The recent wave of antitrust actions by the Federal Trade Commission (FTC) and Department of Justice has largely failed in court and has soured American attitudes toward enforcers. Attempts to move away from the consumer welfare standard (CWS) have only reinforced the need for an objective measurement to measure alleged harm. Proposed replacements for the CWS end up recreating the same issues it was intended to solve.
While not formal law, the CWS has proven to be a reliable guideline for antitrust action only when there is evidence of significant, long-lasting harm to consumers. Before the CWS, antitrust enforcement often led to results that protected competitors rather than competition and left consumers paying the difference. By making the focus impact on consumers, regulators had a more objective means of determining whether to enforce antitrust law.
With the focus narrowed to consumer welfare, companies have a clear, measurable standard to comply with antitrust law. In addition, it also incentivizes companies to behave in a way that leads to lower prices for the end consumers.
That approach is not without its critics. Notably, the current chair of the FTC, Lina Khan, gained attention among antitrust scholars with her article “Amazon’s Antitrust Paradox” and her critique of the CWS. In the article, Khan argued the shift to the CWS ignores factors related to market structure that can give a company monopolistic power, using Amazon as her prime example.
Khan made the case that antitrust law should look beyond the CWS and consider factors that are harder to measure when determining whether or not a company is in violation. The issue with this and other alternative proposals to the CWS, such as the competition and the competitive process test, is that it would unmoor antitrust law from an objective, measurable standard without replacing it with an objective and measurable alternative. The CWS was introduced to solve the issue of ambiguity in antitrust rulings and to protect consumers from price increases. Replacing it with a subjective or multifaceted alternative would only recreate the problem the CWS was introduced to solve.
As the FTC lawsuit against Amazon plays out, recent failures in court seem to indicate the CWS will continue to stand even as the FTC continues its failed strategy. Courts seem hesitant to break from a standard that has been in place for decades and provides clarity for companies and regulators when determining the legality of business practices. The recent change in direction has led to the FTC becoming one of the least popular government agencies as it continues to undermine its mission and lose public trust, as evident from the spike in turnover rates among its staff.
The CWS has succeeded in providing a measurable way to determine violations of antitrust law as well as decrease prices for consumers. Any attempt to move away from the standard is likely to fail without a solution that includes these benefits.
