Busting Collusion Over Books

I did not record it on this blog but it occurred to me that the tough bargain that Apple reached with the publishers on e-books was potentially troublesome. At the time, the idea was that publishers wanted an alternative that ensured that they maintained control of the cost of e-books in the quest to break the perceived  stranglehold on the market by Amazon. Notwithstanding my admiration for Apple, I support the enquiry by the US Department of Justice with the claim that Apple and the publishers colluded to fix prices and thereby raise their revenues in way that was harmful to buyers.

Brian Balker of the Guardian provides the background together with details of the claim by the US Government here. In spite of my reluctance to support government intervention against businesses, I think that this has sufficient justification. To start with, Amazon had placed most publishers in a place where they were the prices of e-books were moving towards marginal cost. The agreement that forms the justification for this suit ensured that publishers maintained the bizarre pricing that made no sense to anyone else but the few publishers. Since then, even Amazon has had to be more cautious in pricing books because it could have been isolated since the iPad gave substantial power to Apple. 

Microsoft Complains of Antitrust Violations by Google

It is worthy of repetition that while I am a libertarian, I maintain that regulatory policy is sensible in the area of competition because it is demonstrably possible that a firm could depress welfare through anti-competitive behaviour. At the same time, I am aware that as George Stigler argued, the market is such a tough and dynamic place that most anti trust policy achieves very little that is positive. more importantly, it is clear that calculating corporations may incite or instigate anti-trust investigations against a competitor to defeat with a view to using government muscle to ensure that a competitor is restrained in legitimate market activity.

And perhaps one firm in the modern times that faced a multiple of claims that its behavior as a dominant firm was distorting markets outcomes was none other than Microsoft. indeed some people have made the claim, unconvincing in my view, that the very rise of Google was made possible due to the temporary distraction that Microsoft faced over a decade since its tribulations with competition authorities commenced. so the irony of this came to me starkly when I learned from this piece by Mark Sweeney in the Guardian that Microsoft is suing Google for violation of competition rules.

I have not had a chance to review any official documents in order to make some comments but I still think that as stated in that piece, this is very interesting. And yet, it is clear, with the benefit of hindsight, that it was predictable.I would like to see what the "pattern of actions" that Microsoft has identified constitute violations by Google.      

Google's Dilemma: Buy or Make

Even putting aside the fact that this blog is largely made possible by a facility that Google makes possible, one could still dispassionately say that the corporation's employees are creative and display good business acumen. Reading this story in the NYT about Google's offer to purchase AdMob in exchange for shares worth US$ 750 million got me thinking about business strategy. To start with, it is clear that the Google seeks to expand the range of its revenues into as many personal devices as is possible and that has inevitably led to mobile phones. And so what Google has done is to conduct surveillance of the landscape and determine whether it needed to build a new device or acquire a separate corporation.

From the point of view of one interested in how businesses weigh decisions, I am wondering how these corporations strike a balance between building up a new service from scratch or acquiring a different entity at a fair cost. In the case under discussion, Google's offer is to take over the new corporation through a share swap hence with no cash changing hands. What draws my attention to this is that google will offer more than a million shares at today's price of US$ 566.7 per share in exchange for a corporation as it chases the opportunity to take up some space in the battle for shares in advertisements for mobile phones. Given the large number of engineers that google has, the calculations that inform this acquisition are unclear to me. I suspect that good managers are capable of considering when an acquisition would be a better deal than a complete buildup from scratch. In spite of this, I am intent to watch this transaction keenly as it would be important to se how Google leverages from computers onto the mobile phone advertisement space.

Related to the story of this transaction is the concern that Google is becoming the behemoth of the technology world and its competitors and detractors would like to see its freedom to make acquisitions checked. It is not clear to me that an acquisition of whatever kind would in itself guarantee Google continued dominance and therefore would not be particularly concerned about the quest to expand its footprint in the digital world. As Peter Osnos writes in The Atlantic, recent history suggests that Google is in a stage where it will have to be more careful to prevent overreach and concentrating on innovation.

Why Intel Should Negotiate a Settlement

Few people who watch technology very keenly are unaware that Intel corporation has been facing law suits in relation to its conduct towards PC makers. The variety of technical claims are complicated but in short, they suggest that this corporation has been paying PC makers not to use its competitors chips in their machines. The direct effect of this is that it forestall competition at the assembly stage and thereby harms the consumers of computers. As the story here states,the corporation has defended itself both in the EU and Japan but has faced heavy fines in both jurisdictions. That notwithstanding, the Attorney General of New York has also instituted a lawsuit against Intel on similar grounds.

