Lego

'Lego: The Toy of Smart Investors' by Victoria Dobrynskaya and Julia Kishilova in (2022) 59 Research in International Business and Finance comments 

We study financial returns on alternative collectible investment assets, such as toys, using LEGO sets as an example. Such iconic toys with diminishing over time supply and high collectible values appear to yield high returns on the secondary market. We find that LEGO investments outperform large stocks, bonds, gold, and alternative investments, yielding an average return of at least 11% (8% in real terms) in the sample period 1987–2015. LEGO returns are not exposed to market, value, momentum, and volatility risk factors but have an almost unit exposure to the size factor. A positive multifactor alpha of 4%–5%, a Sharpe ratio of 0.4, a positive return skewness, and low exposure to standard risk factors make the LEGO toy and other similar collectibles an attractive alternative investment with good diversification potential. 

Increasing globalization and networks between various asset markets limits the opportunities for diversification. Therefore, investors resort to alternative nonfinancial assets to reduce their risks and increase potential returns. A Barclays (2012) survey showed that the average high net-worth individual holds about 10% wealth as collectible assets, such as artworks, antiques, jewelry, fine wines, rare automobiles, and other luxury items partially to diversify their portfolios and hedge their financial investments. Investment funds that deal with collectible wines, artworks, precious metals, and stones improve the accessibility of such assets to retail investors. Studies have focused on such typical alternative investments, which have been popular for decades. 

However, there is a wide array of collectibles, including toys (e.g., LEGO sets, Barbie dolls, superhero figures, car or train models, Beanie Babies, and Silvanian families), which have been neglected in academic literature mainly because of the lack of comprehensive and systematic data. Anecdotal evidence suggests that collectible toys generate high (in some cases, tremendous) returns on the secondary market, because of their limited supply and rarity. Such toys are produced by companies in limited editions. Once they become retired and disappear from the shelves of stores, they can only be bought on the secondary market. Over time, items are increasingly fewer in supply, whereas collectors’ desire increases with rarity, and so do the prices. 

We study secondary market returns on collectible toys using LEGO sets as an example. LEGO is the most popular toy around the globe, and although it may seem odd to invest in a toy, a huge secondary market for LEGO sets with tens of thousands of transactions per day has developed in the 2000s (Maciorowski and Maciorowski, 2015). LEGO investments are popular because this alternative asset does not belong to the luxury segment and is therefore affordable to any retail investor. LEGO Group (LEGO henceforth), a Danish company, which was established in Billund in 1932 as a small wooden toy producer, is the current largest toy producer in the world. Fortune magazine named LEGO “the toy of the century” in 2000. According to a massive survey of more than 3,000 adults in 2010, LEGO was named “the most popular toy of all times” (Robertson and Breen, 2013). With Coca-Cola and Disney, LEGO occupies a top position in the Young & Rubicam rating of the world’s most popular brands. The LEGO factory in Billund produces 2.2 million bricks every hour, and the number of LEGO bricks produced each year is five times as high as the current world population (Robertson and Breen, 2013). Every child in every country knows and plays LEGO. 

Apparently, LEGO is not just a kids’ toy. Thousands of adults around the world collect LEGO sets. LEGO bricks are used to build large-scale objects and real art masterpieces (e.g., the world famous exhibition “The Art of the Brick” by Nathan Sawaya). Even a full-scale house was built of 3.2 million LEGO bricks by a British television presenter and journalist James May. 

LEGO sets and rare minifigures also serve as popular alternative investments. There is a huge secondary market for new and used sets (e.g., eBay), where, globally, tens of thousands of sets are traded daily (Maciorowski and Maciorowski, 2015). The returns on some retired sets reached outrageous numbers (up to 600% p.a.), which received much attention from the financial press. For example, the Telegraph reported a 12% average return on LEGO sets since the turn of the millennium compared with 4.1% on FTSE 100 and 9.6% on gold (the Telegraph, December 24, 2015). The article also named five most expensive sets with the current values above £1,500 and five most profitable sets with returns above 1,000% over 8–10 years since their release dates. 

We study LEGO not only because of its popularity but also because a systematic database of LEGO secondary market prices was available. We study historical returns on a large sample of 2,322 LEGO sets from all most popular themes to understand the attractiveness of this market to investors. We find that different sets perform unequally with average returns ranging from −50% to 600% p.a. The cross-sectional distribution of set average returns has a mean of 18.5%, standard deviation of 35%, and skewness of +9. Small and huge sets are more profitable than medium-sized sets. Small sets often contain unique parts or minifigures, whereas huge sets are released in limited editions and are popular among adult collectors. Different LEGO themes are not equally attractive either. Typically, seasonal, architectural, and movie-based themes deliver higher returns. The cross-sectional analysis suggests that not all LEGO sets are potentially attractive. Rarity is the main feature, which makes a toy a profitable alternative investment, similar to other collectibles (Koford and Tschoegl, 1998; Cameron and Sonnabend, 2020). 

The LEGO price index, constructed from hedonic regression coefficients, has an average return of 11% p.a. (8% in real terms) over 1987–2015. Discounted purchases of LEGO sets on the primary market make the returns even higher. Thus, LEGO investments outperform large stocks, bonds, gold, and other typical “hobby investments,” such as wine or stamps. The LEGO returns are not significantly exposed to market, value, momentum, and volatility risk factors. We only identify a unit exposure to the Fama–French size factor, suggesting that LEGO investments perform similarly to small stocks. The positive multifactor alpha of 4%–5%, a Sharpe ratio of 0.4, positive return skewness, and low exposure to standard risk factors make the LEGO toy an attractive alternative investment with a good diversification potential. Moreover, because sales of LEGO were constantly increasing in the 1990s and 2000s despite the global financial crises, we can expect “safe-haven” properties from LEGO investments. Indeed, the LEGO secondary market delivered positive average returns in the crisis years 2002 and 2008, when the CRSP index plunged. 

The main reason for such high returns on the secondary market is diminishing over time supply. Thus, LEGO and other collectible toys can be compared with fine wines. Once a bottle of wine is opened, the supply of this unique wine declines. Once a LEGO box is opened, the supply of this particular set falls. Eventually, old LEGO sets become rarer, collectors hunt for them, and their prices inevitably rise. 

The high return on LEGO secondary market is also attributed to the underpricing of collectible sets on the primary market. We explore the evolution of secondary market prices during the first six years after sets are released by the company and we find the following tendency. The secondary market prices are lower than the official prices while the sets are still available in stores, and the prices tend to increase after 2–3 years of the release when the sets disappear from the primary market. The prices continue to rise gradually thereafter. Hence, investment in collectible toys only pays off in the long run, when these toys become really rare. 

The rest of the paper is organized as follows. Section 2 explains how LEGO (and similar collectible toys) differ from ordinary kids’ toys and why they can be considered as alternative investments. Section 3 reviews literature on typical “hobby investments.” Section 4 describes an illustrative model of the secondary market price behavior over time. Sections 5 and 6 describe the data, the data sources, and descriptive statistics. In Section 7, we build LEGO price indices and analyze their characteristics and risk exposure. In Section 8, we explore the dynamics of LEGO returns in the first several years after set release. Section 9 focuses on related transaction costs. Section 10 concludes. The online appendix briefly presents the history of the LEGO Group and describes how LEGO became “the toy of the century.”

Disinfo

'How do you solve a problem like misinformation?' by Ryan Calo, Chris Coward, Emma S Spiro, Kate Starbird and Jevin D West in (2021) 7(50) ScienceAdvances comments

Understanding key distinctions between misinformation/disinformation, speech/action, and mistaken belief/conviction provides an opportunity to expand research and policy toward more constructive online communication. 

Trying to navigate misinformation about COVID, climate change, politics, and countless other topics can be overwhelming. This is true for the public, researchers, journalists, and policy-makers alike. As researchers dedicated to the study and resistance of misinformation, we often find ourselves in conversation with government officials and others trying to understand and address the phenomenon. To help illuminate the complexities of misinformation and to guide policy, we find three distinctions helpful: misinformation versus disinformation, speech versus action, and mistaken belief versus conviction. Failing to appreciate these distinctions can lead to unproductive dead ends; understanding them is the first step toward recognizing misinformation and hopefully addressing it. 

