenths of the revenue generated from bag sales will go to the city.
Hawaii
In April 2012, Honolulu County joined the counties of Maui, Kauai, and Hawaii in banning non-biodegradable plastic bags. This amounts to a de facto statewide bag banāa first for the United States. The ordinances state that plastic bag use must be regulated āto preserve health, safety, welfare, and scenic and natural beauty.ā Retailers have until mid-2015 to comply.
Los Angeles County (Unincorporated), CA
In July 2011, a ban on plastic bags in large stores took effect in the unincorporated area of Los Angeles County, home to 1.1 million people. In January 2012, that ban expanded to include small stores, like pharmacies and convenience marts. Nearly 800 retail stores are affected. This was the first in California to add a 10Č¼ charge for paper bags; since its enactment, all other California municipalities have included a paper bag charge. In December 2013, the Department of Public Works announced that the ordinance had resulted in a sustained 90 percent reduction in single-use bag use at large stores.
Los Angeles, CA
In June 2013, the City Council of Los Angeles voted to ban stores from providing plastic carryout bags to customers, as well as to require stores to charge 10Č¼ for paper bags. Large retailers are affected in January 2014; smaller retailers are affected in July 2014. The city was spending $2 million a year cleaning up plastic bags.
Manhattan Beach, CA
After passing a plastic bag ban in 2008, the city became the first to be sued by the Save the Plastic Bag Coalitionāa group of plastic bag manufacturers and distributorsāfor not preparing an environmental impact report as required under the California Environmental Quality Act. The Coalition claimed a shift from plastic to recycled paper bags would harm the environment. Two lower courts sided with the Coalition and ruled that a report was required, but in 2011, on appeal, the California Supreme Court said that any increased use of paper bags in a small city like Manhattan Beach would have negligible environmental impact and therefore a report was unnecessary. This precedent allowed many California cities to proceed with banning plastic bags without such a report.
Nantucket Island, MA
Nantucket, a small seasonal tourist town, banned non-biodegradable plastic bags in 1990. Facing a growing waste disposal problem, the town envisioned building a facility where as much material as possible could be diverted from the landfill to be recycled or composted; such a facility would only be able to accept biodegradable bags.
New York City, NY
Former Mayor Michael Bloomberg proposed a 5Č¼ tax on plastic bags in 2009, but the idea was later dropped in a budget agreement with the City Council. In March 2014, the City Council began to consider a proposal mandating a 10Č¼ charge per plastic and paper bag at most stores.
San Francisco, CA
San Francisco was the first U.S. city to regulate plastic bags. The original ordinance, which was adopted in April 2007, banned non-compostable plastic bags at all large supermarkets and chain pharmacies. In October 2012 the law was applied to all stores, and in October 2013 the law expanded to restaurants. The Save the Plastic Bag Coalition sued the city, contesting the extensions to the ban, but those were upheld by the First District Court of Appeal in December 2013. In April 2014, the Supreme Court of California denied the Coalitionās first appeal, allowing the city to keep its bag ban.
Santa Monica, CA
Santa Monica has banned plastic bags from all retailers since September 2011. Grocery, liquor, and drug stores may offer paper bags for 10Č¼ each, while department stores and restaurants may provide paper bags for no fee. Because the Save the Plastic Bag Coalition had sued other cities for not conducting an environmental impact review prior to the announcements of their bag bans, Santa Monica conducted a review and thus avoided a lawsuit. Plastic bags for carryout food items from restaurants and reusable bags made from polyethylene are allowed.
Seattle, WA
In July 2008 the Seattle government approved a 20Č¼ charge on all paper and plastic checkout bags, but opponents collected enough signatures to put the ordinance up for a vote on the August 2009 primary ballot. The Coalition to Stop the Seattle Bag Taxāconsisting of the American Chemistry Councilās Progressive Bag Affiliates, 7-Eleven, and the Washington Food Industryāspent $1.4 million on the referendum campaign (15 times more than fee supporters), and voters chose to reject the ordinance. It took until July 2012 for the city to enact its current ban on plastic bags and place a 5Č¼ fee on paper bags. Seattle residents are largely in favor of the ban, and attempts to gather signatures to repeal it have not been successful.
Washington, DC
In January 2010, Washington, D.C., began requiring a 5Č¼ charge for plastic and paper carryout bags at all retailers that sell food or alcohol. Businesses keep a portion of the fee, and the remainder goes to The Anacostia River Clean Up and Protection Fund. A survey conducted in early 2013 found that four out of five District households are using fewer bags since the tax came into effect. Almost 60 percent of residents reported carrying reusable bags with them āalwaysā or āmost of the timeā when they shop. Two thirds of District residents reported seeing less plastic bag litter since the tax came into effect. One half of businesses reported saving money because of the fee.
Story 1: Part II More On Jonathan Gruber, Basically PhD (Piled Higher and Deeper) on Healthcare, Obamacare and Lack of Transparency — The American Voters Ā Were Not Stupid And Rejected Democrats Who Supported Obamacare By Voting Them Out of Office — But The Democratic Progressive Elitist Establishment Are Liars and Losers — Stupid Is As Stupid Does — Death Knell of Socialized Medicine — Repeal Obamacare Now! — Videos
Stupid Is As Stupid Does
“This bill was written in a tortured way to make sure CBO did not score the mandate as taxes. If CBO [Congressional Budget Office] scored the mandate as taxes, the bill dies. Okay, so itās written to do that. In terms of risk rated subsidies, if you had a law which said that healthy people are going to pay in ā you made explicit healthy people pay in and sick people get money, it would not have passedā¦ Lack of transparency is a huge political advantage. And basically, call it the stupidity of the American voter or whatever, but basically that was really really critical for the thing to pass….Look, I wish Mark was right that we could make it all transparent, but Iād rather have this law than not.”
~Jonathan Gruber
Stupid is as stupid does, Mrs. Blue..
How Did The Media Cover Jonathan Gruber
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Trey Gowdy on Gruber comments
Megyn Kelly: Democrats Committed Fraud By Not Representing Obamacare as a Tax
Greater Boston Video: Jonathan Gruber Pushes Back
Krauthammer rips Jonathan Gruber: “We’re hearing the true voice of liberal arrogance”
GRUBER: “Lack of transparency is a huge political advantage.”
The Worst of Jonathan Gruber
Flashback: Obama: Transparency and the rule of law will be the touchstones of this presidency.
The Changing Touchstone of Transparency
Nets Ignore ObamaCare Architect Crediting Law’s Passage On ‘The Stupidity Of The American Voter’
Megyn Slams ObamaCare Architect Who Declined to Appear on ‘Kelly File’
WHY IS OBAMA NOT IN PRISON FOR STEALING TAXPAYER MONEY?
ObamaCare: Bill’s architect Gruber admits lies, deception necessary because Americans are stupid
Dems including Harry Reid, Sebelius, and Obama admit Single Payer Healthcare is ultimate goal
Democrats Push for a Single Payer Health Care System Katie Pavlich Charles Payne 8 12 13
Socialize Medicine! – Influential Democrat Calling For Single Payer System Amid Obamacare Trouble
“If you like your plan, you can keep your plan.” – Barack Obama
Jon Stewart on You Can Keep Your Plan. Period.
Jonathan Gruber on MSNBC says he “regrets” calling the American voter stupid
Conversation: “Health Care Reform,” The Comic Book
Gruber Files- Harvard University
The Cadillac Tax
Obama admits he DID raise taxes
Obamacare’s Cadillac Tax Pushing People To Plans With High Deductible- Union You Got What You Wanted
Jonathan Gruber brags about the “basic exploitation” of American voters
What is the “cadillac tax?” M3 Insurance HCR
Unions & Cadilac Health Care Plans
Obama’s Health Care Lies And Reversals
Obama lies about “cadillac” plan taxation.
Rep Joe Courtney Discusses “Cadillac Tax” with Neil Cavuto on Fox Business News Channel
HealthCare Reform – Modified Community Rating Part 1 – Federal Marketplace
HealthCare Reform – Modified Community Rating Part 2 – Federal Marketplace
Community Rating – How the Affordable Care Act Impacts Small Business Owners
Forrest Gump TRAILER
Honest Trailers – Forrest Gump
Forrest Gump’s most beautiful quote
Funeral Toll & Peal, Mount Angel Abbey
When a monk passes away during the night, the toll is sounded early the following morning. It is repeated after the funeral Mass, when the monks process down to the cemetery, and ends with a peal of all the bells. These are the last few tolls of the sequence on the largest bell in the Pacific Northwest.
Please pray for the eternal repose of the soul of this monk, that he may enter into everlasting life with Christ.
Martin Luther King – For whom the bell tolls
Nancy Pelosi says she doesnāt know who Jonathan Gruber is. She touted his work in 2009.
Many have pointed out since then that Pelosi’s office has cited Gruber’s work in the past. That’s notable, but it’s very unlikely Pelosi herself wrote those press releases herself or even participated in their drafting.
But then there’s this:Ā Pelosi herself has also mentioned Gruber and his work — back in November 2009, at the height of the Obamacare debate.
Here’s the transcript, via Nexis:
Q: As you know, the Republicans released their health- care bill this week. And I wanted to get your comment on the bill, and specifically on the CBO analysis that it would cost significantly less than the Democratic plan and that it would lower premiums.
PELOSI: Let me just say this. Anything you need to know about the difference between the Democratic bill and the Republican bill is that the Republicans do not end the health insurance companies’ discrimination against people with preexisting conditions. They let that stand. That’s scandalous, the fact that it exists. I don’t understand why they have not heard the American people, who have said preexisting conditions should not be a source of discrimination.
And secondly, the Republican plan ensures about 3 million more people than now, and ours does 36 million people. So that’s a very big difference in that.
We’re not finished getting all of our reports back from CBO, but we’ll have a side by side to compare. But our bill brings down rates. I don’t know if you have seenĀ Jonathan GruberĀ of MIT’s analysis of what the comparison is to the status quo versus what will happen in our bill for those who seek insurance within the exchange. And our bill takes down those costs, even some now, and much less preventing the upward spiral.
So again, we’re confident about what we set out to do in the bill: middle class affordability, security for our seniors, and accountability to our children.
Pelosi’s office told the Washington Post that the minority leaderĀ meant that she didn’t know Gruber personally.
“She said she doesnāt ‘know who he is,’ not that sheās never heard of him,” Pelosi spokesman Drew Hammill said.
Hammill added: “We’ve cited the work of dozens upon dozens of economists over the years. As the leader said today, Mr. Gruber played no role in drafting our bill.”
Pelosi clearly wants to distance herself and Obamacare from Gruber, given Gruber’s controversial comments about “the stupidity of the American voter,” and Democrats are going to argue that Gruber wasn’t instrumental in the bill. But, as an architect of the Massachusetts health-care law and a consultant to the White House on Obamacare, he’s been regularly citedĀ by Democrats as an authority on this issue — including, apparently, by Pelosi.
This Philly-Based Investment Adviser Has Become Obamacare’s Digital Menace
Sam Stein
You could pardon Rich Weinstein for gloating. These past few days, heās enjoyed the type of journalistic high that comes with unearthing a particularly meaty scoop.
Except Weinstein is no journalist. Heās a Philadelphia-based investment adviser approaching 50 who, until a half-year ago, was unknown to the political world. A set of videos he found of Jonathan Gruber, a Massachusetts Institute of Technology economist who played an important role in drafting the Affordable Care Act, changed all that. The videos have become rich context for a legal challenge to the law now heading to the Supreme Court, and they’ve made Weinstein the celebration of conservative circles.
āThis is going to sound a little cocky and I donāt want it to be,ā Weinstein told The Huffington Post Tuesday in one of the the media interviews he’s given on his feat. āBut Iām not partially responsible for finding those clips. Iām completely responsible.ā
Weinsteinās story, in some respects, would be the stuff of a made-for-TV movie — if the director is a member of the tea party and eager to dramatize the Affordable Care Actās unraveling (those two points, admittedly, are redundant).
Weinstein, who runs his own company, and his family lost their health insurance after Obamacare forced higher standards for policies. On the exchange, the only plan with similar benefits was twice the cost of his old one. Irritated, he began looking into who put together the Affordable Care Act, searching Google with the term āACA architects.ā Days consumed with researching old videos became nights.
āRemember when the husbands used to come home at night in the ’50s and ’60s and grab a newspaper and read it?ā said Weinstein. āWell, Iām like that with the iPad. It was a lot of time. For the past year, I put a lot of time into this.ā
His break came last winter. An op-ed in the Wall Street Journal by Scott Pruitt, the attorney general of Oklahoma, outlined a long-shot legal argument that said a direct interpretation of Affordable Care Act precluded giving subsidies to people on federally run exchanges. Weinstein had seen that argument before, albeit from a different vantage point. Months earlier, he had stumbled across video of Gruber stating that the subsidies to help low-income Americans buy insurance are reserved for state-established exchanges, if only to give states an incentive to establish an exchange
Weinstein had a smoking gun, but no one to show it to.
āIāve got the tinfoil hat,” Weinstein said, excusing the reporters who ignored his early entreaties. “People in the media must be overwhelmed with idiots like me who think they have something.ā
So he took time off — three to four months — and watched his kids play lacrosse. Then, in July, two conservative justices on a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit ruled that the subsidies for those shopping on federally run exchanges were, indeed, illegal. People were talking about the issue again.
Weinstein dropped comments about his Gruber video onto The Washington Postās Volokh Conspiracy blog. Eventually, Ryan Radia, of the Competitive Enterprise Institute, a libertarian think tank, noticed and turned it into a blog post.
Dominos began to fall. Weinsteinās first video was included in the legal challenge to Obamacare. And that challenge — King v. Burwell — ended up making its way to the Supreme Court. āWhich is crazy,ā Weinstein said. āCrazy because I found it. Not crazy because it is a crazy legal case.ā
This week, another of Weinstein’s videos emerged. This one is of Gruber saying that a bit of budgetary deception helped Obamacare pass in Congress (ācall it the stupidity of the American voter, or whatever,ā said the professor). This, too, found its way into the mainstream conversation. Gruber on Tuesday went on MSNBC to apologize for his language, though he may have return. Weinstein said he has another video of a similar comment that he will soon release.
Should the Supreme Court ultimately rule against subsidies being available on federally run insurance exchanges, it would, in some ways, make the perfect ending to a conservative-inspired Horatio Alger story.
āIām kind of a nobody,ā said Weinstein. āAnd, I think, people who are out there, just the average person who gets hacked off about something or has an interest about something, I think Iām a perfect lesson that any one person can make a difference. Anybody. Even guy with the tinfoil hat in his momās basement.ā
Except life and politics arenāt that simple. There is texture. Weinstein doesnāt live in his momās basement. He just says it for rhetorical flair. For those who would like to dismiss him as a knee-jerk partisan, heās not that, either. He voted for Bill Clinton, he said, before he cast a ballot for Ross Perot and, most recently, Mitt Romney. Certainly, heās no longer a ānobodyā in the fight against Obamacare. Elements of the conservative movement have geared up to both promote and protect his work.
Phil Kerpen, who founded the group American Commitment and formerly was vice president for the Koch-funded Americans for Prosperity, helped spread the second of Weinsteinās videos. Once Kerpen found out an article was in the works, he sent a tweet suggesting The Huffington Post was ādoxxingā Weinstein for attacking Gruber. The tweet came just minutes after The Huffington Post asked Weinstein whether he had used an online alias before commenting on The Volokh Conspiracy.
But the real nuance is in the history and the policy details. Gruber was an architect of Obamacare. But he wasnāt the only architect. The staffs to former Sen. Max Baucus (D-Mont.) and Rep. Henry Waxman (D-Calif.), among others, deserve their fair share of credit or blame, depending on oneās perspective.
On the issue of subsidies, the Gruber statement that Weinstein unearthed remains a gem for a reason. Itās because itās rare (Gruber called it a āspeak-oā — like a typo). There has been one other instance unearthed of Gruber discussing tax incentives as a means of compelling a state to set up an exchange.
For defenders of the law, thatās still thin gruel compared with the widely accepted belief during and after the crafting of the bill that subsidies would be universal. (The IRS ruled this way in May 2012, five months after Gruberās speech.)
For critics, itās proof enough.
āI donāt think he misspoke at all. I donāt think he was taken out of context and I donāt think he misspoke,ā said Weinstein.
And then there is the issue of practical outcomes. Weinstein became a digital archaeologist after the cost of his insurance went up two-fold. Should a lawsuit succeed in eliminating subsidies for those buying insurance on federally run exchanges, it would result in many people confronting similar, or worse, price hikes. Itās an outcome that Weinstein admitted weighs on him, even as he keeps scanning the Web for more Gruberisms.
āIt does,ā Weinstein said. āBut the way you say it makes it sound like nothing else will happen. Like it is a straight line. Subsidies are taken away and the world ends. And I think thatās not fair. I think there will most certainly be a disruption. No doubt about it. I think some states will go build their own exchanges quickly. But, I think the markets would find a way to adjust.ā
āIt does bother me,ā he added later. āI get it. Iām not an evil person. I just think people should see these videos. I just think people should know whatās going on. ā
Hearings floated as Hill Republicans seize on Gruber Obamacare comments
Ā By Robert Costa and Jose A. DelReal
Congressional Republicans seized Wednesday on controversial commentsmade by a former health-care consultant to the Obama administration, with one leading House conservative suggesting that hearings could be called in response as part of the GOP effort to dismantle the law in the next Congress and turn public opinion ahead of the 2016 election.
“We may want to have hearings on this,” said Rep. Jim Jordan (R-Ohio), an influential voice among GOP hardliners and a member of the House Oversight and Government Reform Committee, in an interview at the Capitol. “We shouldn’t be surprised they were misleading us.”
The firestorm began when a video emerged showing Jonathan Gruber, a high-profile architectĀ of the Affordable Care Act and one of its fiercest advocates, suggesting that the health reform law passed through Congress because of the āstupidity of the American voterā and a ālack of transparencyā over its funding mechanisms. The remarks were originally made in 2013 during a panel discussion at the University of Pennsylvania but began heavy circulation on social media Monday.
“This bill was written in a tortured way to make sure CBO did not score the mandate as taxes,” Gruber said. “Lack of transparency is a huge political advantage. And basically, call it the ‘stupidity of the American voter’ or whatever, but basically that was really, really critical to getting the thing to pass.ā
Gruber apologized for his incendiary remarks in an on-air interview with MSNBC Tuesday afternoon,Ā calling his comments inappropriate and saying he was speaking “off the cuff.” On Tuesday evening, Fox News’Ā Megyn Kelly aired a secondĀ video, of Gruber calling voters stupid, also from 2013.
The controversy has lit a fire under conservatives eager to dismantle the law and has raised eyebrows among the lawās defenders, who are concerned that such comments will further damage the lawās already shaky standing with American voters. It also comes after a sweeping electoral victory for Republicans last Tuesday, who won control of the Senate and bolstered the size of their majority in the House.
Jordan said House Republicans have been sending each other a blizzard of e-mails and text messages this week, and he expects the interest in “bringing [Gruber] up here to talk” will gain traction as members return to Washington. House Republicans will gather Thursday evening for their first series of votes since the election.
“I just had a colleague text me saying, ‘We’ve got to look into this!” Jordan said as he glanced at his phone outside the House floor Wednesday morning.