As would be expected, the story reveals here the ongoing discussion because there are institutions and professionals pitching on both sides on the merits of the case. Judging from the outcome of the cases in both Europe and Japan, I think that the probability of Intel emerging from this case completely unscathed is low. And while I am reluctant to accept that business targets should of necessity be determined by courts, I think that the management and shareholders of the corporation should consider whether a vigorous battle in court is in the corporation's interest.

Again, in spite of my inability to tell fully how the case will be determined and what the size of any fines may be, I consider that Intel should negotiate with the DOJ and New York's AG. The reason for this is that the corporation will remain a strong competitor in the computer chips market and it should preserve its strength and management focus towards that. This view is informed also by the degree of disclosures that have been made about the conduct of the firm's employees which showed that they were aware that some of the business conduct was questionable. Finally, considering that the lawyers are properly schooled in competition law and would represent the firm competently, the history of these actions suggests that the case will probably be long and take up large sums of money.

So the advise is not to cut and run but rather to admit that management's time over the next few years should not be consumed with a trial of this kind. It is clear that in spite of its big fights in the same places, Microsoft did not do any better. Intel's management should show some intelligence here and choose its fights.

Is the Kindle 2 Leading Towards a Monopoly?

Judging from this earlier post, I leave no doubt that I consider the Amazon Kindle 2 to be a fascinating piece of equipment that may yet change the broad economics of book production and distribution. In that same post, I argued that the traditional paper publishers should be more circumspect in their views about the Kindle 2 for the reason that reason that it will disrupt their business and pricing models.

It is therefore fair to consider what the success of a proprietary model like the Kindle 2 would have on the competition landscape. To start with, this piece by Farhad Manjoo on Slate has addressed the immediate concerns regarding the possibility that the success of Amazon's e-book reader may lead to substantial market power.

The first point is that Amazon has established an exclusive standard and locked in Kindle 2 buyers into purchasing exclusively from Amazon. This means that buyers of the Kindle 2 are bound to be locked into purchasing products from the Amazon stores, a situation that closely mirrors the lock down which Apple maintained with the original sale of tracks from its iTunes stores. In fairness, this is a legitimate concern in the sense that the Kindle 2 is not only an expensive gadget but one that limits the choices of the sources of the material that could be used with it. If this business model is maintained, then it is possible that the success of the Kindle 2 would allow Amazon to wield substantial market power with both the producers of content on the one side and its customers on the other.

Secondly, Farhad Manjoo claims that buyers of books have grown accustomed to sharing their books with others and that this will be impossible with the Kindle 2. I am unsure that this is true because the sharing is still possible only to the extent that one would have to lend out one's kindle together with the entire library for the duration of the lending. What I see as a distinct possibility is that while it may not be possible to transfer the e-books, many people who are avid readers will lend out their machines in exchange for others. I am not that sympathetic to this view because two Kindle 2 owners may soon buy different titles and merely exchange the gadgets to allow each to read the other book. Indeed, if the Kindle 2 was to be so successful that it reached a critical mass, then this would control the extent to which Amazon would use it power to raise prices. Sharing will still happen in the same way that people shared the physical CDs.

The third point follows from the fixed nature of the E-book and the restrictions to copying that come with its purchase. here too, I think that Amazon would be completely naive to think that there would be a perfect electronic format that would preclude copying. It is just not possible that if the Amazon became as successful as I expect it will be, that there would be no software programmer out there who would not breach the DRM system. In a short while, it will be possible to copy the e-book without much problem even if that were illegal. I see no reason why DRM would be useful here when it was not with music. Following Steve Jobs eloquent argument on which this post was based, I am less inclined to believe that no software programmers out there would not be equal o the task. Indeed, the problem would be whether there's a mechanism t transfer it from one machine to the other. But that it would eventually be copied is something that i would wager a reasonable bet on.

