Class 1 Platforms and Networks Spring 2020 Defining

Class 1 Platforms and Networks Spring 2020 Defining the Public Enterprise Randal C. Picker James Parker Hall Distinguished Service Professor of Law The Law School The University of Chicago Copyright © 2000 -20 Randal C. Picker. All Rights Reserved.

Course Syllabus June 15, 2021 2 https: //picker. uchicago. edu/Net. Indus/Syllabus. htm

Course Syllabus June 15, 2021 3 https: //picker. uchicago. edu/Net. Indus/Syllabus. htm

Course Syllabus June 15, 2021 4 https: //picker. uchicago. edu/Net. Indus/Syllabus. htm

The Focus Today n Key Questions/Issues u 1. How does something become a public utility (whatever that is)? u 2. What does that status mean for how it can be or should be regulated? u 3. What does that have to do with whether something is “essential” (groceries/plumbers)? June 15, 2021 5

What is An Essential Business? June 15, 2021 6 New York Times (28 Mar 2020)

What is An Essential Business? June 15, 2021 7 New York Times (28 Mar 2020)

Different Angle: Job Loss from Crisis June 15, 2021 8 Reuters (27 Mar 2020)

Dept of the Interior Ice Report June 15, 2021 9 Hall (1888)

Three Eras of Cold: Harvesting Natural Ice June 15, 2021 10 Hall: Ice Cutting on the Hudson (1888)

The Value of the Ice Crop June 15, 2021 11 Hall (1888)

Some Places Pay 2 X for Ice Compared to Fuel June 15, 2021 12 Hall (1888)

Uses of Ice: Breweries June 15, 2021 13 Hall (1888)

Uses of Ice: Meat Packing June 15, 2021 14 Hall (1888)

Era 2: Manufactured Ice June 15, 2021 15 Hall (1888)

1895: The Ice Box June 15, 2021 16 Montgomery Ward Catalogue (1895)

1895: The Ice Box June 15, 2021 17 Montgomery Ward Catalogue (1895)

1895: The Ice Box June 15, 2021 18 Montgomery Ward Catalogue (1895)

1926 Refrigerators June 15, 2021 19 Sears Catalogue (Spring 1926)

1926 Refrigerators June 15, 2021 20 Sears Catalogue (Spring 1926)

1926 Refrigerators June 15, 2021 21 Sears Catalogue (Spring 1926)

1935 Refrigerators June 15, 2021 22 Sears Catalogue (Fall 1935)

Era 3: Modern Refrigerator Roll Out June 15, 2021 23 Bowden & Offer (1994)

New State Ice v. Liebmann, 285 U. S. 262 (1932) June 15, 2021 24

Ice: Essentially Private, Ordinary Business June 15, 2021 25 New State Ice (US 1932)

Not Ordinarily Public Use Businesses (Except for Grave Emergencies? ) June 15, 2021 26 New State Ice (US 1932)

Ice is an Ordinary Business and is not a Natural Monopoly June 15, 2021 27 New State Ice (US 1932)

Understanding Public Corporations n TTYN (1 of 3) Key Questions u. What are the different types of businesses and are there systemic differences in the types of regulation that should be brought to bear on them? June 15, 2021 28

Understanding Public Corporations n TTYN (2 of 3) Key Questions u. Is it possible to identify a class of activities that we should consider to be infused with a public purpose? u. Should these be done directly by the state? u. Should the state instead grant franchises to entities with corresponding duties? June 15, 2021 29

Understanding Public Corporations n TTYN (3 of 3) Key Questions u. Should the state supply the demand curve for some industries? Entirely or in part? u. What are the essential characteristics of these activities/enterprises? u. Where should the authority to make this determination lie? June 15, 2021 30

th 14 Amendment Ratified July 9, 1868 n Section 1 n u. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are Citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; June 15, 2021 31

th 14 Amendment Ratified July 9, 1868 n Section 1 n unor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny any person within its jurisdiction the equal protection of the laws. June 15, 2021 32

Sec. 13 Oklahoma Act of 1908 June 15, 2021 33 New State Ice (US 1932)

Monopoly + Public Consequences Public Business (TTYN (1 of 4)) “Whenever any business, by reason of its nature, extent, or the existence of a virtual monopoly therein, is such that the public must use the same, or its services, or the consideration by it given or taken or offered, or the commodities bought or sold therein are offered or taken by purchase or sale. . . as to make it of public consequence, ” June 15, 2021 34 New State Ice (US 1932)