The chatter among lawmakers echoes the outrage among the conservative grassroots over the comments. Sen. Ted Cruz in a speech last week said targeting ACA must remain the party’s top priority. “Now is the time to go after and do everything humanely possible to repeal Obamacare,” he said.
House GOP leadership aides expressed new optimism that their desire to target the ACA could get some momentum. While rhetorically committed to full repeal, in order to keep the party’s right flank on board, the party is looking more seriously at undermining specific parts of the law as it navigates divided government next year. Those moves could include repealing the medical device tax; watering down a requirement that employers offer full time workers coverage, which takes effect in January; and changing the definition of a full-time worker from someone who works at least 30 hours a week to someone who works at least 40 — all proposals which could win some Democratic support.
On the other side of the Capitol,Ā Sen. Jeff Sessions (R-Ala.), who is slated to become chairman of the powerful Senate budget committee, also threw his support behind possible hearings. InĀ a furious gaggle with reporters, Sessions said Gruber’s comments could make dealings with the White House more difficult, days after Republican leaders said they would seek areas of common ground.
“The strategy was to hide the truth from the American people,” Sessions said. “I’m not into this post-modern world where you can say whatever you want to in order to achieve your agenda. That is a threat to the American republic… This is far deeper and more significant than the fact that he just spoke.”
Other Senate Republicans expressed similar discomfort with Gruber, but warned conservatives to not get their hopes up about repealing the health-care law while President Obama remains in office, underscoring the tonal difference between the more rabble-rousing House GOP and the new and more even-tempered Republican Senate majority.
Heading into a party luncheon on Wednesday, retiring Sen. Tom Coburn (R-Okla.) said the health care law “is going to still be there regardless because we don’t have the votes” to undo it.
“We can talk all we want but he is going to veto whatever we send him,” Coburn said. “That’s the reality.”
Sen. Ron Johnson (R-Wis.) said he was unsure of how Senate Republicans would use the Gruber kerfuffle to go after the law, if at all. For the moment, he said, Republicans should focus on using the episode to highlight how the national press has covered the president’s signature policy.
“What Gruber said should be read and reported on by every news organization,” he said. “People should be aware of how this administration thinks.”
Several Democrats said Wednesday that they were unaware of Gruber’s comments and declined to speculate on whether there could be political consequences, underscoring how much of the discussion is being driven by Republicans. One, however, did distance herself from the arguably aloof phrasing used by Gruber. “I have not seen them,” said Sen. Patty Murrary (D-Wash). “But I do think voters are pretty smart.”
The challenge for Republicans will be balancing the conservative ire surrounding Gruber with the leaders’ political imperative to establish themselves as a governing congressional majority. House Speaker John Boehner (R-Ohio) and incoming Senate Majority Leader McConnell (R-Ky.) have pledged to bring another repeal bill to floor, but are also focused on achieving incremental legislative gains on Keystone XL and trade agreements.
POSTED AT 6:01 PM ON NOVEMBER 11, 2014 BY NOAH ROTHMAN
On Saturday, Newsbusters was the first major website to feature a video posted to YouTube by AmericanCommitment of Obamacare architect Jonathan Gruber boasting in 2013 how he helped deceive the public via a lack of transparency about that bill. Some readers were anxious about that video being made better known to the public since at the time the article was published, there were only a couple of dozen views of the video on YouTube.
Well they needn’t have worried because since then the video has gone over the top viral to the extent that Rush Limbaugh led his show talking about it at length this morning as did Sean Hannity on his radio show. In addition, the video made it into the mainstream media other than Fox News when Jake Tapper showed the video today on The Lead and The Hill has an article about it as well. As of this writing the video has over 177,000 views and growing fast. Reason today had an excellent analysis of the Gruber revelations:
Massachusetts Institute of Technology Professor Jonathan Gruber was, by most accounts, one of the key figures in constructing the Affordable Care Act, better known as Obamacare. He helped designed the Massachusetts health care law on which it was modeled, assisted the White House in laying out the foundation of the law, and, according to The New York Times, was eventually sent to Capitol Hill “to help Congressional staff members draft the specifics of the legislation.” He provided the media with a stream of supportive quotes, and was paid almost $400,000 for his consulting work.
Jonathan Gruber, in other words, knows exactly what it took to get the health care law passed.
And that’s why you should take him seriously when he says, in the following video, that it was critical to not be transparent about the law’s costs and true effects, and to take advantage of the “stupidity of the American voter” in order to get it passed:
Here’s the full quote:
“This bill was written in a tortured way to make sure CBO did not score the mandate as taxes. If CBO [Congressional Budget Office] scored the mandate as taxes, the bill dies. Okay, so itās written to do that. In terms of risk rated subsidies, if you had a law which said that healthy people are going to pay in ā you made explicit healthy people pay in and sick people get money, it would not have passedā¦ Lack of transparency is a huge political advantage. And basically, call it the stupidity of the American voter or whatever, but basically that was really really critical for the thing to pass….Look, I wish Mark was right that we could make it all transparent, but Iād rather have this law than not.”
This validates much of what critics have said about the health care law, and the tactics used to pass it, for years.
For one thing, it is an explicit admission that the law was designed in such a way to avoid a CBO score that would have tanked the bill. Basically, the Democrats who wrote the bill knowingly gamed the CBO process.
It’s also an admission that the law’s authors understood that one of the effects of the bill would be to make healthy people pay for the sick, but declined to say this for fear that it would kill the bill’s chances. In other words, the law’s supporters believed the public would not like some of the bill’s consequences, and knowingly attempted to hide those consequences from the public.
Most importantly, however, it is an admission that Gruber thinks it’s acceptable to deceive people if he believes that’s the only way to achieve his policy preference. That’s not exactly surprising, given that he failed to disclose payments from the administration to consult on Obamacare even while providing the media with supposedly independent assessments of the law.
…Gruber may believe that American voters are stupid, but he was the one who was dumb enough to say all this on camera.
Now that various MSM outlets have begun to pay attention to the Gruber Obamacare deception video, it will be fascinating to see what type of excuses will be made by the pundits to cover for what he admitted. Bonus points to Jonathan Cohn at New Republic or Politico or any of a vast number of liberal sources for whoever can dream up the most entertaining spin control to explain away this viral video.
p.s. Did I mention that Newsbusters was the first major website to feature this video?
Dr. Jonathan Gruber is a Professor of Economics at the Massachusetts Institute of Technology, where he has taught since 1992. He is also the Director of the Health Care Program at the National Bureau of Economic Research, where he is a Research Associate. He is an Associate Editor of both the Journal of Public Economics and the Journal of Health Economics. In 2009 he was elected to the Executive Committee of the American Economic Association. He is also a member of the Institute of Medicine, the American Academy of Arts and Sciences, and the National Academy of Social Insurance.
Dr. Gruber received his B.S. in Economics from MIT, and his Ph.D. in Economics from Harvard University. Dr. Gruber’s research focuses on the areas of public finance and health economics. He has published more than 140 research articles, has edited six research volumes, and is the author of Public Finance and Public Policy, a leading undergraduate text, and Health Care Reform, a graphic novel. In 2006 he received the American Society of Health Economists Inaugural Medal for the best health economist in the nation aged 40 and under. During the 1997-1998 academic year, Dr. Gruber was on leave as Deputy Assistant Secretary for Economic Policy at the Treasury Department. From 2003-2006 he was a key architect of MassachusettsĆ¢ā¬ā¢ ambitious health reform effort, and in 2006 became an inaugural member of the Health Connector Board, the main implementing body for that effort. In that year, he was named the 19th most powerful person in health care in the United States by Modern Healthcare Magazine.
2012-01-09 Jonathan Gruber on Mitt Romney and Health Care Reform
Jonathan Gruber Once Again Says Subsidies Are Tied to State-Based Exchanges
Jonathan Gruber discusses health care law’s next step
Healthcare Reform 101 Part 1.
Healthcare Reform 101 Part 2.
Healthcare Reform 101 Part 3.
Jonathan Gruber on Obamacare: Part 1 of 3
Jonathan Gruber on Obamacare: Part 2 of 3
Crafting ObamaCare
Obamacare Architect: No State Exchange = No Subsidies; Blatant Enough
#GruberGate: Tale of the Tapes
Rush Limbaugh – MIT Gruber Lied about Obamacare
Rush Limbaugh: Jonathan Gruber says you are Life’s Lottery Winners – Eugenics
Gwen and Jonathan Gruber Talk Health Care with Chris Matthews
Obama 2008: Bypassing Congress Unconstitutional; I’ll Reverse It
Lec 1 | MIT 14.01SC Principles of Microeconomics
Meet Jonathan Gruber, the man whoās willing to say what everyone else is only thinking about Obamacare
By Jason Millman
Jonathan Gruber might not be a household name, but in the world of health care policy, he’s a pretty big deal. And now he’s also known as the guy who’s credited “the stupidity of the American voter” for the passage of the Affordable Care Act.
An old video surfaced this week of Gruber saying thatĀ a lack of transparency was one of the reasons Obamacare got through Congress in 2010. Gruber, a Massachusetts Institute of Technology health economist who’s credited as one of the intellectual godfathers of the Affordable Care Act, has apologized for speaking off the cuff, but critics of the law are eagerly highlighting his comments.
That’s because of what Gruber represents. He was one of the architects of the 2006 Massachusetts health care law, which became the basis for the ACA, and he helped craft the federal legislation that used a similar scheme of guaranteed coverage, financial assistance and insurance mandates. He was far from the only person who helped shape the ACA, but he has been one of its most vocal academic defenders in the nearly five years since it passed. (And he’s the only one to write a comic book about the law.)
It’s easy to see why Gruber’s comments get pored over by ACA opponents. There’s plenty of misunderstanding about what’s in the ACA and mistrust of the motivations for passing the lawĀ ā just recall Nancy Pelosi’s infamous line about needing to pass the bill to find out what’s in it. So when someone like Gruber, who’s supposed to know the law inside and out, seemingly confirms critics’ worst suspicions, that makes for a powerful anecdote.
Gruber, who’s fiercely intelligent and passionate about the health reforms he helped create, also isn’t one to always sugarcoat things.
Earlier this year, a pretty important health policy study showed that the expansion of Medicaid coverage in Oregon was associated with a spike in emergency room visits.Ā The research potentially undercut an argument by supporters of the law who said itĀ would save money since giving more people health insurance meant patients wouldĀ rely more on primary care providers, rather than expensive trips to the ER. And Gruber, commenting on the study, offered an uncomfortable truth.
“I would view [the study] as part of a broader set of evidence that covering people with health insurance doesn’t save money,” Gruber told the Washington Post at the time. “That was sometimes a misleading motivator for the Affordable Care Act. The law isn’t designed to save money. It’s designed to improve health, and that’s going to cost money.”
You may also remember Gruber from the last presidential campaign, when there was plenty of debate over just how similar Obamacare and Romneycare actually were to one another. It was Gruber who artfully cleared up the confusion. “They’re the same f—— bill,” he told Capital New York in what became a widely circulated interview three years ago. It’s probably what ACA supporters wanted to say all along, but only Gruber went ahead and did it.
His most potentially damaging comments surfaced just over the summer, when Gruber seemingly gave credence to the ACA challenge just taken up by the Supreme Court last week ā a challenge that if successful couldtorpedo the law.
The case revolves around whether residents in states that refused to set up their own health insurance marketplacesĀ should still be able to claim tax subsidies to help themĀ afford their insurance. Opponents say no, Congress intentionally didn’t allow that under the law. Democrats say they never intended for people in these 36 states to not have access to the financial assistance.
Here was Gruber again, in January 2012, telling a health-care conference that states refusing to set up their own exchanges would deny their residents premium tax credits. The video wasn’t widely viewed until June of this year, but this is what he said at the time:
I think whatās important to remember politically about this, is if youāre a state and you donāt set up an exchange, that means your citizens donāt get their tax credits. But your citizens still pay the taxes that support this bill. So youāre essentially saying to your citizens, youāre going to pay all the taxes to help all the other states in the country. I hope thatās a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these Exchanges, and that theyāll do it. But you know, once again, the politics can get ugly around this.
Here’s the video, with these comments near the 31:30 mark:
Critics of the law jumped on those comments as further validation of their challenge to the subsidies in the 36 states relying on the federal-run insurance marketplaces, or exchanges. Gruber later said that he misspoke, and that his own work always assumed all exchanges ā whether run by the states or the federal government ā would be eligible for subsidies.
Gruber’s latest commentsĀ have surfaced at an especially inopportune time for the Obama administration. The next enrollment period is approaching this weekend with lowered expectations, just as Republicans reclaimed the Senate and the Supreme Court agreed to hear aĀ new Obamacare challengethat could seriously weaken the law.
The Democrats, realizing how harmful Gruber’s latest comments have become, are already out doing damage control. Former Vermont Gov. Howard Dean was on MSNBC’s “Morning Joe” today to put distance between Gruber and the health-care law, saying he’s not even sure that Gruber ever met with President Obama.
“He’s a consultant, not the architect [of Obamacare,” Dean said. āIām not excusing the language ā itās terrible.”
Jonathan Holmes Gruber is a professor of economics at the Massachusetts Institute of Technology, where he has taught since 1992. He is also the director of the Health Care Program at the National Bureau of Economic Research, where he is a research associate. He is an associate editor of both the Journal of Public Economics and the Journal of Health Economics.
Gruber’s research has focused on public finance and health economics. He has published more than 140 research articles, and has edited six research volumes. He is a co-editor of the Journal of Public Economics, an associate editor of the Journal of Health Economics, and the author of Public Finance and Public Policy.[3] and Health Care Reform, a graphic novel delineating the Affordable Care Act.[citation needed]
Public service
During the 1997ā1998 academic year, Gruber was on leave as Deputy Assistant Secretary for Economic Policy at the Treasury Department. From 2003ā06 he was a key architect of Massachusetts health care reform, also known as “Romneycare”. In 2006 he became an inaugural member of the Health Connector Board, the main implementing body for that effort. In that year, he was named the 19th most powerful person in health care in the United States by Modern Healthcare magazine. During the 2008 election he was a consultant to the Clinton, Edwards and Obama presidential campaigns.
Patient Protection and Affordable Care Act
In 2009ā10 Gruber served as a technical consultant to the Obama Administration and worked with both the administration and Congress to help craft the Patient Protection and Affordable Care Act, often referred to as the ACA or “Obamacare”.[4] The act was signed into law in March 2010, and Gruber has been described as an “architect”, “writer”, and “consultant” of the legislation. He was widely interviewed and quoted during the roll-out of the legislation. [5][6][7][8][9]
One heavily-scrutinized part of the ACA reads that subsidies should be given to healthcare recipients who are enrolled “through an Exchange established by the State”. Some have read this to mean that subsidies can be given only in states that have chosen to create their own healthcare exchanges, and do not use the federal exchange, while the Obama administration says that the wording applies to all states. This dispute is currently part of an ongoing series of lawsuits referred to collectively as King v. Burwell. In July 2014, two separate recordings of Gruber, both from January 2012, surfaced in which he seemed to contradict the administration’s position.[4] In one, Gruber states, in response to an audience question, that “if youāre a state and you donāt set up an exchange, that means your citizens donāt get their tax credits”,[14] while in the other he says, “if your governor doesn’t set up an exchange, youāre losing hundreds of millions of dollars of tax credits to be delivered to your citizens.”[15] When these recordings emerged, Gruber called these statements mistaken, describing them as “just a speak-o ā you know, like a typo”.[14]
In a panel discussion about the ACA at the University of Pennsylvania in October 2013, Gruber stated that the bill was deliberately written “in a tortured way” to disguise the fact that it created a system in which “healthy people pay in and sick people get money”. He stated that this obfuscation was necessary, due to “the stupidity of the American voter or whatever”, in order to get the bill passed and that a “lack of transparency is a huge political advantage.”[16] His comments caused controversy after a video of them was placed on YouTubein November 2014.[17][18][19][20]
Published works
On February 15, 2006, the Center on Budget and Policy Priorities published an article by Gruber entitled “The Cost and Coverage Impact of the President’s Health Insurance Budget Proposals”[21]
In a December 4, 2008 New York Times op-ed, “Medicine for the Job Market”, he claimed that expanding health insurance, even in difficult financial times would stimulate the economy.[22]
On February 9, 2011, the Center for American Progress published an article by Gruber titled “Health Care Reform Without the Individual Mandate,” analyzing the health insurance coverage impacts of alternative policy options for encouraging purchase of health insurance under the Patient Protection and Affordable Care Act, including the mandate, a late penalty, and auto-enrollment.[23]
In 2006, Gruber received the American Society of Health Economists Inaugural Medal for the best health economist in the nation aged 40 and under.[25] He was elected a member of the Institute of Medicine in 2005.[26] In 2009 he was elected to the Executive Committee of the American Economic Association.
In 2011 he was named āOne of the Top 25 Most Innovative and Practical Thinkers of Our Timeā by Slate Magazine. In both 2006 and 2012 he was rated as one of the top 100 most powerful people in health care in the United States by Modern Healthcare Magazine.
Story 2: President Obama Proposed 442 Tax Hikes Since Taking Office — “You will not see your taxes go up by a single dime.” — Just Another Obama Big Lie –Videos
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Obama has Proposed 442 Tax Hikes Since Taking Office
Posted byĀ Max Velthoven,Ā John Kartch,Ā Ryan Ellis
Since taking office in 2009, President Barack Obama has formally proposed a total of 442 tax increases, according to an Americans for Tax Reform analysis of Obama administration budgets for fiscal years 2010 through 2015.
The 442 total proposed tax increasesĀ does notĀ include the 20 tax increases Obama signed into law as part ofĀ Obamacare.
āHistory tells us what Obama wasĀ ableĀ to do. This list reminds us of what ObamaĀ wantedĀ to do,āĀ said GroverĀ Norquist, president of Americans for Tax Reform.
The number of proposed tax increases per year is as follows:
-79 tax increases for FY 2010
-52 tax increases for FY 2011
-47 tax increases for FY 2012
-34 tax increases for FY 2013
-137 tax increases for FY 2014
-93 tax increases for FY 2015
Perhaps not coincidentally, the Obama budget with the lowest number of proposed tax increases was released during an election year: In February 2012, Obama released his FY 2013 budget, with āonlyā 34 proposed tax increases. Once safely re-elected, Obama came back with a vengeance, proposing 137 tax increases, a personal record high for the 44th President.
In addition to the 442 tax increases in his annual budget proposals, the 20 signed into law as part of Obamacare, and theĀ massive tobacco tax hikeĀ signed into law on the sixteenth day of his presidency, Obama has made it clear he is open to other broad-based tax increases.
During anĀ interviewĀ with Menās Health in 2009, when asked about the idea of national tax on soda and sugary drinks, the President said, “I actually think it’s an idea that we should be exploring.”
Obamaās statement was consistent with aĀ pattern of remarksĀ made by Obama White House officials refusing to rule out a VAT.
āPresidents are judged by history based on what they did in power. But presidents can only enact laws when the Congress agrees,āĀ said Norquist. “Thus a record forged by such compromise tells you what a president — limited by congress — did rather than what he wanted to do.ā
A record 20% of American households, one in five, were on food stamps in 2013, according toĀ dataĀ from the U.S. Department of Agriculture (USDA).
The numbers also show there was a record number of individuals on food stamps in 2013 and that the cost of the program, the Supplemental Nutrition Assistance Program (SNAP), was at an all-time high.