The first key distinction covers misinformation—erroneous or misleading information to which the public may be exposed, engage with, and share—and disinformation. Disinformation refers to a purposive strategy to induce false belief, channel behavior, or damage trust. Misinformation is usually discrete or standalone, as when a neighbor shares a false rumor or overhears a misleading exchange. Disinformation tends to take the form of a multifaceted campaign with a predetermined financial, political, or other objective. Disinformation campaigns blend orchestrated action and organic activity, relying on the participation of willing but unwitting online audiences. ... 

Fighting misinformation is about identifying and addressing misleading messages. It is conceivable that a machine learning system could help flag misinformation or that legislation could define it. However, fighting disinformation is another matter. It is an exercise in disentangling the motivations of the various actors, some innocent and sincere, others strategic. The warning signs for a disinformation campaign may, ironically, involve true information and reasonable opinion. This suggests a need for researchers to follow people and strategies, rather than individual content alone, and for legislatures to address the problem at the level of incentives. The best way to address a foreign disinformation campaign, however, may be diplomacy and economic sanctions rather than artificial intelligence or tort law reforms. 

A second distinction is the legal difference between speech and action. The U.S. Constitution protects free speech; however, it does not necessarily protect deceptive speech coupled with harmful action. This distinction potentially removes barriers to accountability for social media platforms that fail to address misinformation. Laws could require procedural safeguards and reporting about misinformation without censoring speech or treating Facebook or Google like a publisher. At a minimum, the assertive steps taken by technology companies to address coronavirus misinformation from warnings to outright deplatforming demonstrate potential methods to counter harmful content that has long plagued the internet. 

We can and should ask more of internet platforms to address the conditions that they helped create and profit from, but what does the law say? The U.S. Constitution prohibits the government from censoring speech, even if the speech is misleading. Federal law (Section 230 of the Communications Decency Act), meanwhile, immunizes platforms like Facebook and Google from liability for speech on their platforms that originate from sources outside the company. Yet, neither the Constitution nor federal law grants legal protections for harmful conduct just because the action involves speech. For example, in striking down the Stolen Valor Act in 2012, which penalized lying about receipt of the Congressional Medal of Honor, the Supreme Court afforded states the power to criminalize fraud based on such a lie, and indeed, Congress passed a new version of the Stolen Valor Act the next year, with a requirement that lying about the medal had to be for the purpose of material gain for it to be criminal. In other words, the government can regulate doing things, or failing to do them, even if those things involve speech. ... 

The final key distinction relates to the nature of belief itself, specifically, the difference between a mistaken belief and a conviction. We recognize that the distinction between belief and behavior is a subject of enduring interest in the social sciences. Indeed, one of our team’s primary research questions examines how exposure to misinformation translates into both belief and behavior. Yet, the distinction between beliefs held out of mistake and beliefs held out of conviction remains undertheorized in both the research literature and within policy circles.

Rivers, Rights, Persons

'Relational personhood: a conception of legal personhood with insights from disability rights and environmental law' by Anna Arstein-Kerslake, Erin O’Donnell, Rosemary Kayess and Joanne Watson in (2021) Griffith Law Review comments -

People with disability have demanded the recognition of full legal personhood in order to realise their rights and to overcome dominance and oppression. Legal personhood is also being claimed for similar reasons for natural entities, including rivers, forests, and mountains. However, the prevailing neo-liberal understanding of legal personhood relies on the individual exercising personhood independently. This may not be enough to secure the interests and realise the rights of people with disability, natural entities, or other cohorts that are not experiencing a wealth of power and privilege. In this article, we attempt to overcome centuries of (white, able-bodied, cis gender) male centric theory of legal personhood. We reject the dominant conceptions of personhood from liberal political theory that emphasise an atomistic, isolated individual making independent decisions. Instead, we argue for a different conception of legal personhood – relational personhood. We use insights from feminist theories of relational autonomy as well as the experience of disability to help us re-conceptualise personhood to embrace exercising autonomy through a collaborative process of acknowledging, interpreting and acting on an individual’s expressions of will and preference. We then apply this new conception to the recognition of legal personhood in nature and explore how natural entities can exercise their personhood via their relationships with humans – and, in particular, Indigenous Peoples, who have developed close relationships with natural entities over centuries. Our aim is to demonstrate the utility of a conception of legal personhood that encompass the reality of the interdependence of all individuals and entities.  

There is a more nuanced approach in 'From Rights to Responsibilities using Legal Personhood and Guardianship for Rivers' by Catherine J Iorns Magallanes in B Martin, L Te Aho and M Humphries-Kil (eds)ResponsAbility: Law and Governance for Living Well with the Earth (Routledge,  2019) 216-239, which states - 

 This chapter surveys a range of examples whereby rivers have been given legal personality or similar rights, seemingly in an effort to uphold human responsibility to better protect them from degradation. The examples are first drawn from the United States of America, where nature has been given a range of rights, in order to illustrate key rights of nature arguments. Then four examples of rivers in different countries are addressed: the Vilcabamba River in Ecuador, the Whanganui River in Aotearoa New Zealand, the Ganges River in India, and the Atrato River in Columbia. Two of these examples emphasise the rights of the rivers and two emphasise duties and responsibilities, while three of them create a separate legal personality for the river. The tools used to protect each of these rivers are slightly different from each other and they illustrate interesting comparisons and likely lessons, even though they are still very new. 

A key lesson from this difference is that rights – including rights for nature – are useful tools, but also, that collective responsibility may be even more useful. All of the examples in this paper can help our societies and their legal systems evolve to protect nature more effectively and engender a greater appreciation of its importance. But explicit frameworks and tools of collective responsibility may provide a clearer path to the paradigm shift that is necessary to better respect humans’ role within nature and ecosystems within which we live. Any framework or tool chosen needs to support a paradigm of collective responsibility and should be carefully designed and worded so as not to obscure or distract from that.

'Property in Indian Water: A Future Transformed by Climate' by Paul T Babie in (2019) 15 Amity Law Review 1-17 comments 

This article, which contains four parts, explores the ways in which climate change challenges the nature of property in Indian water. The first briefly recounts the ways in which control over surface freshwater is currently achieved in India. It focuses on the use of property as a concept for use in determining allocation, identifying a continuum of approaches to allocating property in water. Yet, because such allocation is nothing more than a fragmentation of the water resource in increasingly smaller bundles, the second part explains why doing so will result, ultimately, in the inability of any user to make effective use of the resource, for any purpose. The third part considers two alternatives to property as a means of allocating the use of freshwater found in Indian rivers, one secular, the other sacred. Finally, the article concludes with some brief reflections on the nature of transformative change necessary to achieve a sustainable and inclusive approach to water allocation.

'Constructing legal personhood: corporate law’s legacy' by Michelle Worthington and Peta Spender in (2021) Griffith Law Review comments

Legal personality – its nature and function – has become a topic of renewed interest. In particular, there is increasing interest in extending existing categories of legal personality. While contemporary discussion of legal personality is directed at comparably novel ends, aspects of the discussion are familiar, mirroring broader patterns of thought evident in historical treatments of the subject. Most familiar of all is the pronounced conceptual uncertainty that continues to surround legal personality as a device. This uncertainty may compromise efforts to successfully create and manage new forms of legal person. Proceeding from an understanding of legal personality as function, and the elements of legal personality as the terms of a licence, we explore considerations essential to the effective design of synthetic legal persons, including the need for clarity with respect to immediate purpose, designated legal capacities and the conditions against which the grant of legal personality might be made by the State. Drawing on the historical example of the corporation as the first truly ‘synthetic’ legal person in Anglo-Australian law we tell a cautionary tale about the conferral of synthetic legal personality, contrasting the flawed design of the corporate device with that of new ‘environmental’ devices, including New Zealand’s Whanganui River. .