To my mind, the real issue that concerns competition policy here is to actively watch the markets for Kindle 2 and ensure that Amazon does not retain exclusive arrangements to sell all e-books that are compatible with the Kindle to itself. To democratize that part by allowing Kindle 2 buyers to buy the books from other competing stores would be sufficiently welfare enhancing. The competition at that level would ensure that the publishers reexamine the folly of charging similar prices for the electronic books as they do for paper versions. The Kindle 2 should bust that part. Then the e-books market should be open to competition.

Eliot Spitzer Speaks for Competition

To my mind, one of the most effective forces of an open economy is the fact that it produces the compulsion for firms to compete to supply services and goods. In essence, the competing firms have to work for the good of their clients in order to work for themselves. Writing in Slate Magazine, Eliot Spitzer makes an eloquent case for why the GM corporation on the one side and the Security exchange Commission are now in the uneviable state.

For the SEC, he refuses to accept that the series of unethical practices that some institutions and individuals engaged could not be promptly detected because of the lack of resources and statutory authority. Invoking the virtues of economic competition, Eliot Spitzer states that the SEC was merely interested in protecting its turf without responding to the threats that existed. Mr. Spitzer is not only correct in this assertion but I would add that it is clear that an augmentation of its powers would not help the regulatory institution at all.

Taking on GM, the piece states correctly that this corporation opted to negotiate a safe path with the unions and eschewed economic competition. This preference for protection as opposed to competition led the corporation to place the interests of the unions as a paramount feature and forgot to supply the appropriate automobiles that its customers would purchase. It is difficult to disagree with Spitzer that the reluctance to expose firms to competition soon shows its poor results. While it is clear that the US economy is one of the most open and that is more tolerant to competition in comparison to others, the piece that its creative destruction is required cannot be refuted.

Breaking the Cartel of Steel

This story in the Times of London reports that the Competition Council in France conducted a three year inquiry and determined that a number of firms in the steel industry had colluded to set prices and raise barriers for entry to potential rivals. As has been monotonously stated on this blog, one of the clearest justifications for regulatory policy is in the quest to enhance industry competition. Adam sage's story reports that the Competition Council has levied a record fine of €575 million on 11 firms.

Again, while I am convinced that light regulation is important, the story suggests that there was a finding that this was an elaborate price fixing and barrier raising cartel. I applaud the Competition Council of France because price fixing and lessening of competition is without doubt harmful to competitors and to consumers of steel products. What I am less clear about is the manner in which the size of the fine is determined. It is unclear what assumptions are employed in reaching the fine and the apportionment across the colluding firms. I am also unsure that this is indeed the largest fine in real terms because the comparisons being made are all in nominal terms.

Finally, the mere evidence that the managers of the firms met is insufficient reason to assume that a cartel is in place but the other evidence involving market sharing, price fixing and other collusion in punishing members who do not adhere to the agreements demonstrates the nefarious effects of this cartel. This is one instance in which the use of the word cartel is not a smear word for a dominant set of corporations.

Bankruptcy or Bailout?

The post that preceded this one summed up the main reasons that the Detroit three manufacturers are in danger of collapse. As stated then, their coziness with elected officials ensured that they were protected to death and were not therefore placed under pressure to produce vehicles that were fuel-efficient. Their Japanese competitors appeared to have taken this into account and are selling substantial numbers of vehicles in the US and throughout the world.

That the three main vehicle manufacturers made the wrong bets is clear but the debate has just commenced about how to respond to the possibility of their collapse. Indeed, president-elect Obama appears to be asking for the presentation of a bailout of the firms. The second choice is to allow them to consider the possibility of bankruptcy proceedings or to be left to their devices with the possibility of their quick collapse and the attendant loss of jobs.

David Brooks in the New York Times here, takes the very reasonable and my favoured view that to save the corporations will not only result in moral hazard that failure is intolerable, but also entrench the influence of these firms with the public sector. On the other hand, while Daniel Gross admits in this article that the management of the three firms are culpable, he is concerned that the mechanics of Chapter 11 would be inappropriate for the firms. As he states, the nature of the vehicle manufacturers is that they are connected to many other firms that would in turn be forced to close and trigger other closures down the line.

In all this, I think that the domino effect is overstated and that the firms ought to be left to their devices. The arguments about the financial sector bailout found more sympathy with me than the argument that the automobile industry is also a very critical part of the US economy. Simply put, if any of these firms were to go into bankruptcy, most US citizens will still be able to find vehicles to drive through the imperative of competition. And yet it appears that the bailout will occur. As David Brooks says, this may be a bailout to nowhere.

