Cato Daily Dispatch for October 7, 2003
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Circuit Court: Cable Providers Must Open Up Their NetworksFDA Cracks Down on Drug Reimportation
Supreme Court Overturns Punitive Tobacco Decision
Circuit Court: Cable Providers Must Open Up Their Networks
"Cable companies would be required to open their networks to rival high-speed Internet service providers under a federal appeals court ruling yesterday that could lead to more choices for consumers and subject the industry to the same competitive pressures roiling the telephone market," The Washington Post reports.
"The ruling by the San Francisco-based U.S. Court of Appeals for the 9th Circuit bars the Federal Communications Commission from following through with plans to allow cable companies to exclude rivals from selling competing brands of Internet service over their lines. ... If the ruling survives a likely appeal, the decision could provide broadband Internet users with new options for the content they see online, their e-mail addresses and potentially the monthly rates they pay."
In What's Yours Is Mine: Open Access and the Rise of Infrastructure Socialism, Cato scholars Adam Thierer and Clyde Wayne Crews Jr. examine the hazards of mandatory "open access". They argue that genuine competition requires that firms have the ability to exclude rivals. Government seizure of existing networks and technologies on behalf of rivals means that next-generation technologies will not be created by those rivals or the incumbents. Competition, innovation, and consumers will suffer if forced sharing policies are not abandoned.
Thierer and Crews recommend that Congress "take immediate action to end such mandated infrastructure sharing and quasi-socialistic technology management schemes. Existing forced access mandates for the local telephone exchange should be quarantined and phased out on a rapid, date-certain timetable. State and local forced access mandates should be pre-empted since they conflict with federal competition standards and restrict interstate commerce."
FDA Cracks Down on Drug Reimportation
"It began as a novelty: grannies riding buses to Canada in search of cheaper medicines. But today, that search has mushroomed into a cross-border war that pits desperate consumers and defiant state and local governments against the powerful pharmaceutical industry and the Bush administration," according to USA Today.
"From just a few million dollars a year in 2000, the importation of price-controlled drugs from Canada has grown to a projected $800 million this year and shows no signs of letting up."
In "Conservative Drug Split," Cato President Edward H. Crane and Vice President for Legal Affairs Roger Pilon write: "Because our drug market, burdened as it is with regulations and cost controls, is still free relative to such systems [abroad], America's drug companies, which do most of the world's drug research and development, recoup most of their costs, including R&D costs, in the domestic market, then sell abroad at prices far below true costs. Foreigners are thus classic free riders. As with defense, Americans are underwriting a good part of the health-care costs of the rest of the world."
They go on to say: "[D]ropping trade barriers and freeing U.S. consumers to purchase drugs at far lower prices overseas would significantly threaten the profit margins of the pharmaceutical companies. These companies would be forced to present the price-setting countries with an ultimatum: Either liberalize your market or we will leave. It's hard to imagine that countries in this situation will deny their citizens access to life-saving drugs. Instead, they will most likely ease their controls and increase the price they are willing to pay for their drugs. ... It is neither right nor good that Americans bear so great a portion of the health-care costs of the world."
Supreme Court Overturns Punitive Tobacco Decision
"The Supreme Court on Monday threw out an $80 million verdict against cigarette-maker Philip Morris," reports The Associated Press. "The verdict, for the family of an Oregon janitor who died in 1997 of lung cancer, should be reviewed by lower courts to ensure it is not unconstitutionally excessive, justices said."
"The Supreme Court ordered Oregon courts to review the judgment, in light of their ruling earlier this year that a jury went too far in ordering an insurance company to pay $145 million over the way it handled claims from a car accident. Andrew Frey of Washington, an attorney for Philip Morris, had told the court that like the State Farm judgment, the verdict against Philip Morris was out-of-line."
The recently released Cato Supreme Court Review includes a chapter by Cato Senior Fellow Robert A. Levy on State Farm Mutual Automobile Insurance Co. v. Campbell. Levy suggests several approaches to curb punitive damage abuse (without endorsing one in particular) including the possibility of paying punitive damages to the state rather than the plaintiff.
Wyatt Dubois, editor, wdubois@cato.org
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