SEP 1'95 11:41 FR 416 863 2613 TO 86135943965 THE COMPimTION TRIBUNAL IN THE MAI TER OF an Application by the Director f Investigation and Research under sections 77 and 79 of e Competition 6ct R.S.C. 1985 c. C-34, as amended BETWEEN: THE DIREC'fOR OF INVESTIGATION AND RESEARCH - and-
TEJ...E..DIRECT (PUBLICATIONS) INC., ...:OMPETITlON TRIBUNAL TELE-DIRECT (SERVICES) INC. TRIBUNAL OE LA CONCURRENCE Respondents
File No. tf--14-/3 - and -No'C&d ossler v Jh _, ~ et f-/ 7 4- IDJ ANGLO-CANADIAN TELEPHONE COMPANY, Exhibit No . - ~ NDAP-TMP WORIDWIDE LID., 18 No. de ~?hs-';.~JPRECTORY ADVERTISING CONSULTANTS LIMITED ~':s': 1e ~ I 1 AND THUNDER BAY TELEPHONE Registrar ~ ~ Greffier lmervenors AFFIDAVIT OF MICHAEL TREBILCOCK 1, Michael Trebilcock, of the City of Toronto, in the Province of Ontario, MAKE OATH AND SAY AS POI.LOWS:
1. I have been a Professor of Law at the University of Toronto since 1972 and Director of the Law and Economics Programme since 1976. I was a Visiting Fellow in Law and Economics at the University of Chicago Law School in 1976 and a Visiting Professor in
P.1216 No. CT-94/3 ............ .......... lA lOllQllllNG p /1 .d ~ SEP 1 '995 /CIJ ~ 0 RE_,'"'"''R _ "''"sraAIRE ~ -~A\v'A: ~~T. -·-f#; AQ, Applicant
SEP 1'95 11:41 FR 416 863 2613 TO 86135943965 P.07 -2-Law and F.conomics, at Yale Law School in 1986. I was eleaed a member of the Royal Society of Canada m1 987 and appointed a University Professor in 1990. I teach and research in the areas of contract Jaw and theory, competition policy. intemaiionaJ ttadc law and government regulation. I have published numerous books and articles in these areas as set out in my cuniculum vitae (attached hereto as Exhibit "A")_ I have consulted extensively to private secror clients and the Competition Policy Bureau in a wide r.mge of competition policy matters. I have given expert evidence before courts, the Competition Tribunal and various federal and provincial regulatory bodies on competition and regulatory issues. I have been retained by the Respondents to provide an expen opinion and expert evidence specifically with respect to the Director's allegation of tied selling in bis Statement of Grounds and Material Facts (amended) in this matter and tiled with the Tti1>un.al (hereinafter The Director's Facrum).
2. Tele-Direct (Publications) Inc. and Tele-Direct (Services) Inc. (hereinafter collectively referred to as "ID") are Canadian corporations with head offices in Montreal. 1D is the authorized publisher of telephone directories which are distributed to telephone subscribers in Ontario, Quebec, New Brunswick, Newfoundland and Labrador, the Yukon Territory and the Northwest Territories. TD is wholly owned by the Bell Canada group.
3. Telephone companies are required by the CRTC to distribute t.elepbone dire.ctories at no additional charge to telephone subscribers. 1bese directories include both alphabetical listings of all subscribers in an area (the "White Pages"), as well as a listing of
415 853 2513 TO 85135943955 P.08 SEP 1'95 11:41 FR - 3 all businesses in a region according to their field of bu.miess (the "Yellow Pages.,."). While all businesses are listed in the basic listings· in the Yellow Pages 91 free of charge, these directories have also become an effective paid advertising medium. TD pays the tclcos, for the right to publish and provide the directories free of charge to subscribers in order to sell tbe advertising space.
4. The Dire.ctor alleges that m ties the provision of various "advertising services· to the purchase of space in the Yellow Pages"'. 1be Director submits:
The "advertising services· or "selling" business refers to the provision of s=rvi.ces relating to the sale of advertising space in a telephone directory. including establishing new customers, calling on customers, and providing advice, info nnation and other services relating to the design, cost, content, location, creation and placing of the advertisements. [Director's Factum, para. 9].
Only if a customer's account is "commissionable" and the advenising agent in question is approved by TD (a specialized Certified Marketing Represemative, or CMR, and certain general advertising agencies) will TD pay a commission to an independem advertisllig agent for selling advertising tO an advertiser. Approximately 903 of accountS do not meet the commissionability criteria set by TD. The commissionability criteria for the most pan refer to large national or regional advertisers who advertise in many yellow pages directories published by different publishers. For the remaining accounts, the only commissioned sales people from whom an advertiser may purchase m directory ads are internal TD employe.es although TD will accept ads placed and paid on behalf of an advertiser by a C:MR., but without payment of a COIIlIJlission. The Director alleges that this amoums to a tie of advertising services (the "tied good") to advenising space (the "tying good-) that substantially lessens competition in violation of Section 77{1) of the Competition Act. The Director alleges in the iDslant case chat the customer is induced to purchase advertising
SEP 1'95 11:41 FR 416 863 2613 TO 86135943965 P.1219 -4-services from TD along with advertising space because there is no additional cost to doing so. This, it is comended, bas impeded emry or expansion of advertising agencies or others in the market for lbe provision of telephone directory advertising services. The Director claims:
Advertising agencies or others would provide such services or expand if a reasonable commission were available or if space and service were offered at unbundled prices which reasonably reflected relative ~ [Director's Factum, para. 55].
s. By way of relief, the Director seeks an order from the Tribunal requiring TD, in the alternative, either to offer and supply advertising services and advertising space at separate prices and in a fashion such that (a) the price of advenising services and advertising space when offered together equals the sum of the separately quoted prices for such products and that such separate prices reflect the relative costs of providing each component or (b) that TD expand its commission criteria so that all or further advenisement.S placed by independent advertising agencies certified by TD qualify for a spedfied commission, where certification is available on a non-discriIIUnatory basis to all iDdependent advcnis.ing agencies who can satisfy reasonable requirements of solvency. (Facnun, para. 69a).
6. In conceprua.Iizing the nature of the tying allegations in this case, I tiisI adopt the perspecti"e of Lhe fmn (TD) against whom the allegations are directed and seek to explain why. from its private perspective, it has organized irs selling functions in the way that it has. Later in my opinion, I adopt a broader social welfare perspective in whether the arrangements adopted. even if in the interest of the firm. arc nevertheless inconsistent with social welfare. Finally, I relate my analysis to the tying provisions (s.7 7) of the C.Omperition Act.
7. From the perspective of TD, in considering bow to organi7.e its selling functions with respect to Yellow Pages 111 advertising, the central challenge facing it is bow to motivate a sales force (internal or external) to sell an optimal quantity and quality of
SEP 1'95 11:42 FR 416 863 2613 TO 86135943965 P.10 -s advertising when the revenues from advertising sales do not all accrue to the sales force but to an imponant extem to 1D as the directory publisher. 'Ibis is a classic principal-agent problem and requires an analysis of the incentive properties of various contraaual or orpnizarional mangementS designed to align as fully as possible the interests of the agem (i.e. the sales force) with those of the principal ('l1>). This in mm implicates the theory of the firm and theories of vertical integration, because what the Director is essentially alleging in this case is that Tele-Direct has vertically imegrated within m the various aspects of the
advertising production function, with the consequence that illdependeDt advcnising sales agencies play a less significant role in this sector than if all or more of the selling functions were "contracted out".
8. The literature on the theory of the fum and vertical integration addresses the question of when fums will integrate productive functions internally and when it will contract them out i.e. the "make or buy" decision. For example, if General Motors requires tires for its cars. it may purchase them from an independent tiie-manufacmring company or it may crea.t.e its own internal tire-manufacturing division. Why do we sometimes observe firms producing their O'WD inputs and at other times observe firms coDIIaCting out the provision of inpllts? The pioneering analysis by RoDald Coase (the 1991 Nobel Laureate in Economics) of this question focuses on the traDSaction costs inherent in organizing an activity thr-0ugh either the market or the firm. 1 Where a transaction is organized tbrough tbe m.arket, information on available prices and quality must be obtained. As well, contracts must be negotia?ed, monitored. and enforced for each desired purchase. F.ach of thc!se steps is costly. On the other hand, internalizing production is also costly because information on the value and scarcity of iDputs - which would otherwise be provided by the market - is replaced by less accurate internal proxies. 2 Subsequem theorists have stressed the relative costs of l Ronald Coase. "The Nature of the Firm". (1937) 4 Econo11Uca 397. See, for example, Oliver Williamson. "Hierarchical Control and Optimal Firm Size, .. (1967) 75 Journal of Poliric.al Econom:y 123.
SEP 1'95 11=42 FR 416 863 2613 TO 86135943965 P.11 - 6 differem forms of oppormnism under contracting out and im.emal production regimes. 3 In the case of contracting out, there are incentives for the outside comractor to engage in peamiary forms of opponunism by chiselling on feamres of the contract that are difficult to specify. monitor or enforce. On the other band, where production is moved in-house using contracted employees, there are incentives to engage in non-peomiary fonns of opportunism, such as consumption or slacking on the job, given that employee remuneration is often not closely tied to output.
