OP-ED

Judge Mehta Reminds Regulators That the Consumer Welfare Standard Is Still in Charge

Reactions to Judge Amit Mehta’s opinion in the Google antitrust case range from primal screams from progressive antitrusters (Matt Stoller: “A Judge Lets Google Get Away with Monopoly”), to libertarian gloating (Reason: “Trump and Biden Tried to Break Up Google,
Now They’ve Both Failed”), to futurist market economics (WSJ editorial page: “AI Wins the Google Antitrust Suit”).

My headline is that Judge Mehta’s ruling was a big win for the Consumer Welfare Standard. This is the doctrine, held by the courts for 47 years, stating that antitrust enforcement should shun exotic theories and judge business deals and practices by how they impact consumers.

Remember them?

Biden’s antitrust regulators, Jonathan Kanter at DOJ and Lina Khan at the Federal Trade Commission, managed to write new guidelines for antitrust enforcement that avoided even mentioning the Consumer Welfare Standard. The new Trump-appointed antitrust chiefs surprised much of the antitrust community by adopting the Biden CWS-free guidelines with no changes. With both parties jettisoning the Consumer Welfare Standard, surely it was headed for extinction, right?

No. In Judge Mehta’s ruling on Google’s antitrust case, he reminded the regulators that consumer welfare remains at the heart of antitrust law.

Judge Mehta considered the government’s request for a ban on Google’s payments to Apple and others to make Google their default search engine. The judge outlined many possible dire consequences to equipment manufacturers like Apple and Samsung, as well as to browser developers and carriers. Harm to these businesses would likely radiate down to consumers. Here are some select quotes from Judge Mehta:

“[I]f one or more of these adverse market impacts were to come to pass, it would harm consumer welfare. That could manifest in various ways, including higher prices, less innovation, and less competition.”

And this, a quote from precedent:

“[C]ourts must exercise care to ensure that the cost of correcting market failure does not exceed the anticompetitive injury visited on consumers.”

Judge Mehta also quoted an econometric study showing that a forced decline in Google’s market share would almost certainly result in a “large reduction in consumer surplus.”

The judge also applied the logic of the Consumer Welfare Standard to the request by the Biden Administration and revived by the Trump Administration that Google be forced to divest its Chrome search engine, which the company has built from the ground, up.

He found that a divestiture of Chrome would be “incredibly messy and highly risky.” It is not equipped in its functionality and operations to be a standalone business. The likely result would be a pale afterlife for Chrome with a lot less functionality.

Judge Mehta concluded:

“[T]he court is highly skeptical that a Chrome divestiture would not come at the expense of substantial product degradation and a loss of consumer welfare.”

The judge consistently came back to the central metric of consumer welfare – all proof that despite the posturing of regulators, the courts remain solidly anchored to the Consumer Welfare Standard.

Originally published at Real Clear Markets.