Pharma Prices and Patents

'Access to Medicine and TRIPS Agreement: A Historiographic Mapping of the Tradescape' by Srividhya Ragavan and Amaka Vanni in Intellectual Property Law and Access to Medicines: TRIPS Agreement, Health and Pharmaceuticals (Routledge, 2021) comments 

The tumultuous tradescape, which references the landscape of the trade regime, provides the background for this chapter and hopes to outline a historiographic mapping of the struggles of diverse actors for access to medicine rupturing established global structures over three generations. The historiographic mapping traces the changes in the patent discourse terrain by analyzing the metamorphosis of IP ideology, particularly patents. In doing so, this larger book captures the different sets of actors such as states, transnational business corporations, civil society groups, and the (re)framing of patent discourses within and among these actors. Our intergenerational analyses of the legal issues surrounding the access to medicine question provides an insight into the structures within which the actors have operated along with the dynamic relationship between structures and actors. The term structure refers to the economic system within which various actors operate. The influence of structures over the behavior of actors and in turn, the influence exerted by actors over structures eventually caused generational shifts in the debate on the role of patents, trade, and access to medication. The book examines the influences over established global protocols, national and international agreements, and state and non-state entities. In doing so, we acknowledge that the history of patent harmonization discourse is a story of dynamic actors, whose interactions with established structures continue to shape the global patent regime. 

 The authors note 

The next generation in the drug debate surprisingly involved developed countries where a steady increase in the price of pharmaceuticals over a decade caused health-care costs to skyrocket, raising questions with implications beyond pat- ents. Interestingly, pharmaceutical companies are facing growing condemnation against the background of soaring drug prices, causing governments to become constituencies acting for the cause of making either medication or health care accessible to citizens. For example, the UK’s National Institute for Health and Care Excellence recommended against the use of trastuzumab emtansine (brand name Kadcyla) in the National Health Service because of its high price, even though it recognized the efficacy of the drug to treat breast cancer. Similarly, when patient-led campaign organization Just Treatment criticized the price of cystic fibrosis drug Orkambi manufactured by Vertex Pharmaceuticals, the NHS entered into price negotiations to reduce the cost. In the Netherlands, hospitals started making their own generic versions of expensive medicines to ensure availability of expensive drugs. In France, Médecins du Monde filed a challenge at the European Patent Office against Gilead’s Sovaldi – used to treat hepatitis C – challenging the cost and patent validity of the drug.  The US has been exceptional, where several issues have been raised on the question of pharmaceutical pricing, health-care access, patents, secondary patents, data exclusivity, and more. The practice of inflating the price of off-patent drugs, such as in the case of Humalog – a brand of insulin manufactured by Eli Lilly whose patent had expired 75 years ago and whose price nearly tripled between 2002 and 2013 and doubled again since then – raised concerns even among supporters of the Pharmaceutical Research and Manufacturers of America. The biggest game changers were American senators and members of Congress – who evangelized to sympathizers for reducing health-care costs – who became critical of the exorbitant cost of pharmaceuticals. 

Particularly in the US, and generally in the West, the evolution of health care into a privilege has proportionally seen an increase in discontentment and considerable challenges against all structural barriers that work to overprotect private capital at a huge public cost. Thus, beginning with the subject of patents and its correlation to innovation, several issues have brought the health-care access debate to the forefront by raising concerns about secondary patents, the regula- tory issues relating to patents, market and data exclusivities, patent linkage, and more, each of which is dealt with in the book. For example, secondary patenting – the practice of filing patents that are minor variants of the parent compound – leads to evergreening by creating a stack of patents, such that the innovator can exercise monopoly even after the first of several stacked patents expires. Such stacking effectively extends monopoly that unfairly delays the entry of generics to the market and raises costs for governments and patients as a result. Secondary patents have been challenged because, while they can increase the number of patents, they do not necessarily reflect the presence of innovation. A report by the advocacy group Initiative for Medicines, Access & Knowledge (I-MAK) discussed that pharmaceutical companies file hundreds of patent applications that are used to extend their patent term beyond the 20 years of protection intended under international patent law. This effectively blocks competition, keeps cheaper versions of medicines off the market, and makes medicines harder to access on account of high drug prices. In effect, the world is witnessing a global shift in the access-patent discourse. Previously considered a problem for low-in- come countries, the issue is a global barrier to public health and trade. Like secondary patents, the issue of data exclusivity can also work in tandem with the patent regime to add another level of protection. Data exclusivity refers to the practice of protecting clinical trial data submitted to a regulatory body to prove the safety, quality, and efficacy of a new drug. In practical terms, this prohibits the dissemination of clinical trial data to a third party (usually, a generic company), thereby preventing the generic company from relying on the data for its own drug approval. For instance, the US Affordable Health Care for America Act in 2009 extended a 12-year exclusivity period for biologics. When patents are awarded for 20 years, whether the safety data and related information should be independently protected remains an important question. It is more complicated in cases where the underlying patent is found invalid, resulting in the clinical trial data alone preventing a generic drug company from releasing a cheaper version until the data protection period is over, thereby virtually allow- ing the holder of the invalid patent to monopolize the market for the duration when data protection prevails. 

Data exclusivity can also affect the use of CL by requiring the generic man- ufacturer to seek the patent holder’s approval to use the test data separately for marketing approval. In the EU, for instance, depending on whether the orig- inator drug is a chemical or biologic, a generic may not be marketed between 10 and 12 years after the grant of the initial market authorization for the originator product. This forces a generic company to duplicate the clinical trial, the cost of which will be passed on to consumers. The issue of data exclusivity, especially as required under Article 39 of the TRIPS Agreement, has been contentious among legal scholars and commentators. For example, Daniel Gervais reads data exclusivity as a mandate in the TRIPS requirement to protect against unfair commercial use.  Carlos Correa, on the other hand, argue that the language of Article 39 falls short of what could be recognized as data exclusivity, and that the US position is inconsistent with the TRIPS Agreement.  Similarly, Ellen T’Hoen believe that the TRIPS Agreement does not oblige countries to confer exclusive rights over data related to market- ing approval to the originator company. This book presents these challenges and issues that implicate data exclusivity, patents, and their effect on access to medication. 

In addition, patent linkage has grown in recent times to pose as a barrier to medicine access. According to Ragavan, patent linkage, which is the tying-in of patent information with data exclusivity, requires the regulatory body to verify if a generic application relates to a patented product. Thus, a government body essentially performs the role of a gatekeeper of private property. This adds another layer of administrative approval, thus operating to further delay the entry of generics. Patent linkage has far-reaching effects due to its widening scope and geographical coverage via free trade agreements (FTAs) and mega-regional agreements. By delaying the entry of generics into markets, patent link- age allows the high prices of originator medicines to remain unrestrained. It is essentially an additional layer that shields the originator pharmaceutical com- pany from generic competitors. As Kyung-Bok asserts, patent linkage facilitates innovator pharmaceutical companies to obtain a de facto injunction against a generic drug company. Such injunctions can delay generic applications for up to 30 months, unless noninfringement or invalidity is established earlier, either by court judgment or patent expiry, during the 30 months.

PharmaBro

Ahead of my 'COVID snails in policy bottles: Trust, Regulation and Therapeutics' presentation at today's QUT TRIPS Waiver: IP, Access to Essential Medicines, and COVID-19 symposium it was interesting to note Tuesday's announcement by the US Fderal Trade Commission regarding the Pharma Bro and anti-competitive behaviour. 

The Federal Trade Commission and its state co-plaintiffs, New York, California, Illinois, North Carolina, Ohio, Pennsylvania, and Virginia, filed an order in court today that shuts down an illegal scheme masterminded by ‘Pharma Bro’ Martin Shkreli that fleeced patients dependent on the life-saving drug Daraprim. The order follows a January 2020 complaint against Shkreli, his associate Kevin Mulleady, their company Vyera Pharmaceuticals, LLC, and its parent company Phoenixus AG. Enforcers alleged that Shkreli, currently in prison for securities fraud, and Mulleady hiked the price of Daraprim by 4000 percent and then concocted an elaborate web of restrictions to illegally block competitors from producing a cheaper option. 

