A Stitch in Haste

I used the self-study product MicroMash to prepare for the Bar, so I guess I won't be seeing any money:

More than 300,000 lawyers and law students were each charged an estimated $1,000 extra for bar review courses, according to a complaint filed against BAR/BRI bar review and The West Publishing Corporation and Kaplan, Inc. in the U.S. District Court for the Central District of California in Los Angeles today.

West Publishing Corp., dba BAR/BRI, and Kaplan are joined as defendants in a class action lawsuit accusing the two companies of illegally dividing the highly lucrative LSAT and bar exam test preparation businesses. According to the complaint, executives of BAR/BRI and Kaplan secretly agreed to a per se illegal market division.

BAR/BRI agreed to close its Law School Aptitude Test (LSAT) preparation course from the market in which Kaplan was the dominant competitor. Kaplan, in turn, agreed not to enter the full-service bar review business, in which BAR/BRI was the dominant competitor. The two companies then entered into an agreement to work together "strategically" to enhance Kaplan's share of the LSAT market and to increase BAR/BRI's control of the bar review market.

The complaint is here (PDF - 23 pages). I've only glanced at it. Basic Clayton Act and Sherman Act type stuff, although I noticed some whining about the omnipresent claim that "BAR/BRI tears down other services' flyers" and the fact that they offer a scholarship with the ABA's imprimatur. And the class action allegations might make a good review for those taking Civil Procedure.

I didn't take antitrust in law school, but I did take Industrial Organization in grad school, and I'm an investment banker, so I'm literate in the basics. And of course as a libertarian I despise all antitrust regulation.

By what perverse reasoning can an agreement between two companies in unrelated fields saying "I won't enter your niche if you don't enter mine" possibly be illegal? How can not doing something be legal, then agreeing to continue not doing that same thing suddenly become illegal? It boggles the mind.

Of course, antitrust is never about protecting competition, but rather about protecting competitors, via the force of the government.

Suppose the lawsuit somehow succeeded, or is settled. What happens? The "lucrative" bar review market instantly becomes less lucrative, because prices are artificially forced downward. But if the market is less lucrative, then there is less reason for new competitors to enter that market. So, in order to "protect customers," you keep potential alternative providers out of the market. You entrench the very companies you claim have been "abusing" customers. Try reviewing that study material a few times.

Let's say BAR/BRI settles and agrees to lower its prices. Neat-o -- except that all the class actions in the world don't change the rule that "you get what you pay for." Does anybody really believe that every lost dollar in revenue comes only from profit and not from developing and maintaining the product itself? Is it such a victory if law students pay $1,000 less for their materials and the probability that they fail the bar increases by 5% because those cheaper materials are of a lower quality?

And here's the real kicker: Kaplan is owned by the Washington Post (bet you didn't know that); BAR/BRI is owned by Thomson Company -- Canadian, incidentally...shame on all you law students for not "studying American!" (just teasing). I'm fairly confident that the Washington Post and Thomson could merge tomorrow and not a single antitrust regulator would bat an eyelash, rendering the Kaplan-BAR/BRI "anticompetitive" agreement moot. Antitrust is supposed to make more sense at the subsidiary level than at the parent level? It boggles the mind.

I'm sure the blawgosphere will be all over this -- I'll try to provide updates as appropriate.

Hat tip to En Passant by way of Pejmanesque.