9. The literature on the theory of the firm and vertical integration suggests that market provision of needed inputs .may well be more efficient when needs can be easily specified and are relatively constant; when compliance with conrractuaJ terms is easily monitored; when negotiation of contracts is relatively inexpensive; and when there are highly differentiated inputs with few economies of scale and scope but large returns to speciali.7.ation. On the other hand, production within the firm is preferred when needs are difficult to specify or are in a state of continuous evolution; when compliance with contractual terms becomes more difficult to monitor, and hence there is an increased risk of chiselling by com:ractors; and when contraet negotiations become more complicated and expensive. 4 3 See, for example, Armen Alchian and Harold De:mset:z, "Production, Information, Costs~ and Economic Organization", (1972) 62 American &anomic Review 777; John McManus, "The Costs of Alternative Economic Organiz.ation", (1975) 8 Canadian
Joumal of Economics 334; Oliver Williamson, Markets and Hierarchies (New York: Free Press, 1975); idem, "Transaction Cost Economics: Tbe Governance of Collll'aCtual Relations", (1979) 22 Journal of Law and Economics 3; Oliver Han, ·An :Economist's Perspective on the Theory of the Firm'', (1989) 89 Columbia L.Rev. 1757; Paul Milgrom and John Robens, Economic OrganU.prion arid Management (New Jersey: Prentice-Hall, 1992) at 552-569.
See Michael J_ Tre~ilcock and J.R.S. Prichard, "Crown Corporations in Canada: The calculus of Instrument Choice", in J.R.S. Prichard, ed., Crown Corporariorzs in
Canada (Toronto: Butterwonhs, 1983).
SEP 1'95 11:42 FR 415 853 2513 TO 85135943955 P.12 - 7 -10. It must be emphasized that whether or not a tiim bas market power in its output market is unlikely to affect & calculus with respect to the "make or buy .. decision regarding the provision of inputs. For example, suppose a coat manufacmrer has (for whateVer reason) a monopoly in the coat (output) market and chooses to sell coats with buttons rather than coats and buttons separately. Its calculus on the integration or •bundling" decisions in its ourput and input markets reflect quite different considerations. A decision to imegnue or bundle in its output market will reflect customer preferences and the relative transaction costs entailed for firms and customers in providing coats with buttons or coats and buttons separately. However. on the input side, the coat manufacturer may choose to contract out the supply of material and t:he manufacwre of buttons. Whether it chooses to do so, or alternatively to produce all inputs intemally, will be governed by efficiency i.e. cost minimizjng, considerations. Similarly, a firm which has a natural monopoly in its output market or holds a product patent that confers market power on it may or may not choose to contract out the provision of various productive inputs e.g. payroll services, accounting and computer services. janitorial services, etc. etc. Fim:ls will approach these decisions in precisely the same way whatever their degree of market power (from zero to full monopoly) in their output markets. In such cases, it would normally not be regarded as a compelling competition law claim for an external contractor to argue that it should be entitled to bid on the provision of some of these inputs or to render a firm's decisions on how to organize its production functions subject to external vetting by a third pany agency. precisely because there is no reason to suppose that tlIIIlS generally will be motivated by considerations other than cost minimizing considerations (subject to well-recogniu:d exceptions such as foreclosure ro competitors of access to essential facilities - disclwed further below under "Barriers to Entry"). Moreover, this will be so even though the effect of decisions by firms to internally integrate production functions by definition will reduce tbe role and number of external providers who may wish to perform some of these functions. As was stated by the U.S. District Court for the Central District of California in 17z.e Selten Agency Inc. v. The Paci.fie Telephone and Telegraph Co. et. al (1981), on similar facts to the present case: "It is not a violation of the anti-uust laws for a publisher to refuse to buy a service that is not
SEP 1'95 11:43 FR 416 863 2613 TO 86135943965 P.13 -8-wonb. buying"' (at p. 17). Or as .staled by ITT World Direcmries Ud., in the investigation by the U.K. Office of Fair Trading of British Telecommunications' pricing policies for yellow pages directory advertising (October 11, 1984) (benceforth the OFT Repon). •Having tendered competitively and been awarded the position of sales contract.or. we do not see any reason why a company should claim to do part of our work at a cost which exceeds ours and expect us to pay them for it" (at p. 24). Or as stated by the Seventh Ciicuit Court of Appeals in Jack Walters & Sons DJrp. v. Monon Building Inc. (1994) 737 F. 2d. 698 at 710:
V enical integration is not unlawful or even a suspect category under the antitrust laws: "Firms constantly face make-or-by decisions - that .is, decisions whether to purchase a good or service in the market or to produce it iDternally - and ordinarily the decision, whichever way it goes, raises no antitrUSt question."' ...
Venical integration is a universal feature of economic life and it would be absurd to make it a suspect category under the antitrust laws just
because it may bun suppliers of the service that bas been brought within the firm ...
We just said that venical integration is not an improper objective. But this puts the matter too tepidly. Vertical integration usually is procompetitive. If there are cost savings from bringing into the fum a function formerly performed outside it, the firm will be made a more. effective competitor. Moreover. the option of vertical integration places competitive pressure on the fmn's suppliers and buyers. who know if they charge too much for their services the firm. may decide to perform them itself. It thus increases competition in the markets for
those services.
11. Within the analytical framework provided by tbe theory of the firm and theories of vertical integration, I now attempt to explain pievailing selling policies and practices in Tele-Direct's directory territories. In my opinion, any tbeoey of the tying allegations in this case needs to explain the following central facts:
416 863 2613 TO 86135943965 P.14 SEP 1'95 11:43 FR - 9 -(A) CMRs are not paid commissions by TD in tbe smaller advertiser sector. CMRs do not, for the most part, wish to enter the smaller advertiser secror. TD services the smaller advertiser market. In inlerviews by the Director's staff with CMRs (as reported in notes made available to me on a confidential basis), CMRs provided various estimares of this cut-off ranging from $10.000 per accou.nt per year to $50,000 per year (depending on the commission rate payable).
(B) CMRs are not paid commissions on larger local advertising accouD1s. CMRs wish to expand their presence in the larger local advertisiDg ~"tor by receiving commissions from TD for selling advertising and related services. m prefers to provide selling and related functions in the larger local
advertising sector through its O'WD. internal sales forc.e.
(C) CM.Rs sell Yellow Pages'l)l advertising and related services to larger national or regional advertisers on a commission basis. CM.Rs service the vast majority of these larger national or regional advertisers.
(D) A closely similar panern in the organization of advertising selling functions obtains with respect to most. if not all, telco-affiliated yellow page directories in North America, both where the directory publisher is responsible for the selling function and where these functions have been contracted out on an exclusive basis to a single jndependent sales agent, and with respect to almost all independent or proprietary consumer directories.
12. Before commenting on each of these four central facts directly, in my opinion it is useful to set the context by developing a clear appreciation of what is involved in the provision of yellow pages advertising. As a generalization, there are three distiJlcc elements in the provision of yellow pages advertising: efforts devoted to selling the space, consulting
416 863 2613 TO 86135943965 P.15 SEP 1'95 11:43 FR - 10 advice regarding the advertisement (artwork. placement. etc-). and the space itself. Each of these elements are inputs into the provision of advertising. The Director is, in effect, alleging that these three elements have been tied together by Tele-Direct, with tbe effect that independent advertising agew are being foreclosed from undemJdng a broader range of advertising functions. Tbe question I address here is the extent to which ODe can properly regard the internal integration of the production of complememary iDpms as tying, or whether on the other bmd there is simply a single outpu~ i.e. advertising.
13. I examine fust the possibility of viewing each of the three functions identified above as unbundled producrs that TD might price separately and Vrith IQ])CCt to which advertisers might be given a choice as to supplier (as the Dim:ror has proposed). It becomes immediately apparent that the selling function is not a separable function that c.ould be priced separately. Potential adverusers who are recipients of sales pitches but decide not to advenise will obviously not be willing to pay for the sales pitch either ex ante or e:x poSI. Potential advertisers who rea:ive the sales pit.eh and are persuaded by it face strong incentives to behave opponunistically by not placing their advertising business through the selling agent but directing it through either the seller of the space or the seller of the advertising services, implying that there will be strongly attenuated incemives to engage in the selling function. 'Ibis illustrates what Arrow refers to as "the paradox in determination of the demand for information " 5 - information cannot be accurately valued in many cases by recipienrs without disclosing to tbem the illfo nnation before a contract to pay for the information is c.oncluded. which renders the contract pointless. Thus, it quickly becomes clear that the selling function must be bundled with one or both of the other two functioos, i.e. space or consulting services. If the selling function is bundled with tbe provision of consulting servic.es, similar problems quickly become manifest. For example, a selling agent approaches a potential advertiser and offers a joint price for selling and '"°multin& services.
s Kenneth Anow. Essays in the Theory of Risk Bearing (North Holland Publishing Company: Amsterdam, 1974) Chap. 6 at 151 and 152.
- 11 -The advertiser is persuaded of the advantages of advertising but does not place his advertising with the initial selling agent and instead approaches another agent and simply purchases desired but discrete consulting services from it, implying again that resources invested in the selling function will be umecouped.
14. This leads then to the option of bundling the selling tunction with the provision of space. Here. because a potential advertiser who has been persuaded to advertise, always needs the space, be cannot behave opportunistically and will be required to pay for the semng effort as pan of the price for the space (in much the way that new car dealers recoup their selling costs in the costs of their cars). This suggesrs that the only possible way of separating advertising into its three component elements would be to bundle space and selling effon on the one hand and sell advenising consulting services separately on the other. However, even here problems can readily be anticipated. First. it is often difficult to disentangle selling effort from consulting services. In sel1ing a potential advertiser on the advantages of advertising, a sales agent will often propose various advertising strategies that entail advising on issues such as potential ad design and placem.ent. Thus, it may be next to impossible for TD to place a separate and non-contestable price on advertising consulting services relative to the prices it charges for the bundle of space and selling effort. Moreover. according to the OFT Report, even for large national advertising these discrete consulting services amount to no more than 4 112 percent of gross revenues from advertising, implying a very small market for these services on a stand-alone basis.