The USDA says that there were 23,052,388 households on food stamps in the average month of fiscal 2013, an increase of 722,675 from fiscal year 2012, when there were 22,329,713 households on food stamps in the average month.
Those numbers were compared with the Census BureauāsĀ estimatesĀ for the total number of U.S. households in the last month (September) of each fiscal year to determine the percentage of all U.S. households in that fiscal year that were on food stamps.
In 2013, according to the Census Bureau, there were 115,013,000 households, which means the that the households on food stamps–23,052,388 households–equaled 20.0% of all households.
In the past five years alone, the number of households on food stamps has greatly increased. In fiscal year 2009 ā Oct. 1, 2008 through Sept. 30, 2009 — the number of households on food stamps was 15,232,115. Five years later, in 2013, that amount had increased by 51.3% Ā to reach 23,052,388 households.
Not only have households seen a major increase in food stampsā participation, but so have individuals.
In 2013, the monthly average for individuals on food stampsĀ hit an all-time-high of 47,636,084,Ā according to the USDA, an increase of 1,027,012 over the Ā 46,609,072 individuals who were participating in the program in 2012.
That number has dramatically increased from five years ago. In fiscal year 2009, the number of individuals participating in the food stamp program was 33,489,975. In 2013, the number was 47,636,084, an increase of 42.2%.
Furthermore, the cost of food stamps, the Supplemental Nutrition Assistance Program (SNAP), has reachedĀ an all-time high.
For fiscal year 2013, the SNAP program cost $79,641,880,000, which is a 164% increase over the past decade. When adjusted for inflation, the cost of the SNAP program was $30,153,090,000 in fiscal year 2003.
During the last five years, the SNAP program grew by 36.8%, from $58,223,790,000 in 2009 to $79,641,880,000 in 2013.
The business and economic reporting of CNSNews.com is funded in part with a gift made in memory of Dr. Keith C. Wold.
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Zuckerberg meets Trump, senators; nixes breaking up Facebook
ByĀ AFP
PUBLISHED:Ā 19:32 EDT, 19 September 2019Ā |Ā UPDATED:Ā 20:57 EDT, 19 September 2019
Facebook chief executive Mark Zuckerberg held private meetings with US lawmakers in Washington to discuss technology regulations and social media issues, including concerns about the social network’s operations
Facebook chief executive Mark Zuckerberg met Thursday with US President Donald Trump and members of Congress on a political reconnaissance mission to Washington, where he rejected calls to break up the world’s biggest social network.
Zuckerberg’s visit comes as Facebook faces a myriad of regulatory and legal questions surrounding issues like competition, digital privacy, censorship and transparency in political advertising.
A Facebook spokesman said discussions were focusing in part on future internet regulation.
Senate Democrat Mark Warner, one of the lawmakers who has taken the lead in Washington on digital security, signalled they gave Zuckerberg an earful.
The visit, including a Wednesday night private dinner with Warner and other lawmakers, comes after his stormy appearance last year before Congress, where he was grilled on Facebook’s data protection and privacy missteps.
Senator Josh Hawley, a Republican freshman and one of the more outspoken critics of Facebook, said he had a “frank conversation” with Zuckerberg but remains concerned.
“Challenged him to do two things to show FB is serious about bias, privacy & competition. 1) Sell WhatsApp & Instagram 2) Submit to independent, third-party audit on censorship,” Hawley tweeted.
“He said no to both.”
Trump late Thursday posted a picture on Facebook and Twitter showing him shaking hands with Zuckerberg, but didn’t share details of their conversation.
“Nice meeting with Mark Zuckerberg of Facebook in the Oval Office today,” the president wrote.
Federal and state anti-trust enforcers are looking into potential anti-competitive actions by Facebook, and members of Congress are debating national privacy legislation.
The messaging product WhatsApp and picture-sharing giant Instagram are part of Facebook’s broad family of services that has made it a global online behemoth, but have also exposed the company to concerns about competition, data harvesting and sprawling digital control.
Warner said he was not prepared to call for Facebook’s dismantlement.
“I’m not yet with some of my friends who want to go straight to break up,” he told Fox Business Network.
“I am concerned. These are global companies, and I don’t want to transfer the leadership to Chinese companies,” he added.
“But I do think we need a lot more transparency. We need to have privacy rights protected. We need to increase competition with things like data portability and interoperability.”
Two months ago, the US Federal Trade Commission hit Facebook with a record $5 billion fine for data protection violations in a wide-ranging settlement that calls for revamping privacy controls and oversight at the social network.
Earlier Wednesday, executives from Facebook, Google and Twitter appeared before a Senate panel to answer questions on “digital responsibility” in the face of online violence and extremism.
https://www.dailymail.co.uk/wires/reuters/article-7484185/Saudi-led-coalition-launches-military-operation-north-Hodeidah-Yemen.html
Hawley Introduces Bill to Make Big Tech Embrace Free Speech
ByĀ Corinne WeaverĀ | June 19, 2019 10:49 AM EDT
Republicans in the Senate plan on striking a blow for online free speech ā by eradicating censorship of conservatives online.
Senator Josh Hawley (R-MO) introduced a new bill June 19, meant to tackle the problem of tech monopolies and their consistent censorship of conservatives and conservative ideology. The bill, called theĀ Ending Support for Internet Censorship Act, looks to remove the immunity enjoyed by Big Tech companies from Section 230 of the Communications Decency Act. The bill would target companies with more than 30 million monthly users, such as Facebook, Google, Twitter, and YouTube.
Hawley wrote that the companies could earn their immunity back through a series of third-party external audits that provided āconvincing evidence that their algorithms and content-removal practices are politically neutral.ā
The legislation would exclude smaller companies. Hawleyās bill is more interested in going after the ātech monopoliesā that present a greater threat through censorship. He stated in his press release:
In theĀ billĀ itself, all acts of business were permitted except for those that favored or were biased against a specific ideology, political candidates, or political opinions.
So far,Ā major criticsĀ have gone after Hawley on Twitter. Americans for Prosperity called the bill āmisguided legislation.ā The group argued that the bill will prevent innovative startups from succeeding, even though it is clearly aimed at companies larger than 30 million monthly users.
Executive editor of Voxās tech magazine,Ā The Verge, Dieter Bohn, wrote that Hawley ādoesnāt understand section 230.ā
https://www.newsbusters.org/blogs/2019/06/19/hawley-introduces-bill-make-big-tech-embrace-free-speech
Mark Zuckerbergās Call to Regulate Facebook, Explained
Hereās why the Facebook chief executive invited Congress to regulate his company in a post on Saturday.
Facebook has faced months of scrutiny for a litany of ills, from spreading misinformation to not properly protecting its usersā data to allowing foreign meddling in elections.
Many at the Silicon Valley company now expect lawmakers and regulators to act to contain it ā so the social network is trying to set its own terms for what any regulations should look like.
That helps explain why Mark Zuckerberg, Facebookās chief executive, wrote an opinion piece forĀ The Washington PostĀ on Saturday laying out a case for how he believes his company should be treated.
In his post, Mr. Zuckerberg discussed four policy areas ā harmful content, election integrity, privacy and data portability ā which he said the government should focus attention on.
https://www.nytimes.com/2019/03/30/technology/mark-zuckerberg-facebook-regulation-explained.html
What Would Regulating Facebook Look Like?
In an interview with WIRED, Mark Zuckerberg seemed to accept the idea of some US regulation. Other countries could provide the blueprint.
US politicians have called for Facebook CEO Mark Zuckerberg to appear in person before Congress. Some tech-focused legislation is currently wending its way through the Capitolās corridors. And regulators in other countries have already clamped down on tech.
FACEBOOK CEO MARK ZUCKERBERG
InĀ an interview with WIRED editor-in-chief Nicholas ThompsonĀ Wednesday, Facebook CEO Mark Zuckberg seemed if not outright welcoming toward regulation, at least accepting of it. āThere are some really nuanced questions though about how to regulate, which I think are extremely interesting intellectually,ā says Zuckerberg, who points toĀ the bipartisan Honest Ads Act, cosponsored by senators Mark Warner, Amy Klobuchar, and John McCain, as an example of the sort of bill his company can get behind.
The Honest Ads Act, legislation that calls for increased transparency behind who pays for political ads online, makes for a convenient example, though, in part because Facebook has already implemented many of its provisions. The bill, introduced last October, also appears to have languished, making it a non-substantive threat. Meanwhile, critics say itĀ wouldnāt have stopped Russian propagandists from flooding FacebookĀ in the first place.
Besides, even the Honest Ads Actās sponsors have noted that it addresses a very small piece of a very large problem. And it does nothing to address the data privacy concerns that rightly create so much angst among anyone with any sort of presence online. Which is to say, everyone. For that, the US would need something much bigger.
āWe do not have an omnibus privacy legislation at the federal level,ā says David Vladeck, former director of the Federal Trade Commissionās Bureau of Consumer Protection. āWe donāt have a statute that recognizes generally that privacy is a right thatās secured by federal law. And that puts us at the opposite end of the spectrum from some of the other major economies in the world.ā
Itās not that living in the US puts you totally in the privacy hinterlands. The FTC has a modicum of authority, and has used it when companies grossly overreachāas it did against Facebook in 2011, when the companyĀ failed to keep its promisesĀ regarding how it treated their data. Facebook had made user information public, even if they’d previously had more restrictive privacy settings, and allowed third-party developers to mine the data not just of the Facebook users who downloaded their apps, but of all of those peoples’ friends. (If that sounds familiar, well,Ā it’s precisely what allowed the Cambridge Analytica fiasco.)
Even then, though, Facebook got off with a scolding. It had to sign a consent decree, essentially a promise that it wouldnāt stray again. That’s gone unchecked until this week, when the FTCĀ reportedlyĀ opened an investigation into the Cambridge Analytica scandal, and could fine Facebook up to $40,000 per violationāwith 50 million people impacted, the potential fine hypothetically stretches into the trillions.
But the threat of retroactive fines clearly hasn’t done the trick. The FTC, meanwhile, can only work with the legislative tools itās given. So what would it look like if Congress gave it better tools? Other countries might offer something like an outline, if not an outright blueprint.
In Finland,Ā officials feelĀ that their strong public education system and a coordinated government response have been enough to stave off Russiaās propaganda; Sri Lanka banned Facebook, WhatsApp, and Instagram entirely. Which is to say, it’s a wide gamut.
On the data privacy front, the most recent high-profile model comes from the European Union, whereĀ General Data Protection Regulation becomes the lawĀ of the land on May 25. GDPR focuses on ensuring that people who use online services know not only exactly what data those companies will take, but how they put it to use.
Zuckerberg, at least, seems supportive of those levels of transparencyāalthough theyāre also, since GDPRās passage, an inevitability. āI think what tends to work well is transparency, which I think is an area where we need to do a lot better and are working on,ā Zuckerberg tells WIRED. āI think guidelines are much better than dictating specific processes.ā
DAVID VLADECK FORMER BUREAU OF CONSUMER PROTECTION DIRECTOR
Rough guidelines also seem like a more plausible approach in the US due to both precedent and practicality. The EU approach to privacy law has long been highly detailed and prescriptive, says Vladeck, which sounds good in theory but can create issues in practice. āThe implementation of it, in my view, is going to be ineffective, because it places an enormous regulatory burden on some parties, and worse, it places an enormous regulatory burden on the data protection authorities that need to enforce it,ā says Vladeck. āI donāt think we could simply take the European regulation and simply adopt it in the United States. But I think there are a lot of elements in it that could provide guidance.ā
One danger of an overly prescribed law is that technological solutions can outpace those mandates. Zuckerberg points to Germany, where hate speech laws require Facebook and other companies to remove offending posts within 24 hours. āThe German modelāyou have to handle hate speech in this wayāin some ways thatās actually backfired,ā Zuckerberg says. āBecause now we are handling hate speech in Germany in a specific way, for Germany, and our processes for the rest of the world have far surpassed our ability to handle that. But weāre still doing it in Germany the way that itās mandated that we do it there. So I think guidelines are probably going to be a lot better.ā
Zuckerberg also raises the question of the use of artificial intelligence in weeding out unwelcome uploads. āNow that companies increasingly over the next five to 10 years as AI tools get better and better will be able to proactively determine what might be offensive content or violate some rules, what therefore is the responsibility and legal responsibility of companies to do that,ā Zuckerberg says.
Here, too, Facebookās getting out ahead of any potential legal requirements; it already scans for nudity and terrorist content, and remains hard at work at AI that can spot what Zuckerberg calls āreally nuanced hate speech and bullying.ā
Eventually, though, Silicon Valley may run out of ways to appease regulators. By now there have been too many data breaches, too much negligence, whether by Facebook,Ā Equifax, orĀ the government itself. āI do think increasingly that thereās a sense that we need it,ā says Vladeck.
At the very least, when regulation does come, Facebook has an open invite to help inform what happens, albeit in gruff terms. āMr. Zuckerberg needs to testify before the Senate and answer some tough questions about Russian activity on the platform, and the way his company protectsāor doesnātāits usersā data,ā said Senator Mark Warner in a email to WIRED Wednesday.
And if it doesnāt pitch in, Congress has a model for privacy protection waiting for it, at least philosophically, just an ocean away.
Facebook’s World
https://www.wired.com/story/what-would-regulating-facebook-look-like/
Section 230 of the Communications Decency Act
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Section 230Ā of theĀ Communications Decency ActĀ (CDA) of 1996 (a common name for Title V of theĀ Telecommunications Act of 1996) is a landmark piece ofĀ InternetĀ legislation in the United States, codified atĀ 47 U.S.C.Ā Ā§Ā 230. Section 230(c)(1) provides immunity from liability for providers and users of an “interactive computer service” who publish information provided by third-party users:
Section 230 was developed in response to a pair of lawsuits against Internet service providers in the early 1990s that had different interpretations of whether the services providers should be treated as publishers or distributors of content created by its users. It was also pushed by the tech industry and other experts that language in the proposed CDA making providers responsible for indecent content posted by users that could extend to other types of questionable free speech. After passage of the Telecommunications Act, the CDA was challenged in courts and ruled by the Supreme Court inĀ Reno v. American Civil Liberties UnionĀ (1997) to be partially unconstitutional, leaving the Section 230 provisions in place. Since then, several legal challenges have validated the constitutionality of Section 230. Section 230 protects are not limitless, requiring providers to remove criminal material such as copyright infringement; more recently, Section 230 was amended by theĀ Stop Enabling Sex Traffickers ActĀ in 2018 to require the removal of material violating federal and state sex trafficking laws.
Passed at a time where Internet use was just starting to take off, Section 230 has frequently been referred as a key law that has allowed the Internet to flourish, often referred to as “The Twenty-Six Words That Created the Internet”.
Contents
History
Prior to the Internet, case law was clear that a liability line was drawn between publishers of content and distributors of content; publishers would be expected to have awareness of material it was publishing and thus should be held liable for any illegal content it published, while distributors would likely not be aware and thus would be immune. This was established inĀ Smith v. CaliforniaĀ (1959), where the Supreme Court ruled that putting liability on the provider (a book store in this case) would have “a collateral effect of inhibiting the freedom of expression, by making the individual the more reluctant to exercise it.”[1]
In the early 1990s, the Internet became more widely adopted and created means for users to engage in forums and other user-generated content. While this helped to expand the use of the Internet, it also resulted in a number of legal cases putting service providers at fault for the content generated by its users. This concern was raised by legal challenges againstĀ CompuServeĀ andĀ Prodigy, early service providers at this time.[2]Ā CompuServe stated they would not attempt to regulate what users posted on their services, while Prodigy had employed a team of moderators to validate content. Both faced legal challenges related to content posted by their users. InĀ Cubby, Inc. v. CompuServe Inc., CompuServe was found not be at fault as, by its stance as allowing all content to go unmoderated, it was a distributor and thus not liable forĀ libelousĀ content posted by users. However,Ā Stratton Oakmont, Inc. v. Prodigy Services Co.Ā found that as Prodigy had taken anĀ editorialĀ role with regard to customer content, it was a publisher and legally responsible for libel committed by customers.[3][a]
Service providers made their Congresspersons aware of these cases, believing that if upheld across the nation, it would stifle the growth of the Internet.Ā United States RepresentativeĀ Christopher CoxĀ (R-CA) had read an article about the two cases and felt the decisions were backwards. “It struck me that if that rule was going to take hold then the internet would become the Wild West and nobody would have any incentive to keep the internet civil”, Cox stated.[4]
At the time, Congress was preparing theĀ Communications Decency ActĀ (CDA), part of the omnibusĀ Telecommunications Act of 1996, which was designed to make knowingly sending indecent or obscene material to minors a criminal offense. A version of the CDA had passed through the Senate pushed by SenatorĀ J. James Exon.[5]Ā A grassroots effort in the tech industry reacted to try to convince the House of Representatives to challenge Exon’s bill. Based on theĀ Stratton OakmontĀ decision, Congress recognized that by requiring service providers to block indecent content would make them be treated as publishers in context of the First Amendment and thus become liable for other illegal content such as libel, not set out in the existing CDA.[2]Ā Cox and fellow RepresentativeĀ Ron WydenĀ (D-OR) wrote the House bill’s section 509, titled the Internet Freedom and Family Empowerment Act, designed to override the decision fromĀ Stratton Oakmont, so that services providers could moderate content as necessary and did not have to act as a wholly neutral conduit. The new Act was added the section while the CDA was in conference within the House.
The overall Telecommunications Act, with both Exon’s CDA and Cox/Wyden’s provision, passed both Houses by near-unanimous votes and signed into law by PresidentĀ Bill ClintonĀ by February 1996.[6]Ā Cox/Wyden’s section was codified as Section 230 in Title 47 of the US Code. The anti-indecency portion of the CDA was immediately challenged on passage, resulting in theĀ Supreme CourtĀ 1997 case,Ā Reno v. American Civil Liberties Union, that ruled all of the anti-indecency sections of the CDA were unconstitutional, but left Section 230.[7]
One of the first legal challenges to Section 230 was the 1997 caseĀ Zeran v. America Online, Inc., in which a Federal court affirmed that the purpose of Section 230 as passed by Congress was “to remove the disincentives to self-regulation created by theĀ Stratton OakmontĀ decision”.[8]Ā Under that court’s holding, computer service providers who regulated the dissemination of offensive material on their services risked subjecting themselves to liability, because such regulation cast the service provider in the role of a publisher. Fearing that the specter of liability would therefore deter service providers from blocking and screening offensive material, Congress enacted Ā§ 230’s broad immunity “to remove disincentives for the development and utilization of blocking and filtering technologies that empower parents to restrict their children’s access to objectionable or inappropriate online material.”[8]Ā In addition,Ā ZeranĀ notes “the amount of information communicated via interactive computer services is . . . staggering. The specter of tort liability in an area of such prolific speech would have an obviously chilling effect. It would be impossible for service providers to screen each of their millions of postings for possible problems. Faced with potential liability for each message republished by their services, interactive computer service providers might choose to severely restrict the number and type of messages posted. Congress considered the weight of the speech interests implicated and chose to immunize service providers to avoid any such restrictive effect.”[8]
Application and limits
In analyzing the availability of the immunity offered by Section 230, courts generally apply a three-prong test. A defendant must satisfy each of the three prongs to gain the benefit of the immunity:[9]
Section 230 immunity is not unlimited. The statute specifically excepts federal criminal liability and intellectual property claims.[10]Ā However, state criminal laws have been held preempted in cases such asĀ Backpage.com, LLC v. McKenna[11]Ā andĀ Voicenet Commc’ns, Inc. v. Corbett[12]Ā (agreeing “[T]he plain language of the CDA provides … immunity from inconsistent state criminal laws.”).