How US Protected Detroit to Death

During my brief visit to the Us a couple of years ago, I was on the watch for the kind of cars that were most available. The reason being that I had made crude comparisons and even after adjusting for PPP, determined that petroleum is incredibly cheap in the US as compared to Europe. I noted that there was a large and growing number of Japanese models side by side with the impressive looking but fuel guzzling SUVs.

I found this fascinating because the connection between the addiction to oil and security has been eloquently made by Thomas Friedman. Writing this piece in the NYT, he extends the theme by showing how the three main car manufacturers in the US relied on connections in congress to ensure that they would not adjust to Japanese competition and to provide more fuel-efficient vehicles. In spite of the heavy protection received from some congressmen, it is clear that the rise in petroleum prices has shifted demand away from the models that GM, Chrysler and Ford presently produce almost irreversibly. The managers of these corporations are compelled to plead for government subvention to ensure their survival. In essence, the car manufacturers are close to being nationalized.

The moral of the story is that government should not contemplate protectionism to begin with because it builds the power of corporations to ask for more help later. As their world unraveled, the corporations were so confident of their ability to manipulate congress that they refused to back a health care plan that would have substantially reduced their wage costs. In the writer's reckoning, the Detroit corporations now need an equivalent of or the real Steve Jobs and more competition from Japanese manufacturers. I would welcome an icar too.

Dental Highway to Improved Income

My concern with economic competition in services such as dental care in the United States has been recorded on this blog. Now comes this interesting paper that has featured on a post on the Freakonomics blog that makes the claim that there's an appreciable economic value to having good teeth as it affects income for women especially. Following the brilliant argument that Dubner puts forth and the conclusion that this effect suggests that there's a consistent beauty premium, leads me to wonder how to consider the fact that the dental profession in the US and most probably other parts of the world maintain high barriers to entry.

Taking it as a given that good dental care improves the future income of an individual places dentists in a situation where they are not only able to charge premium prices for the specific dental services that would improve the economic value of teeth but are vicariously responsible for income distribution when they ration dental care. This postulation could be tested by finding out whether areas that have a higher concentration of dental surgeons have higher incomes because of that care or because of the fact that those inhabitants are bound to be significantly wealthier to begin with.

Microsoft Fails to Acquire Yahoo!

For a considerable time now, Microsoft has been waiting to conclude an acquisition of Yahoo and the deal seems to have collapsed early this week ostensibly because the latter did not accept the enhanced offer of US$ 33 per share. Considering that the initial offer was made while Yahoo shares traded in the US$ 19-20 range, it appears that Microsoft was prepared to pay a hefty premium to make the acquisition and ensure that it is able to compete with Google.

With the expected acquisition having failed, the combined wisdom from these separate pieces in the Slate Magazine and the Timesonline lead to two main conclusions. Firstly, knowing that acquisitions are fraught with danger of failure, Microsoft was extremely eager to make succeed in this acquisition by offering such a large premium. Secondly given that Yahoo! appears to be struggling in taking market share away from Google in respect to advertisements, its managers should have taken the perceptibly generous enhanced offer. My random conclusion is that either firm requires renewed thinking to determine the line of attack against Google as they are both devoid of ideas. Which implies that there's no guarantee that the acquisition would have worked well for either side. What is regarded as failure today may turn out to be lucky escape for Microsoft.

Dentists Protecting Turf

It has been argued in an earlier post here that in spite of the failure to ensure coverage for US citizens, the American Dental Association was fundamentally opposed to any initiatives to allow dental therapists without full training to provide routine care. according to this NYT report, it appears that they are losing the argument because Alaska has allowed a number of professionals with capability to provide routine dental care to consult with patients.

As would be expected, the ADA continues to argue against through scare tactics involving allusion to uncontrolled bleeding. While I note that proper care is required, maintain that it is indefensible that a child with cavities has to wait for four years to receive dental care from the therapists whose skills the members of the ADA so disparage. Given the high income that some dentists have and their ability to restrict supply by keeping working for fewer hours, it is clear that the therapists are infusing competition while serving people without access. For as long as the population grows much faster than the ADA will allow training, the therapists must continue to provide basic dental care in the rest of the US too. There's no reason why the dental care should not operate as a market.

