What’s so wrong about ‘fairness’? A lot.

October 6, 2022

The Republican Attorneys General Association will meet this week in Miami to debate if we should retain or jettison a principle in antitrust law that has protected consumers for close to fifty years.

This judicially mandated principle, the Consumer Welfare Standard, holds that judges should refrain from an antitrust action against a merger, acquisition, or other business deal if the likely economic result of that deal is to the benefit of the consumer. Sounds reasonable, right? It did to my father, Robert Bork, a Yale Law professor who reviewed the vague language of antitrust law and set out to undergird it with economic reasoning.

His Consumer Welfare Standard recognized that mergers that made business more efficient would also lead to lower prices and more innovative (and better) products for consumers. The clarity of this standard was instantly recognized by courts. The antitrust division of the Department of Justice website still pays lip service to the Consumer Welfare Standard, noting: “Free and open competition benefits consumers by ensuring lower prices and new and better products.”

The era of the Consumer Welfare Standard brought a half-century of business creation, job creation and rising equity values that exceeded anything this country had ever known before. The economy almost tripled in size from 1980 to 2020. Americans’ per capita income has nearly doubled. A $1,000 investment in the S&P in 1980 would have been worth almost $100,000 by 2020.

But this record of achievement is not good enough for progressive antitrust theorists, like FTC Chair Lina Khan, who argues antitrust law should be expanded to deal with “equity,” and protect the rights of workers, the environment, and even weaker and less efficient competitors. She says the law should return to “fairness.”

There’s nothing wrong with being fair, of course. But fairness according to whose definition? 

Alvaro M. Bedoya, a Biden appointee to the Federal Trade Commission, recently denounced the Consumer Welfare Standard’s elevation of “efficiency” over “fairness.” He artfully wove into his speech three heart-rending examples of people being sacrificed on the altar of business efficiency – a child who must wait for two weeks for life-saving cancer treatment at the whim of a corporate pharmacy benefit manager; a grocery store chain serving Indian reservations that must pay higher produce prices to wholesalers than Walmart and cannot obtain basics like baby formula; and, cattlemen who get lowball offers from the single meatpacker in their region.

This is the crux of the progressive antitrust theory – human lives are being sacrificed before the capitalist god of efficiency. And simple “fairness” suggests we should also use the law to protect not just people, but other businesses, no matter how poorly they serve the consumer.

But Bedoya overlooks something: Pharmaceutical patients and Native Americans are consumers. Under the Consumer Welfare Standard, if business consolidations have denied them the benefits of an efficient and competitive market, then consumer advocates and courts should do a better job of exercising the full reach of existing antitrust law. 

And what about the cattle ranchers? They have recently banded together, raised hundreds of millions of dollars, to build meatpacking plants of their own. We have seen time and again that temporary bottlenecks are often fixed by the free market years faster before federal regulators have finished their briefs.

We shouldn’t bat away the question about whether we have been lax in executing the full potential of the Consumer Welfare Standard. Pharmaceutical benefit managers have sometimes lacked transparency and even compassion. Meatpackers have sometimes displayed a king of the hill mentality. But the means to challenge and correct these errors exist in the law, as well as with the power of Congress and the White House to write new laws. 

By tasking federal regulators with establishing “fairness,” Bedoya and other Biden commissioners propose something new and radical. The Consumer Welfare Standard’s concept of efficiency can be measured and applied mathematically. But a mandate for fairness cannot be legally or economically defined. 

Such a vague “fairness” standard would give government the ability to prosecute any executive at any time for any reason, just like in Putin’s Russia. Such a regime would instill fear throughout the business community. It would quietly but effectively recruit intimidated private business to advance the social, ideological, and political interests of elite Washington. It is not without reason that Republican FTC Commissioner Christine Wilson says the radicals running the FTC have “a unified worldview that draws heavily on concepts of Marxism and Critical Legal Studies.” 

We should stick with what works and what we can measure. The Consumer Welfare Standard has met that challenge and can be adapted to meet new challenges. “Fairness,” on the other, is a prescription for the expansion of Washington’s soft tyranny.

Robert H. Bork Jr. is president of the Antitrust Education Project.