15. These difficulties of pricing separately the various inputs into the provision of advertising raise serious questions as to whether it is appropriate to conceive of TD's present pricing policies as tying of one product to another product at all. rather than simply conceiving of advertising as a single product. These difficulties persuaded the OFT and most of the witnesses that appeared before it that unbundling was simply nor a viable option. At chis point, the Director may choose to emphasize the alternative remedy that he bas proposed, i.e. that all o.r most Yellow Pages'!X accounts be commissionable, on the premise ,. percent in this example). In this case, therC are mutual gains from trade to be realized by commissioning external sales agems. On the other hand, if ID's internal sales costs are 8
SEP 01 '95 12:SBPM BLAKES TOR 28TH FLR P.2 - 12 that a bundle of services can then be contracted out for a Jingle commission. However, it is easy to show that this is cquivalem to buDdling selling e~ort and advertising consulting services and separating them from space 1 with much the same implications as under the unbundling remedy proposed by the Director. Suppose npw that there are a number of independent advertising ageocies compedng for Yellow Pages• advertisers' business on the basis of stipulated commissiom payable by TD. Agent " approaches a potential advertiser and persuades him of the advantages of advcnising, but the advertiser declines to place the ad through Agent A and instead contacts Agent B and asks Agent B to prepare the artWork and design layout, etc. (perhaps free-riding on suggestions made by Agent A) in return for a discount on Agent B's commission so that the residual copmrlssion received by Agent B reflects only the costs incurred by Agent B in providing ~e discrete advertising consulting services (perhaps 4 1/2 percent of the cost of the ad, if tbe OFT9s estimates are approximately accurate in a Canadian context). Only if TD was able effectively to contract with all agents not to rebate commissions to advertisers ~ould this problem be addressed, but such a contract would be extremely difficult to monitor apd enforce. As in the unbundling scenario, the commission scenario creates serious unde~centives to ·provide optimal selling effon, given that it will often be uncompensated. ~ ord~r to avoid this, one will often be driven again to bundling the selling effort with the sale of the space. through an internal sales force leaving only a small stand .. aJone market for the sal~ of discrete advertising consulting services.
' . 16. As to when a directory publisher will und~rtake the selling function in-house or contract out, the economic calculus is clear. For exa.Dlple, if CMRs face lower costs of ' selling advenising than TD (for example, suppose CMRs, average cost of selling constitutes 6 percent of gross advertising revenues and TD has an itjternal cost of selling of 8 percent), and assuming CMRs offer the same quality of service, TD would benefit by offering a
commission to CMRs below TD's costs but higher than~ costs facing CMRs (perhaps 7 percent in this example). In this case, there are mutual gains from trade to be realized by commissioning external sales agents. On the other hand~ if TD's internal sales costs are 8
SEP 1'95 11:44 FR 416 863 2613 TO 86135943965 P.17 - 13 percent on average and CMR's are 10 percent, any commission l~ than 10 percent would not jndt1ce CMRs to enter this market and any commission in excess of 10 percent would lead to inefficient substitution effects and higher cosr.s of providing Yellow Pages 111 advertis:ing to advertisers. In the light of these general analytical considerations. I now move on to consider the four central facts in this case that I identified above.
17. Fact A: ID sells all Yellow Pages• advertjsjng to maJJ advettjS'i"§ and CMR's do not wish to do so There are several reasons that explain these facts. First and foremost, it seems highly likely that TD faces a lower marginal cost of servicing smaller advertisers than independent advertising agencies. The most effective method of selling advertising to smaller advertisers appears to em.ail "blanketing" directory territories in concentrated time blocks on a sequential basis as TD currently does with its in-house sales force of almost 500 people. lbis ensures the currency of the advertising information as of the time of the publication of each directory, given a high "chum" factor with small b ··= ~ ) . According to data provided to me b~ ~3:'1vertisers with accounts wonb or less in monthly revenue accoum for almost: : of TD's advertisers, and over\ ·iii terms of revenue. Moreover, i / \ / for smaller advertisers·;'t he cost of providing advenisiog overwhelmingly comprises space and selling effort rather than advisory services. The OFT concluded in its report that for smaller advertisers. "planning and creation of the adven&.'llleDI is minimal and therefore agency services have little relevance and cannot be effectively separated from the selling function." (at p. 45). That is to say. space, selling effon, and advenising consulting services are effectively one product or alternatively an integrated set of inputs tbat yield one product: advenising. The OFT also found that direct sales costs on smaller accounts are nup to four ~ greater than direct sales costs on national accounts as a proportion of relevant revenue" (at p.27) and that "small businesses or others with small and stnightforward accounts are very unlikely to wish to use the services of either general or specialist agencies and it is equally unlikely that agencies would be willing to service small accounts." (at p. 11). As
SEP 1'95 11:44 FR 416 863 2613 TO 86135943965 P.18 - 14 noted above, evidence from the Director's notes of interviews with CMRs in the present procttrling$ reveals a similM reluctaDce on their part to service small accounts. lbese facts imply significam economies of scale for TD in selliDg Yellow Pages• advenising through its large in-house sales force to smaller advertisers that cannot be reali7P.d by CM.Rs.
18. Apart from these cost differentials. Faa A is further explaiDed by a second factor: a divergence of interest between m and CMRs leading to incentive compatibility
problems. As Professor Robert Willig and other ~ will po:im om in their evidence in the current proceedings, an important competitive cb.aracteristic of yellow pages advertising relative 10 other advenising for both users of yellow pages directories and advertisers seeking their patronage is the relative completeness of yellow pages directories both in terms of coverage of advertisers by product or service category and in the information provided about basic product and service offerings. If the directory (ic is, after all, a directory) is not relatively complete or representative in its coverage of advertisers and information about their offerings (a kind of paper bazaar), consUlllers will find it less useful as an informational reference, and the value of the directory falls. There is therefore a positive excemality to all advertisers from the placement of an advertisement by an individual advertiser. Since advertisers themselves only minimally benefit from their own conrribution to completeness they will be wiwilling to pay for this effect. However, since TD, as owner of the Yellow Pages"nl directories. realizes the benefit of this extemality in the form of increased demand for advertising space {reflecting the benefit that consumers realize from this externality), TD is willing to incur a cost of selling spac.e that may be greater tban the price that an individual advertiser is initially willing to pay for the advertising, justifying long-te:rm increases in advertising rates to all advertisers as completeness iDcreases and the value of Yellow Pages~ directories to both advertisers and users correspondingly appreciates. Thus, TD realizes over the longer term a benefit from servicing smaller advertisers that CMRs would not. In other words, m, as the owner of Yellow Pages'ftl directories, is able to intemaliZe more fully the
completeness externality than CMRs. This second factor funher explains why 1D finds it profitable to sell advertising to smaller customers, but CMRs do not. This concept of a
SEP 1'95 11:45 FR 416 863 2613 TO 86135943965 P.19 - 15 network exter:Dality is analyzed in detail in a recent paper by S.J. Liebowitz and Stephen Margolis,6 where they adopt the following ~efinition of such an cxtemality: "The utility that a given user derives from a good depends upon the mmber of other users who are in tbe same DCtWOik." The most straightforward example is the telephone network where the value of an individual becoming a subscriber is contingent upon how many other individuals decide to become subscribers. The authors poiDI out in their paper that network extcmalities are much less likely to result in market failures where the network is fully owned, i.e. property rights in the network are well defined in contrast to uno'W'DCd networks (e.g. lntcmet). where sub--Optimal provision in terms of quantity or quality may occur. Or as Katz and Shapiro state in another recent paper 7 : "Property rights may help solve ext.emality and invesnnent problems. Specifically, when there is a single owner of the network, that fum may be willing to sponsor the network by making investments in its growth that competitive [hardware] suppliers would not. ..
19. In addition to these two factors, a third factor is likely to lead to attenuated :incentives for CMRs to engage in selling efforts to miall advertisers: opportunistic or free-riding behaviour by advertisers who receive and are persuaded by the sales representations by one CMR but then place their ad through another CMR, the latter bring compensated only for discrete advertising consulting seivices (through rebate.son commissions). leaving the fim CMR WlCOmpensated for investmenrs in selling efforts (as noted earlier in this opinion). TD is able to prevent this form of adveniser opporrunism by bundling the selling effort with the sale of space.
6 S.J. Liebowitz and StepheD Margolis, "Network Extemality: An Uncommon Trage.dy" (1994) 8 J. of F.conomic Perspectives 133.