As of mid-2016, courts have issued conflicting decisions regarding the scope of the intellectual property exclusion set forth in 47 U.S.C. Ā§ 230(e)(2). For example, inĀ Perfect 10, Inc. v. CCBill, LLC,[13]Ā theĀ 9th CircuitĀ Court of Appeals ruled that the exception for intellectual property law applies only toĀ federalĀ intellectual property claims such as copyright infringement, trademark infringement, and patents, reversing a district court ruling that the exception applies to state-law right of publicity claims.[14]Ā The 9th Circuit’s decision inĀ Perfect 10Ā conflicts with conclusions from other courts includingĀ Doe v. Friendfinder. TheĀ FriendfinderĀ court specifically discussed and rejected the lower court’s reading of “intellectual property law” inĀ CCBillĀ and held that the immunity does not reach state right of publicity claims.[15]
Additionally, with the passage of theĀ Digital Millennium Copyright ActĀ in 1998, services provides must comply with additional requirements for copyright infringement to maintain “safe harbor” protections from liability, as defined in the DMCA’s Title II,Ā Online Copyright Infringement Liability Limitation Act.[16]
Controversies
The first major challenge to Section 230 was inĀ Zeran v. AOL, a 1997 case decided at theĀ Fourth Circuit. The case involved a person that suedĀ America OnlineĀ (AOL) for failing to remove, in a timely manner, libelous ads posted by AOL users that inappropriately connected his home phone number to theĀ Oklahoma City bombing. The court found for AOL and upheld the constitutionality of Section 230, stating that Section 230 “creates a federal immunity to any cause of action that would make service providers liable for information originating with a third-party user of the service.”[17]Ā This rule, cementing Section 230’s liability protections, has been considered one of the most important case laws affecting the growth of the Internet, allowing websites to be able to incorporate user-generated content without fear of prosecution.[18]Ā However, at the same time, this has led to Section 230 being used as a shield for some website owners as courts have ruled Section 230 provides complete immunity for ISPs with regard to theĀ tortsĀ committed by their users over their systems.[19]
Sex trafficking
Around 2001, a University of Pennsylvania paper warned that “online sexual victimization of American children appears to have reached epidemic proportions” due to the allowances granted by Section 230.[20]Ā Over the next decade, advocates against such exploitation such as theĀ National Center for Missing and Exploited ChildrenĀ pressured major websites to block or remove content related to sex trafficking, leading to sites likeĀ Facebook,Ā MySpace, andĀ CraigslistĀ to pull such content. Because mainstream sites were blocking this content, those that engaged or profited from trafficking started to use more obscure sites, leading to the creation of sites likeĀ Backpage. In addition to removing these from the public eye, these new sites worked to obscure what trafficking was going on and who was behind it, limiting ability for law enforcement to take action.[20]Ā Backpage and similar sites quickly came under numerous lawsuits from victims of the sex traffickers and exploiters for enabling this crime, but the court continually found in favor of Backpage due to Section 230,[21]Ā and the Supreme Court let stand a Circuit Court decision in favor of Backpage due to Section 230 in January 2017.[22]
Due to numerous complaints from constituents, Congress began an investigation into Backpage and similar sites in January 2017, finding Backpage complicit in aiding and profiting from illegal sex trafficking.[23]Ā Subsequently, Congress introduced the FOSTA-SESTA bills: theĀ Allow States and Victims to Fight Online Sex Trafficking ActĀ (FOSTA) in the House of Representatives byĀ Ann WagnerĀ in April 2017, and theĀ Stop Enabling Sex Traffickers ActĀ (SESTA) U.S. Senate bill introduced by Rob Portman in August 2017. Combined, the FOSTA-SESTA bills modified Section 230 to exempt services providers from Section 230 immunity when dealing with civil or criminal crimes related to sex trafficking,[24]Ā which removes section 230 safe harbors for services that knowingly facilitate or support sex trafficking.[25]Ā The bill passed both Houses and was signed into law by PresidentĀ Donald TrumpĀ on April 11, 2018.[26][27]
The bills were criticized by pro-free speechĀ and pro-Internet groups as a “disguised internet censorship bill” that weakens the section 230 safe harbors, places unnecessary burdens on Internet companies and intermediaries that handle user-generated content or communications with service providers required to proactively take action against sex trafficking activities, and requires a “team of lawyers” to evaluate all possible scenarios under state and federal law (which may be financially unfeasible for smaller companies).[28][29][30][31][32]Ā Critics also argued that FOSTA-SESTA did not distinguish between consensual, legal sex offerings from non-consensual ones, and argued it would cause websites otherwise engaged in legal offerings of sex work would be threatened with liability charges.[23]Ā Online sex workers argued that the bill would harm their safety, as the platforms they utilize for offering and discussing sexual services in a legal manner (as an alternative toĀ street prostitution) had begun to reduce their services or shut down entirely due to the threat of liability under the bill.[33][34]
Social media
Many social media sites, notablyĀ FacebookĀ andĀ Twitter, came under scrutiny as a result of the allegedĀ Russian interference in the 2016 United States elections, where it was alleged that Russian agents used the sites to spread propaganda andĀ fake newsĀ to swing the election in favor ofĀ Donald Trump. These platforms also were criticized for not taking action against users that used the social media outlets for harassment and hate speech against others. Shortly after the passage of FOSTA-SESTA acts, some in Congress recognized that additional changes could be made to Section 230 to require service providers to deal with these bad actors, beyond what Section 230 already provided to them.[35]Ā During 2019, there have been renewed calls for changes in Section 230 to address what are seen as growing problems across social media and the protections given to tech companies.
Platform neutrality
Some politicians, including Republican senatorsĀ Ted CruzĀ andĀ Josh Hawley, have accused major social networks ofĀ displaying a biasĀ againstĀ conservativeĀ perspectives when moderating content (such asĀ Twitter suspensions).[36][36][37][38]Ā In aĀ Fox NewsĀ op-ed, Cruz argued that section 230 should only apply to providers that are politically “neutral”, suggesting that a provider “should be considered to be a [liable] ‘publisher or speaker’ of user content if they pick and choose what gets published or spoke.”[39]Ā Section 230 does not contain any requirements that moderation decisions be neutral.[39]Ā Hawley alleged that section 230 safe harbors were a “sweetheart deal betweenĀ big techĀ and big government”.[40][41]
In December 2018, RepublicanĀ house representativeĀ Louie GohmertĀ introduced the Biased Algorithm Deterrence Act (H.R.492), which would remove all section 230 protections for any provider that used filters or any other type of algorithms to display user content when otherwise not directed by a user.[42][43]
In June 2019, Hawley introduced the Ending Support for Internet Censorship Act (S. 1914), that would remove section 230 protections from companies whose services have more than 30 million active monthly users in the U.S. and more than 300 million worldwide, or have over $500 million in annual global revenue, unless they receive a certification from the majority of theĀ Federal Trade CommissionĀ that they do not moderate against any political viewpoint, and have not done so in the past 2 years.[44][45]
There has been criticismāand supportāof the proposed bill from various points on the political spectrum. A poll of more than 1,000 voters gave Senator Hawley’s bill a net favorability rating of 29 points among Republicans (53% favor, 24% oppose) and 26 points among Democrats (46% favor, 20% oppose).[46]Ā Some Republicans feared that by adding FTC oversight, the bill would continue to fuel fears of a big government with excessive oversight powers.[47]Ā Democrat Speaker Nancy Pelosi has indicated support for the same approach Hawley has taken.[48]Ā The chairman of the Senate Judiciary Committee, Senator Graham, has also indicated support for the same approach Hawley has taken, saying “he is considering legislation that would require companies to uphold ‘best business practices’ to maintain their liability shield, subject to periodic review by federal regulators.”Ā [49]
Legal experts have criticized the Republicans’ push to make Section 230 encompass platform neutrality. Wyden stated in response to potential law changes that “Section 230 is not about neutrality. Period. Full stop. 230 is all about letting private companies make their own decisions to leave up some content and take other content down.”[50]Ā Law professorĀ Jeff Kosseff, who has written extensively on Section 230, has stated that the Republican intentions are based on a “fundamental misunderstanding” of Section 230’s purpose, as platform neutrality was not one of the considerations made at the time of passage.[51]Ā Kosseff stated that political neutrality was not the intent of Section 230 according to the framers, but rather making sure providers had the ability to make content-removal judgement without fear of liability.[2]Ā There have been concerns that any attempt to weaken Section 230 could actually cause an increase in censorship when services lose their liability.[41][52]
Hate speech
In the wake of the 2019 shootings inĀ Christchurch, New Zealand,Ā El Paso, TexasĀ andĀ Dayton, Ohio, the impact on Section 230 and liability towards onlineĀ hate speechĀ has been raised. In both the Christchurch and El Paso shootings, the perpetrator posted hate speech manifestos toĀ 8chan, a moderatedĀ imageboardĀ known to be favorable for the posting of extreme views. Concerned politicians and citizens raised calls at large tech companies for the need for hate speech to be removed from the Internet; however, hate speech is generally protected speech under the First Amendment, and Section 230 removes the liability for these tech companies to moderate such content as long as it is not illegal. This has given the appearance that tech companies do not need to be proactive against hateful content, thus allowing the hate content to fester online and lead to such incidents.[53][5]
Notable articles on this concerns were published after the El Paso shooting byĀ The New York Times,[53]Ā The Wall Street Journal,[54]Ā andĀ Bloomberg Businessweek,[5]Ā among other outlets, but which were criticized by legal experts includingĀ Mike Godwin,Ā Mark Lemley, andĀ David Kaye, as the articles implied that hate speech was protected by Section 230, when it is in fact protected by the First Amendment. In the case ofĀ The New York Times, the paper issued a correction to affirm that the First Amendment protected hate speech, and not Section 230.[55][56][57]
Members of Congress have indicated they may pass a law that changes how Section 230 would apply to hate speed as to make tech companies liable for this. Wyden, now a Senator, stated that he intended for Section 230 to be both “a sword and a shield” for Internet companies, the “sword” allowing them to remove content they deem inappropriate for their service, and the shield to help keep offensive content their from sites without liability. However, Wyden argued that become tech companies have not been willing to use the sword to remove content, it is necessary to take away that shield.[53][5]Ā Some have compared Section 230 to theĀ Protection of Lawful Commerce in Arms Act, a law that grants gun manufacturers immunity from certain types of lawsuits when their weapons are used in criminal acts. According to law professorĀ Mary Anne Franks, “They have not only let a lot of bad stuff happen on their platforms, but theyāve actually decided to profit off of peopleās bad behavior.”[5]Ā RepresentativeĀ Beto OāRourkeĀ has stated his intent for hisĀ 2020 presidential campaignĀ to introduce sweeping changes to Section 230 to make Internet companies liable for not being proactive in taking down hate speech.[58]
Terrorism-related content
In the aftermath of the Backpage trial and subsequent passage of FOSTA-SESTA, others have found that Section 230 appears to protect tech companies from content that is otherwise illegal under United States law. ProfessorĀ Danielle CitronĀ and journalistĀ Benjamin WittesĀ found that as late as 2018, several groups deemed as terrorist organizations by the United States had been able to maintain social media accounts on services run by American companies, despite federal laws that make providing material support to terrorist groups subject to civil and criminal charges.[59]Ā However, case law from theĀ Second CircuitĀ has ruled that under Section 230, technology companies are not liable for civil claims based on terrorism-related content.[60]
Case law
Defamatory information
Immunity wasĀ upheldĀ against claims thatĀ AOLĀ unreasonably delayed in removing defamatory messages posted by third party, failed to post retractions, and failed to screen for similar postings.
The courtĀ upheldĀ AOL’s immunity from liability for defamation. AOL’s agreement with the contractor allowing AOL to modify or remove such content did not make AOL the “information content provider” because the content was created by an independent contractor. The Court noted that Congress made a policy choice by “providing immunity even where the interactive service provider has an active, even aggressive role in making available content prepared by others.”
The courtĀ upheldĀ immunity for an Internet dating service provider from liability stemming from third party’s submission of a false profile. The plaintiff,Ā Carafano, claimed the false profile defamed her, but because the content was created by a third party, the website was immune, even though it had provided multiple choice selections to aid profile creation.
Immunity wasĀ upheldĀ for a website operator for distributing an email to a listserv where the plaintiff claimed the email was defamatory. Though there was a question as to whether the information provider intended to send the email to the listserv, the Court decided that for determining the liability of the service provider, “the focus should be not on the information provider’s intentions or knowledge when transmitting content but, instead, on the service provider’s or user’s reasonable perception of those intentions or knowledge.” The Court found immunity proper “under circumstances in which a reasonable person in the position of the service provider or user would conclude that the information was provided for publication on the Internet or other ‘interactive computer service’.”
The courtĀ upheldĀ immunity forĀ AOLĀ against allegations of negligence. Green claimed AOL failed to adequately police its services and allowed third parties to defame him and inflict intentional emotional distress. The court rejected these arguments because holding AOL negligent in promulgating harmful content would be equivalent to holding AOL “liable for decisions relating to the monitoring, screening, and deletion of content from its network — actions quintessentially related to a publisher’s role.”
Immunity wasĀ upheldĀ for an individual internet user from liability for republication of defamatory statements on a listserv. The court found the defendant to be a “user of interactive computer services” and thus immune from liability for posting information passed to her by the author.
The courtĀ rejectedĀ the defendant’s motion to dismiss on the grounds of Section 230 immunity, ruling that the plaintiff’s allegations that the defendants wrote disparaging report titles and headings, and themselves wrote disparaging editorial messages about the plaintiff, rendered them information content providers. The Web site, http://www.badbusinessbureau.com, allows users to upload “reports” containing complaints about businesses they have dealt with.
The courtĀ rejectedĀ immunity and found the defendant was an “information content provider” under Section 230 using much of the same reasoning as theĀ MCWĀ case.
False information
eBay‘s immunity wasĀ upheldĀ for claims based on forged autograph sports items purchased on the auction site.
Immunity forĀ AOLĀ wasĀ upheldĀ against liability for a user’s posting of incorrect stock information.
Immunity wasĀ upheldĀ against claims of fraud and money laundering.Ā GoogleĀ was not responsible for misleading advertising created by third parties who bought space on Google’s pages. The court found the creative pleading of money laundering did not cause the case to fall into the crime exception to Section 230 immunity.
Immunity forĀ OrbitzĀ andĀ CheapTicketsĀ wasĀ upheldĀ for claims based on fraudulent ticket listings entered by third parties on ticket resale marketplaces.
TheĀ Second CircuitĀ upheldĀ immunity for theĀ GrindrĀ dating app forĀ LGBTĀ persons under Section 230 in regards to the misuse of false profiles created in the names of a real person. The plaintiff had broken up with a boyfriend, who later went onto Grindr to create multiple false profiles that presented the real-life identity and address of the plaintiff and as being available for sexual encounters, as well as having illegal drugs for sale. The plaintiff reported that over a thousand men had come to his house for sex and drugs, based on the communications with the fake profile, and he began to fear for his safety. He sued Grindr for not taking actions to block the false profiles after multiple requests. Grindr asserted Section 230 did not make them liable for the actions of the ex-boyfriend. This was agreed by the district court and the Second Circuit.[73][74]
Sexually explicit content and minors
The courtĀ upheldĀ immunity against state claims of negligence based on “chat room marketing” of obscene photographs of minor by a third party.
The California Court of AppealĀ upheldĀ the immunity of a city from claims of waste of public funds, nuisance, premises liability, and denial of substantive due process. The plaintiff’s child downloaded pornography from a public library’s computers, which did not restrict access to minors. The court found the library was not responsible for the content of the internet and explicitly found that section 230(c)(1) immunity covers governmental entities and taxpayer causes of action.
The courtĀ upheldĀ immunity for a social networking site from negligence and gross negligence liability for failing to institute safety measures to protect minors and failure to institute policies relating to age verification. The Does’ daughter had lied about her age and communicated overĀ MySpaceĀ with a man who later sexually assaulted her. In the court’s view, the Does’ allegations were “merely another way of claiming that MySpace was liable for publishing the communications.”
The courtĀ upheldĀ immunity forĀ CraigslistĀ against a county sheriff’s claims that its “erotic services” section constituted a public nuisance because it caused or induced prostitution.
The courtĀ upheldĀ immunity forĀ BackpageĀ in contesting a Washington state law (SB6251)[82]Ā that would have made providers of third-party content online liable for any crimes related to a minor in Washington state.[83]Ā The states of Tennessee and New Jersey later passed similar legislation. Backpage argued that the laws violated Section 230, the Commerce Clause of the United States Constitution, and the First and Fifth Amendments.[82]Ā In all three cases the courts granted Backpage permanent injunctive relief and awarded them attorney’s fees.[80][84][85][86][87]
The courtĀ ruledĀ in favorĀ of Backpage after Sheriff Tom Dart of Cook County IL, a frequent critic of Backpage and its adult postings section, sent a letter on his official stationary to Visa and MasterCard demanding that these firms “immediately cease and desist” allowing the use of their credit cards to purchase ads on Backpage. Within two days both companies withdrew their services from Backpage.[89]Ā Backpage filed a lawsuit asking for a temporary restraining order and preliminary injunction against Dart granting Backpage relief and return to the status quo prior to Dart sending the letter. Backpage alleged that Dart’s actions were unconstitutional, violating the First and Fourteenth Amendments to the US Constitution as well as Section 230 of the CDA. Backpage asked for Dart to retract his “cease and desist” letters.[90]Ā After initially being denied the injunctive relief by a lower court,[91][92]Ā the Seventh Circuit U.S. Court of Appeals reversed that decision and directed that a permanent injunction be issued enjoining Dart and his office from taking any actions “to coerce or threaten credit card companiesā¦with sanctions intended to ban credit card or other financial services from being provided to Backpage.com.”[93]Ā The court cited section 230 as part of its decision.
Discriminatory housing ads
The courtĀ upheldĀ immunity forĀ CraigslistĀ againstĀ Fair Housing ActĀ claims based on discriminatory statements in postings on the classifieds website by third party users.
TheĀ Ninth Circuit Court of AppealsĀ rejectedĀ immunity for the Roommates.com roommate matching service for claims brought under the federalĀ Fair Housing Act[96]Ā and California housing discrimination laws.[97]Ā The court concluded that the manner in which the service elicited information from users concerning their roommate preferences (by having dropdowns specifying gender, presence of children, and sexual orientation), and the manner in which it utilized that information in generating roommate matches (by eliminating profiles that did not match user specifications), the matching service created or developed the information claimed to violate the FHA, and thus was responsible for it as an “information content provider.” The courtĀ upheldĀ immunity for the descriptions posted by users in the “Additional Comments” section because these were entirely created by users.
Threats
A California Appellate Court unanimouslyĀ upheldĀ immunity from state tort claims arising from an employee’s use of the employer’s e-mail system to send threatening messages. The court concluded that an employer that provides Internet access to its employees qualifies as a “provider . . . of an interactive service.”
