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Consumer welfare standards that have guided antitrust enforcement for 40 years are under attack. This standard, often associated with the ideas of legal scholar and unsuccessful Supreme Court nominee Robert Bork, suggests that mergers should be considered as long as they improve consumer welfare through factors such as lower prices, higher quality, and greater choice.・The acquisition should be allowed. But a new group of “neo-Brandeisian” scholars, such as Federal Trade Commission Chair Lina Khan, reject that theory in favor of a more straightforward approach that blames corporate “bigness.” There is. If antitrust agreements surrounding consumer welfare break down, a new framework may be needed to scrutinize corporate M&A activity. One alternative is an approach that focuses on America’s total capital stock.
Bork revolutionized antitrust law in the 1970s by introducing economic analysis to his field. His alternative to prevailing legal theories is that rather than following vague moral judgments such as big is inherently bad and small is inherently good, his alternative is economic efficiency and consumer benefit. It was to insist that priority should be given to To accomplish this, antitrust law needed clear, economically grounded rules for determining when a merger would be beneficial and when it would lead to a monopoly.
This does not mean that Bork’s ideas were perfect or fundamentally correct. Those who favor the use of economics in antitrust enforcement may recognize that consumer welfare and overall economic efficiency are often disconnected, at least in the short run. Overall improvements in innovation and national income growth often require short-term trade-offs for consumers. But whatever the limitations of Bork’s ideas, there is little denying that the consumer welfare standard represented a significant improvement over earlier theories.
The benefits of the consumer welfare standard become clear when placed alongside the standards of neo-Brandeisn opponents, such as the FTC Chairman, who offer no coherent alternative. Although they seem to simply oppose corporate “bigness” and the concentration of economic power in general, they almost uncritically idealize small and medium-sized enterprises. However, the “big is bad” philosophy provides little guidance for analyzing specific mergers or practices, as it seems to want to protect small businesses at almost any cost. I don’t.
Taken at face value, neo-Brandeians would appear to rule out mergers and acquisitions altogether. I don’t think that’s wise or possible. Is a $100 billion company always better than a $50 billion company? If so, why not split a $50 billion company into two $25 billion companies? Merger What if the price for consumers falls by 50%, but the company’s market share increases by 1%?
The problem with the “bigger is bad” philosophy is clear. On the other hand, the era of consumer welfare was beneficial to the country. Antitrust authorities have identified a number of combinations that increase efficiency, whether in media (such as XM and Sirius Satellite Radio), pharmaceuticals (such as Roche Genentech), or technology (such as Google GOOG and YouTube), to name just a few. allowed. Meanwhile, the mergers they blocked (such as Blockbuster and Hollywood Video) often looked foolish in hindsight.
Still, if the consensus of the past 40 years has indeed broken down, it might be wise to consider at least some alternative theories should lawmakers and judges abandon the consumer welfare beacon altogether .
One potential candidate is antitrust law focused on America’s total capital stock. Rather than analyzing the effects of acquisitions on consumer prices and bills, regulators could determine whether mergers and acquisitions increase the capital stock of society as a whole. Capital in this context includes physical capital such as plant and equipment, human capital such as the education and skills of employees, and parts of natural capital such as land (as long as the proceeds are exchanged in the market) . The underlying assumption is that increasing a country’s capital stock (except in situations involving “dynamic inefficiency”) will expand the country’s output. Increased production leads to widespread improvements in living standards.
There are several factors that support this capital stock approach. First, we will align policy and enforcement to accelerate economic growth. Few goals carry such moral weight. Growth allows society to gain compounding benefits over time through consumer purchases, leisure activities, longevity, environmental conservation, and other purposes.
Capital standards would also reconcile the current disconnect in antitrust policy between consumer interests and overall welfare. Consumers often choose immediate gratification over future benefits, even if the latter ultimately promotes happiness. For example, young people often prefer smoking cigarettes or eating fast food to exercising or cooking nutritious meals at home. Similarly, saving more of your income or investing in education both involve short-term trade-offs in terms of consumption and leisure, but ultimately increase your income in midlife and retirement. It also leads to improvement of lifestyle.
An additional advantage of capital-based standards is that they are relatively easy to implement, similar to consumer welfare standards, because measuring capital stock is fairly straightforward.
To be clear, this is not a call for a change in current antitrust policy, at least in the short term, but rather an irreversible shift in consensus on the consumer welfare regime on which 40 years of policy success has been based. It’s just a suggestion that something should be done. -A focused approach merits consideration as an alternative basis for U.S. antitrust policy.
Antitrust enforcement must ultimately empower consumers by strengthening the engines of economic growth that enable them to prosper. By focusing on the stock of wealth we inherit, policymakers can address the limitations of existing frameworks while also determining how our people can benefit from our nation’s unprecedented wealth and prosperity. You can choose freely.
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