Public Businesses Are Regulated Industries (TTYN (2 of 4)) “or to affect the community at large as to supply, demand or price or rate thereof. . . said business is a public business, and subject to be controlled by the State, by the Corporation Commission or by an action in any district court of the State, as to all of its practices, prices, rates and charges, ” June 15, 2021 35 New State Ice (US 1932)

Obligations of Public Business (TTYN (3 of 4)) “And it is hereby declared to be the duty of any person, firm or corporation engaged in any public business to render its services and offer its commodities, or either, upon reasonable terms without discrimination and adequately to the needs of the public, considering the facilities of said business. ” June 15, 2021 36 New State Ice (US 1932)

TTYN (4 of 4) Assess this Regulatory Regime n Questions u. What are the key features of this regime? u. What do you see as the likely successful features of the regime? u. What failures would you predict? u. How would you rewrite the law? June 15, 2021 37

Ice Economics n Natural Monopoly? u. Is this a business where we can produce at the lowest cost having a single producer? u. Put differently, is the ice business a natural monopoly? June 15, 2021 38

Answer n As to production u. FN 19 suggests not: scale of ice plants has not varied with ownership structure or amount of ice produced n As to transportation u. This June 15, 2021 may be the key; bulky and expensive to transport, suggests, perhaps, local monopolies, but also note shared delivery system for competing plants (FN 24) 39

Answer n As to entrants u 1/3 are existing public utilities (electricity, gas and water) (FN 18) June 15, 2021 40

Evolution of Convenience and Necessity Statutes n Three Groups u. Businesses requiring a special privilege w First railroads, then street railways then other public utilities u. Businesses w Common carriers using public highways u. Businesses w First June 15, 2021 conducted on public property conducted on private property cotton gins, and then ice 41

Key Qs How should we understand these groups analytically? n What are the legal categories that explain these results? n June 15, 2021 42

Possibilities n Need for Eminent Domain => Unavoidable Role of State re Entry u. Think of CCN as setting standard for choice to exercise eminent domain u. Works perhaps for railroads, but not for motor common carriers June 15, 2021 43

Possibilities n Use of public property => right to restrict use? u. Based on what? Neutral rules regarding use different from flat-out entry limits n Importance to state? u“Cotton is the chief industry of the state of Oklahoma” June 15, 2021 44

1925 Ice Act: Certificate of Convenience and Necessity/Preexisting Sufficiency n Standard Setting n Mandatory Service Obligation n Grandfathering n June 15, 2021 45

1925 Act: Necessity and Preexisting Sufficiency “That the Corporation Commission shall not issue license to any persons, firm or corporation for the manufacture, sale and distribution of ice, or either of them, within this State, except upon a hearing had by said Commission at which said hearing, competent testimony and proof shall be presented showing the necessity for the manufacture, sale or distribution of ice, or either of them, at the point, community or place desired. ” June 15, 2021 46 New State Ice (US 1932)

Necessity and Preexisting Sufficiency “If the facts proved at said hearing disclose that the facilities for the manufacture, sale and distribution of ice by some person, firm or corporation already licensed by said Commission at said point, community or place, are sufficient to meet the public needs therein, the said Corporation Commission may refuse and deny the applicant (application) for said license. ” June 15, 2021 47 New State Ice (US 1932)

Standard Setting “In addition to said authority, the said Commission shall have the right to take into consideration the responsibility, reliability, qualifications and capacity of the person, firm or corporation applying for said license and of the person, firm or corporation already licensed in said place or community, ” June 15, 2021 48 New State Ice (US 1932)

Mandatory Service Obligation “as to afford all reasonable facilities, conveniences and services to the public and shall have the power and authority to require such facilities and services to be afforded the public; ” June 15, 2021 49 New State Ice (US 1932)

Preservation of Preexisting Firms “provided, that nothing herein shall operate to prevent the licensing of any person, firm or corporation now engaged in the manufacture, sale and distribution of ice, or either of them, in any town, city or community of this State, whose license shall be granted and issued by said Commission upon application of such person, firm or corporation and payment of license fee. ” June 15, 2021 50 New State Ice (US 1932)

TTYN Assess this Regulatory Regime n Questions u. What are the key features of this regime? u. What changes did the 1925 Act make from the 1908 regime and why? u. What do you see as the likely successful features of the regime? Failures? u. How would you rewrite the law? June 15, 2021 51