Failure to warn
TheĀ Ninth Circuit Court of AppealsĀ rejectedĀ immunity for claims of negligence under California law. Doe filed a complaint against Internet Brands which alleged a “failure to warn” her of a known rape scheme, despite her relationship to them as a ModelMayhem.com member. They also had requisite knowledge to avoid future victimization of ModelMayhem.com users by warning users of online sexual predators. The Ninth Circuit Court of Appeals concluded that the Communications Decency Act did not bar the claim and remanded the case to the district court for further proceedings.
In February 2015, the Ninth Circuit panel set aside its 2014 opinion and set the case for reargument. In May 2016, the panel again held that Doe’s case could proceed.[98][99]
Terrorism
The Second CircuitĀ upheldĀ immunity in civil claims for service providers for hosting terrorism-related content created by users. Families, friends, and associates of several killed inĀ Hamas-attacks filed suit against Facebook under the United State’s Anti-Terrorism Act, asserting that since Hamas members used Facebook to coordinate activities, Facebook was liable for its content. While previous rules at federal District and Circuit level have generally ruled against such cases, this decision in the Second Circuit was first to assert that Section 230’s safe harbor provisions do apply even to acts related to terrorism that may be posted by users of service providers, thus dismissing the suit against Facebook. The Second Circuit ruled that the various algorithms Facebook uses to recommend content remains as part of the role of the distributor of the content and not the publisher, since these automated tools were essentially neutral.[60]
Similar legislation in other countries]
European Union
Directive 2000/31/EC[100]Ā establishes a safe haven regime for hosting providers:
The updatedĀ Directive on Copyright in the Digital Single MarketĀ (Directive 2019/790) Article 17 makes providers liable if they fail to take “effective and proportionate measures” to prevent users from uploading certain copyright violations and do not response immediately to takedown requests.[101]
Australia
InĀ Dow Jones & Company Inc v Gutnick,[102]Ā the High Court of Australia treated defamatory material on a server outside Australia as having been published in Australia when it is downloaded or read by someone in Australia.
Gorton v Australian Broadcasting Commission & AnorĀ (1973) 1 ACTR 6
Under theĀ Defamation Act 2005Ā (NSW),[103]Ā s 32, a defence to defamation is that the defendant neither knew, nor ought reasonably to have known of the defamation, and the lack of knowledge was not due to the defendant’s negligence.
New Zealandcause of the material CompuServe’s network was carrying into Germany. He was convicted and sentenced to two years probation on May 28, 1998.[104][105]Ā He was cleared on appeal on November 17, 1999.[106][107]
The Oberlandesgericht (OLG) Cologne, an appellate court, found that an online auctioneer does not have an active duty to check for counterfeit goods (Az 6 U 12/01).[108]
In one example, the first-instance district court of Hamburg issued a temporary restraining order requiring message board operator Universal Boards to review all comments before they can be posted to prevent the publication of messages inciting others to download harmful files. The court reasoned that “the publishing house must be held liable for spreading such material in the forum, regardless of whether it was aware of the content.”[109]
United Kingdom
The laws of libel and defamation will treat a disseminator of information as having “published” material posted by a user, and the onus will then be on a defendant to prove that it did not know the publication was defamatory and was not negligent in failing to know:Ā Goldsmith v Sperrings LtdĀ (1977) 2 All ER 566;Ā Vizetelly v Mudie’s Select Library LtdĀ (1900) 2 QB 170;Ā Emmens v Pottle & OrsĀ (1885) 16 QBD 354.
In an action against a website operator, on a statement posted on the website, it is a defence to show that it was not the operator who posted the statement on the website. The defence is defeated if it was not possible for the claimant to identify the person who posted the statement, or the claimant gave the operator a notice of complaint and the operator failed to respond in accordance with regulations.
Notes
References …
External links
https://en.wikipedia.org/wiki/Section_230_of_the_Communications_Decency_Act
United States antitrust law
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“The Bosses of the Senate”, a cartoon byĀ Joseph KepplerĀ depicting corporate interestsāfrom steel, copper, oil, iron, sugar, tin, and coal to paper bags, envelopes, and saltāas giant money bags looming over the tiny senators at their desks in the Chamber of theĀ United States Senate.[1]
In the United States,Ā antitrust lawĀ is a collection of federal and state government laws that regulates the conduct and organization of business corporations, generally to promoteĀ competitionĀ for the benefit ofĀ consumers. (The concept is calledĀ competition lawĀ in other English-speaking countries.) The main statutes are theĀ Sherman Act of 1890, theĀ Clayton Act of 1914Ā and theĀ Federal Trade Commission Act of 1914. These Acts serve three major functions. First, Section 1 of the Sherman Act prohibits price-fixing and the operation ofĀ cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts theĀ mergers and acquisitionsĀ of organizations that would likely substantially lessen competition. Third, Section 2 of the Sherman Act prohibits the abuse of monopoly power.[2]
TheĀ Federal Trade Commission, theĀ U.S. Department of Justice, state governments and private parties who are sufficiently affected may all bring actions in the courts to enforce the antitrust laws. The scope of antitrust laws, and the degree to which they should interfere in an enterprise’s freedom to conduct business, or to protect smaller businesses, communities and consumers, are strongly debated. One view, mostly closely associated with the “Chicago School of economics” suggests that antitrust laws should focus solely on the benefits to consumers and overall efficiency, while a broad range of legal and economic theory sees the role of antitrust laws as also controllingĀ economic powerĀ in the public interest.[3]
Contents
History
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Although “trust” has a specific legal meaning (where one person holds property for the benefit of another), in the late 19th century the word was commonly used to denote big business, because that legal instrument was frequently used to effect a combination of companies.[4]Ā Large manufacturing conglomerates emerged in great numbers in the 1880s and 1890s, and were perceived to have excessive economic power.[5]Ā TheĀ Interstate Commerce ActĀ of 1887 began a shift towards federal rather than state regulation of big business.[6]Ā It was followed by theĀ Sherman Antitrust ActĀ of 1890, theĀ Clayton Antitrust ActĀ of 1914 and theĀ Federal Trade Commission ActĀ of 1914, theĀ RobinsonāPatman ActĀ of 1936, and theĀ CellerāKefauver ActĀ of 1950.
In the 1880s, hundreds of small short-line railroads were being bought up and consolidated into giant systems. (Separate laws and policies emerged regarding railroads and financial concerns such as banks and insurance companies.) People for strong antitrust laws argued that, in order for the American economy to be successful, it would require free competition and the opportunity for individual Americans to build their own businesses. As SenatorĀ John ShermanĀ put it, “If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life.” Congress passed theĀ Sherman Antitrust ActĀ almost unanimously in 1890, and it remains the core of antitrust policy. The Act prohibits agreements in restraint of trade and abuse of monopoly power. It gives theĀ Justice DepartmentĀ the mandate to go to federal court for orders to stop illegal behavior or to impose remedies.[7][original research?]
Public officials during theĀ Progressive EraĀ put passing and enforcing strong antitrust high on their agenda. PresidentĀ Theodore RooseveltĀ sued 45 companies under the Sherman Act, whileĀ William Howard TaftĀ sued 75. In 1902, Roosevelt stopped the formation of theĀ Northern Securities Company, which threatened to monopolize transportation in the Northwest (seeĀ Northern Securities Co. v. United States).
Standard OilĀ (Refinery No. 1 inĀ Cleveland,Ā Ohio, pictured) was a major company broken up under United States antitrust laws.
One of the better-known trusts was theĀ Standard Oil Company;Ā John D. RockefellerĀ in the 1870s and 1880s had used economic threats against competitors and secret rebate deals with railroads to build what was called a monopoly in the oil business, though some minor competitors remained in business. In 1911 the Supreme Court agreed that in recent years (1900ā1904) Standard had violated the Sherman Act (seeĀ Standard Oil Co. of New Jersey v. United States). It broke the monopoly into three dozen separate companies that competed with one another, including Standard Oil of New Jersey (later known asĀ ExxonĀ and nowĀ ExxonMobil), Standard Oil of Indiana (Amoco), Standard Oil Company of New York (Mobil, again, later merged with Exxon to form ExxonMobil), of California (Chevron), and so on. In approving the breakup the Supreme Court added the “rule of reason”: not all big companies, and not all monopolies, are evil; and the courts (not the executive branch) are to make that decision. To be harmful, a trust had to somehow damage the economic environment of its competitors.[citation needed]
United States Steel Corporation, which was much larger than Standard Oil, won its antitrust suit in 1920 despite never having delivered the benefits to consumers that Standard Oil did.[citation needed]Ā In fact, it lobbied for tariff protection that reduced competition, and so contending that it was one of the “good trusts” that benefited the economy is somewhat doubtful.[citation needed]Ā LikewiseĀ International HarvesterĀ survived its court test, while other monopolies were broken up inĀ tobacco, meatpacking, and bathtub fixtures. Over the years hundreds of executives of competing companies who met together illegally to fix prices went to federal prison.[citation needed]
In 1914 Congress passed theĀ Clayton Act, which prohibited specific business actions (such asĀ price discriminationĀ andĀ tying) if they substantially lessened competition. At the same time Congress established theĀ Federal Trade CommissionĀ (FTC), whose legal and business experts could force business to agree to “consent decrees“, which provided an alternative mechanism to police antitrust.[citation needed]
American hostility to big business began to decrease after the Progressive Era.[citation needed]Ā For example,Ā Ford Motor CompanyĀ dominated auto manufacturing, built millions of cheap cars that put America on wheels, and at the same time lowered prices, raised wages, and promoted manufacturing efficiency.Ā Welfare capitalismĀ made large companies an attractive place to work; new career paths opened up in middle management; local suppliers discovered that big corporations were big purchasers.[citation needed]Ā Talk of trust busting faded away. Under the leadership ofĀ Herbert Hoover, the government in the 1920s promoted business cooperation, fostered the creation of self-policing trade associations, and made the FTC an ally of “respectable business”.[citation needed]
The printing equipment companyĀ ATFĀ explicitly states in its 1923 manual that its goal is to ‘discourage unhealthy competition’ in the printing industry.
During the New Deal, attempts were made to stop cutthroat competition. TheĀ National Industrial Recovery ActĀ (NIRA) was a short-lived program in 1933ā35 designed to strengthen trade associations, and raise prices, profits and wages at the same time. TheĀ Robinson-Patman ActĀ of 1936 sought to protect local retailers against the onslaught of the more efficient chain stores, by making it illegal to discount prices. To control big business, the New Deal policymakers preferred federal and state regulation ācontrolling the rates and telephone services provided by AT&T, for exampleā and by building up countervailing power in the form of labor unions.[citation needed]
The antitrust environment of the 70’s was dominated by the caseĀ United States v. IBM, which was filed by theĀ U.S. Justice DepartmentĀ in 1969.Ā IBMĀ at the time dominated the computer market through alleged bundling of software and hardware as well as sabotage at the sales level and false product announcements. It was one of the largest and certainly the lengthiest antitrust case the DoJ brought against a company. In 1982, theĀ Reagan administrationĀ dismissed the case, and the costs and wasted resources were heavily criticized. However, contemporary economists argue that the legal pressure on IBM during that period allowed for the development of an independent software and personal computer industry with major importance for the national economy.[8]
In 1982 the Reagan administration used the Sherman Act to break up AT&T into one long-distance company and seven regional “Baby Bells“, arguing that competition should replace monopoly for the benefit of consumers and the economy as a whole. The pace of business takeovers quickened in the 1990s, but whenever one large corporation sought to acquire another, it first had to obtain the approval of either the FTC or the Justice Department. Often the government demanded that certain subsidiaries be sold so that the new company would not monopolize a particular geographical market.[citation needed]
In 1999 a coalition of 19 states and the federal Justice Department suedĀ Microsoft.[9]Ā A highly publicized trial found that Microsoft had strong-armed many companies in an attempt to prevent competition from theĀ NetscapeĀ browser.[10]Ā In 2000, the trial court ordered Microsoft to split in two, preventing it from future misbehavior.[11][9]Ā The Court of Appeals affirmed in part and reversed in part. In addition, it removed the judge from the case for discussing the case with the media while it was still pending.[12]Ā With the case in front of a new judge, Microsoft and the government settled, with the government dropping the case in return for Microsoft agreeing to cease many of the practices the government challenged.[13]Ā In his defense, CEOĀ Bill GatesĀ argued that Microsoft always worked on behalf of the consumer and that splitting the company would diminish efficiency and slow the pace of software development.[citation needed]
Cartels and collusion
āSherman Act 1890Ā Ā§1
Preventing collusion and cartels that act inĀ restraint of tradeĀ is an essential task of antitrust law. It reflects the view that each business has a duty to act independently on the market, and so earn its profits solely by providing better priced and quality products than its competitors. The Sherman Act Ā§1 prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce.”[14]Ā This targets two or more distinct enterprises acting together in a way that harms third parties. It does not capture the decisions of a single enterprise, or a single economic entity, even though the form of an entity may be two or moreĀ separate legal personsĀ or companies. InĀ Copperweld Corp. v. Independence Tube Corp.[15]Ā it was held an agreement between a parent company and aĀ wholly owned subsidiaryĀ could not be subject to antitrust law, because the decision took place within a single economic entity.[16]Ā This reflects the view that if the enterprise (as an economic entity) has not acquired aĀ monopolyĀ position, or has significantĀ market power, then no harm is done. The same rationale has been extended toĀ joint ventures, where corporate shareholders make a decision through a new company they form. InĀ Texaco Inc. v. Dagher[17]Ā the Supreme Court held unanimously that a price set by a joint venture betweenĀ TexacoĀ andĀ Shell OilĀ did not count as making an unlawful agreement. Thus the law draws a “basic distinction between concerted and independent action”.[18]Ā Multi-firm conduct tends to be seen as more likely than single-firm conduct to have an unambiguously negative effect and “is judged more sternly”.[19]Ā Generally the law identifies four main categories of agreement. First, some agreements such as price fixing or sharing markets are automatically unlawful, or illegalĀ per se. Second, because the law does not seek to prohibit every kind of agreement that hindersĀ freedom of contract, it developed a “rule of reason” where a practice might restrict trade in a way that is seen as positive or beneficial for consumers or society. Third, significant problems of proof and identification of wrongdoing arise where businesses make no overt contact, or simply share information, but appear to act in concert.Ā Tacit collusion, particularly in concentrated markets with a small number of competitors orĀ oligopolists, have led to significant controversy over whether or not antitrust authorities should intervene. Fourth, vertical agreements between a business and a supplier or purchaser “up” or “downstream” raise concerns about the exercise ofĀ market power, however they are generally subject to a more relaxed standard under the “rule of reason”.
Restrictive practices
Some practices are deemed by the courts to be so obviously detrimental that they are categorized as being automatically unlawful, or illegalĀ per se. The simplest and central case of this isĀ price fixing. This involves an agreement by businesses to set the price orĀ considerationĀ of a good or service which they buy or sell from others at a specific level. If the agreement is durable, the general term for these businesses is aĀ cartel. It is irrelevant whether or not the businesses succeed in increasing their profits, or whether together they reach the level of havingĀ market powerĀ as might aĀ monopoly. Such collusion is illegalĀ per se.
Bid riggingĀ is a form of price fixing and market allocation that involves an agreement in which one party of a group of bidders will be designated to win the bid.Ā Geographic market allocationĀ is an agreement between competitors not to compete within each other’s geographic territories.
Rule of reason
If an antitrust claim does not fall within aĀ per seĀ illegal category, the plaintiff must show the conduct causes harm in “restraint of trade” under the Sherman Act Ā§1 according to “the facts peculiar to the business to which the restraint is applied”.[21]Ā This essentially means that unless a plaintiff can point to a clear precedent, to which the situation is analogous, proof of an anti-competitive effect is more difficult. The reason for this is that the courts have endeavoured to draw a line between practices that restrain trade in a “good” compared to a “bad” way. In the first case,Ā United States v. Trans-Missouri Freight Association,[22]Ā the Supreme Court found that railroad companies had acted unlawfully by setting up an organisation to fix transport prices. The railroads had protested that their intention was to keep prices low, not high. The court found that this was not true, but stated that not every “restraint of trade” in a literal sense could be unlawful. Just as under the common law, the restraint of trade had to be “unreasonable”. InĀ Chicago Board of Trade v. United StatesĀ the Supreme Court found a “good” restraint of trade.[23]Ā TheĀ Chicago Board of TradeĀ had a rule thatĀ commodities tradersĀ were not allowed to privately agree to sell or buy after the market’s closing time (and then finalise the deals when it opened the next day). The reason for the Board of Trade having this rule was to ensure that all traders had an equal chance to trade at a transparent market price. It plainly restricted trading, but the Chicago Board of Trade argued this was beneficial. Brandeis J., giving judgment for a unanimous Supreme Court, held the rule to be pro-competitive, and comply with the rule of reason. It did not violate the Sherman Act Ā§1. As he put it,
Tacit collusion and oligopoly
Vertical restraints
Mergers
āClayton Act 1914Ā Ā§7
Although theĀ Sherman Act 1890Ā initially dealt, in general, with cartels (where businesses combined their activities to the detriment of others) and monopolies (where one business was so large it could use its power to the detriment of others alone) it was recognized that this left a gap. Instead of forming a cartel, businesses could simply merge into one entity. The period between 1895 and 1904 saw a “great merger movement” as business competitors combined into ever more giantĀ corporations.[25]Ā However upon a literal reading of Sherman Act, no remedy could be granted until a monopoly had already formed. TheĀ Clayton Act 1914Ā attempted to fill this gap by giving jurisdiction to prevent mergers in the first place if they would “substantially lessen competition”.
Dual antitrust enforcement by theĀ Department of JusticeĀ andĀ Federal Trade CommissionĀ has long elicited concerns about disparate treatment of mergers. In response, in September 2014, the House Judiciary Committee approved the Standard Merger and Acquisition Reviews Through Equal Rules Act (“SMARTER Act”).[26]
Horizontal mergers
Vertical mergers
Conglomerate mergers
Monopoly and power
āSherman Act 1890Ā Ā§2
The law’s treatment of monopolies is potentially the strongest in the field of antitrust law. Judicial remedies can force large organizations to be broken up, be run subject toĀ positive obligations, massive penalties may be imposed, and/or the people involved can be sentenced to jail. Under Ā§2 of theĀ Sherman Act 1890Ā every “person who shall monopolize, or attempt to monopolize … any part of the trade or commerce among the several States” commits an offence.[27]Ā The courts have interpreted this to mean that monopoly is not unlawfulĀ per se, but only if acquired through prohibited conduct.[28]Ā Historically, where the ability ofĀ judicial remediesĀ to combatĀ market powerĀ have ended, the legislature of states or the Federal government have still intervened by takingĀ public ownershipĀ of an enterprise, or subjecting the industry to sector specific regulation (frequently done, for example, in the casesĀ water,Ā education,Ā energyĀ orĀ health care). The law onĀ public servicesĀ andĀ administrationĀ goes significantly beyond the realm of antitrust law’s treatment of monopolies. When enterprises are not under public ownership, and where regulation does not foreclose the application of antitrust law, two requirements must be shown for the offense of monopolization. First, the alleged monopolist must possess sufficientĀ powerĀ in an accurately definedĀ marketĀ for its products or services. Second, the monopolist must have used its power in a prohibited way. The categories of prohibited conduct are not closed, and are contested in theory. Historically they have been held to includeĀ exclusive dealing,Ā price discrimination, refusing to supply anĀ essential facility,Ā product tyingĀ andĀ predatory pricing.