The order bans Mulleady from the pharmaceutical industry and requires Vyera and Phoenixus AG to provide up to $40 million in relief for victims. Shkreli, who allegedly pioneered the scheme as Vyera’s first CEO and continued to mastermind it from prison, is set to begin trial later this month. 

“Today’s action puts money back in the pockets of drug patients fleeced by a monopolistic scheme,” said FTC Chair Lina M. Khan. “Martin Shkreli masterminded an elaborate plan to dramatically jack up the price of life-saving drug Daraprim by blocking cheaper options. While litigation against Shkreli continues, the order shuts down the illegal enterprise run by his companies, Vyera and Phoenixus, and bans his associate from the industry. This strong relief sets a new standard and puts corporate leaders on notice that they will face severe consequences for ripping off the public by wantonly monopolizing markets.” 

The complaint alleges that Shkreli and Mulleady launched Vyera with a plan to purchase a life-saving drug, raise the price dramatically, and use anticompetitive contracts to block competition. Vyera acquired Daraprim in 2015 and immediately raised the list price from $17.50 to $750 per tablet. According to the complaint, Vyera then created a web of anticompetitive restrictions to box out the competition: it entered resale-restriction agreements with distributors that prevented generic companies from procuring the drug for FDA-mandated testing; it entered exclusivity agreements with the suppliers of a critical input known as pyrimethamine API; and it inked data-blocking agreements with two key distributors to prevent them from releasing Daraprim sales data and thereby mask the true size of the market opportunity for potential generic competitors. The complaint alleges that this scheme delayed generic competition for years and caused tens of millions of dollars in harm to consumers. 

Upon the federal district court’s entry of the stipulated order, Mulleady will generally be banned from working for, consulting for, or controlling a pharmaceutical company for 7 years. Mulleady is also subject to a $250,000 suspended judgment if he is found to have violated the terms of this order. 

The order requires Vyera and Phoenixus to pay up to $40 million total in equitable monetary relief – $10 million is guaranteed up front and up to $30 million more is payable over 10 years if the companies’ financial condition improves. Vyera and Phoenixus are required to make Daraprim available to any potential generic competitor at list price, and to provide prior notification of any planned pharmaceutical transaction valued at $25 million or more. Mulleady, Vyera, and Phoenixus also are prohibited for 10 years from engaging in any conduct similar to what the FTC and the states alleged in their amended April 2020 complaint.

Conspiracies

'Where the Earth is flat and 9/11 is an inside job: A comparative algorithm audit of conspiratorial information in web search results' by Aleksandra Urmana, Mykola Makhortykh, Roberto Ulloa and Juhi Kulshrestha comments 

Web search engines are important online information intermediaries that are frequently used and highly trusted by the public despite multiple evidence of their outputs being subjected to inaccuracies and biases. One form of such inaccuracy, which so far received little scholarly attention, is the presence of conspiratorial information, namely pages promoting conspiracy theories. We address this gap by conducting a comparative algorithm audit to examine the distribution of conspiratorial information in search results across five search engines: Google, Bing, DuckDuckGo, Yahoo and Yandex. Using a virtual agent-based infrastructure, we systematically collect search outputs for six conspiracy theory-related queries (“flat earth”, “new world order”, “qanon”, “9/11”, “illuminati”, “george soros”) across three locations (two in the US and one in the UK) and two observation periods (March and May 2021). We find that all search engines except Google consistently displayed conspiracy-promoting results and returned links to conspiracy-dedicated websites in their top results, although the share of such content varied across queries. Most conspiracy-promoting results came from social media and conspiracy-dedicated websites while conspiracy-debunking information was shared by scientific websites and, to a lesser extent, legacy media. The fact that these observations are consistent across different locations and time periods highlight the possibility of some search engines systematically prioritizing conspiracy-promoting content and, thus, amplifying their distribution in the online environments. 

Web search engines (SEs) are crucial information gatekeepers in contemporary high-choice information environments (Van Aelst et al., 2017) with internet users turning to them on a daily basis (Urman and Makhortykh, 2021). At the same time, as demonstrated by a mounting body of evidence, search results can be inaccurate or biased (Kay et al., 2015; Kulshrestha et al., 2017; Makhortykh et al., 2020; Noble, 2018; Otterbacher et al., 2017). Still, search outputs are highly trusted by people and can influence their opinions on matters ranging from commercial brands to elections (e.g., Fisher et al., 2015; Nichols, 2017). Thus, malperformance of SEs can cause societal problems by leading, for example, to the spread of misinformation or of racial stereotypes (Noble, 2018). 

While the explorations of bias in search results are increasingly common (see below), other forms of SE malperformance, in particular the one related to inaccurate search results, remain under-studied with a few notable exceptions (Bernstam et al., 2008; Bradshaw, 2019; Cooper and Feder, 2004). Unlike biased outputs, which tend to disproportionately amplify a particular point of view - e.g., by associating modern technology with Whiteness (Makhortykh et al., 2021a), - inaccurate outputs contain factually incorrect information (e.g., that the Earth is flat). Consequently, inaccurate outputs have higher potential for misinforming the users of SEs, which in some cases can pose a threat for their individual well-being as well as the society. It is particularly valid for outputs promoting conspiracy theories, which unlike other forms of incorrect or biased search outputs has so far received meager attention from the scholarly community. As shown by the ongoing COVID-19 crisis (European Commission, 2021), conspiracy theories diminish trust towards authorities and scientific community which can undermine societal cohesion and lead to radicalization, in particular at the time of crises. 

In this paper, we address the above-mentioned gap by investigating the presence of content promoting conspiracy theories in web search results through a systematic comparative algorithm impact audit. We rely on virtual agent-based infrastructure to systematically collect search outputs for six conspiracy theory-related queries on five most popular SEs across three locations and two waves (in March and in May 2021). Out of six utilized queries, three correspond to specific conspiracy theories (“flat earth”, “new world order”, “qanon”) - and are likely to be utilized by users interested in respective theories. Another three broadly refer to subjects about which many conspiracy theories circulate (“9/11”, “illuminati”, “george soros”) - and can be utilized by users broadly interested in related topics, without specific interest in conspiracy theories. We then conduct a qualitative analysis of all retrieved results to establish their stance on conspiracy theories (e.g., promoting/debunking) and their sources (e.g., social media or scientific websites), and compare our observations across locations and time periods. With this paper, we contribute, first, to the body of research on the spread of conspiracy theories through online platforms by analyzing their presence in web search results which were not studied in this context before; and second, to the literature on algorithm auditing and quality of information provided by web search engines. 

The rest of the paper is organized as follows: we first review the state of research on inaccurate and biased information in web search and on conspiracy theories online. Then, we build on this review to formulate concrete research questions and describe the methodology of our study in detail. Finally, we summarize our results and discuss their implications as well as the limitations of the current research.

One example of conspiracy claims is Attorney-General for the State of Victoria v Shaw [2012] VSC 334 dealing with a vexatious litigant. 

The Court states 

 [11] After setting out in considerable detail the various proceedings issued by Mr Shaw prior to 2007, Hansen J summarised the position as follows:

I make the following observations concerning the legal proceedings brought by the defendant. The defendant has brought a large number of criminal prosecutions in which he has made a range of the most serious allegations, including treason and perverting the course of justice, against numerous public officials. In all cases the charges have been struck out on the basis that the relevant Director of Public Prosecutions took over and withdrew the charges. I accept that by the nature of the charges, the circumstances in which they were laid, and the material provided by the defendant in support of them, it can be inferred that each charge was untenable and doomed to fail. In this sense, the proceedings were vexatious legal proceedings instituted without any reasonable ground. As to whether they were instituted habitually and persistently, I note that while not an invariable rule, there does emerge from the material a pattern whereby the defendant has brought criminal proceedings against those persons who have made decisions adverse to him. For example, upon taking over and discontinuing criminal prosecutions, both the Victorian and Commonwealth Directors of Public Prosecutions were themselves charged. After refusing the defendant’s grand jury application, the five members of the Court of Appeal were charged with criminal offences. And, after refusing to accept for filing an application for a grand jury, Master Cain was charged with criminal offences. These are just a few examples. And although there was some variation in the wording of the defendant’s allegations against those he charged, the substance of his allegations remained the same, namely their complicity in indictable offences relating to a Freemason conspiracy and/or constitutional improprieties. 