Understanding the Ice Act n 1916 Commission Report u. CCN would “prevent ruinous competition resulting in the driving out of business of small though competent public service utilities by more powerful corporations” n So protecting small incumbents against large entrants? June 15, 2021 52

Understanding the Ice Act n CCN as Commitment Device u. Think of certificates of convenience and necessity as commitment device by state to guarantee initial entrant that it will not face unlimited entry June 15, 2021 53

Understanding the Ice Act Under what circumstances, will we see entry by someone like Liebmann? n Why does that matter? n What would “ruinous competition” look like? n June 15, 2021 54

Regulating During an Economic Emergency June 15, 2021 55 New State Ice (US 1932)

Does Capitalism Work? June 15, 2021 56 New State Ice (US 1932)

More Gov’t Control Over the Economy Required June 15, 2021 57 New State Ice (US 1932)

Regulate New Entry Generally? June 15, 2021 58 New State Ice (US 1932)

States as Experimental Laboratories June 15, 2021 59 New State Ice (US 1932)

Protecting Experimentation June 15, 2021 60 New State Ice (US 1932)

TTYN (1 of 3) New State Ice v. The 2020 Illinois Executive Order n Key Questions u. What is the conception of essential/public business in New State Ice? u. How does that compare to the vision set out in Governor Pritzker’s executive order? June 15, 2021 61

TTYN (2 of 3) Understanding Essential Services in the Exec Order n Key Questions u. Does the executive order have the list right? Too many things included? Were some things omitted that should have been on it? u. Once we conclude something is essential, what does that tell us about how it should be provided (public or private)? Paid for (publicly or privately)? June 15, 2021 62

TTYN (3 of 3) Understanding Essential Services in the Exec Order n Key Questions u. More generally, once something is essential, what does that tell us about the scope of regulation that should be brought to bear on it? u. And at what gov’t level should regulations be implemented (local, state or federal)? June 15, 2021 63

Stay at Home Order/Exceptions June 15, 2021 64 Illinois Exec Order 2020 -10 (20 Mar 2020)

Stop Non-Essential Business June 15, 2021 65 Illinois Exec Order 2020 -10 (20 Mar 2020)

No Public Amusement June 15, 2021 66 Illinois Exec Order 2020 -10 (20 Mar 2020)

Allowed to Leave the House for Essential Activities a. For health and safety b. For necessary supplies and services (e. g. groceries) c. For outdoor activity (walking, running, biking) d. For certain types of work e. To take care of others June 15, 2021 67 Illinois Exec Order 2020 -10 (20 Mar 2020)

Healthcare June 15, 2021 68 Illinois Exec Order 2020 -10 (20 Mar 2020)

Healthcare Is and Isn’t … June 15, 2021 69 Illinois Exec Order 2020 -10 (20 Mar 2020)

Human Service Operations June 15, 2021 70 Illinois Exec Order 2020 -10 (20 Mar 2020)

Essential Infrastructure June 15, 2021 71 Illinois Exec Order 2020 -10 (20 Mar 2020)

Essential Governmental Functions June 15, 2021 72 Illinois Exec Order 2020 -10 (20 Mar 2020)

Essential Businesses a. Stores that sell groceries and medicine b. Food, beverage, and cannabis production and agriculture c. Organizations that provide charitable and social services d. Media e. Gas stations and businesses need for transportation f. Financial institutions g. Hardware and supply stores June 15, 2021 73 Illinois Exec Order 2020 -10 (20 Mar 2020)

More Essential Businesses h. Critical trades (e. g. plumbers) i. Mail, post, shipping, delivery and pick-up services j. Educational institutions (to make possible distance ed) k. Laundry services l. Restaurants for consumption off-premises m. Supplies to work from home n. Supplies for Essential Businesses and Operations o. Transportation (airlines, Uber and more) June 15, 2021 74 Illinois Exec Order 2020 -10 (20 Mar 2020)

Only Using 23 Letters in the Alphabet p. Home-based care and services q. Residential facilities and shelters r. Professional services (e. g. lawyers) s. Day care centers for employees exempted by this Executive Order t. Manufacture, distribution, and supply chain for critical products and industries u. Critical labor union functions v. Hotels and Motels w. Funeral services June 15, 2021 75 Illinois Exec Order 2020 -10 (20 Mar 2020)