Monopolization
Exclusive dealing
Price discrimination
Essential facilities
Tying products
āClayton Act 1914Ā Ā§3
Predatory pricing
In theory, which is hotly contested, predatory pricing happens when large companies with huge cash reserves and large lines ofĀ creditĀ stifle competition by selling their products and services at a loss for a time, to force their smaller competitors out of business. With no competition, they are then free to consolidate control of the industry and charge whatever prices they wish. At this point, there is also little motivation for investing in furtherĀ technologicalĀ research, since there are no competitors left to gain an advantage over. HighĀ barriers to entryĀ such as large upfront investment, notably namedĀ sunk costs, requirements in infrastructure and exclusive agreements with distributors, customers, and wholesalers ensure that it will be difficult for any new competitors to enter the market, and that if any do, the trust will have ample advance warning and time in which to either buy the competitor out, or engage in its own research and return toĀ predatory pricingĀ long enough to force the competitor out of business. Critics argue that the empirical evidence shows that “predatory pricing” does not work in practice and is better defeated by a trulyĀ free marketĀ than by antitrust laws (seeĀ Criticism of the theory of predatory pricing).
Intellectual property
Scope of antitrust law
Antitrust laws do not apply to, or are modified in, several specific categories ofĀ enterpriseĀ (including sports, media, utilities,Ā health care,Ā insurance,Ā banks, andĀ financial markets) and for several kinds of actor (such as employees or consumers takingĀ collective action).[29]
Collective actions
First, since theĀ Clayton Act 1914Ā Ā§6, there is no application of antitrust laws to agreements between employees to form or act inĀ labor unions. This was seen as the “Bill of Rights” for labor, as the Act laid down that the “labor of a human being is not aĀ commodityĀ or article of commerce”. The purpose was to ensure that employees withĀ unequal bargaining powerĀ were not prevented from combining in the same way that their employers could combine inĀ corporations,[30]Ā subject to the restrictions on mergers that the Clayton Act set out. However, sufficiently autonomous workers, such as professional sports players have been held to fall within antitrust provisions.[31]
Pro sports exemptions and the NFL cartel
Since 1922 the courts and Congress have leftĀ Major League Baseball, as played atĀ Chicago‘sĀ Wrigley Field, unrestrained by antitrust laws.
Second, professional sports leagues enjoy a number of exemptions. Mergers and joint agreements of professional football, hockey, baseball, and basketball leagues are exempt.[32]Ā Major League BaseballĀ was held to be broadly exempt from antitrust law inĀ Federal Baseball Club v. National League.[33]Ā Holmes J held that the baseball league’s organization meant that there was no commerce between the states taking place, even though teams traveled across state lines to put on the games. That travel was merely incidental to a business which took place in each state. It was subsequently held in 1952 inĀ Toolson v. New York Yankees,[34]Ā and then again in 1972Ā Flood v. Kuhn,[35]Ā that the baseball league’s exemption was an “aberration”. However Congress had accepted it, and favored it, so retroactively overruling the exemption was no longer a matter for the courts, but the legislature. InĀ United States v. International Boxing Club of New York,[36]Ā it was held that, unlike baseball, boxing was not exempt, and inĀ Radovich v. National Football League (NFL),[37]Ā professional football is generally subject to antitrust laws. As a result of theĀ AFL-NFL merger, theĀ National Football LeagueĀ was also given exemptions in exchange for certain conditions, such as not directly competing with college or high school football.[38]Ā However, the 2010 Supreme Court ruling inĀ American Needle Inc. v. NFLĀ characterised the NFL as a “cartel” of 32 independent businesses subject to antitrust law, not a single entity.
Media
Third, antitrust laws are modified where they are perceived to encroach upon theĀ mediaĀ and free speech, or are not strong enough. Newspapers under joint operating agreements are allowed limited antitrust immunity under theĀ Newspaper Preservation Act of 1970.[39]Ā More generally, and partly because of concerns aboutĀ media cross-ownership in the United States, regulation of media is subject to specific statutes, chiefly theĀ Communications Act of 1934Ā and theĀ Telecommunications Act of 1996, under the guidance of theĀ Federal Communications Commission. The historical policy has been to use the state’s licensing powers over the airwaves to promote plurality. Antitrust laws do not prevent companies from using the legal system or political process to attempt to reduce competition. Most of these activities are considered legal under theĀ Noerr-Pennington doctrine. Also, regulations by states may be immune under theĀ Parker immunity doctrine.[40]
Other
Fourth, the government mayĀ grant monopoliesĀ in certain industries such asĀ utilitiesĀ and infrastructure where multiple players are seen as unfeasible or impractical.[41]
Fifth,Ā insuranceĀ is allowed limited antitrust exemptions as provided by theĀ McCarran-Ferguson ActĀ of 1945.[42]
Sixth, M&A transactions in the defense sector are often subject to greater antitrust scrutiny from theĀ Department of JusticeĀ and theĀ Federal Trade Commission.[43]
Remedies and enforcement
āSherman Act 1890Ā Ā§4
The remedies for violations of U.S. antitrust laws are as broad as anyĀ equitable remedyĀ that a court has the power to make, as well as being able to impose penalties. When private parties have suffered an actionable loss, they may claim compensation. Under theĀ Sherman Act 1890Ā Ā§7, these may be trebled, a measure to encourage private litigation to enforce the laws and act as a deterrent. The courts may award penalties under Ā§Ā§1 and 2, which are measured according to the size of the company or the business. In their inherent jurisdiction to prevent violations in future, the courts have additionally exercised the power to break up businesses into competing parts under different owners, although this remedy has rarely been exercised (examples includeĀ Standard Oil,Ā Northern Securities Company,Ā American Tobacco Company,Ā AT&T CorporationĀ and, although reversed on appeal,Ā Microsoft). Three levels of enforcement come from the Federal government, primarily through the Department of Justice and the Federal Trade Commission, the governments of states, and private parties. Public enforcement of antitrust laws is seen as important, given the cost, complexity and daunting task for private parties to bring litigation, particularly against large corporations.
Federal government
Along with theĀ Federal Trade CommissionĀ theĀ Department of JusticeĀ inĀ Washington, D.C.Ā is the public enforcer ofĀ antitrustĀ law.
Federal Trade CommissionĀ building, view from southeast
The federal government, via both theĀ Antitrust DivisionĀ of theĀ United States Department of JusticeĀ and theĀ Federal Trade Commission, can bringĀ civil lawsuitsĀ enforcing the laws. The United States Department of Justice alone may bring criminal antitrust suits under federal antitrust laws.[44]Ā Perhaps the most famous antitrust enforcement actions brought by the federal government were the break-up ofĀ AT&T’s local telephone service monopolyĀ in the early 1980s[45]Ā and its actions againstĀ Microsoft in the late 1990s.
Additionally, the federal government alsoĀ reviews potential mergersĀ to attempt to preventĀ market concentration. As outlined by theĀ Hart-Scott-Rodino Antitrust Improvements Act, larger companies attempting to merge must first notify the Federal Trade Commission and the Department of Justice’s Antitrust Division prior to consummating a merger.[46]Ā These agencies then review the proposed merger first by defining what the market is and then determining theĀ market concentrationĀ using theĀ Herfindahl-Hirschman IndexĀ (HHI) and each company’sĀ market share.[46]Ā The government looks to avoid allowing a company to developĀ market power, which if left unchecked could lead to monopoly power.[46]
TheĀ United States Department of JusticeĀ andĀ Federal Trade CommissionĀ target nonreportable mergers for enforcement as well. Notably, between 2009 and 2013, 20% of all merger investigations conducted by theĀ United States Department of JusticeĀ involved nonreportable transactions.[47]
International cooperation
Despite considerable effort by theĀ Clinton administration, the Federal government attempted to extend antitrust cooperation with other countries for mutual detection, prosecution and enforcement. A bill was unanimously passed by theĀ US Congress;[48]Ā however by 2000 only oneĀ treatyĀ has been signed[49]Ā withĀ Australia.[50]Ā OnĀ 3 July 2017Ā theĀ Australian Competition and Consumer CommissionĀ announced it was seeking explanations from a US company,Ā Apple Inc.Ā In relation to potentially anticompetitive behaviour against an Australian bank in possible relation toĀ Apple Pay.[51]Ā It is not known whether the treaty could influence the enquiry or outcome.
In many cases large US companies tend to deal with overseas antitrust within the overseas jurisdiction, autonomous of US laws, such as inĀ Microsoft Corp v CommissionĀ and more recently,Ā GoogleĀ vĀ European UnionĀ where the companies were heavily fined.[52]Ā Questions have been raised with regards to the consistency of antitrust between jurisdictions where the same antitrust corporate behaviour, and similar antitrust legal environment, is prosecuted in one jurisdiction but not another.[53]
State governments
State attorneys generalĀ may file suits to enforce both state and federal antitrust laws.
Private suits]
Private civil suits may be brought, in both state and federal court, against violators of state and federal antitrust law. Federal antitrust laws, as well as most state laws, provide for triple damages against antitrust violators in order to encourage private lawsuit enforcement of antitrust law. Thus, if a company is sued for monopolizing a market and the jury concludes the conduct resulted in consumers’ being overcharged $200,000, that amount will automatically be tripled, so the injured consumers will receive $600,000. The United States Supreme Court summarized why Congress authorized private antitrust lawsuits in the caseĀ Hawaii v. Standard Oil Co. of Cal., 405 U.S. 251, 262 (1972):
Theory
The Supreme Court calls the Sherman Antitrust Act a “charter of freedom”, designed to protect free enterprise in America.[54]Ā One view of the statutory purpose, urged for example by Justice Douglas, was that the goal was not only to protect consumers, but at least as importantly to prohibit the use of power to control the marketplace.[55]
By contrast, efficiency argue that antitrust legislation should be changed to primarily benefit consumers, and have no other purpose.Ā Free marketĀ economistĀ Milton FriedmanĀ states that he initially agreed with the underlying principles of antitrust laws (breaking upĀ monopoliesĀ andĀ oligopoliesĀ and promoting more competition), but that he came to the conclusion that they do more harm than good.[56]Ā Thomas SowellĀ argues that, even if a superior business drives out a competitor, it does not follow that competition has ended:
Alan GreenspanĀ argues that the very existence of antitrust laws discourages businessmen from some activities that might be socially useful out of fear that their business actions will be determined illegal and dismantled by government. In his essay entitledĀ Antitrust,Ā he says: “No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible.” Those, like Greenspan, who oppose antitrust tend not to support competition as an end in itself but for its resultsālow prices. As long as a monopoly is not aĀ coercive monopolyĀ where a firm is securely insulated fromĀ potentialĀ competition, it is argued that the firm must keep prices low in order to discourage competition from arising. Hence, legal action is uncalled for and wrongly harms the firm and consumers.[58]
Thomas DiLorenzo, an adherent of theĀ Austrian SchoolĀ of economics, found that the “trusts” of the late 19th century were dropping their prices faster than the rest of the economy, and he holds that they were not monopolists at all.[59]Ā Ayn Rand, the American writer, provides a moral argument against antitrust laws. She holds that these laws in principle criminalize any person engaged in making a business successful, and, thus, are gross violations of their individual expectations.[60]Ā Such laissez faire advocates suggest that only aĀ coercive monopolyĀ should be broken up, that is the persistent, exclusive control of a vitally needed resource, good, or service such that the community is at the mercy of the controller, and where there are no suppliers of the same or substitute goods to which the consumer can turn. In such a monopoly, the monopolist is able to make pricing and production decisions without an eye on competitive market forces and is able to curtail production toĀ price-gougeĀ consumers. Laissez-faire advocates argue that such a monopoly can only come about through the use of physical coercion or fraudulent means by the corporation or by government intervention and that there is no case of a coercive monopoly ever existing that was not the result of government policies.
JudgeĀ Robert Bork‘s writings on antitrust law (particularlyĀ The Antitrust Paradox), along with those ofĀ Richard PosnerĀ and otherĀ law and economicsĀ thinkers, were heavily influential in causing a shift in the U.S. Supreme Court’s approach to antitrust laws since the 1970s, to be focused solely on what is best for the consumer rather than the company’s practices.[45]
See also[
Notes …
References
External links
https://en.wikipedia.org/wiki/United_States_antitrust_law
Industrial Concentration
By William F. Shughart II
ā
Industrial concentrationā refers to a structural characteristic of the business sector. It is the degree to which production in an industryāor in the economy as a wholeāis dominated by a few large firms. Once assumed to be a symptom of āmarket failure,ā concentration is, for the most part, seen nowadays as an indicator of superior economic performance. In the early 1970s, Yale Brozen, a key contributor to the new thinking, called the professionās about-face on this issue āa revolution in economics.ā Industrial concentration remains a matter of public policy concern even so.
The Measurement of Industrial Concentration
Industrial concentration was traditionally summarized by the concentration ratio, which simply adds the market shares of an industryās four, eight, twenty, or fifty largest companies. In 1982, when new federal merger guidelines were issued, the Herfindahl-Hirschman Index (HHI) became the standard measure of industrial concentration. Suppose that an industry contains ten firms that individually account for 25, 15, 12, 10, 10, 8, 7, 5, 5, and 3 percent of total sales. The four-firm concentration ratio for this industryāthe most widely used numberāis 25 + 15 + 12 + 10 = 62, meaning that the top four firms account for 62 percent of the industryās sales. The HHI, by contrast, is calculated by summing the squared market shares of all of the firms in the industry: 252Ā + 152Ā + 122Ā + 102Ā + 102Ā + 82Ā + 72Ā + 52Ā + 52Ā + 32Ā = 1,366. The HHI has two distinct advantages over the concentration ratio. It usesĀ informationĀ about the relative sizes of all of an industryās members, not just some arbitrary subset of the leading companies, and it weights the market shares of the largest enterprises more heavily.
In general, the fewer the firms and the more unequal the distribution of market shares among them, the larger the HHI. Two four-firm industries, one containing equalsized firms each accounting for 25 percent of total sales, the other with market shares of 97, 1, 1, and 1, have the same four-firm concentration ratio (100) but very different HHIs (2,500 versus 9,412). An industry controlled by a single firm has an HHI of 1002Ā = 10,000, while the HHI for an industry populated by a very large number of very small firms would approach the indexās theoretical minimum value of zero.
Concentration in the U.S. Economy
According to the U.S. Department of Justiceās merger guidelines, an industry is considered āconcentratedā if the HHI exceeds 1,800; it is āunconcentratedā if the HHI is below 1,000. Since 1982, HHIs based on the value of shipments of the fifty largest companies have been calculated and reported in the manufacturing series of the Economic Census.1Ā Concentration levels exceeding 1,800 are rare. The exceptions include glass containers (HHI = 2,959.9 in 1997), motor vehicles (2,505.8), and breakfast cereals (2,445.9). Cigarette manufacturing also is highly concentrated, but its HHI is not reported owing to the small number of firms in that industry, the largest four of which accounted for 89 percent of shipments in 1997. At the other extreme, the HHI for machine shops was 1.9 the same year.
Whether an industry is concentrated hinges on how narrowly or broadly it is defined, both in terms of the product it produces and the extent of the geographic area it serves. The U.S. footwear manufacturing industry as a whole is very unconcentrated (HHI = 317 in 1997); the level of concentration among house slipper manufacturers is considerably higher, though (HHI = 2,053.4). Similarly, althoughĀ the national ready-mix concrete industry is unconcentrated (HHI = 29.4), concentration in that industry undoubtedly is much higher in specific cities and towns that typically are served by only a handful of such firms.
These examples suggest that concentration varies substantially across U.S. industries. Trends in concentration vary from industry to industry, but most changes in concentration proceed at a glacial pace. So, too, does aggregate concentration: the fifty largest U.S. companies accounted for 24 percent of manufacturing value added (revenue minus the costs of fuel, power, and raw materials) in 1997, the same percentage as in 1992 (and as in 1954, for that matter). On some measuresāthe percentages of total employment and total assets controlled by the nationās 50, 100, or 200 largest firmsāindustrial concentration in the United States actually has declined since World War II.
Concentration indexes calculated for a particular year conceal the identities of the industryās members. In reality, turnover among the nationās leading firms is fairly regular over long time horizons, averaging between 2 and 5 percent annually. Success at one point in time does not guarantee survival: only three of the ten largest U.S. companies in 1909 made the top one hundred list in 1987. Available concentration indexes, which are based solely on domestic manufacturing data, also ignore the global dimensions of industrial production.
The Causes and Consequences of Industrial Concentration
Some industries are more concentrated than others because of technical properties of their production technologies or unique characteristics of the markets they serve. Economies of scale, which allow firms to reduce their average costs as they increase their rates of output, favor large-scale production over small-scale production. Thus, industries for which scale economies are important (e.g., auto manufacturing and petroleum refining) are expected to be more concentrated than others in which costs do not fall as rapidly as output expands (e.g., cut-and-sew apparel manufacturing). Similarly, concentration tends to be higher in industries, such as aircraft and semiconductor manufacturing, where learning curves generate substantial production-cost savings as additional units of the original model or design are made.
Owing to so-called network effects, some goods increase in value as more people use them. Computer operating systems, word-processing software, and video recorder-players are examples of such goods, as are literal networks such as railroads, commercial air transportation, and wire line telephony. Because standard technologies and protocols that provide compatible interconnections are critical to the realization of network effectsā allowing faxes to be sent and received or computer users easily to exchange filesāconsumers rationally favor large networks over small ones. The necessity of building networks that accommodate critical masses of users means that only a few providers will achieve dominant positions, and therefore the industry will tend to be highly concentrated. Such domination is likely to be temporary, however, since consumers will switch networks when benefits outweigh costs, as illustrated by the replacement of Betaformatted video tapes by VHS formatted ones, which in turn are being replaced by DVDs.
Industrial concentration also is promoted by barriers to entry, which make it difficult for new firms to displace established firms. Barriers to entry are erected by government-conferred privileges such as patents, copyrights and trademarks, exclusive franchises, and licensing requirements. Existing firms may possess other advantages over newcomers, including lower costs and brand loyalty, which make entry more difficult.
The fundamental public policy question posed by industrial concentration is this: Are concentrated industries somehow less competitive than unconcentrated ones? Concentration would have adverse effects if it bred market powerāthe ability to charge prices in excess of costsāthereby increasing industryĀ profitsĀ at consumersā expense. In theory, industrial concentration can facilitate the exercise of market power if the members of the industry agree to cooperate rather than compete, or if the industryās dominant firm takes the lead in setting prices that rivals follow. And, indeed, the evidence generated by hundreds of econometric studies suggests that concentrated industries are more profitable than unconcentrated ones. But that evidence begs the question. It does not tell us whether profits are higher in concentrated industries because of market power effects or because the firms in those industries use resources more efficiently (i.e., have lower costs).
