Document Type

Article

Publication Date

6-21-2018

Abstract

Antitrust’s consumer welfare principle stands for the proposition that antitrust policy should encourage markets to produce output as high as is consistent with sustainable competition, and prices that are accordingly as low. Such a policy does not protect every interest group. For example, it opposes the interests of cartels or other competition-limiting associations who profit from lower output and higher prices. It also runs counter to the interest of less competitive firms that need higher prices in order to survive. Market structure is relevant to antitrust policy, but its importance is contingent rather than absolute – that is, market structure is a concern when it facilitates reduced output or innovation or leads to higher prices.

Antitrust’s consumer welfare principle is currently navigating between two hazards, both of which threaten the importance of low prices as an antitrust goal. On the right is a general welfare approach best identified with Robert Bork that would permit efficiency claims as an antitrust defense even when the challenged practice leads to higher prices and causes consumer harm. On the left is an emergent “neo-Brandeisian” approach that often regards low prices as the enemy, at least when they come from large firms at the expense of higher cost rivals.

In both cases, the full story is more complex. The general welfare approach as Robert Bork presented it was built on a strong faith that various practices produced cost savings or other efficiencies, whether or not these were provable, as well as considerable doubt that a large menu of practices caused genuine competitive harm. In the process it also approved an approach to antitrust that was very difficult to administer and underdeterrent over a wide range of practices. By contrast, a central claim of the Neo-Brandeis approach is that markets are fragile, threatening monopoly nearly everywhere. Further, antitrust policy should be driven more by political theory rather than economics. While political voices are diverse, making it difficult to identify a single theme, one clear consequence is greater protection for small business. For example, they point with admiration to some of antitrust’s greatest acknowledged disasters, such as the Robinson-Patman Act.

One serious problem facing the neo-Brandeis movement is lack of transparency. The attack on low prices as a central antitrust goal will harm consumers, and vulnerable consumers are most at risk. To the extent that the United States Democratic Party becomes the institution to embrace its concerns, it will be harming its own constituencies the most, and that could spell political suicide.

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