I turn now to the proceedings in which the defendant sought to challenge determinations of the Magistrates’ Court in relation to traffic offences. In essence the defendant alleged that the law under which he was charged was invalid because the Victorian constitution was invalid. He also raised allegations of a Freemason conspiracy. In each case the defendant’s proceeding was dismissed or struck out. The material demonstrates that these proceedings, instituted over at least six years, were vexatious and had no prospect of success. 

I now turn to the applications to summon a grand jury. This category is particularly significant, as it is apparent, both from an overview of the legal proceedings instituted by the defendant generally, and from what his counsel said during argument, that the defendant ultimately seeks to place before a grand jury his allegations that: (a) a Freemason conspiracy has corrupted the judiciary and the court process in Victoria; (b) there is currently an illegal conspiracy, already commenced in Western Australia, to fracture the Commonwealth of Australia and create a republic in its place; and (c) the Victorian Constitution is invalid and enacted without legal authority. ... 

Viewing the matter overall, I am of the opinion that the defendant has habitually and persistently instituted vexatious legal proceedings, without any reasonable ground. The allegations made by the defendant are of the most serious nature, yet completely lacking in substance. ...

[18] I do not propose to set out every matter addressed in oral submissions by Mr Shaw, but will identify some of those that made their mark with me.

• The removal of the oath of allegiance and the oath sworn by Australian lawyers is an act of treason on the part of at least the Attorney-General and possibly the Victorian Parliament. This was also said to be relevant to the affidavit sworn by Ms English on behalf of the Attorney-General. 

• In a similar way, the Courts and Tribunals Legislation (Further Amendment) Act 2000 of this State has shattered the whole structure of “our jurisprudence” by removing the oath of allegiance. The Attorney-General at the time the Act was introduced, Mr Rob Hulls, had acted in a treasonous way for his involvement in removing the oath of allegiance and subsequently declaring Mr Shaw a vexatious litigant “for exposing it”. 

• The Acts Amendment and Repeal (Courts and Legal Practice) Act 2003 (WA) had, by omitting references to the Crown, fractured the constitution. 

• Every politician, State or Commonwealth, from Western Australia is not qualified to sit since the passing of the Acts Amendment and Repeal (Courts and Legal Practice) Act 2003 (WA). 

• The Public Prosecutions Act 1994 (Vic), by s 51(3) which separated the office of the DPP from that of the Crown, was unconstitutional. 

• The lack of qualifications of Mr Andrew McGinty, the Western Australian Attorney-General in the year 2000, who subsequently allowed legislation to be introduced that “turned the whole jurisprudence of Australia upside down”. 

• That charges against 54 defendants (including the former Prime Minister Mr John Howard) are still pending before a grand jury. 

• That two UK judges should sit in Victoria to determine the constitutional points he has raised. 

• There are possibly two Victorian constitutions. 

• The Australia Act 1986 (Cth), at the instigation of the then Prime Minister, Mr Bob Hawke, and six premiers, is totally invalid and fraudulent, as is the sale of the Commonwealth Bank. 

• Mr Hawke, the Prime Minister responsible for introducing the Australia Act 1986 (Cth) continues to act illegally, as demonstrated by the front page of the Weekly Times of June this year, which showed a photograph of Mr Hawke. 

• The removal of the grand jury provisions by the Criminal Procedure Act 2010 (Vic) was, in effect, a scheme devised by the Victorian Attorney-General to avoid being prosecuted by Mr Shaw before a grand jury and amounted to perverting the course of justice.

[19] Mr Shaw also relied upon a number of matters contained in the notice given under s 78(b) of the Judiciary Act 1903 (Cth) to the Victorian Attorney-General. It included the following allegations.

• The existence of a criminal conspiracy to move the people of the Commonwealth into and under the United Nations, with or without the people’s knowledge and/or consent. 

• That the grand jury proceedings against the former Attorney-General, Mr Hulls, remained pending. 

• That in 2008, the then Attorney-General (Mr Hulls) perverted the course of justice when he introduced the Criminal Procedure Bill 2008 (Vic). 

• The decision of the Full Court in Re Shaw is “nugatory because the five judges entered into evidence and in doing so moved into the exclusive jurisdiction of a Grand Jury (23 electors) thereby voiding any ruling, order or judgment”. 

• That all State Governors are “Principal Offenders” and asserted that the Supreme Court, the County Court, the Magistrates’ Court and VCAT had their independent jurisdictions removed under Business Unit 19 of the Justice Department. 

• That the passing of the Western Australian Acts Amendment and Repeal (Courts and Legal Practice) Act 2003 had “broken unlawfully” the Act of Settlement 1700 (UK) and was an act of treason against both the Queen and the people. 

• That Judges of the High Court and the Governor-General were principal offenders and that the Premier, Deputy Premier or Attorney-General, Governor, Chief Justice and President of the Court of Appeal were each involved in a criminal conspiracy against the people. 

• That the principal issue in the Supreme Court in issuing a vexatious judgment related to and involved Freemasonry and the oaths and obligations of Freemasonry and the Masonic allegiance, and that the Supreme Court is a Masonic lodge. 

• That many lawyers, judges and magistrates are Catholic with no working knowledge either of scripture or the constitution.

[20] I do not think it is necessary to itemise any more of the allegations contained in this document, nor is it necessary to repeat the allegations contained in the written submissions which are in a similar vein.

The dastardly freemasons appear in other claims such as Haughton, Commonwealth Bank of Australia & Ors v Ridout & Ors [2004] WASC 136 and National Australia Bank v Walter [2004] VSC 36. In the latter the Court states 

The Walters raised a number of unorthodox arguments and challenges to jurisdiction at the commencement of the trial, on which I ruled at the outset. The matters in question included the alleged impact of Freemasonry, an alleged banking practice described as "fractional reserve banking", the invalidity of the Constitution of the State of Victoria, the Walters' entitlement to trial by jury under Magna Carta, and apprehended bias on my part, due to my disclosure of beneficial ownership of a parcel of NAB shares. 

I determined that none of the Walters' challenges to the Court's jurisdiction was of any substance. I also ruled that the issues of Freemasonry and fractional reserve banking were of no substance and irrelevant to any legitimate claim. Despite those rulings, the issues, which were not clearly defined, were persistently raised by the Walters in various altered guises throughout the course of the trial. 

The claims and challenges based on Freemasonry, fractional reserve banking, constitutional invalidity and Magna Carta which were raised by the Walters in these proceedings have previously been raised by litigants in person in the course of enforcement proceedings by banks. All have been the subject of some degree of previous judicial consideration and have been dismissed as wanting substance or as nonsense. Although those arguments occupied a considerable time at trial, the Walters also advanced a more conventional claim that the loans and securities were unenforceable on various related equitable grounds, including unconscionable conduct, duress, undue influence and estoppel. ... 

The Walters contended that the Court lacked jurisdiction to hear and determine the proceedings and was unlawfully constituted because certain judges and other Court officials are, or are suspected to be, Freemasons. They alleged that Freemasons administer and swear unlawful oaths, including oaths of allegiance to a foreign power, contrary to s.316 of the Crimes Act and s.321 of the Crimes Act. Further, the Walters contended that Freemasons are party to conspiracies to commit criminal acts and are otherwise implicated in criminal conduct. 

Ms Walter read to the Court some oaths allegedly administered to, and taken by, Freemasons. The Walters served a subpoena on an associate of a judge of the Court, requiring him to produce documentation which would reveal the identity of any judges, masters or other Court officials or employees who were Freemasons. 