7 Michael Katz and Carl Shapiro, "Systems Competition and Network Effects" (1994) J of Economic Perspectives 93 at 101.
416 863 2613 TO 86135943965 P.20 SEP 1'95 11:45 FR - 16 -20. Fact B: CMRs wish to be paid commissions to sell advertising to larger local advertisers but m prefers to perform the selling function in-house A simple cost divergence st.anding alone, i.e. that TD bas lower costs in servicing larger local advertisers. cannot explain Fact B. If TD had lower costS, CMRs would not wish to enter this segment of the maiket (as in the case of small advertisers) and TD would not resist it, given that CMRs would fail in this market segment, given their cost disadvantage. As with the smaller advertiser market segment, the completeness extemality panly explains m·s resisrance to contracting out. First, consider the scenario emailed in the
Director's "unbundling" proposal. ID charges for its space indepeDdently of selling effon and advertising services, and CMRs bill the cliem directly for their efforts. With respect to soliciting new accounts, presumably the marginal costs of recruiting non-advertisers are likely to rise with the additional selling cffon and advisory seivices required to persuade more relucr.am non-advertisers to become advertisers. At the point where these marginal costs exceed the marginal revenue generated from the individual advertiser, CMRs will expand no further selling effort. In contrast, ID {as in the case of smaller advertisers) may find it rational to continue to incur these costs given the longer term benefits it derives from maximizing the value of the Yellow Pages'DI directories generally to all advertisers and users. Thus, CMRs in this market segment are likely to f~ most of their efforts on attracting accounts of existing advertisers from TD or other CMRs rather than recruiting new advertisers 8 • ·while CMRs partially benefit from completeness (perhaps through the preservation of Yellow Pagesw directories as a viable advertising tool), to the extent that one CMR benefits, all CMRs benefit, CMRs thus fail to realize the full benefit of providing optimal selling and advisory services: there is an incentive to "shirk" on advice-giving, since the completeness benefit of retainiug the customer in the future is only fractionally felt by the CMR. Advertisers themselves also fail to realize the full benefit of their effect on completeness; the value added from the placement of their advertisement is realized by all
8 0'Connor Agency v. General Telephone Co. et al. (1994} at 215, U.S. Di:;trict Court Ccnttal District of Ollifomia
SEP 1'95 11:45 FR 416 863 2613 TO 86135943965 P.21 - 17 -advertisers, not just the advertiser itself. m, on the other hand, reali7.es much of the completeness benefit, since advertising space in Yellow Pages,. dire.ctories rises in value over time as Wreaory completeness increases. As iD the case of smaller advertisers, this effect will be compounded by advertiser opportwlism in free-riding on sales representations by one CMR by placing their ads with another CMR and then demanding a rebate on the latter~s commmion, leaving the first CMR unrompensated for its selling effons.
21. These observations lead to the following results. TD will have a much stronger inceniive than CMRs to incur costs on selling and advisory services to recruit new accounts than CMRs. CMRs will focus most of their efforts on attempting t.o attract existing advertisers from ID or other CMR.s. While TD will be interested in retaining existing customers over time in order to enhance the compl~ of the directory. CMRs will be more concerned. with immediate reOJ.rnS. Consequently. if TD suggestS the optimal package to the advertiser (that is, the package which gives the greatest value for the price of advertising), CMRs face an incentive to convince the advertiser that a less expemive package (e.g. smaller size, less colour. fewer directories, etc.) is equally useful as an advertising tool in order to attract customers away from TD or other CMR.s. This increases the likelihood of the customer becoming dissatisfied with its Yello w Pages advenisingm and therefore increases the likelihood tbat the customer will stop using Yc llow Pages""' adverti.slllg since it will often be difficult for a customer to distinguish whether a poor response to advertising is the result of bad advice or of an inherent weakness in Yellow PagesTK advertising as a medium. The selling effort required to recruit Yellow Pagesftl advertisers suggests significant informational imperfections and uncertainties in the advertising services m.azket. or advertising media would rely solely on client-initiated co~. Since TD faces an incentive to maintain completeness. it will be barmed by the advertiser discontinuing its advertising in a more significant way than the CMR which simply loses a client. This problem could perhaps be overcome if the client were either better informed or more concerned about its advertisement's effectiveness. However, since it too fails to benefit privately from its own effect on completeness to any significant degree, it will be less concerned about the
SEP 1'95 11:45 FR 415 853 2513 TO 85135943955 P.22 • 18 -advertisement's effectiveness than is socially optimal. Thus CMRs will convince advertisers to pu:rcllase sub-optimal amounu or quality of advertising, which leads to greater inconlpleteness in the future due to the poorer quality of advertising.
22. The question then arises whether TD could strike an optimal contract with CMRs to offset this effect. Given that the \'alue to ID of good advice to clients is greater tban the value to CMRs of good advice. an optimal iDce:ntive structure effected through the commissions paid to CMRs by TD must compensate for this. This would email m compensating CMRs in order to induce the CMR to attempt to sell socially optimal quantities and quality of advertising. For example, mo rder to induce CMRs to sell to and coDSUlt with current non-advenisers, TD could pay a higher commission rare to cover the higher marginal costs of sales to non-advertisers than the rate paid for sales to current advertisers. However. further contractual terms would be necessaiy to ensure tbat the CMR.s sell optimally despite the completeness externality and not, in competition with each other, cut quality comers to attract cliems. A contra.ct of this son would likely geDerate significant uansactions costs. Some definition of "optimal advertising" must be contractually established, which would be very difficult to stipulate aDd would be costly to monitor and enforce. m, on the ocher band, motivates its internal sales force to sell and advise clients to purchase optimal packages by offering training, encouragement, screening of advertising sales by managers, internal promotions, awards, a team ethic, etc- The transactioDS costs entailed in ensuring that CMRs sell and consult optimally renders contracting out inefficient. It is more efficient for TD and for its advenisers that ID undertake these tasks internally.
23. This conclusion is strengthened in the presem context. The above discussion presumed that TD and CMRs would themselves negotiate commission rates and other contract terms and that TD would only find it rational to pay a commission rate that is less than its own avoidable costs of undertaking the selling functions in-house. However~ it is conceivable that the Director may seek to expand his proposed remedy by requesting an order from the Tribuml that commissions be paid but be paid at a prescribed or "reasonable"
SEP 1'95 11:46 FR 416 863 2613 TO 86135943965 P.23 - 19 me (by way of analogy with tbe Tribunal's previous Consent Order against TD). This would put the Tn'bunal mt he position of not only controlling TD's vertical imegration
decisions. but also regulating the prices TD must pay for its inputs. As noted above, if the c:ommission is set below ahe CMR's costs they will not enter. If it is set above TD's avoidable costs there will be inefficient entry by CMRs that will r.Use the eost of Yellow Pages. . advertising to advertisers. reducing the number of advertisers who will choose to advertise and reducing the value of directories to users because of Jess completeness. This commission would require constant adjumnent to reflect changes in the relative selling and related costs of TD and CMRs and the Tribunal would thus be cast in the role of a permanent price regulator - a role it has eschewed in similar comcxts in the past (see, for example, Palm Dairies (1986) lZ C.P.R. (3d) 540).
24. Even in the absence of the two remedial scenarios proposed by the Director (unbundling and commissioning), certain advertising agents currently operating in this marker segment often negotiate remuneration arrangements with existing advertisers through a sharing of cost savings from smaller or less sophisticated advertisements (so-ailed "cut agents"), over short contracrual time frames of from one to five years. Again, there will be perverse incentives to undersell the quantity and quality of advertising by exploiting information imperfections on the pan of advertisers and by ignoring the completeness extemality. Th.us, in all three scenarios a mb-optinW equilibrium may emerge, but the Director's two remedial scenarios will in fact exacerbaie existing market imperfections.
25. Fact C: TD pays CMRs commission on larger national or regional accounts involvin2 multiple directoiy publishers. and CMRs dominate this market segment In this market segment, advertisers who wish to advertise in many directories published by different publishers face significant aansaction costs if they must negotiate with each directozy publisher them.selves. These costs can be reduced through the use of a single agent. Either one yellow pages publisher could be designated the single agent for dealing
SEP 1'95 11:45 FR 416 863 2613 TO 86135943965 P.24 -20-with all other publishers (e.g. the publisher located closest to the advertiser's headquarters, as under previous :rules that prevailed iD Canada and Ihe U.S.), or iDdependen1 CMRs can act as the single agent (or both). As between CMRs and yeD'>w pages publishers playmg this agea;y role in multiple directory publisher advertising, the failure of CMRs to account for the eompleteneSS extemality from advcnising will also be present to some degree in the market for larger advertisers. However, various factors suggest that it may nonetheless be offset by efficiencies that CMRS can realize in servicing this :market. First, because of the idiosyncratic needs of larger advertisers, the economies of scale associated with servicing smaller advertisers which gives TD a cost advamage in this market are unlikely to be present in the larger advertiser market. This suggests that more specialized agems may be better equipped to handle these larger, more unique clients. This in turn suggests that CMRs may have a lower cost of providing appropriate service to larger clients than TD. This is supponed by the fact that CMRs have a 903 share of this larger advertiser marke~ and by TD's recem decision to begin marketing its services to larger cUents with a wholly-owned, nand-alone agency. If this cost differential is great enough, this alone may explain why m
permits CMRs to service larger clients. Vlhile completeness externalities imply tbe under-provision of optimal service, cost advantages imply greater service provision than TD would otherwise provide itself. Similar considerations apply to the advertiser opponunismffreeriding concern not.ed above {para. 13). If CMR's costs arc low enough these will more than outweigh the effects of this form of opportunism.
26. Other factors strengthen this conclusion. In the large advertiser market, advertisers may be better at monitoring the quality of CMRs' service than smaller advertisers. For example, a larger advertiser may be more sophisticated and aware of the revenue generating potential of yellow pages advertising. This may be explained by economies of scale through investments in information regarding the effectiveness of advertising more generally. For larger advenisers, it may be necessary to ~ advertising media generally; the marginal cost of investigating yellow pages advertising itself may be minimal given the fixed cost of developing a marketing strategy. Smaller advertisers, on the
SEP 1'95 11:47 FR 416 863 2613 TO 86135943965 P.25 - 21 other band, are more likely to take an ad hoc approach to marketing strategies, given that they are less able to spread the cost of inv~gation over all nwXeti.ng expend.imres. The mchetiDg down of service quality may be prevented by sophisticated pu.rdJasers who are aware of the potential in yellow pages advertising and will auribute marketing failures to the CMR who is servicing their account, not to the advertising medium irsclf. The ri5k to CMRs of Joss of a large yellow pages account and in some cues other advertising services in other media being provided to the same diem is likely t0 opente as a more effective form of quality assurance than with smaller accounts. The effect on completeness from poor service may thus be mitigated; large advertisers may not necessarily ~ign the blame of poor performance to yellow pages advertising. but rather seek out high quality CMRs. Thus, the completeness externalicy problem is mitigated, since poor service, is less likely to result in a Jarge advertiser discontinuing its yellow pages advertisemems altogether, although the completeness externality may still result in sub-optimal effons to recruit current large non-advertisers. Similarly, the adveniser opportunism problem may be mitigated by advertisers reputation effects in the small numbers - large account marlc.et, rendering CMRs reluctant to service known oppormnists. On a netting out of these factors, it appears to be efficient for TD to pay commissions to CMRs to service large national or regional advertisers who wish to advenise in many directories published by multiple publishers.
