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.
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Trey Price is a policy analyst at the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.