Let Apple Price its Music

This IHT story shows some really bizarre actions by the European Competition Commission against Apple. The substance of the action is that the commission accused apple of unfairly making British buyers of music from the iTunes stores in the UK to pay a higher price than equivalent consumers in the rest of Europe.

Despite my unqualified enthusiasm for enforcement actions that increase the degree of economic competition, I am not sure that the commission is working in the the interests of the consumers by trying to impose a standard price within the EU countries. Instead, the Commission would be better advised to seek to abolish the requirement that buyers of music must use a payment card that was issued by a bank based in the country from which the purchase is being made.

Considering that music is a now a good being purchased and delivered through the internet and consumers should not be compelled to make purchases from specified sites based in certain countries in the first instance. That restriction is a far greater hindrance to competition that harms consumer interests than the price discrimination that that the commission is sweating about. In a single market, consumers ought to be able to purchase goods using a card issued in any member country.

Even more puzzling is that this complicated situation is the result of different requirements of copyright laws. The story suggests that part of the settlement will lead to the creation of a single market for music. That is what the Commission should have sought in the first place and left the matter of prices alone.

Is Google taking on Microsoft?

A number of software corporations that tried to frontally compete against Microsoft did not succeed much but that may have as much to do with the latter's business ability than the aggressive tactics that many claim that the largest software firm employs. Still, my understanding of any market is that no corporation can enjoy the extreme dominance that Microsoft does regarding any service without attracting an equally capable firm sooner than later.

An article in the NYT reports here that Google is the latest firm to frontally seek to compete with Microsoft. In itself the story is an interesting case of industry reporting because it exposes the different views that the two companies have about the future of computing in general. the story suggests that Google considers that most work processes will move to the internet and therefore it is considering the placement of applications that may be accessed through that medium. On the other hand, Microsoft does appear to consider the internet as a mechanism for supporting computing services and considers the high regard that Google is reported to place on Cloud Computing as ill-informed.

To my mind, I see in this the possibility of Microsoft's hubris in considering that cloud computing has no chance. It ought to review the intelligent decisions institutions such as universities are taking in moving a host of services onto the internet. secondly, since university campuses constitute the places in which the per capita use of a variety of computer applications does take place, Google's experiment is not as bad as one may think. This does not necessarily imply that most computing services will shift wholesome to the net and into Google's palms but it is possible that a substantial number of them will be efficiently delivered through the web.

In addition, the article exposes one of the distinguishing facts about Google's creative style and that is tied to speedy execution. Because Microsoft has the sustained tendency for the late release of products, it should be less sanguine about facing a corporation whose creative talents operate on a five month cycle. Whichever way the battle goes, all users of software products and services will benefit from the intense competition between two firms with immense reserves of cash and human resources. My guess is that a good proportion of the applications will migrate to the web in the medium term and that some of that will continue to be provided by Microsoft.

Price Fixing by UK Supermarkets

The Office of Fair Trading of the UK has levied fines totaling £116 million against Sainsbury's and Asda following their admission to having engaged in price fixing for dairy products. Given that these firms have admitted to the charges and opted to settle the matter, one cannot reasonably argue about the size of the fine itself or the punitive nature of that settlement. As this story states, a number of other supermarkets in the UK have not reached an agreement hence investigations will continue against them.

It is noticeable however that the offenses for which the firms are charged occurred between 2002 and 2003. This leads to the thinking that either the OFT is more inclined to act after firms have benefited from the offenses or that timely detection of price fixing is particularly difficult. Given the enormous sums that it raises while levying fines, the OFT should consider the development of a random price tracking algorithm to detect movements in price that suggest price fixing. Put forensic economists to work here because it is seems that price fixing is more prevalent than is immeditely evident.

Why Make Use of the iphone a Nuisance?

Apple has gone from a corporation that designs and makes computers and related software and into other successful electronics products such as the iPod and the iphone. it is while bearing this in mind that I keep wondering why this corporation enters into agreements with mobile phone companies in order to tie the sale of the iPhone to specific networks and thereby restrict their use to networks that the phone manufacturer approves.