27. Fact D: Almost all yellow pages directory publishers organize their selling functions in a similar way to TD i.e. ey heayy reliance on an iqtemal sales force. In a telephone conversation I had on Friday, July 28, 1995, with Mr. Lany Small, Vice-President of Marketing Services for the Yellow Pages Publishers' Association (YPPA), head-quartered in Michigan, he informed me that YPPA has 191 directory publisher members. These include both telco-affiliated yellow page directory publishers and independent yellow page directory publishers ("Yellow Pages" is not ttade-marked in the U.S.). He told me that to the best of his .knowledge no directory in the U.S. organizes its selling functions any differently from TD. That is to say, whether teJco-affiliated or not, they all rely heavily on an internal sales force. The only apparent exception to this panern
416 863 2613 TO 86135943965 P.26 SEP 1'95 11:47 FR - 22 noted by Mr. Small is that a small number of U.S. directory publishers comract out the advertismg selling filnc:tion to exclusive selling agems. However. they in tum rely almost entirely on their own imemaI sales forces. This view is confirmed by a recent report by SlMBA Communications Trends entitled "Lessons of Yellow Pages Competition: A Study of lDdepeDdem and Competitive Directory Strategies". (1993). which reports im'1 a}ia on the si7.e of the imemal work forces of independent publishers by range of revenues. The relevam tables are attached hereto as Exhibit "B". The same report notes in the text (at p. 95) that "among the nation's largest independent publishers, sales staffs are mostly premise, but in some cases do :include telemarketing reps. " With respect to medium-size independent directory publishers, the repon states that "a medium-siz.e independent might have up to 30 or so sales reps, a sales manager or two. or even a Vice-President of Sales that directly oversees the sales force". implying that this is also an i.ntema.I sales force (at p. 105) (see also Table 1.3 appended hereto). With respect to small independent directory publishers, the repon states that "smaller independeru:s might have up to 10 sales reps. almost entirely premise, and one sales ma.nager or VicewPresidenr of Sales overseeing the entire sales force" (at p. 109). It will be obvious that many of these directories do not remotely possess any market power (however measured) ill many of the direaory market.s in whi:h they operate. The ST.Mk and enormously significant implication of this fag is that the decision to venica.lJy lntemte advertising selling functions clearly has nothing to do with market power. -It must be explained entirely by the kind of efficiency considerations that I bave outlined earlier in this opinion.
28. In the light of my analysis above of TD's incentives in the organization of advertising selling functions for its directories, I now tum to an analysis of the social welfare implications of these arrangements and the Director's allegations of tying, i.e. that TD bas tied the provision of advertising services to the provision of space and has thus impeded the CDtry or expansion of advertising agencies in the ma.rtet for the provision of telephone directory advertising services. presumably in his view reducing competition and social welfare.
SEP 1'95 11:47 FR 416 863 2613 TO 86135943965 P.27 - 23 -29. Even assuming that tied selling of products (as opposed to inputs) exists ill this case (which I do not accept). for tying to have any relevance to competition policy, i1 is widely accepted Ullder all theories of tying that the firm in question must have market power in the alleged tying good (here advertising space). If the alleged tying good is sold in a competitive market, tying another product will not have any anti-competitive effect. If the commner does not wish to purchase the tied good. be will simply purchase from a different supplier of the tying good. Competition will also ensure that firms will supply the package consumers prefer (i.e_ either selling the products separately or bundling them). Professor Robert Willig will be testifying in these proceedings on the question of whether Tele-Direct bas market power with respect to yellow pages advertising space. and bas concluded that it lacks market power. I have reviewed his evidence and find it compelling.
30. However. assuming, for the sake of argument, that ID is found to possess market power in the yellow pages advertising space market, does the insistence by m in most segments of its market on joint provision of space. sales effon. and other advertising services imply a substantial lessening of competition under s. 77 of the Competition Act! Various sinister expJanations have been offered for tying in previous case-law and academic literature. I review each of these explanations briefly below and relate them to the facts in issue mt his case.
The l..eyerage Theoty 31. 1be leverage theory states that a firm with monopoly power in one market will use a tie to gain monopoly power in a second market. As Hovenkamp states. however. "Such 'leveraging' is not a plausible way to increase monopoly profits, 9 " for the following reasons. It is impossible to purchase advertising space without purchasing advenising
9 Herbert Hovenkamp. Fe4eral Antitrust Policy (St. Paul: West publishing, 1994) at 371.
415 863 2613 TO 86135943965 P.28 SEP 1'95 11:48 FR - 24 -services. The advertiser therefore views the services and space as a bundle in deciding whether to purchase. If advertising space is being sold at its profit-maxm»zmg monopoly price, any increase in the price of advertising services will reduce profi~ by raising the price of the bundle above the profit-maximizing price. For a n;onopomc. it is preferable that the
second good be sold at a competitive price. Consider the following example offered by Hovenkamp. Seller X has a monopoly in glass jars and sells them at the monopoly price of $1.50. The competitive price of lids is 30 cents. X decides to sell lids and jars together as a package. Since X's monopoly price of $1.50 for jars was predicated on the competitive price for lids, the profit maximizing price for the bundle is $1.80. That is.
As long as the proponion of jars to lids is coDStant the purchaser will attribute a price change in either [the lid or the jar] to the price of the entire package. A monopolist cannot make any more monopoly profits from the sale of jars with lids. The jar monopolist cannot make any more monopoly profit by
monopolizing the lid market as well (Hovenkamp, p.371].
The profit maximizing price for the bundle is $1.80, so raising the price above 30 cents for lids will reduce profits (unless the price of jars is lowered to compensate). The jar manufacturer has maximized its own profits by selling jars alone for $1.50 and letting lids remain competitive.
32. In the instant case. if it is found tbat TD has market power in the telephone directories space market, there is a profit maximizing price for the package of advertising services and space. If the price of advertising services rises as a result of increased barriers to entry from the tie, then to maintain the profit maximizing price for the package, the price of advertising space must fall. Thus, the assertion of the Director that the objective of the tie is to raise barriers to enny in the advenising services market raises the question of the motivation for this objective: the above analysis indicates that this strategy by TD would nor be profitable.
416 863 2613 TO 86135943965 P.29 SEP 1'95 11:48 FR -25 -33. Some commentators have suggested, however, that the leverage tbeoiy may have some validity if differently conceived. Kaplow, for example, suggests that tied selling may operate as a fozm of predatory pricing. 10 By offering the tied &ood at a low price (close to or below its competitive price), a firm with marlcet power in the tying good may esrablish market power in the tied good market in the long nm, by way of amlogy to predatoey pricing. However. this argument runs UlU> the same difficulr:y as the more co.ovemional leverage theory in tbe case at band. Where the tied good will ODly be pu.rcbased if tbe tying good is also purchased, as in this case (purchasing telepbo:oe directory advertising services is pointl~ unless advertising ~ in a telephone directory is also purchased), independent: market power in the tied good market is of little or no value. As discussed above, the bundle of services and space bas a set profit maximizi'll.g price, and any price .increase in advertising services will lower overall profit UDless tbe price for the space drops to compensate. Thus, establishing independem market power in the telephone directory advertising service market will not raise profits for TD 11 • Price Discriminatbn 34. A more convincing explanation of tied sales tban the leverage theory in some contexts is that they permit price discrimination by a monopolist. For example, by tying the sale of punch cards to the supply of computers (as was the case in IBM v. U.S. 298 U.S. 131 (1936)), a monopolist in the latter market may be able to meter intensity of use and~ intensity of demand for the primary product and charge different consumers different prices that reflect their different reservation values but not differences in the cosrs of supplying them. thus appropriating more of the comu.mer surplus than can be achieved. through a single price for the tying prOduct. In other words, by charging a supra-competitive price for the
10 Louis Kaplow, "Extension of Monopoly Power 1brough Leverage" (1985) 85 Col.L.Rev. 515.
ll Se.e J.B. Dunlop, D. McQueen, and M.J. Trebilcock, Canadian Competition Policy: A Legal and :Economic Analysis (Toronto: Canada Law Book, 1987) at 253·257)).
416 863 2613 TO 86135943965 P.30 SEP 1'95 11=48 FR - 26 punch cards, high illtensity usersldemanders will end up paying more in effect for the machine than low intensity users/demanc1ers. The price discrimination theory of tied sales clearly seems plausible ma .range of settings. Whether price discrimination is or is not
socially desirable is a controversial issue, given its ambiguous but often positive effects on firm omput (see Dunlop, McQueen and Trebilcock, mtm· at pp .255-256). However,
resolving this comroversy is not required on the facu of this case. Tyina arrangements that have been alleged to facilitate price discrimination have been confined to re.quiremem conttaas where a purchaser of one gocxl agrees to purchase a variable, amount of a fwure good from the seller of the first good, e.g. computers and punch cards, photocopiers and paper or service, salt-processing machines and salt, etc., not package ties whereby the tying and tied good are consumed in fixed proportions such as is alleged by the Director here. Where two goods are consumed in fixed proportions, the metering effect of future purchases of the tied good is eliminated, along with the potential for price discrimination. Thus, price discrimination cannot explain the alleged tie here.