Some economists have found that concentration leads to higher prices, but the link observed typically is both small (prices elevated by 1ā5 percent) and statistically weak. A detailed econometric study by Sam Peltzman (1977) reaches the opposite conclusion. He reports that profits are higher in concentrated industries not because prices are higher, but because they do not decline as much as costs do as efficient firms expand their scales of operation. Analyses by Yale Brozen (1982), Harold Demsetz (1974), and others have found that the positive relation between industrial concentration and profits disappears altogether when firm size is taken into account. These results are consistent with the hypothesis that some industries areĀ more concentrated than others because large firms have significant cost advantages over small firms. There is, in short, little unequivocal evidence that industrial concentration per se is worrisome. Just the reverse seems to be true.
Public Policies Toward Industrial Concentration
Consolidating production in the hands of fewer firms through mergers and acquisitions obviously is the most direct route to industrial concentration. Preventing transactions that, by eliminating one or more competitors, would lead to undue increases in concentration and the possible exercise of market power by the remaining firms is the mandate of the two federalĀ antitrustĀ agenciesāthe U.S. Department of Justice and the Federal Trade Commissionāunder section 7 of the Clayton Act (1914). That mandate was strengthened considerably by the Hart-Scott-Rodino Act (1978), which requires firms to notify the antitrust authorities of their intention to merge and then to hold the transaction in abeyance until it has been reviewed. Most transactions with summed firm values of fifteen million dollars or more had to file premerger notifications initially; in February 2001 that threshold was raised to fifty million dollars and indexed forĀ inflation.
Two important factors that antitrust authorities consider in deciding whether to allow a proposed merger to proceed are the level of market concentration if the merger is consummated and the change in market concentration from its premerger level. (Note that the āmarketā considered relevant for merger analysis hardly ever corresponds to the āindustryā defined by the Economic Census; antitrust markets may be defined more broadly or more narrowly; in practice, the definition of the relevant market usually is the key to whether a merger is lawful or not.) Concentration thresholds are laid out in the Justice Departmentās merger guidelines, first promulgated in 1968, revised substantially in 1982, and amended several times since.
The guidelines state that proposed mergers are unlikely to be challenged if the postmerger market is unconcentrated (HHI remains below 1,000). However, mergers generally will not be approved if, following consummation, market concentration falls within the 1,000ā1,800 range, and the HHI increases by more than 100 points or, if the postmerger HHI is 1,800 or more, concentration increases by more than 50 points.2Ā Exceptions are provided when the merging firms can demonstrate significant cost savings, when barriers to entry are low, or when one of the mergerās partners would fail otherwise. (In theĀ European Union, by contrast,Ā competitionĀ policy, including merger law enforcement, is shaped principally by fears of possible āabuses of dominant market positionsā by large firms.)
Studies examining the enforcement of section 7 under the merger guidelines have found that they are not always followed closely. Mergers are, indeed, more likely to be challenged the greater the level of market concentration and the higher the barriers to entry are thought to be. But law enforcement also is found to be influenced significantly by political pressures on the antitrust authorities from groups that stand to lose if a merger is approved, including rivals worried that the transaction will create a more effective competitor. In fact, studies of stock-market reactions to news that a merger is likely to be challenged typically find competitors to be the main beneficiaries of such decisions.
About the Author
William F. Shughart II is F. A. P. Barnard Distinguished Professor of Economics at the University of Mississippi. He was special assistant to the director of the Federal Trade Commissionās Bureau of Economics during the Reagan administration and currently is editor in chief ofĀ Public ChoiceĀ and associate editor of theĀ Southern Economic Journal.
Further Reading
Introductory
Advanced
Footnotes
The Economic Census has been conducted every five years since 1967, and before that for 1954, 1958, and 1963. Prior to 1997, it was known as the Census of Manufactures. That same year, industries began being categorized according to the North American Industry Classification System (NAICS), which replaced the Standard Industrial Classification (SIC) codes used until 1992. Industrial concentration also is reported by the Economic Census on the basis of value added. Industry concentration ratios and HHIs for the 1992 and 1997 economic censuses can be accessed online at:Ā http://www.census.gov/epcd/www/concentration.html. Information on industrial concentration is not readily available for sectors of the economy other than manufacturing.
When firms with market shares ofĀ s1Ā andĀ s2Ā merge, the HHI increases by (s1Ā +Ā s2)2Ā āĀ s12Ā āĀ s22Ā = 2s1s2. So, for example, if a merger is proposed between the two largest firms in the hypothetical ten-firm industry described earlier, the HHI would increase by 2 Ć 25 Ć 15 = 750 points (from 1,366 to 2,116). According to the guidelines, that merger would in all likelihood be challenged.
https://www.econlib.org/library/Enc/IndustrialConcentration.html
Cryptocurrency
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Various cryptocurrency logos.
AĀ cryptocurrencyĀ (orĀ crypto currency) is aĀ digital assetĀ designed to work as aĀ medium of exchangeĀ that usesĀ strong cryptographyĀ to secure financial transactions, control the creation of additional units, and verify the transfer of assets.[1][2][3]Ā Cryptocurrencies useĀ decentralized controlĀ as opposed to centralized digital currency andĀ central bankingĀ systems.[4]
The decentralized control of each cryptocurrency works throughĀ distributed ledgerĀ technology, typically aĀ blockchain, that serves as a public financial transaction database.[5]
Bitcoin, first released as open-source software in 2009, is generally considered the first decentralized cryptocurrency.[6]Ā Since the release of bitcoin, over 4,000Ā altcoinsĀ (alternative variants of bitcoin, or other cryptocurrencies) have been created.
Contents
History
In 1983, the American cryptographerĀ David ChaumĀ conceived an anonymous cryptographicĀ electronic moneyĀ calledĀ ecash.[7][8]Ā Later, in 1995, he implemented it throughĀ Digicash,[9]Ā an early form of cryptographic electronic payments which required user software in order to withdraw notes from a bank and designate specific encrypted keys before it can be sent to a recipient. This allowed the digital currency to be untraceable by the issuing bank, the government, or any third party.
In 1996, theĀ NSAĀ published a paper entitledĀ How to Make a Mint: the Cryptography of Anonymous Electronic Cash, describing a Cryptocurrency system first publishing it in a MIT mailing list[10]Ā and later in 1997, inĀ The American Law ReviewĀ (Vol. 46, Issue 4).[11]
In 1998,Ā Wei DaiĀ published a description of “b-money”, characterized as an anonymous, distributed electronic cash system.[12]Ā Shortly thereafter,Ā Nick SzaboĀ describedĀ bit gold.[13]Ā LikeĀ bitcoinĀ and other cryptocurrencies that would follow it, bit gold (not to be confused with the later gold-based exchange,Ā BitGold) was described as an electronic currency system which required users to complete aĀ proof of workĀ function with solutions being cryptographically put together and published. A currency system based on aĀ reusable proof of workĀ was later created by Hal Finney who followed the work of Dai and Szabo.[citation needed]
The first decentralized cryptocurrency, bitcoin, was created in 2009 byĀ pseudonymousĀ developerĀ Satoshi Nakamoto. It usedĀ SHA-256, a cryptographic hash function, as itsĀ proof-of-workĀ scheme.[14][15]Ā In April 2011,Ā NamecoinĀ was created as an attempt at forming a decentralizedĀ DNS, which would makeĀ internet censorshipĀ very difficult. Soon after, in October 2011,Ā LitecoinĀ was released. It was the first successful cryptocurrency to useĀ scryptĀ as its hash function instead of SHA-256. Another notable cryptocurrency,Ā PeercoinĀ was the first to use a proof-of-work/proof-of-stake hybrid.[16]
On 6 August 2014, the UK announced itsĀ TreasuryĀ had been commissioned to do a study of cryptocurrencies, and what role, if any, they can play in the UK economy. The study was also to report on whether regulation should be considered.[17]
Formal definition
According to Jan Lansky, a cryptocurrency is a system that meets six conditions:[18]
In March 2018, the wordĀ cryptocurrencyĀ was added to theĀ Merriam-Webster Dictionary.[19]
Altcoin
The term altcoin has various similar definitions. Stephanie Yang ofĀ The Wall Street JournalĀ defined altcoins as “alternative digital currencies,”[20]Ā while Paul Vigna, also ofĀ The Wall Street Journal, described altcoins as alternative versions of bitcoin.[21]Ā Aaron Hankins of theĀ MarketWatchĀ refers to any cryptocurrencies other than bitcoin as altcoins.[22]
Crypto token
AĀ blockchainĀ account can provide functions other than making payments, for example inĀ decentralized applicationsĀ orĀ smart contracts. In this case, the units or coins are sometimes referred to as crypto tokens (or cryptotokens).
Architecture
Decentralized cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is defined when the system is created and which is publicly known. In centralized banking and economic systems such as theĀ Federal Reserve System, corporate boards or governments control the supply of currency by printing units ofĀ fiat moneyĀ or demanding additions to digital banking ledgers. In case of decentralized cryptocurrency, companies or governments cannot produce new units, and have not so far provided backing for other firms, banks or corporate entities which hold asset value measured in it. The underlying technical system upon which decentralized cryptocurrencies are based was created by the group or individual known asĀ Satoshi Nakamoto.[23]
As of May 2018, over 1,800 cryptocurrency specifications existed.[24]Ā Within a cryptocurrency system, the safety, integrity and balance ofĀ ledgersĀ is maintained by a community of mutually distrustful parties referred to asĀ miners: who use their computers to help validate and timestamp transactions, adding them to the ledger in accordance with a particular timestamping scheme.[14]
Most cryptocurrencies are designed to gradually decrease production of that currency, placing a cap on the total amount of that currency that will ever be in circulation.[25]Ā Compared with ordinary currencies held by financial institutions or kept asĀ cashĀ on hand, cryptocurrencies can be more difficult forĀ seizureĀ by law enforcement.[1]Ā This difficulty is derived from leveraging cryptographic technologies.
Blockchain
The validity of each cryptocurrency’s coins is provided by aĀ blockchain. A blockchain is a continuously growing list ofĀ records, calledĀ blocks, which are linked and secured usingĀ cryptography.[23][26]Ā Each block typically contains aĀ hashĀ pointer as a link to a previous block,[26]Ā aĀ timestampĀ and transaction data.[27]Ā By design, blockchains are inherently resistant to modification of the data. It is “an open,Ā distributed ledgerĀ that can record transactions between two parties efficiently and in a verifiable and permanent way”.[28]Ā For use as a distributed ledger, a blockchain is typically managed by aĀ peer-to-peerĀ network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.
Blockchains areĀ secure by designĀ and are an example of a distributed computing system with highĀ Byzantine fault tolerance.Ā DecentralizedĀ consensus has therefore been achieved with a blockchain.[29]Ā Blockchains solve theĀ double-spendingĀ problem without the need of a trusted authority or centralĀ server, assuming noĀ 51% attackĀ (that has worked against several cryptocurrencies).
Timestamping
Cryptocurrencies use various timestamping schemes to “prove” the validity of transactions added to the blockchain ledger without the need for a trusted third party.
The first timestamping scheme invented was theĀ proof-of-workĀ scheme. The most widely used proof-of-work schemes are based on SHA-256 andĀ scrypt.[16]
Some other hashing algorithms that are used for proof-of-work includeĀ CryptoNight,Ā Blake,Ā SHA-3, andĀ X11.
The proof-of-stake is a method of securing a cryptocurrency network and achieving distributed consensus through requesting users to show ownership of a certain amount of currency. It is different from proof-of-work systems that run difficult hashing algorithms to validate electronic transactions. The scheme is largely dependent on the coin, and there’s currently no standard form of it. Some cryptocurrencies use a combinedĀ proof-of-work/proof-of-stakeĀ scheme.[16]
Mining
HashcoinĀ mine
In cryptocurrency networks,Ā miningĀ is a validation of transactions. For this effort, successful miners obtain new cryptocurrency as a reward. The reward decreasesĀ transaction feesĀ by creating a complementary incentive to contribute to the processing power of the network. The rate of generating hashes, which validate any transaction, has been increased by the use of specialized machines such asĀ FPGAsĀ andĀ ASICsĀ running complex hashing algorithms like SHA-256 and Scrypt.[30]Ā This arms race for cheaper-yet-efficient machines has been on since the day the first cryptocurrency, bitcoin, was introduced in 2009.[30]Ā With more people venturing into the world of virtual currency, generating hashes for this validation has become far more complex over the years, with miners having to invest large sums of money on employing multiple high performance ASICs. Thus the value of the currency obtained for finding a hash often does not justify the amount of money spent on setting up the machines, the cooling facilities to overcome the enormous amount of heat they produce, and the electricity required to run them.[30][31]
SomeĀ miners pool resources, sharing theirĀ processing powerĀ over a network to split the reward equally, according to the amount of work they contributed to the probability of finding aĀ block. A “share” is awarded to members of the mining pool who present a valid partialĀ proof-of-work.
As of FebruaryĀ 2018, the Chinese Government halted trading of virtual currency, banned initial coin offerings and shut down mining. Some Chinese miners have since relocated to Canada.[32]Ā One company is operating data centers for mining operations at Canadian oil and gas field sites, due to low gas prices.[33]Ā In June 2018,Ā Hydro QuebecĀ proposed to the provincial government to allocate 500 MW to crypto companies for mining.[34]Ā According to a February 2018 report fromĀ Fortune,[35]Ā Iceland has become a haven for cryptocurrency miners in part because of its cheap electricity. Prices are contained because nearly all of the country’s energy comes from renewable sources, prompting more mining companies to consider opening operations in Iceland.[citation needed]
In March 2018, a town in Upstate New York put an 18-month moratorium on all cryptocurrency mining in an effort to preserve natural resources and the “character and direction” of the city.[36]
GPU price rise
An increase in cryptocurrency mining increased the demand ofĀ graphics cardsĀ (GPU) in 2017.[37]Ā Popular favorites of cryptocurrency miners such as Nvidia’sĀ GTX 1060Ā andĀ GTX 1070Ā graphics cards, as well as AMD’s RX 570 and RX 580 GPUs, doubled or tripled in priceĀ ā or were out of stock.[38]Ā A GTX 1070 Ti which was released at a price of $450 sold for as much as $1100. Another popular card GTX 1060’s 6 GB model was released at an MSRP of $250, sold for almost $500. RX 570 and RX 580 cards fromĀ AMDĀ were out of stock for almost a year. Miners regularly buy up the entire stock of new GPU’s as soon as they are available.[39]
Nvidia has asked retailers to do what they can when it comes to selling GPUs to gamers instead of miners. “Gamers come first forĀ Nvidia,” said Boris Bƶhles, PR manager forĀ NvidiaĀ in the German region.[40]
Wallets
An example paper printable bitcoin wallet consisting of one bitcoin address for receiving and the corresponding private key for spending
AĀ cryptocurrency walletĀ stores theĀ public and private “keys”Ā or “addresses” which can be used to receive or spend the cryptocurrency. With the private key, it is possible to write in the public ledger, effectively spending the associated cryptocurrency. With the public key, it is possible for others to send currency to the wallet.
Anonymity
Bitcoin is pseudonymous rather than anonymous in that the cryptocurrency within a wallet is not tied to people, but rather to one or more specific keys (or “addresses”).[41]Ā Thereby, bitcoin owners are not identifiable, but all transactions are publicly available in the blockchain. Still,Ā cryptocurrency exchangesĀ are often required by law to collect the personal information of their users.[citation needed]
Additions such asĀ Zerocoin, Zerocash andĀ CryptoNoteĀ have been suggested, which would allow for additionalĀ anonymityĀ and fungibility.[42][43]
Fungibility
Most cryptocurrency tokens are fungible and interchangeable. However, uniqueĀ non-fungible tokensĀ also exist. Such tokens can serve as assets in games likeĀ CryptoKitties.
Economics
Cryptocurrencies are used primarily outside existing banking and governmental institutions and are exchanged over the Internet.
Transaction fees
Transaction fees for cryptocurrency depend mainly on theĀ supplyĀ of network capacity at the time, versus theĀ demandĀ from the currency holder for a faster transaction. The currency holder can choose a specific transaction fee, while network entities process transactions in order of highest offered fee to lowest. Cryptocurrency exchanges can simplify the process for currency holders by offering priority alternatives and thereby determine which fee will likely cause the transaction to be processed in the requested time.
ForĀ ether, transaction fees differ by computational complexity, bandwidth use, and storage needs, while bitcoin transaction fees differ by transaction size and whether the transaction usesĀ SegWit. In September 2018, the median transaction fee for ether corresponded to $0.017,[44]Ā while for bitcoin it corresponded to $0.55.[45]
Exchanges
Cryptocurrency exchangesĀ allow customers to trade cryptocurrencies for other assets, such as conventionalĀ fiat money, or to trade between different digital currencies.
Atomic swaps
Atomic swaps are a mechanism where one cryptocurrency can be exchanged directly for another cryptocurrency, without the need for a trusted third party such as an exchange.
ATMs
Bitcoin ATM
Jordan Kelley, founder ofĀ Robocoin, launched the firstĀ bitcoin ATMĀ in the United States on 20 February 2014. The kiosk installed in Austin, Texas is similar to bank ATMs but has scanners to read government-issued identification such as a driver’s license or a passport to confirm users’ identities.[46]
Initial coin offerings
AnĀ initial coin offeringĀ (ICO) is a controversial means of raising funds for a new cryptocurrency venture. An ICO may be used by startups with the intention of avoiding regulation. However, securities regulators in many jurisdictions, including in the U.S., and Canada have indicated that if a coin or token is an “investment contract” (e.g., under the Howey test, i.e., an investment of money with a reasonable expectation of profit based significantly on the entrepreneurial or managerial efforts of others), it is a security and is subject to securities regulation. In an ICO campaign, a percentage of the cryptocurrency (usually in the form of “tokens”) is sold to early backers of the project in exchange for legal tender or other cryptocurrencies, often bitcoin or ether.[47][48][49]
According toĀ PricewaterhouseCoopers, four of the 10 biggest proposed initial coin offerings have usedĀ SwitzerlandĀ as a base, where they are frequently registered as non-profit foundations. The Swiss regulatory agencyĀ FINMAĀ stated that it would take a “balanced approach” to ICO projects and would allow “legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with national laws protecting investors and the integrity of the financial system.” In response to numerous requests by industry representatives, a legislative ICO working group began to issue legal guidelines in 2018, which are intended to remove uncertainty from cryptocurrency offerings and to establish sustainable business practices.[50]
Legality
The legal status of cryptocurrencies varies substantially from country to country and is still undefined or changing in many of them. While some countries have explicitly allowed their use and trade,[51]Ā others have banned or restricted it. According to theĀ Library of Congress, an “absolute ban” on trading or using cryptocurrencies applies in eight countries: Algeria, Bolivia, Egypt, Iraq, Morocco, Nepal, Pakistan, and the United Arab Emirates. An “implicit ban” applies in another 15 countries, which include Bahrain, Bangladesh, China, Colombia, the Dominican Republic, Indonesia, Iran, Kuwait, Lesotho, Lithuania, Macau, Oman, Qatar, Saudi Arabia and Taiwan.[52]Ā In the United States and Canada, state and provincial securities regulators, coordinated through theĀ North American Securities Administrators Association, are investigating “bitcoin scams” andĀ ICOsĀ in 40 jurisdictions.[53]
Various government agencies, departments, and courts have classified bitcoin differently.Ā China Central BankĀ banned the handling of bitcoins by financial institutions inĀ ChinaĀ in early 2014.