The Walters contended that Freemasonry is a brotherhood of persons who habitually take unlawful oaths and who owe obedience to foreign powers. They alleged that in the course of their dealing with the NAB, Mr Fritz Walter (who is not a Freemason) failed to respond to a secret Masonic handshake made by an unidentified bank officer. The Walters claimed that in consequence, the NAB thereafter acted to the Walters' detriment and ultimately sold their property. No evidence of the alleged handshake incident was adduced at any stage. However, the Walters asserted that alleged Freemasonry within the Court precluded a fair trial of their claims. Ms Walter stated: "If the judge hearing the case were a Freemason, and the other party was a Masonic member as well and they had discussed the court case previously and made their decision while they were in the lodge" then "a litigant could not win." 

Master Evans, whom the Walters believed to be a Freemason (as he would neither confirm nor deny membership) had made an order in the principal proceeding for trial by judge alone. Master Evans' order was said to be of no effect, due to his alleged status as a Freemason. 

Although I stated that I was not, and had never been, a Freemason, the Walters contended that the status of the individual judge hearing the proceeding was irrelevant. They claimed that the Bench of the Supreme Court of Victoria was infested with Freemasons who were guilty of criminal acts, indictable offences and other unlawful conduct which contaminated the entire Court. Although Ms Walter preferred to characterise it as a "question", she essentially submitted that the Court lacked jurisdiction to determine the proceedings on the ground of Freemasonry. 

In reliance upon Re Shaw & Another, in which the Court of Appeal considered almost identical arguments about Freemasonry to those raised in the present matter, I ruled from the outset that Freemasonry had no bearing on any legitimate issue to be determined in the case. The reiteration of such allegations and the associated baseless attack on the Court's personnel and processes were, in my view, irresponsible and regrettable. SLAs where the High Court was unimpressed include Knight v Bell and Anor M43/2000 [2002] HCATrans 446 and Fyffe v The State of Victoria M123/1999 [2002] HCATrans 442.

Food Advertising

'Monitoring complaints about food marketing to children under the Australian industry Codes 2015–20: a qualitative analysis' by Wendy L Watson, Amy Pagotto, Korina Richmond and Clare Hughes in (2021) 45(6) Australian and New Zealand Journal of Public Health 562 comments 

 Regulation of food marketing to children is widely recognised as key to addressing childhood obesity rates. A review of evidence-based obesity prevention interventions for the Australian context found legislation restricting television advertising of unhealthy foods a cost-effective obesity prevention initiative. Addressing marketing of unhealthy foods in publicly-controlled settings and marketing associated with sport and major community events were promising interventions. Reducing advertising of, and exposure to, unhealthy food and drinks was one of the top five focus areas raised by participants in the 2020 consultation on the National Obesity Strategy nd was listed in the draft National Preventive Health Strategy, released in March 2021. 

In 2009, the Australian food industry introduced two self-regulatory Codes to address food and beverage advertising to children, the Responsible Children's Marketing Initiative (RCMI) for grocery products and the Quick Service Restaurant Initiative for Responsible Advertising and Marketing to Children (QSRI) for fast food. Within the RCMI, healthiness of foods appropriate for advertising is defined by individual company criteria, and the QSRI includes specific energy and nutrient criteria for a ‘children's meal’ but no other fast food products. The Australian Association of National Advertisers (AANA) has self-regulatory Codes relevant to protecting children from unhealthy food advertising, the Code of Ethics, the Code of Advertising and Marketing to Children and the Food and Beverages Code. Previously, companies were voluntary signatories to the RCMI and QSRI, however, in June 2019 an additional clause in the Food and Beverages Code required compliance with the RCMI or QSRI, meaning all food and beverage advertising should comply with these Codes. From July 2020, these two Codes came under the management of the AANA. 

The self-regulatory Codes in Australia have not changed the rate of children's exposure to food advertising on television, or in outdoor settings. Globally, while industry-sponsored reports indicate high adherence to voluntary Codes, peer-reviewed papers show self-regulatory Codes have failed to reduce children's exposure to unhealthy food advertising. Since 2010, the World Health Organization (WHO) has had a set of recommendations to reduce both the exposure of children to, and power of, marketing of foods. The 2012 WHO framework for implementing those standards provides a broad range of options and factors to consider when developing a policy. The 2020 World Cancer Research Fund (WCRF) Building Momentum report has built on that framework and collated international experience on best practice policy in five main areas: legal measures needed, who should be protected, forms and levels of marketing to be restricted, and which foods and beverages should be restricted. 

A complaints program managed by Ad Standards supports the Australian advertising Codes. Complainants lodge complaints regarding advertising through an online form on the Ad Standards website or by post. Ad Standards convenes a Community Panel (the Board) responsible for reviewing these complaints. Decisions on the outcomes of complaints are reported on the website in a case report that summarises what the complainant/s said, the advertiser's response, deliberations and final outcome (dismissed or upheld). Complaints about the same advertisement are grouped together with, typically, one case report per advertisement. There has been no independent critique of these complaints to understand whether the Codes address complainants’ concerns. This paper aims to qualitatively analyse the case reports of complaints to Ad Standards, regarding unhealthy food marketing to children, published over the last six years, and compare the Codes with best practice recommendations from WCRF.

The authors note that case reports on complaints about food marketing to children under the five industry Codes – the Responsible Children's Marketing Initiative, the Quick Service Restaurant Initiative and the Australian Association of National Advertisers Code of Ethics, Code of Advertising and Marketing to Children and Food and Beverages Code – were qualitatively analysed. Reports on the Ad Standards website in the food/beverage groceries and food/beverage venues categories from 2015-2020 were investigated. The most common clauses from the Codes were identified and quotes from reports used to illustrate the determinations. Codes were compared with World Cancer Research Fund recommendations on policy to protect children. 

Only 14 of 119 complaints resulted in a reported breach of industry Codes, with the most common reason for dismissing complaints involved clauses requiring advertisements to be ‘primarily’ directed to children. The Codes did not align with best practice recommendations. Complaints by the public show concern for food advertising to children but the Australian industry Codes fall short of addressing those concerns. Government regulation is required to protect children from unhealthy food marketing.

Magic Cures

A feature of snake oil therapeutics is often the wide range of conditions that will be prevented or cured through use of the particular product or practice. Sometimes regulators are very slow to respond. 

In Secretary, Department of Health v Oxymed Australia Pty Ltd [2021] FCA 1518 the Federal Court has ordered Oxymed to pay $2 million for advertising medical devices intended to administer hyperbaric oxygen therapy (HBOT) in breach of the Therapeutic Goods Act 1989 (Cth). Malcolm Hooper, the Director of Oxymed, was ordered to pay $1 million in penalties for aiding, abetting, counselling or procuring Oxymed's contraventions of the Act. Hooper and Oxymed were also hit with costs. It is unclear how much  wealth Hooper has accrued from HBOT over the past decade and whether the Commonwealth can extract the $2m from Oxymed, whose sole shareholder is reported to be his daughter.

The Federal Court found that Oxymed's advertising was "intended to engender in the unscientifically trained and vulnerable reader a perception of credibility" as to the claims regarding HBOT as a treatment for specific conditions, with the use of hyperbaric oxygen therapy to treat most of those conditions not supported by scientific evidence. Oxymed and Hooper were held to 'have a practice of posting pseudo-scientific articles targeted at a vulnerable audience'. 

Rofe J considered that although HBOT presented a limited risk of direct harm to patients, "there is a potential for significant harm if patients with conditions such as cancer or HIV/AIDS defer or avoid orthodox evidence-based treatment" in favour of hyperbaric oxygen therapy, alongside a "risk of substantial financial harm to patients" depending on the duration of the course of treatment. 