Barriers to EntIY 35. It is sometimes argued that tying may increase baniers to entry by forcing a market cmrant to enter two mark~. i.e. the tied and the tying good market, rather. than one. Thus, barriers to both the directory market and the advertising services :m.arket are relevant in this respect. As I have argued above, raising barriers to entering the services market does not allow 1D to realize any more profit from any market power it possesses with respect to the space market than it currently reaps in the directory market. Any monopoly profit for the bundle may be realized in the space market. With respect to barriers to entry to the directory market, a tie is unlikely to raise barriers to emering the directory market since baniers to entering the services market are so low a start-up directory could presumably induce entry by independent advenising agencies by itself. More importamly. the evidence cited above (para. 26) suggests tbar independent consumer directories organize their production function in much the same way as TD does and rely largely on an internal sales
416 B63 2613 TO 86135943965 P.31 SEP 1'95 11:49 FR -27-force and not on e.xtemaI agents - the Director bas not alleged that TD bas attempted to foreclose access by independent directories ~ this labour market nor is it easy to imagine how m could do this even if so minded.
36. Thus, all potential sinister explanations for the alleged tic in this case are unconvincing, and the efficiency explanations for the ·make or buy" decisiom made by Tele-Direct offered earlier in this opinion are much more compelling. If any of these sinister explanations bad salience in this case, it is difficult to explain why 1D and other yellow page publishers have over the years expanded the scope for CMR participation in some segments of yellow pages advertisillg. This fact is inconsistent wirh allegations of attempts to monopolize the advertising services market as an end in itself or as a means of raising barriers to entry into the drrecwry market. Moreover, the substantial growth in yellow pages advertising in recent years relative to other advertising media is incomistent with c.la.ims of monopolization in either market which would normally entail higher prices and reduced output (see Se/ten, op.cit. at p.15; UK OFT Repon. op.cir. at p.6).
37. If this coDClusion is accepted, then the only is.me remaining is how it can be accommodated within the criteria set out in s. 77 of the Act, in panicular the test of substantial lessening of competition that is applied to tying arrangements. My analysis leads me to conclude that TD contracts out the selling and advenising functions when it is efficient to do so (large national accounts) and undertakes them internally when it is not efficient to do so (other accounrs). It is true that in the latter case independent advertising agents have a more limited domain in which they c.an operat.e than if TD were to contract out in all or a wider range of cases. Thus, it is true but trivial that chere will be fewer independent advertising agencies functivning in the yellow pages advertising sector than might otherwise be the case. This is also true of all cases where firms vertically integrate production functions to maximize efficiency. This can surely not be an appropriate test of substantial lessening of competition. If so, in every case where potential altemative suppliers were driven out of, or excluded from, a market by more cfficjem prodUcers or production
416 863 2613 TO 86135943965 P.32 SEP 1'95 11:49 FR -28-techniques. they would be entitled to launch a competition law complaint. In this event, the purposes of compecilion law would become that of proreaiDg competitors rather than competition. i.e. maxin>izing the DWDber of competitors and not maximfa:ing efficiency. To cast in sharp relief the implications of the Director's proposed remedies in this case. it would equally seem to follow that an exte:mal sales agent should be entitled to demand a commission at least equal to its costs from F.atons, Simpsons. the Bay, Walman, or any other retailer if customers for e.g. appliances, men·s suits, or women's fur coats are referred to the store by lhe agent and make a purchase. despite the fact that the store has chosen to organize its selling functions internally by providing display space and sales staff. If ID were to decide to contract out all selling and advertising functions, it is much more likely to follow the practice adopted by British Telecom (when still in public ownership) and some other North American telcos of comracting out these functions through a competitive tendering process for long-term exclusive contracts on a regional basis, which would then imemalize the completeness externality discussed earlier in my opinion to the franchisee in each region and minimize perverse incentives to undersell the quantity or quality of advertising to existing advertisers. However, given that TD already bas a large installed sales force. it is hard to imagine why such a strategy would be efficient, and even if it were. how it would help the independent advenising agencies who have equally complained about exclusive franchise arrangements in other jurisdictions where the franchisee also typically uses almost exclusively its own internal sales force (see e.g. OFT Report).
38. In my opinion, the alleged tie in this case docs not substantiaUy lessen competition in terms of s. 77 of the Ccmpetition Act for either of two reasons. First. by imemalizing the completeness extemality and by addressing su~tima.l incentives to sell the optimal quantities and quality of advertising to advertisers, existing production arrangements maxllnize the long-term value of Yellow Pages,. directories as a total product to all advenisers and users and thus enhances its competitive efficacy vis-a-vis other advertising media, thus increasing competition in the advertising market generally. That is to say, while vertical imegzation may reduce imrabrand competition, it enhances inter-brand competition.
416 853 2613 TO 86135943965 P.33 SEP 1'95 11:49 FR - 29-Alternatively. if one concludes that Yellow Pagesw advertising constitutes a distinct advertising market and that TD po~ market power in this market. it still follows that in cboosiJlg the appropriate form and degree of vertical integration, TD is maximizing the value of Yellow Pages~ advertising ~ a product for advertisers and users generally and thus is maximizing consumer welfare (defined as the welfare of advertisers and users) or total welfare more generally (defined as producer and consumer welfare).
SWORN BEFORE ME at the City of Toromo in the Municipality of Metropolitan Toronto this 18th day of August. 1995
416 863 2613 TO 86135943965 P.34 SEP 1'95 11:49 FR EXHIBIT 11 A " CURRICULUM VITAE NAME: Michael John Trebilcock DATE OF BIRTH: 15 September, 1941 CITIZENSHIP: Canadian MARITAL STATUS: Married: Five children DEGREES; LL.B (University of Canterbury, New Zealand) LL.M (University of Adelaide, South Australia)
EMPLOYMENT WSTORY; 1. Appointed full-time Tutor, Law School, University of Adelaide, January, 1963. 2. Appointed Lecturer in Law, Adelaide, January, 1964. 3. Appointed Senior Lecturer, Adelaide, January, 1967. 4. Barrister and Solicitor of the Supreme Court of New z.ealand; 1964 -5. Visiting Associate Professor of Law, McGill Law School 1969-1970. 6. Associate Professor of I.aw, McGill Law School 1970-1972. 7. Professor of Law, University of Toronto Law School, 1972-present. 8. Barrister and Solicitor of the High Coun of Ontario, 1975-9. National Vice-President, Consumers Association of Canada 1974-1975. 10. Chairman, Regulated Industries Program, Consumers Association of Canada, 1973-1975.
11. Member, Academic Advisory Panel, Department of Consumer and Corporate Affairs, 1973-1975.
12. Chairman, Consumer Research Council, 1975-1976.
416 863 2613 TO 86135943965 P.35 SEP 1'95 11:50 FR 2 13. Research Director, Professional Organizations Committee, Government of Onrario, 1976 to 1980.
14. Participant, Summer Institute, Economics for Law Professors University of Rochester, 1974.
15. Fellow in Law and Economics, University of Chicago Law School 1976. 16. Member of the Presidential Advisory Committee on Institutional Strategy (PACIS), University of Toronto 1982-1983.
17. Acting Research Director; Institute of National Affaiis, Papua New Ouinea, 1982. 18. I..ay Member - Canadian Competition Tribunal 1987-89. 19. Visiting Professor, Yale Law School, January to June, 1985. 20. University Law School Committees (at various times): Admissions Committee, Curriculum Committee, Graduat.e Committee, Hiring Committee.
2L Director, Laidlaw Foundation, 1985 -22. Member, Research Board, University of Toronto 1986 - 1988 23. Elected Fellow of Royal Society of Canada, 1987. 24. Recipient, University of Toronto Teaching Award, 1986 25. Winner of the Walter Ovlen Prize for Best English Legal Text in canacfa, 1986-1988 for The Common La.w of Restraint of Trade. 26. Appointed University of Toronto Professor, 1990. 27. Recipient of the 1990 Joint Award of the Canadian Law Teachers Association and Law Refonn Commission of Canada for outstanding contributions to legal research and law reform. · 28. Member of the Research Council of the Canadian Institute of Advanced Research (1982 - 1986).
29. Director, Law and Economics Programme, University of Toronto Law School, 1976 to present.
416 863 2613 TO 86135943965 P.36 SEP 1'95 11:50 FR 3 30. Chairman, lntemati.onal Business and Trade Law Programme, University of Toronto Law School, 1988 -
GRAJ)UATE SUPERVISION 25 IL.M's since 1969 8 Ph.D's
GRADUATE COURSK5 IAVGHI Alternative Approaches to Legal Scholarship (1985-) The Public Policy-Making Process (Department of F.conomics, 1982-1985) Social Regulation (Osgoode Hall Part-time LL.M., 1987) International Trade Regulation (Osgoode Hall Pan-Time IL.M., 1990). LL.B. CQURSES TAUGHT AT VARIOUS 1JMF.s Commercial Law; Corporate Law: Contract Law; Competition Law; Government Regulation; Social Security Law; F.oo~omic Analysis of Law; International Trade Regulation; The Limits of Freedom of Contract; Debtor - Creditor Law; Consumer Protection Law.
