The Future Of Antitrust: Do Higher Profits Merit The Retirement Of The Consumer-Welfare Standard?

The consumer-welfare standard that undergirds modern antitrust enforcement is under attack. Although the standard hasn’t changed since the landmark U.S. v. Microsoft litigation, there has not been a single case brought by a U.S. antitrust agency under Section 2 of the Sherman Act against a monopolist threatening innovation in the past two decades. What explains this retreat by antitrust enforcers? Some antitrust scholars suggest that courts increasingly demand tangible evidence of consumer injury to satisfy the consumer-welfare standard, and because such proof is difficult in many cases, the agencies are reluctant to pursue cases they are bound to lose.

In a new paper released by the Roosevelt Institute, economist Marshall Steinbaum and Professor Maurice Stucke of the University of Tennessee College of Law propose the “effective competition standard” as an alternative to the consumer-welfare (“CW”) standard that would revive the original aims of antitrust law—namely, to preserve competitive market structures. They explain that a “price-centric” approach that flows from the CW standard misses important metrics such as harms to quality, privacy, innovation, and input providers, including workers. The effective competition standard would call for “the preservation of competitive market structures that protect individuals, purchasers, consumers, and producers.” Courts would rely far less on the Supreme Court’s rule-of-reason framework under the new standard, and far more on simpler legal presumptions.

Are these changes necessary? And would they constitute an improvement relative to the CW standard? To answer those questions, we invited the Roosevelt’s Marshall Steinbaum, the Capitol Forum’s Sally Hubbard and the Hoover Institution’s Nicolas Petit to discuss the latest attempt to reinvigorate antitrust enforcement. The Chat was moderated by Hal Singer, editor of Washington Bytes and Senior Fellow of the George Washington Institute of Public Policy. The transcript was edited lightly for readability.

*          *          *

Hal Singer: To peddle any alternative standard, including the effective competition standard, one must believe that the CW standard yields too little antitrust enforcement, or what economists describe as too many “false negatives”—for example, approving too many anticompetitive mergers or condoning too much anticompetitive conduct. What specific cases should we look back on as proof that these false negatives actually occur under the CW standard? Any mergers that should have been blocked or conduct that should have been barred, which now with the benefit of hindsight, were clearly anticompetitive?