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Rethinking Consumer Welfare

Americans deserve a new standard for antitrust that proactively protects workers, consumers, and economic actors along a supply chain. A new standard that actively and effectively protects the process of competition—not promoting “efficiency” as a means of measuring market outcomes within narrowly defined markets—would be in direct conflict with how antitrust jurisprudence has been interpreted for several years. The consumer welfare standard has become inextricably linked to placing the resource-intensive burden plaintiffs. It is their burden to prove anticompetitive harm of the defendant by weighing such conduct against its subsequent price effects (Did the price go down as a result of the conduct? This is how narrowly antitrust determines harm). The doctrine that guides this reasoning does not award any inquiry into the actual threat that the process of competition or its structures face. The “consumer welfare” standard also doesn’t recognize the manifold abuses firms engage in—mergers, absorbing smaller companies, or other exclusionary conduct. Furthermore, dominant firms are then incentivized (“economically rational”) by lax enforcement to use their muscle in labor markets: paying employees a poverty wage even as profits are at record highs while corporate tax rates are insanely low or stripping away health benefits. The U.S is indeed overdue for sweeping antitrust overhauls because the broken system of current standard is killing consumers.

Tim Wu, a law professor at Columbia and author of The Curse of Bigness, offers a useful and more effective question into the structures of competition should they become threatened by a dominant firm’s anticompetitive conduct or exclusionary practices: “is the [complained-of] conduct actually part of the competitive process, or is it a sufficient deviation as to be unlawful?” According to Wu, antitrust law can revert back to its original goals by reenforcing the common and broad language of the original trust-busting statutes. By doing this, there would be less wiggle-room for idealistic judicial interpretations, effectively punishing aforementioned and unrecognized exclusionary conduct or anticompetitive behavior. The punishment would have to be proportional to the conduct and taken seriously. Punishment for these harms should not just become a drop in the bucket fine or slap on the wrist, either—and enforcement should become key. For example, when a large corporations like FaceBook egregiously violate some antitrust statute, they should’t be fined an arbitrary sum that amounts to nothing more than their cost of doing business. When the government signals to large corporations that they will hardly get so much as a scolding for violation of federal laws, the conduct is likely to continue—the fines are budgeted for.

As it stands, the law has come to require a narrowly focused economic analysis that pushes judges to determine the “reasonableness” of anticompetitive harms or exclusionary conduct (with exception to tying arrangements in vertical integration). What the law requires is harder to obtain in practice than what orthodoxy suggests—which is consistent of most neoliberal assumptions of how firms function in a supposed perfectly competitive environment. At the very least, a plaintiff has to gather the context, define the industry, articulate the intent of the conduct (the section 2 provision of the Sherman Act prohibits attempts to monopolize), and determine whether the conduct is even categorized as exclusionary or anticompetitive. It also requires that a plaintiff bring an analysis of elasticity (which is incredibly difficult in practice), an analysis of how much market power the defendant has, and use only an economists toolkit that reduces these harms to mere economic outcomes. This standard not only demands that a plaintiff prove that there was malfeasance and anticompetitive conduct, it also demands that they prove a harm to consumers as well. This would be like courts judging that by me racing in the Indy 500 with my ’97 Toyota Avalon amongst 200 mph race cars was not only a fair race, but that it’s fair because it proved no harm to consumers in the stands—perhaps because they paid a cheaper price to watch than they otherwise might have absent market “efficiency.”

As I’ve said in the past, we don’t live solely in the courtroom—where socioeconomic justice is supposed to prevail without bias and without a zero-sum sacrifice. We live in a universe where having formal laws in the books is completely separate from the issue of enforcement. Stronger more robust antitrust enforcement is necessary to preserve the economic liberty of our citizenry, reduce inequalities, and preserve the health of democracy. We should heed the advice of the so-called anti-monopoly “New Brandesian School” of thought and return to an era of enforcement against corporations that allows the public and government to hold private power accountable—our economy depends on it.