1WIBARCR FUNJ>IN!i PROGRAMME GRANTS Con.naught Seed Grant to Law and F.conomics Programme, 1976-1980 .......• $140,000 Donner Foundation Grant to Law and Economics Program.me .......•..•.. $150,000 Co~t Grant to Legal Theory and Public Policy Progxamme, 1985 - .•..•• $800,000 Olin Grant to Law and Economics Programme, 1989 - .............•... $330,000 PROJECT GRANTS <WITH OWERS> Crown Corporations in Canada (Ontario Economics Council 1978) $ 30,000
416 863 2613 TO 86135943965 P.37 SEP 1'95 11:50 FR 4 Fedetalism and the Canadian F.a>nomic Union (Ontmo F.conomic Council and Canada -U.S. Law Institute 1980) $ 80,.000
The Choice of Governing Instrument (Economic Council of Canada 1980) $ 80,000
The Political Economy of Business Bailouts (Ontar.io Economic Council 1984) $ 80,000
The Political Economy of Economic Adjustment (Macdonald Royal Commission, 1985) $ 15,000
Adjusting to Trade (F.conomic Council of Canada., 1988) $ 15,000
Medic:al Malpractice (Federal-Provincial H~Ih Care Task Force, 1988) $ 55,000
American Law Institute, Ton Reform Project $ 80,000
PU]ILICAT IQNS; BOOKS; A Casebook on Company Law. (Sweet and Maxwell, U.K. 1977) with H.R. Hahlo The Prof~ons and Public Policy (University of Toronto~. 1978) with Slayton {eds.). Handbook on Consumer Riehts in Cana® (C.B.C., 1978; revised edition forthcoming) Professiona} Rrolation (Ontario Govt. Printer, 1979) with Tuohy and Wolfson. Pebtor and Creditor Casebook, (University of Toronto Press, 1982) with Reiter, Laskin, Springman and Gertner.
Lawyers and thG Consumer Interest Evans and Trebilcock (eds.) (Butterwonhs, 1982). Federalism ang the Can.adian F.conomic Union edited with Prichard, Whalley and Courchene, (University of Toronto Press, 1983).
416 863 2613 TO 86135943965 P.38 SEP 1'95 11:50 FR 5 The Political Economy of ~~ ~Iou~ with Chandler, Quinn, Halpern and Gunderson, (Ontario Economic Council, 1986).
The Political F&onomy of F&onomic Acijustmem: The Qt~ of Declinin& Sectors, (Macdonald Royal Commission, Research Monog13ph, 1986).
The Common I..aw of Restraint of T@de; A I fUl and pconomic Ana]ysis (Carswell, Toronto, 1986) (winner of Walter Owen Pri2e).
OurMtian Competition Policy: A l...e£al and Economic Anajysis (with Dunlop and McQueen) (Canada Law Book Co., 1987).
Rqulatin& Traffic SafetY (with Friedland and Roach) (University of Toronto Press, 1990) Trade and Transitions (with Chandler and Howse) (Routledge, 1990. The l.aw and Economics of Competition Poli£Y (Fraser Institute, 1990) (with Mathewson and Walker, eds.)
Fair E:xchm&e: Refonnin& Tra<k Remedy Laws (C.D. Howe, 1990) (with York, eds.) The Limits of Freedom of Contract (Harvard University Press, 1993). EJwloring the Domain of Accident I.aw: Taking the Facts Seriously (with Dewees and Duft) {Oxford University Press, forthcoming, 1995).
Intemationa] Trade R~u)ation (with Howse) (Routledge, 1995) Unfinished Busin@: Refonnine Trade Reme.dy I..aw~ in North America (With Boddez) {C.D. Howe, 1993) .
CHAPlEl<S IN BOOKS "When is a Consumer Protection Bill not a Consumer Protection Bill?", (1971 Wainwright Lecture Collection).
"The Consumer in the Post-Industrial Market-Place", in Lindgreen and Mason (eds.), ~ Coxpozation and Australian Society. (Law Book Co. of Australia, 1974). "The Consumer Interest and Regulatory Refonn", in Doem (ed.), The Re&nlatocy Process in Canooa (Macmillan, 1978).
416 863 2613 TO 86135943965 P.39 SEP 1'95 11:51 FR 6 •Problems of Economic Integration in a Decentralized Federation", (with Shiroky), in .Ille Canadian Confederation at the Cross·roads (Fraser Institute, 1978).
"Economic Analysis of Commercial Law", (with Prichard) (Annual Commercial Law Workshop Volume, 1978).
"Markets for Regulation", (with Wavennan, Prichard), in Govemment Rtzlliation (Ontario Economic Council, 1978).
•Interprovincial Restrictions on the Mobility of Resources", (with others) (Ontario Economic Council, 1977).
"The Consumer Interest and the Regulatory Process", (with Prichard and Waverman), in Duggan and Dmva1l (eds.), Consumer Protection I.aw and Theory (Law Book Co., 1980). "Crown Corporations: The Calculus of Instrument Choice", (with Prichard) in Prichard (ed.), bblic Entewrise in Canada, (Butterworth, 1983). "An Approach to Framing Regulatory Policies for the Professions", (with Tuohy and Wolfson) in Rottenberg (ed.), Occwatton Llcensure, (American F.nterprise Institute, 1980). "Regulating the Quality of Psychotherapeutic Services", (with Shaul) in Dewees (ed.), Quality Re:ulation, (1983); also in Journal of Law and Human Behaviour, (1983).
"Policy Options in Quality Regulation", (with Dewees), in Dewees (ed.), Quality Regulation, (1983).
"Comparative Advertising", in Evans and Trebilcock (eds.). Lawyers and the Consumer Interest:, (Butterworths, 1982). •ucensure in Law", (with Reiter) in Evans and Trebilcock (eds.). I..awers and the Consumer Interest, (Butterwonhs, 1982). · "Crown Corporations in Canada", (with Prichard) in Chandler and Atkinson (eds.), Public Policy Makin~ in Omada,. (University of Toronto Press, 1982).
"Customary Land Law Reform in Papua New Guine.a", Adelaide Law School Centenary Essays, (1983).
"Federalism and the Qiuadian Economic Union", in Ba.kvis and Chandler (eds.) Federalism and the RQ}e of the State (University of Toronto Press, 1987).
"Can We Become Better Losers? The Political Economy of Economic Adjustment". in Maslove and Winer (eds.), Knockini on the Back DoQr (I.R.P.P. 1987).
16 863 2613 TO 86135943965 P.4121 4 SEP 1'95 11:51 FR 7 •:Economic Analysis of Law" in Devlin (ed.), SQJd!es in Qim1dian Leal Theo~ (Oirswell, 1990).
"The Evolution of Competition Policy: A Comparative Pezspo..'1ive• in Mathewson, Trebilcock and Walker (edS. ), The I..aw Md Economics of Q>mpetition Policy (Fraser Institute, 1980).
"Throwing Deep: Trade Remedy Laws in a First-Best World" in Trebilcock & York (eds.). Fair Ex£hqe: Reformine Trade Remeqy I.aws (C.D. Howe, 199).
ACAl>EWC ARTICLES "Finders Keep - How True Today?" [1962] N.Z.L.J. 276. "Scope of the Defence of Provocation in New Zealand Law" [1963] N.Z.L.J. 619. "Section 200: A Critical Examinatlon" (Income Tax) (1964) 38 Australian Law Journal 237 (discussed and applied by the New Zealand Supreme Court in Lewis v. Commissi2ner Qf In1and Revenue, [1965] N.Z.L.R. 634).
"Taxation of Assigned Income" (1963) 4 The Australian Lawyer 121 and 145. "Company Contracts' (1966) Vol. 2, No. 3 Adelaide law Review 310. "Rights on a Bill of Exchange" (1966) Vol. 2, No. 3 University of Tasmania Law Review 270.
"Effects of Alternations to Articles of Association" (1967) Vol. 31, No. 2 The Conveyancer (U.K.) 95.
"~pen.ing Hire-purchase Transactions" (1968) 41 Australian Law Journal 424. "The Liability of Company Directors for Negligence" (1969) U.K. Modem L.R., September issue.
•eompany Law Problems in Family Tax Companies" 1969 Australian Law Journal, January, February, March issues.
"When does a Settlement 'Take Effect"?" (Succession Duty) (1969) 42 Australian Law Journal 308.
"Reform of the Law Relating to Consumer Credit" - (1970) Vol. 7, No. 4, Melbourne University Law Review 315.
416 863 2613 TO 86135943965 P.41 SEP 1'95 11:51 FR & "Consumer Protection itl the Affluent Society", (1970) 16 McGill L.J. 263. "P:rot.ectini Consumers Against the Purchase of Defective Mercb.a.ndis.e", (1971) 4 Adelaide L.R. 12.
•Private Law Remedies for Misleading Advertising" (1972) 22 University of Toronto L.J. "Manufacturers' Guarantees•, (1972) 18 McGill L.J. 2 . .. Market Considerations itl the Formulation of Consumer Protection Policy• (1973) 23 University of Toronto Law Journal 396 (with Cayne).
"Winners and Losers in the Modern Regulatory System: Must the Consumer Always Lose?'\ (1975) 13 Osgoode Hall L.J. 417.
"The Pathology of Credit Breakdown", (1976) 22 McGill L.J. 417. "Regulators and the Consumer Interest'', (1977) 2 Qlnadjan Business LJ. 101. Class Actions and Private Law Enforcement", (with Prichard) (1978) 27 U.N.B.L.J. 5. "The Doctrine of Inequality of Bargaining Power", (1976) 26 University of Toronto L.J. 359. "An Economic Approach to the Doctrine of Unc.onscionability" in Reiter and Swan (eds.) ~in l.he yw of Contract (Butterworths, 1979). "A Consumer Perspective on the Anti·Dumping Act" (with Quinn 1979 Canada-U.S. Law Journal.