What did the supposed therapy cover? The judgment lists Alzheimer’s disease, Amyotrophic lateral sclerosis, Autism spectrum disorders, Autoimmune illness, Back pain, Brain injury, Carbon monoxide (CO) poisoning, Cellulitis, Cerebral malaria, Cerebral palsy, Near drowning, Chronic fatigue illness, Chronic infections, Complex pain syndrome, Concussion disability, Coronavirus, Crohn’s disease, Crush injury, Cytokine storm syndrome, Dementia / cognitive decline, Disc prolapse, Failed back surgery, Fibromyalgia, Fracture repair, Gadolinium poisoning, Hearing loss, Hospital infections (MRSA, VRE), Irritable bowel syndrome, Infertility, Kidney disease, Live[r] disease, Lyme disease, Macular degeneration, Multiple sclerosis, Muscular dystrophy, Motor neuron disease, Osteoporosis, Pancreatitis, Paraplegia, quadriplegia, Psoriasis, Radiation necrosis, Reflex sympathetic dystrophy, Spinal cord injury, Spinal instability, Sensorineural hearing loss, Stroke, Tarlov cyst, Traumatic brain injury and Ulcerative colitis.

Action by the Commonwealth comes rather late. 

Hooper appeared in Chiropractic Board of Australia v Hooper (Occupational and Business Regulation) [2011] VCAT 641 with the Tribunal referring to allegations that Hooper failed to -

make a proper assessment; obtain informed consent; prepare and modify the treatment plan; liaise with other treating health practitioners and monitor outcomes. Further ... misrepresented the likely efficacy of treatment; engaged in misleading and deceptive advertising and maintained an inadequate clinical file. 

 Subsequent appearances include Chiropractic Board of Australia v Hooper (Occupational and Business Regulation) [2011] VCAT 2400, Chiropractic Board of Australia v Hooper (Occupational and Business Regulation) [2012] VCAT 1042, Chiropractic Board of Australia v Hooper (Review and Regulation) [2013] VCAT 236, and Chiropractic Board of Australia v Hooper (Review and Regulation) [2013] VCAT 417. 

In Chiropractic Board of Australia v Hooper (Review and Regulation) [2013] VCAT 878 the Tribunal noted referral pursuant to s 59(2)(g) of the Health Professions Registration Act 2005 (Vic), with allegations that Hooper failed to undertake a proper clinical assessment of patient QS prior to recommending and undertaking HBOT, failed to obtain informed consent from QS, failed to prepare a treatment plan or an adequate treatment plan in relation to treatment of QS, failed to modify the treatment plan (if it did exist), failed to clinically monitor or evaluate any measurable improvement in QS’s condition, misrepresented the likely effectiveness of treatment and in advertising treatment regarding 30 named conditions was misleading and deceptive about the effectiveness of that treatment.

Some of Hooper's patients were unhappy. One died. During January this year in DPP v Hooper Anor (application for trial by judge alone) [2021] VCC 34 Hooper and Oxymed were the subject of charges re six offences under the Occupational Health and Safety Act 2004 (Vic), with a conviction - as yet unreported - on some charges more recently.

It would appear that Hooper finessed the regulatory frameworks by ceasing to present as a chiropractor (struck off in 2013) and only belatedly being caught under the Therapeutic Goods Act. That might provoke some thought about regulatory coherence. There is no requirement for registration of HBOT devices under the Therapeutic Goods Act.

Wealth Transfer in Australia

Fans of Piketty, trusts, wills and other matters may relish the Productivity Commission's paper Wealth Transfers and their Economic Effects, out today.

The Commission states 

Until now, little has been known about how much wealth Australians transfer while they are alive (gifts) or after they die (inheritances), let alone how those transfers affect those who receive them, or the impact on the distribution of wealth in society. This report sheds light on these questions. 

Wealth transfers are large and growing — over $120 billion was passed on in 2018, more than double that in 2002. Inheritances in particular, which account for around 90 per cent of all transfers, have increased steadily in line with the growing wealth of older Australians. In 2018 19 the value of the average inheritance was $125 000 compared to $8000 for gifts. 

Conventional wisdom suggests that wealth transfers make the richest Australians even better off. And in fact wealthier Australians do receive larger transfers on average. But by the time people receive an inheritance, they will be well into middle age — about 50 years old on average — already established in their careers and housing, and many will potentially be nearing retirement themselves. So while inheritances weigh on economic mobility — by increasing the likelihood that wealthy parents have wealthy children — the effect is moderated by the lateness in life at which they are received. 

What about inequality? 

Wealth transfers have unambiguously increased the amount of wealth held by richer Australians. However, when measured against the amount of wealth they already own — and this may surprise — the less well off get a much bigger boost from wealth transfers. That is, wealth transfers increase the share of wealth held by poorer Australians, reducing relative wealth inequality. And we are not an outlier. This finding is replicated in every other country studied around the world. That said, in Australia, the moderating effect is quite small: a one percentage point change in the rate of return to housing wealth — a fraction of the average annual historical return — would have a much larger impact on relative wealth inequality. 

What does the future hold? 

Older Australians are projected to hold a growing share of total wealth. They will also account for a larger share of total deaths, and consistent with falling fertility rates, they will also have fewer children to pass their wealth onto. These factors are projected to drive a four fold increase in the total value of inheritances, which could lead to a significant increase in the total value of wealth transfers when compared to lifetime earnings. Nevertheless, absent a significant change in how wealth transfers are distributed or saved in the future — for example, because the wealthiest Australians receive a much larger share of total inheritances than in the past, or save a much larger share of their inheritances compared to less wealthy people — they are unlikely to significantly worsen wealth inequality in Australia in the coming decades.

We might of course ask about mechanisms such as trusts. 

 The paper comments 

The wealth of the average older Australian has grown remarkably since the turn of the century. It has been buoyed by strong real growth in house prices and almost three decades of growth in superannuation balances, alongside low rates of asset drawdown to fund retirement. As such, many older, retired Australians, at a time of life where one would expect them to be drawing down their wealth to fund consumption, have actually accumulated increasingly large stores of wealth (figure 1). They transfer their increased wealth while they are alive (known as inter vivos gifts — ‘gifts’ henceforth) and at death (inheritances). 

Although research into wealth transfers has a relatively long history overseas, little is known in Australia. This report seeks to fill that gap by creating a wealth transfer fact base for Australia to answer basic questions, such as: how much wealth is transferred between Australians each year, when, and to whom? And how do people respond to receiving a wealth transfer — for example, by immediately consuming it, or investing it to consume later? 

We also investigate the contribution of wealth transfers to wealth inequality in Australia in the past and the (simulated) future. Previous work by the Commission found that wealth inequality had likely increased in the opening decades of the 21st century. Academic work by Piketty and others has argued that wealth transfers, and inheritances in particular, might contribute to worsening wealth inequality in the future. We do not find compelling evidence for this. As is commonly believed, wealth transfers do largely go to the rich, but on some measures wealth transfers actually reduce wealth inequality. 

While there are many factors at work, government policies affect the accumulation of wealth and the terms and conditions of its transfer to younger generations (through the tax and transfer system, superannuation policies and the treatment of housing over the lifecycle, among other factors). Of particular relevance is the extent to which policies may be contributing to the accumulation of large stores of wealth by many households and individuals, which are increasingly persisting until death. This has led to debate about policy settings that encourage retirement savings. These policy issues are complex and are not covered in this report (box 1). 

Superannuation tax and contribution arrangements have led to higher levels of private saving than would occur in their absence. As many people draw down only the minimum allowable amount of their superannuation, larger inheritances result. 

Precautionary saving (in anticipation of high aged care deposits, unknown medical expenses and concern that the money might run out given an uncertain time of death) contributes to unintended inheritances as does uncertainty about asset returns. To the extent that people have poorly-informed views about risks or are unable to manage these risks through different retirement products, some older Australians can be deprived of higher consumption and wellbeing in their retirement. 

Moreover, some older people use their liquid savings to meet their current consumption needs, but not draw down on their housing wealth because of a lack of attractive financial approaches to liquidate housing wealth, such as equity withdrawal. This behaviour is likely influenced by the favourable treatment of owner-occupied housing in asset tests for access to the Age Pension. 

