Antitrust: What Counts as Consumer Welfare?

Herbert Hovenkamp

University of Penn, Institute for Law & Economic Research Paper No 20-44

Abstract

Antitrust’s consumer welfare principle is accepted in some form by the entire Supreme Court and the majority of other writers. However, it means different things to different people. For example, some members of the Supreme Court can simultaneously acknowledge the antitrust consumer welfare principle even as they approve practices that result in immediate, obvious, and substantial consumer harm. At the same time, however, a properly defined consumer welfare principle is essential if antitrust is to achieve its statutory purpose, which is to pursue practices that injure competition. The wish to make antitrust a more general social justice statute is understandable: it permits people to obtain a result from the judiciary that they cannot get through legislation.

One thing antitrust enforcers and policy makers can do is agree that while antitrust should be guided by a consumer welfare principle, output rather than price should be the relevant variable. Higher output benefits not only consumers, but also workers and most of the smaller firms that are affected. The consumer welfare principle in antitrust is best understood as pursuing maximum output consistent with sustainable competition.

Keywords: Competition law & policy, antitrust enforcement, labor markets, consumer welfare, microeconomic analysis, marginal cost of production, bigness, Sherman Act, Clayton Act, Oliver Williamson, Robert Bork