Before the acceptance of the Consumer Welfare Standard, antitrust law had become a mélange of conflicting decisions that tended to raise prices and support inefficient firms to the detriment of consumers. In much of the 20th century, the U.S. Supreme Court’s antitrust jurisprudence focused on exotic goals that often proved irrelevant or even harmful to the well-being of consumers.
Antitrust law had fallen under the sway of subjective biases. Justice Louis Brandeis denounced the “curse of bigness” against “small dealers and worthy men” – the idea being that it was the job of the law to protect small, often artisanal firms against the predations of larger, more efficient companies. Judge William O. Douglas took up this cudgel in the 1960s and 70s, hitting businesses for being too big for his taste.
Such decisions were not based on any real economic analysis. The Consumer Welfare Standard arose in response to this legal chaos from debates among economists and legal scholars, many at the University of Chicago. These scholars crafted a corrective standard by which to weigh costs and benefits of antitrust law with the welfare of the consumer as its governing principle.
This Consumer Welfare Standard held that the logical goal embedded in antitrust law is “economic efficiency” – delivering lower prices, heightened innovation and more choices for consumers.
Courts were quick to see the merit of this new standard. By 1979, the new scholarship had convinced jurists that because the law was detached from consumer welfare, it was free to pursue aesthetic and political goals at the expense of consumers and innovation. Judges began to eagerly applied the standard’s neutral principles, with no slant against or for “bigness,” or “small dealers,” or a magical ability to identify “worthy men.” It had become an accepted principle that when judges use antitrust law to reorder business according to a judge’s personal whim or aesthetics, they undermine free markets, democracy, and rule of law.
This common understanding of antitrust law’s purpose is now in danger of being replaced by theories that are even more vague, subjective and politicized than they were before the widespread adoption of the Consumer Welfare Standard. We are seeing a renewed push to forget what we’ve learned and embrace what we once legitimately rejected:
Resurrecting old but discredited dogma: Recent lawsuits against technology companies supported by almost every state attorney general and the Department of Justice are rooted in an animus over size, resurrecting the old but discredited dogma of “the curse of bigness.”
Stifling Innovation with Reversible Decisions: Government attorneys in both parties demonize multi-billion-dollar acquisitions as harmful to innovation, when such buyouts were allowed by regulators and have actually stimulated the desire for innovators to innovate. This contradiction threatens to undermine business confidence by making government actions easily reversible or rescindable. These mixed signals threaten to degrade innovation in the name of spurring innovation.
Shifting the Burden of Proof to the Defendant: New proposals in Congress would shift the burden of proof, tasking defendant corporations with the near-impossible task of demonstrating in advance that a given merger or acquisition won’t harm competition.
Vague New Notions: Legislators are advancing new theories of antitrust that would address poorly defined ideas about “equity” and “values” that would uncouple this body of law from its beneficial economic effects.
Ignoring Consumer Preferences for Network Effects: Proponents of a new antitrust standard ignore the benefits of economies of scale and network effects, which are the result of the decisions of millions of consumers who remain free to make competitive choices with a mere purchase or a click.
Degrading Democracy: Modern thinkers and practitioners are losing touch with how democracy depends on neutral judges enforcing a neutral standard. We all lose when judges replace the laws enacted by our elected representatives with their personal sensibilities. We also lose when judges no longer accord respect to the “votes” consumers make with their dollars.
On the political left – a self-declared new Brandeis movement is underway. The 117th Congress faces sweeping legislation that would transform antitrust law into mechanisms for government to regulate any American business of significant size.
On the political right – conservatives are suddenly signing up for the dilution of long-standing antitrust principles to exact what they see as political retribution against Big Tech social media platforms.
The Antitrust Education Project uses education and advocacy to alert policymakers, opinion leaders and consumers about how much is at stake, both for consumers’ economic well-being and for democracy. The Project explains and defends the Consumer Welfare Standard and seeks to extend it as the best rule for the 21st century.