This anti-competition device is particularly ill-informed since it effectively compels purchasers of the product to use it on pre-selected networks. This news item on the BBC news site reports on the penalty that users who wish to buy an unlocked phone have to pay. That customers have chosen to pay an 87% "tax" to ensure the retention of the freedom of choice of network should be instructive to the networks but especially to Apple Inc. iphone owners will search for an alternative mechanism to unblock the device and this will happen pretty quickly as has already happened.

Recalling an earlier post here in which Steve Jobs argued against the futility of the DRM, it may make sense for him to review the numbers and the additional costs that is imposed on purchasers through this anti-competitive device. Mr. Jobs knows what the outcome of this unnecessary and expensive imposition will be. My hint: consumers will circumvent it.

OFCOM Supports Number Portability

A statement released by the Office of Communications in the UK has made one of the most cogent and reasonable arguments for number portability. Given that phones are now used more widely and reliance on them has grown, the losses that could accrue from change of service providers are a part of the consideration that individuals make. So while this blogger is generally tolerant of very minimal regulation, here is one regulatory measure that has unequivocal support.

The primary reason for my support is that measures to ensure seamless number portability for consumers is great for competition. Transfer of calls to a new network is expected to occur within a couple of hours following a formal communication of change of providers.

New Entrants to the Billionaires League

I do not pay much attention to the ubiquitous league tables showing who the highest net worth individuals for any given year are. This is not out of envy as much as the fact that by the time most people have gotten to be placed on that table, often the most interesting entrepreneurial ideas that they espoused are probably going out of date and that the methodology for the comparisons is often unsound. However, reading this slightly hostile piece from Foreign Policy Magazine, I have had to eschew this and take notice of the fact that the man of the moment is the Mexican citizen Carlos Slim Helu who is now assessed as the world's most affluent man.

While his business interests and background is undeniably impressive, the point that I consider relevant is one that stands for most billionaires in countries bereft of robust market systems. This would include the large number of Russian oligarchs, Indian billionaires, African political entrepreneurs and some of the Chinese enterpreneurs. The running thread among most of them is that the state was a direct enabler for the building of their fortunes. Granted, fortunes built from honest enterprise in any part of the world is deserving of respect but I think that given the tendency for having run large monopolies and the proximity to political power that this special category of billionaires wield, perhaps they deserve a list of their own.

Of concern is that the manner of acqusition and extension of fortunes through political connections, ruthless maintenance of monopoly and denial of entry to potential competitors merely erodes the confidence of their fellow citizens in the fairness and strengths of the operation of open markets. The result is that the citizens of these countries are wont to insist on and tolerate heavy regulation of markets.

European Court Scores for Competition

An item from the Guardian site reports the good news that the European Court of Justice has struck down a federal law in Germany that acted as a barrier against a takeover of Volkswagen. I applaud the court for this clearly correct decision because this impediment merely served to keep the local state's power in the firm in addition to serving as a protectionist instrument. As the court argued, this legal requirement limited the movement of capital by hindering acquisition and management control. the related argument that the instrument was necessary to protect the interest of workers and the Lower Saxony region deserved to fail for the reason that it merely gave power to politicians.

As is expected, Porsche may make a formal offer for acquisition and control of the firm but this will now be open to competition by other firms who see value in the open business environment. While I am cautious of large mergers and acquisition because of the poor record throughout the world, the court has opened up Europe to fuller competition in industry and investment and that is all for the good. More competition please!

US Dentists Should Compete

Health professionals throughout the world create the impression that tight regulation of entry into the profession is necessary for the reason that people's health should be cared for by highly trained professionals. Perhaps so, but this article in the NYT shows that good times for dentists is not necesarilly good for those with dental problems. Quite to the contrary, dentists are doing well as measured by income in real terms and number of hours worked (more money for less effort) while the access to dental health care is demonstrably poorer.

Again, the question here is one of a regulated profession that tightly restricts entry ostensibly in the interest of patients and ends up serving fewer at higher costs. as the story states, there's complete resistance to allowing entry for people who with much less qualification to provide care to ensure that fees remain high.

The argument here is not that dentists are compelled to provide care to those who cannot afford their fees or even to work 4000 hours per annum, but that they should not be allowed to restrict competition through arbitrary standards that merely provides a financial boom to them at the cost of public who pay for dental care. No doubt a number of them will still earn a high income in an market with more dentists but that will be without denying patients the opportunity to find alternative care. Any approach towards universal dental care would not work while practitioners of dental medicine control numbers and choose which patients to treat.