What we do in this study 

We undertake backward-looking empirical analysis over the past two decades to create a fact base on wealth transfer behaviour (chapter 1), and investigate how wealth transfers have affected the distribution of wealth over that time (chapter 2). We also undertake forward looking empirical analysis by projecting wealth outcomes to 2050 to examine the potential impact of future wealth transfers on inequality under different scenarios (chapter 3). 

The data 

The key data sources for this analysis are: the Melbourne Institute’s Household, Income and Labour Dynamics in Australia (HILDA) survey; two probate datasets, which provide partial information about wealth at death for a representative Australian sample in 2010 and for Victoria in 2016; and tax file return data, which provides information about wealth held in superannuation accounts. 

The breadth and depth of information about the wealth transfer behaviour of individual Australians in these data sources is somewhat limited. But, as this report shows, a wide range of economic analysis is still possible and there is good evidence that the constraints imposed by the data do not undermine the robustness of the findings. Indeed many of the findings in this paper about the impact of wealth transfers in Australia are similar in nature (if not magnitude) to the research findings from other countries, including research undertaken with much more extensive datasets. 

Richer insights about wealth transfers in Australia could be facilitated at relatively low cost in the future by including additional questions in the HILDA survey — the only household level dataset for analysing wealth transfers in Australia — and linking administrative datasets with probate records (as the latter are progressively digitised). 

What we find 

Australian wealth transfers are large and growing 

More than $120 billion was transferred in 2018 alone (figure 2) — to put this sum in perspective, this is significantly more than Australian government expenditure in 2018 19 on health ($80 billion) and about 30 per cent less than total spending on social security and welfare ($170 billion). 

The aggregate annual value of wealth transfers has more than doubled in real terms since 2002, as Australians have accumulated larger amounts of wealth. The cumulative impact on wealth transfers is immense, with slightly less than $1.5 trillion being transferred since 2002. 

The annual value of wealth transfers has more than doubled since 2002 

Most transfers are inheritances given to (adult) children and spouses of the deceased 

Close to 90 per cent of transferred wealth — just over $100 billion in 2018 — was in the form of inheritances, passed on following death. And about half of all inheritances immediately went to the children of the deceased. The remainder went to a surviving spouse or to other family and friends. About 2 per cent went to charity. The vast majority of reported gifts went to children. 

Gift recipients are much younger 

Children are the key recipients of both inheritances and gifts, but they tend to receive them at different stages of their life. The average recipient of an inheritance was, at about 50 years old, close to peak earning capacity, established in a house, and received about $125 000 (the median was much lower, at about $45 000 in 2018 19). In contrast, the average recipient of a gift was about 20 years of age, at the beginning of their career, yet to start a family or purchase a house, and received about $8000 (again, the median was much lower, at about $1000) (figure 3). 

Wealth transfers have increased absolute wealth inequality but decreased relative wealth inequality 

Over the past two decades, wealthier people typically received more via wealth transfers than poorer people, increasing absolute wealth inequality (figure 4, panel a) (box 2). This is intuitive because wealthier parents have more wealth to transfer to their children, and their children tend to be wealthier even in the absence of those transfers. 

That wealth transfers increased absolute wealth inequality is consistent with recent work by the Grattan Institute and the Treasury, which found that inheritances increase absolute wealth inequality because ‘they are not distributed equally’ (The Treasury 2020, p. 51) and they ‘tend to go to people who are already wealthy’ (Wood, Griffiths and Emslie 2019, p. 3). 

A less intuitive result, but one that is replicated in research for all other countries for which information was available (Britain, France, Germany, Italy, Spain and the United States), is that wealth transfers reduced relative wealth inequality, because wealthier people received less in wealth transfers as a share of their existing wealth than poorer people (figure 4, panel b). For example, as a share of their existing wealth, transfers boosted the wealth of the bottom 20 per cent (quintile 1) of the wealth distribution by about 30 times more than for those in the top 20 per cent (quintile 5). 

That said, wealth transfers have less of an equalising effect on relative wealth inequality in Australia than in all countries studied, except for the United States. This is primarily because Australian wealth transfers are smaller as a share of the total stock of wealth.  ...

Wealth transfers increased absolute wealth inequality, but reduced relative wealth inequality 

Wealth inequality can be expressed in absolute or relative terms. While relative wealth inequality is the more commonly invoked concept, both are valid and useful. Absolute wealth inequality is inequality in the dollar value of wealth held by each person in society. If every person’s wealth were to increase by a fixed amount, say $5, then absolute wealth inequality would be unchanged. If wealthier people’s wealth increased by more than poorer people’s wealth, say $10 compared to $5, then absolute wealth inequality would increase. 

Relative wealth inequality is inequality in the share of wealth held by each person. If every person’s wealth were to increase by the same fixed share, say 5 per cent, then relative wealth inequality would be unchanged. If wealthier people’s wealth increased by a larger share than for poorer people, say 10 per cent compared to 5 per cent, then relative wealth inequality would increase. 

If changes to wealth increase relative wealth inequality, they must also increase absolute wealth inequality. But changes to wealth that decrease relative wealth inequality do not necessarily decrease absolute wealth inequality. 

The moderating effect of inheritances on relative wealth inequality persists 

Studies of other countries have found that the effect of inheritances on relative inequality erodes over time because poorer recipients deplete their inheritances faster than wealthier recipients. Some studies have found that wealthier recipients earn larger returns to the invested component of their inheritances, while others have suggested that wealthier recipients consume smaller shares of their inheritances. (No studies exist for gifts.) 

Our results suggest that the reduction in relative wealth inequality from inheritances persists in the longer term, because both wealthy and poor tend not to deplete their inheritances. 

Inheritances impede social mobility among older Australians 

As noted above, wealthier parents tend to have wealthier children, even in the absence of wealth transfers. Inheritances strengthen this relationship — which means inheritances impede social mobility — because they move children closer to their respective parent’s position in the wealth distribution. This effect is conceptually different to the effect of inheritances on wealth inequality. Among older Australians whose last surviving parent died in the past two decades, about one third of the association between their position in the wealth distribution (relative to their peers) and their parents’ position in the wealth distribution (relative to their peers, and when still alive) was because of inheritances. 

Future wealth transfers are projected to increase in size 

Consistent with trends over the past two decades, older Australians are projected to hold a disproportionately larger share of wealth over time relative to their share of the population (figure 5, panel a). This finding is replicated across a number of reasonable scenarios for rates of return on different assets, home ownership, savings and wealth transfer behaviour, while holding current policy settings fixed (box 3). Housing wealth is a large driver of this result (figure 5, panel b) — older age groups own more housing wealth, they draw down on housing wealth slowly, and inherit large housing wealth from their partners in old age. ... 

Older people are projected to hold a greater share of wealth 

Inheritances passed onto the next generation are projected to grow in line with rising wealth among older age groups, with the total amount increasing nearly fourfold between 2020 and 2050. Falling fertility rates — a long term trend evident in Australia since the late 1950s — means that people who die will have fewer children to leave their wealth to, contributing to larger average inheritances received per person. Projections of the value of gifts were based on existing gifting rates estimated from survey data (which may underreport gifts received). The size of gifts is projected to fall relative to the size of inheritances, because gifts tend to be made years before death from a relatively smaller stock of wealth than exists when people die. 

Wealth transfers are projected to reduce relative wealth inequality, although behavioural changes could increase it In most of the scenarios that were modelled, wealth transfers are projected to increase absolute wealth inequality but reduce relative wealth inequality. The mechanics are the same as described above: even though wealthier people receive larger wealth transfers on average, less wealthy people receive wealth transfers that are a larger share of their existing wealth. 

If wealthier people are assumed to benefit more from wealth transfers in the future — for example, because they receive a much larger share of total inheritances than observed in the past, or save a much larger share of their inheritances compared to less wealthy people — then there could be an increase in relative wealth inequality. 

That said, the projected effects of wealth transfers on relative wealth inequality under all modelled scenarios are small. A one percentage point change in the rate of return to housing wealth — a fraction of the average annual historical return — is projected to have a much larger impact on wealth inequality than wealth transfers