"Judicial Control of Standard form Contract: An Economic Analysis" (with Dewees), (in Veljanovski and Burrows, eds.).
•A Tax Credit for Public Interest Groups" (with Engel.hart). (Canadian Taxation 1982). "An Economic Analysis of Cost and Fee Rules and Class Actions .. (with Dewees and Prichard) (1981) 10 Journal of Legal Studies, University of Chicago, 155).
"An F&onomic Analysis of Limited Liability in Coqx>ration Law" (with Halpern and Twllbull), (1980) 30 University Toronto L.J. 117.
"The Deregulation Debate", (1979) IO Canadian Marketer 9.
41 6 863 2613 TO 86135943965 P.42 SEP 1'95 11:51 FR 9 '"Compensation, Transition Costs and ReguJatory Change. . (with Quinn) (1982 University of Toronto L.J.).
"The Choice of Governing Instrument" (witb Hanle) (1be InternatioDal Review of Law and Economics, U.K., 1982).
"Lawyers Advertising" (with Hudec) (the University of Western Ontario L.R., 1982). "The Administration of the Federal Harndous Products Act" (with Shaul) (the Canadian Business Law Journal, 1982).
"The Prospects of Law and Economics: A Omadian-Perspective", (1983) 33 J. Leg. Ed. 288.
"Regulatory Reform and the Politi.cal Process", (with Hartle) (198.2) 20 Osgoode Hall L.J. 643.
"Products Liability and the Allergic Consumer - A study in the Problems of Fiaming an Efficient Liability Regime (with Rogm10n} (1986), University of Toronto Law Journal.
"Communal Property Rights: The Papua New Guinean &perience", (1984) 34 University of Toronto L.J. 377.
"The Law and :Economics of Conttact Modifications" (with Aivazian and Penny), (1984) 22 Osgoode Hall L.J. 173. "Restrictive Covenants in the Sale of a Business", (1984) International Review of Law and Economics.
"F.conomic Mobility and Constitutional Reform", (1987) University of Toronto L.J. 268 (with Lee).
"The Social Insurance-Deterrence Dilemma of Modem North American Tort Law", (1987) 24 San Diego L.R. 929.
"The Role of Insurance Considerations in the Choice of Efficient Civil Liability Rules", (1988) Yale J. L. Ee. and Org.
•Jncentive Issues in the Design of No-Fault Compensation Sc.hemes'", (1988) University of Toronto Law Journal.
•ne case for Free Trade", (1988) 14 Can. Bus. L. J. 387. "The .Future of Ton Law: Mapping the Contours of the Debate•, (1989) 15 Can. Bus. L.J.
416 863 2613 TO 86135943965 P.43 SEP 1'95 11:52 FR 10 •Punitive Damages: Divergence in Search of a Rationale", (with Chapman) (1989) 40 Alabama L. Rev. 741.
•.An Empirical Analysis of the Application of Qmadian Antidumping Laws: A Search for Nonnative Rationales", (with Hutton)~ (1990) 24 J. Wodd Trade 123.
•Trade :Restrictive Policies and Democratic Politics: A Proposal for Reform (with Chandler and Howse) (1990)~ 1 Public Law 234.
"Smaller or Smarter Government?" (with Howse and Prichard) (1990) 40 Univ. Toronto L.J. 498.
"Making Bard Social Choices: Lessons From the Auto Accident c.ompensati.on Debate"~ (with Chapman) (1992) 44 Rutgers L. Rev. 78.
"The Efficacy of the Tort System and its Alternatives: A Review of the Empirical Evidence". (with Dewees) (1992) 30 Osgoode Hall L.J. 57.
"The Role of Private Ordering in Family Law; A Law and Economics Perspective", (with Keshvani) (19'Jl) 41 U. of Toronto L.J. 5. · .. Rethinking Anti-Competitive Conspiracy Law", (with Warner), McGill L.J. (forthcoming). "Protecting the Employment Bargain" (with Howse) U. of Toronto L.J. (forthcoming). .. Taking Stock: Consumerism in the 1990s", (19'Jl) 19 C-anadian Business L.J. 412. "The Medical Malpractice Crisis: A Comparative Empirical Pen-peetive", (with Dewees and Coyte) (1991) 65 Law and Contemporary Problems 217.
"Reforming Trade Remedy Law in North America Global Trade.
"Choice of Policy Instrument in the Provision of Public Infrastructure" (with Daniels) in Mintz (ed.) lD~t:ruetur~ and Competitivai§j (John Deutsch Institute, 1994).
"Testing the Limits of Freedom of Contract; Commercialiution of Reproductive Technologies and Materials" (with Martin, Lawson and Lewis) (1995) Osgoode Hall L.1.
(forthcoming).
"The Canadian Internal Trade Agreement" (with .Behboodi) in Sehwanen and Trebilcock,~ Intema.l Trade A&ree~t (C.D. Howe, forthc.om.ing, 1995). "Voice and Exit in New Zealand Health Care Reforms" (University of Auckland Research
11 (with Boddez) (1994) Minnesota J. of
416 S63 2613 TO 86135943965 P.44 SEP 1'95 11:52 FR 11 Jou.mal). •ean Governments Be Reinvented?" in Boston (ed.) !be State in an AJC of Gsmtractin& Qu.t (1995).
"The Prospects for Reinventing Government" (C.D. Howe Institute~ Toronto, 1994).
Member~ Adelaide Law School Committee, Report to the Standing Committee of Australian Commonwealth and State Attorneys-General on the law relating to Consumer Credit and
Moneylending, (140 pp.) (South Australian Government Printer, July 1969).
Report (under contract) to the Canadian Minister of Consumer and Corporate Affairs on "~ Problems of Product Quality in the Consumer Marketplace•, (180 pp.) (1971).
Position Paper (under contract) for ~ National Council of Welfare, PJjg;s and tile Poor, (1973).
A Study on Qmsumer. MWea.diog Mti Unfair Trade Practi~s. (Information canada, 1976) with others (2 vols.).
'I1Re papers on Good Faith in Contracting, Unconscionability, and Disclaimer Clauses for the Ontario Law Reform Commission 1973-1974.
'"The Scope of Section 260 of the Income Tax Assessment Act• - 1967 South Australian Annual Convention of the Taxation Institute of Australia.
Land Pojiky in l3Pua Na- Quinea. (with Knetsch) (published by the Institute of National Affairs, Port Moresby, 1981).
Mlic ;snt:emrise in .Pg?ua New Guinea, (Institute of National Affairs, 1982). Th~ Role Qf th~ Priyate Sector in tbs; ijcongm.ic Deyelqprrumt of Papua New Guinea (Institute of Natural Affairs 1983).
The ChQis,:e gf G2vernine Ins.tmi:nmt (with Hanle, Prichard and Dewees), :Economic Council of Cana~ 1982.
PuQJic Strats=y and the Cran§ian Moriw Picture lndustzy (with Lyon). Ontario F.conomic Council, 1982. Policy Qptigns in the Rsaiulation Qf Asbestot-.Relareq lkiltb Hai.ards (with Tuohy), Royal
416 863 2613 TO 86135943965 P.45 SEP 1'95 11:52 FR 12 Commission on Asbestos, 1982. "Public Participation in Colkctive Decision-making: The Question of Funding" (with EngelhMt) (Economic Council of c.anada, Regulation Reference, Working Paper, 1981).
"Case Studies in the Choice of Governing Instrument", (with Hartle, Prichard and Dewees) (&anomic Council of Canada, Working Paper, 1981). A Survey of Industrial Policies in Selected OECD Countries (with O>andler)~ Macdonald Royal Com.mission, 1985.
The Politics of Positive Sum, in otfawa. Money ang Power (ed. Courchene ~- Ontario Economic Council, 1985.
Adjusting to Trade: A Comparative Perspective, (with Chandler and Howse), Economic Council of Canada, Discussion Paper, December 1988.
Medical Malpractice: An Empirical Allalysis of the Canadian Experience (with Dewees and Coyt.e) (for Federal-Provincial Task Force on Malpractice Liability, 1989,
The Limits of Freedom of Contract: The Commercialization of Reproductive Materials and Services (with Martin, Lawson, and Lewis) (for the Royal Commission on New Reproductive
Technologies, 1993).
ID)RK IN PRQGR§S 1. The Making of the Mosaic: A History of Canadian Immigration Policy, (with Ninette Kelley). 2. A paper on the economic implications of the Nuclear Liability Act with Winter (accepted for publication in International Review of Law and F.oonomics).
3. A paper on the Restructuring of Ontario Hydro (with Daniels). 4. A paper "Competition Policy and Trade Policy: Mediating the Interface". 5. A paper on the Fair Trade, Free Trade Debate (with Howse), to be published in a volume of essays by Cambridge University Press.
6. A paper "'Wbat Makes Poor Countries Poor? The Role of Institutional Capital in Economic Developmentn.
7. A paper on Comparative Monopoly Laws (with Campbell and Rowley).
416 863 2613 TO 86135943965 P.46 SEP 1'95 11:53 FR 13 8. A pa.per "The Law and Economics of Corporate Restructuring" (with Kalz). 9. A paper on the Role of the Civil Justice System in the Choice of Governing Instrument (with Howse).
rev. June 1. 1995
SEP 1'95 11:53 FR 416 863 2613 TO 86135943965 P.47 -/. • EXHIBIT "B"