In Russia, though cryptocurrencies are legal, it is illegal to actually purchase goods with any currency other than theĀ Russian ruble.[54]Ā Regulations and bans that apply to bitcoin probably extend to similar cryptocurrency systems.[55]
Cryptocurrencies are a potential tool to evade economic sanctions for example againstĀ Russia,Ā Iran, orĀ Venezuela. Russia also secretly supported Venezuela with the creation of theĀ petroĀ (El Petro), a national cryptocurrency initiated by theĀ MaduroĀ government to obtain valuable oil revenues by circumventing US sanctions.[citation needed]
In August 2018, theĀ Bank of ThailandĀ announced its plans to create its own cryptocurrency, the Central Bank Digital Currency (CBDC).[56]
Advertising bans
Bitcoin and other cryptocurrency advertisements were temporarily banned onĀ Facebook,[57]Ā Google,Ā Twitter,[58]Ā Bing,[59]Ā Snapchat,Ā LinkedInĀ andĀ MailChimp.[60]Ā Chinese internet platformsĀ Baidu,Ā Tencent, andĀ WeiboĀ have also prohibited bitcoin advertisements. The Japanese platformĀ LineĀ and the Russian platformĀ YandexĀ have similar prohibitions.[61]
U.S. tax status
On 25 March 2014, the United StatesĀ Internal Revenue ServiceĀ (IRS) ruled that bitcoin will be treated as property for tax purposes. This means bitcoin will be subject toĀ capital gains tax.[62]Ā In a paper published by researchers from Oxford and Warwick, it was shown that bitcoin has some characteristics more like the precious metals market than traditional currencies, hence in agreement with the IRS decision even if based on different reasons.[63]
In July 2019, the IRS started sending letters to cryptocurrency owners warning them to amend their returns and pay taxes.[64]
The legal concern of an unregulated global economy
As the popularity of and demand for online currencies has increased since the inception of bitcoin in 2009,[65]Ā so have concerns that such an unregulated person to person global economy that cryptocurrencies offer may become a threat to society. Concerns abound that altcoins may become tools for anonymous web criminals.[66]
Cryptocurrency networks display a lack of regulation that has been criticized as enabling criminals who seek to evade taxes andĀ launder money.
Transactions that occur through the use and exchange of these altcoins are independent from formal banking systems, and therefore can make tax evasion simpler for individuals. Since charting taxable income is based upon what a recipient reports to the revenue service, it becomes extremely difficult to account for transactions made using existing cryptocurrencies, a mode of exchange that is complex and difficult to track.[66]
Systems of anonymity that most cryptocurrencies offer can also serve as a simpler means to launder money. Rather than laundering money through an intricate net of financial actors and offshore bank accounts, laundering money through altcoins can be achieved through anonymous transactions.[66]
Loss, theft, and fraud
In February 2014 the world’s largest bitcoin exchange,Ā Mt. Gox, declaredĀ bankruptcy. The company stated that it had lost nearly $473 million of their customers’ bitcoins likely due to theft. This was equivalent to approximately 750,000 bitcoins, or about 7% of all the bitcoins in existence. The price of a bitcoin fell from a high of about $1,160 in December to under $400 in February.[67]
Two members of the Silk Road Task Forceāa multi-agency federal task force that carried out the U.S. investigation ofĀ Silk Roadāseized bitcoins for their own use in the course of the investigation.[68]Ā DEAĀ agent Carl Mark Force IV, who attempted to extort Silk Road founderĀ Ross UlbrichtĀ (“Dread Pirate Roberts”), pleaded guilty to money laundering,Ā obstruction of justice, and extortion under color of official right, and was sentenced to 6.5 years in federal prison.[68]Ā U.S. Secret ServiceĀ agent Shaun Bridges pleaded guilty to crimes relating to his diversion of $800,000 worth of bitcoins to his personal account during the investigation, and also separately pleaded guilty to money laundering in connection with another cryptocurrency theft; he was sentenced to nearly eight years in federal prison.[69]
Homero Josh Garza, who founded the cryptocurrency startups GAW Miners and ZenMiner in 2014, acknowledged in aĀ plea agreementĀ that the companies were part of aĀ pyramid scheme, and pleaded guilty toĀ wire fraudĀ in 2015. The U.S.Ā Securities and Exchange CommissionĀ separately brought a civil enforcement action against Garza, who was eventually ordered to pay a judgment of $9.1 million plus $700,000 in interest. The SEC’s complaint stated that Garza, through his companies, had fraudulently sold “investment contracts representing shares in the profits they claimed would be generated” from mining.[70]
On 21 November 2017, theĀ Tether cryptocurrencyĀ announced they were hacked, losing $31 million in USDT from their primary wallet.[71]Ā The company has ‘tagged’ the stolen currency, hoping to ‘lock’ them in the hacker’s wallet (making them unspendable). Tether indicates that it is building a new core for its primary wallet in response to the attack in order to prevent the stolen coins from being used.
In May 2018,Ā Bitcoin GoldĀ (and two other cryptocurrencies) were hit by a successful 51% hashing attack by an unknown actor, in which exchanges lost estimated $18m.[citation needed]Ā In June 2018, Korean exchangeĀ Coinrail was hacked, losing US$37 million worth of altcoin. Fear surrounding the hack was blamed for a $42 billion cryptocurrency market selloff.[72]Ā On 9 July 2018 the exchange Bancor had $23.5 million in cryptocurrency stolen.[73]
The French regulatorĀ AutoritĆ© des marchĆ©s financiersĀ (AMF) lists 15 websites of companies that solicit investment in cryptocurrency without being authorised to do so in France.[74]
Darknet markets
Properties of cryptocurrencies gave them popularity in applications such as a safe haven in banking crises and means of payment, which also led to the cryptocurrency use in controversial settings in the form ofĀ online black markets, such asĀ Silk Road.[66]Ā The original Silk Road was shut down in October 2013 and there have been two more versions in use since then. In the year following the initial shutdown of Silk Road, the number of prominent dark markets increased from four to twelve, while the amount of drug listings increased from 18,000 to 32,000.[66]
Darknet markets present challenges in regard to legality. Bitcoins and other forms of cryptocurrency used in dark markets are not clearly or legally classified in almost all parts of the world. In the U.S., bitcoins are labelled as “virtual assets”. This type of ambiguous classification puts pressure on law enforcement agencies around the world to adapt to the shifting drug trade of dark markets.[75]
Reception
Cryptocurrencies have been compared toĀ Ponzi schemes,Ā pyramid schemes[76]Ā andĀ economic bubbles,[77]Ā such asĀ housing market bubbles.[78]Ā Howard MarksĀ ofĀ Oaktree Capital ManagementĀ stated in 2017 that digital currencies were “nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it”, and compared them to theĀ tulip maniaĀ (1637),Ā South Sea BubbleĀ (1720), andĀ dot-com bubbleĀ (1999).[79]Ā The New YorkerĀ has explained the debate based on interviews with blockchain founders in an article about the āargument over whether Bitcoin, Ethereum, and the blockchain are transforming the worldā.[80]
While cryptocurrencies are digital currencies that are managed through advanced encryption techniques, many governments have taken a cautious approach toward them, fearing their lack of central control and the effects they could have on financial security.[81]Ā Regulators in several countries have warned against cryptocurrency and some have taken concrete regulatory measures to dissuade users.[82]Ā Additionally, many banks do not offer services for cryptocurrencies and can refuse to offer services to virtual-currency companies.[83]Ā Gareth Murphy, a senior central banking officer has stated “widespread use [of cryptocurrency] would also make it more difficult for statistical agencies to gather data on economic activity, which are used by governments to steer the economy”. He cautioned that virtual currencies pose a new challenge to central banks’ control over the important functions of monetary and exchange rate policy.[84]Ā While traditional financial products have strong consumer protections in place, there is no intermediary with the power to limit consumer losses if bitcoins are lost or stolen.[85]Ā One of the features cryptocurrency lacks in comparison to credit cards, for example, is consumer protection against fraud, such asĀ chargebacks.
An enormous amount of energy goes intoĀ proof-of-workĀ cryptocurrency mining, although cryptocurrency proponents claim it is important to compare it to the consumption of the traditional financial system.[86]
There are also purely technical elements to consider. For example, technological advancement in cryptocurrencies such as bitcoin result in high up-front costs to miners in the form of specializedĀ hardwareĀ andĀ software.[87]Ā Cryptocurrency transactions are normally irreversible after a number of blocks confirm the transaction. Additionally, cryptocurrency private keys can be permanently lost from local storage due to malware, data loss or the destruction of the physical media. This prevents the cryptocurrency from being spent, resulting in its effective removal from the markets.[88]
The cryptocurrency community refers to pre-mining, hidden launches,Ā ICOĀ or extreme rewards for the altcoin founders as a deceptive practice.[89]Ā It can also be used as an inherent part of a cryptocurrency’s design.[90]Ā Pre-mining means currency is generated by the currency’s founders prior to being released to the public.[91]
Paul Krugman,Ā Nobel Memorial Prize in Economic SciencesĀ winner does not like bitcoin, has repeated numerous times that it is a bubble that will not last[92]Ā and links it toĀ Tulip mania.[93]Ā American business magnateĀ Warren BuffettĀ thinks that cryptocurrency will come to a bad ending.[94]Ā In October 2017,Ā BlackRockĀ CEOĀ Laurence D. FinkĀ called bitcoin an ‘index ofĀ money laundering‘.[95]Ā “Bitcoin just shows you how much demand for money laundering there is in the world,” he said.
Academic studies
In September 2015, the establishment of theĀ peer-reviewedĀ academic journalĀ LedgerĀ (ISSNĀ 2379-5980) was announced. It covers studies of cryptocurrencies and related technologies, and is published by theĀ University of Pittsburgh.[96]
The journal encourages authors toĀ digitally signĀ aĀ file hashĀ of submitted papers, which will then beĀ timestampedĀ into the bitcoinĀ blockchain. Authors are also asked to include a personal bitcoin address in the first page of their papers.[97][98]
See also
References …
https://en.wikipedia.org/wiki/Cryptocurrency
Texas Health Care Fraud and Opioid Takedown Results in Charges Against 58
HOUSTON – The Justice Department has announced a coordinated health care fraud enforcement operation across the state of Texas involving charges against a total of 58 individuals, several of which are charged in Houston. They were allegedly involved in Medicare fraud schemes and networks of āpill millā clinics resulting in $66 million in loss and 6.2 million pills. Of those charged, 16 were doctors or medical professionals, while 20 were charged for their role in diverting opioids.
The Health Care Fraud Unit of the Criminal Divisionās Fraud Section in conjunction with its Medicare Fraud Strike Force (MFSF) partners led the enforcement actions. The MFSF is a partnership among the Criminal Division, U.S. Attorneyās Offices, FBI, Department of Health and Human Services ā Office of Inspector General (HHS-OIG) and Drug Enforcement Administration. In addition, the operation includes the participation of the Veterans Affairs ā OIG and the Department of Labor (DOL), various other federal law enforcement agencies and Texas State Medicaid Fraud Control Units.
The charges announced today aggressively target schemes billing Medicare, Medicaid, TRICARE (a health insurance program for members and veterans of the armed forces and their families), DOL – Office of Workerās Compensation Programs and private insurance companies for medically unnecessary prescription drugs and compounded medications that often were never even purchased and/or distributed to beneficiaries. The charges also involve individuals contributing to the opioid epidemic, with a particular focus on medical professionals allegedly involved in the unlawful distribution of opioids and other prescription narcotics, a particular focus for the Department.
According to the Centers for Disease Control, approximately 115 Americans die every day of an opioid-related overdose.
Todayās arrests come three weeks after the Department announced that the Health Care Fraud Unitās Houston Strike Force coordinated the filing of charges against dozens in a trafficking network responsible for diverting over 23 million oxycodone, hydrocodone and carisoprodol pills.
āSadly, opioid proliferation is nothing new to Americans,ā said U.S. Attorney Ryan K. Patrick of the Southern District of Texas. āWhat is new, is the reinforced fight being taken to dirty doctors and shady pharmacists. Texas may have four U.S. Attorneys, but we are focused on one health care mission: shutting down pills mills and rooting out corruption in health care. From Lufkin to Laredo and Dallas to Del Rio, one of us will shut these operations down.ā
āTodayās charges highlight the amazing work being done by the Departmentās Medicare Fraud Strike Force and our partners in Texas,ā said Assistant Attorney General Brian A. Benczkowski of the Justice Departmentās Criminal Division.Ā āAs we continue to dedicate resources to battle healthcare and opioid fraud schemes in Texas and elsewhere, we are shining an inescapable light on dirty doctors, clinic owners, pharmacists and others who may have long believed they could perpetrate their frauds behind closed doors.ā
āThese arrests across multiple investigations and jurisdictions is further proof that successful teamwork exemplifies Texas law enforcement,ā said DEA Houston Special Agent in Charge Will R. Glaspy. āTodayās operation affirms both our commitment to targeting those individuals who illegally divert opioids in our communities, and our collective will to bring those individuals to justice.ā
āHealth care fraud undermines our country by driving up medical costs, wasting taxpayer dollars, and often harming patients,ā said Special Agent in Charge C.J. Porter of HHS-OIG. āTodayās takedown shows that we are fighting hard to protect Medicare and Medicaid and the patients served by those programs. Working closely with our law enforcement partners, our agents are determined to ensure fraudsters pay for their crimes.ā
āTodayās announcement demonstrates the close collaboration between the FBI and its law enforcement partners in North Texas,ā said Special Agent in Charge Matthew J. DeSarno of the FBIās Dallas Field Office. āThe enormous economic damage caused by those who defraud crucial public health programs, as well as the ever-increasing loss of life caused by illicit and illegitimate pill schemes cannot be overstated. The public can rest assured the FBI will continue to make these investigations a top priority moving forward.ā
Among those charged in the Southern District of Texas are:
Diana Hernandez, Kathy Hernandez, Hieu Troung R.P.H., Clint Randall, Prince White, Charles Walton and Cedric Milbrurn were charged for their alleged participation in a scheme to unlawfully distribute and dispense controlled substance without a legitimate medical purpose through S&S Pharmacy of Houston.
Franklin Nwabugwu R.P.H. was charged for their alleged participation in a scheme to unlawfully distribute and dispense controlled substance without a legitimate medical purpose through Golden Pharmacy of Houston.
Steven Inbody M.D. and Hoai-Huong Truong were charged for their alleged participation in a scheme to unlawfully distribute and dispense controlled substance without a legitimate medical purpose.
Ashley McCain, John Sims, Gregory Comer, Kesia Banks and Jacqueline Hill were charged for their alleged participation in a scheme to unlawfully distribute and dispense a controlled substance without a legitimate medical purpose through Continuous Medical Care and Rehabilitation.
Trial Attorneys Devon Helfmeyer and Catherine Wagner and Assistant Deputy Chief Aleza Remi, all of the Fraud Section, are prosecuting the respective cases.
Several others were also charged inĀ the Northern District of Texas (NDTX), Eastern District of Texas (EDTX) and Eastern District of Texas (EDTX).
āHealthcare should revolve around patientsā well-being ā not providersā personal interests,ā said NDTX U.S. Attorney Erin Nealy Cox.Ā āWhen medical professionals line their own pockets by submitting false insurance claims or prescribing unnecessary medications, equipment or treatments, it not only drains taxpayer coffers ā but it makes healthcare more expensive for everyone else. We cannot allow the healthcare industry to become bloated by fraud.ā
āEvery dollar stolen from Medicare through fraud comes out of the pocket of taxpayers,ā said EDTXU.S. Attorney Joseph D. Brown of the āThese are real costs that help drive up the cost of medical services for everyone. It is important that there be real consequences for those who cheat the system.ā
āI am proud to fight healthcare fraud in Texas alongside Ryan Patrick, Erin Nealy Cox and Joe Brown,ā said WDTX U.S. Attorney John Bash.Ā āThese crimes drive up the cost of health insurance, waste tax revenue and threaten the well-being of Texans.ā
The Fraud Section leads the MFSF, which is part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. MFSF maintains 15 strike forces operating in 24 districts. Since its inception in March 2007, MFSF has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion. In addition, HHS Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
An indictment is a formal accusation of criminal conduct, not evidence.
A defendant is presumed innocent unless convicted through due process of law.
Medicaid Fraud and Abuse
Overview
Fraud, abuse and waste in Medicaid cost states billions of dollars every year, diverting funds that could otherwise be used for legitimate health care services.Ā Not only do fraudulent and abusive practices increase the cost of Medicaid without adding value ā they increase risk and potential harm to patients who are exposed to unnecessary procedures.Ā In 2015, improper payments aloneāwhich include things like payment for non-covered services or for services that were billed but not providedātotaledĀ more than $29 billion according to the Government Accountability Office.
While Medicaid fraud involves knowingly misrepresenting the truth to obtain unauthorized benefit, abuse includes any practice that is inconsistent with acceptable fiscal, business or medical practices that unnecessarily increase costs.Ā Waste encompasses overutilization of resources and inaccurate payments for services, such as unintentional duplicate payments.Ā As states look for innovative ways to contain burgeoning Medicaid costs and promote the programās integrity, fighting fraud and abuse offers one approach that everyone can support.
Program Integrity Initiatives. The federal government and states have adopted aĀ varietyĀ of steps to combat Medicaid fraud, waste and abuse and to ensure that public funds are used to promote Medicaid enrolleesā health. According to the Medicaid and CHIP Payment Access Commission (MACPAC), these include data mining, audits, investigations, enforcement actions, technical assistance to help state agencies detect fraud and abuse, and provider and enrollee outreach and education. Well-designed program integrity initiatives ensure that:
A 2013 Pew Charitable Trustsā report found that states utilized three types of Medicaid fraud prevention strategies, including: provider screening; prior authorization and pre-payment reviews; and post-payment review and recovery. While states have traditionally relied upon the latter, āpay and chaseā model in which they pay Medicaid claims and then try to recover improper payments, they are increasingly focusing on preventing and detecting fraudulent activities early on. New York, for example has integrated targeted data mining and risk analysis into its fraud-fighting tool box.Ā In Texas, a few simple process changes and new pattern analysis and recognition efforts moved the state closer to ārealātime analysisā and significantly increased the amount of fraud identified. Ā For more on what these states have done to fight Medicaid fraud and abuse, check out thisĀ WebinarĀ archive.
Federal Medicaid Integrity Provisions.Ā The Affordable Care Act (ACA) introducedĀ various requirements aimed at improving Medicaid program integrity.Ā For example, the law created a web-based portal, enabling states to compare information on providers that have been terminated (and whose billing privileges have been revoked). An overview of the lawās provisions related to improving Medicaid program integrity is availableĀ here.
Common Examples ofĀ Medicaid Fraud
Provider Fraud
Patient Fraud
Insurer Fraud
Additional NCSL Resources
Other Recent Medicaid Program Integrity and Fraud Prevention Resources
http://www.ncsl.org/research/health/medicaid-fraud-and-abuse.aspx
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Listen To Pronk Pops Podcast or Download Shows 38-40
Listen To Pronk Pops Podcast or Download Shows 34-37
Listen To Pronk Pops Podcast or Download Shows 30-33
Listen To Pronk Pops Podcast or Download Shows 27-29
Listen To Pronk Pops Podcast or Download Shows 17-26
Listen To Pronk Pops Podcast or Download Shows 16-22
Listen To Pronk Pops Podcast or Download Shows 10-15
Listen To Pronk Pops Podcast or Download Shows 1-9
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