The Profound Nonsense of Consumer Welfare Antitrust

• Author: Sandeep Vaheesan
• Published date: 01 December 2019
• Date: 01 December 2019
• DOI: http://doi.org/10.1177/0003603X19875036

Article

The Profound Nonsense

of Consumer Welfare Antitrust

Sandeep Vaheesan*

Abstract

Despite being the prevailing wisdom, consumer welfare antitrust rests on a bed of nonsense. First,

consumer welfare antitrust is built on false history and a rewriting of legislative intent. Second, it relies

on a false conception of the market and submerges the state construction of the economy. Third, it

depends on, and is informed by, false assumptions about business conduct. While the third falsehood

suggests an analytical renovation and better antitrust economics are sorely needed, the first two

falsehoods show that empirical improvements are necessary but not enough. These falsehoods

together mean that the entire enterprise at present is built on a bed of sand and that a fundamental

reconstruction of antitrust is required. An antitrust that promotes an equitable economy and protects

democratic institutions will be true to legislative intent, recognize the state construction of the

marketplace, and informed by empiricism.

Keywords

Antitrust goals, consumer welfare, Chicago School, legal realism

I. Introduction

In 1979, the Supreme Court, citing Robert Bork, declared that the “Congress designed the Sherman Act

as a ‘consumer welfare prescriptio n.’”

1

Since the late 1970s, the Supreme Court and the federal

antitrust agencies (the Department of Justice [DOJ] and the Federal Trade Commission [FTC]) have

reinterpreted antitrust law accordingly. Over the past four decades, they have revised legal doctrines,

policy guidance, and enforcement priorities to advance this consumer welfare objective. Within the

community of antitrust specialists, this objective was accepted on a bipartisan basis. Until recently, the

debates within the antitrust world concerned how best to promote consumer welfare, not whether it is

the right objective.

Despite being the prevailing wisdom, consumer welfare antitrust rests on a bed of nonsense. First,

consumer welfare antitrust is built on false history and a rewriting of legislative intent. Second, it relies

*Legal Director, Open Markets Institute, Washington, D.C., USA

Corresponding Author:

Sandeep Vaheesan, Open Markets Institute, 1440 G Street, NW, Washington, D.C. 20005, USA.

Email: vaheesan@openmarketsinstitute.org

1. Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979) (quoting Robert H. Bork, The Antitrust Paradox 66 (1978)).

The Antitrust Bulletin

2019, Vol. 64(4) 479-494

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DOI: 10.1177/0003603X19875036

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on a false conception of the market and submerges the state construction of the economy. Third, it

depends on, and is informed by, false assumptions about business conduct. While the third falsehood

suggests an analytical renovation and better antitrust economics are sorely needed, the first two

falsehoods indicate that empirical improveme nts are necessary but not enough. These falsehoo ds

together undermine the entire enterprise and call for a fundamental remaking of the field of antitrust.

An antitrust that promotes an equitable economy and protects democratic institutions will be built

on very different foundations than the present antitrust system. First, it would recover and revive the

antimonopoly vision of the framers of the antitrust laws. Second, instead of naturalizing the market and

obscuring the state action on which it depends, it would recognize the state construction of the

economy and how every market requires rules of one type or another. In this light, effective antitrust

structures the economy to promote a more equitable distribution of power. Third, in place of devel-

oping doctrines and rules from deductive reasoning, it would use induction and careful study of firms

and institutions to formulate antitrust rules. These philosophical changes would represent a break with

forty years of antitrust policy and practice and be a paradigmatic shift undergirded by history, law, and

realism.

II. The False Reading of Congressional Intent

The Congresses that enacted the principal antitrust laws sought to control the economic and political

power of trusts and monopolies. They recognized that large corporations exercise power over con-

sumers, workers, farmers, suppliers, rivals, and citizens. Accordingly, they enacted the antitrust laws to

control corporate power writ large, not merely one manifestation of this private power.

Since the 1970s, however, the Supreme Court and the federal antitrust agencies have disregarded

this legislative history and substituted their own policy objectives for those of Congress. In lieu of the

economic and political goals announced by the legislature, the judiciary and executive branch have

interpreted the antitrust laws, in particular the Sherman Act, as a “consumer welfare prescription.”

2

They have reinterpreted the antitrust laws based on the false historical analysis of Robert Bork.

A. Congressional Goals in Enacting the Antitrust Laws

In enacting the Sherman, Clayton, and Federal Trade Commission Acts, Congress aimed to constrain

corporate power broadly. The drafters of these landmark statutes sought to restrict corporate power

over consumers, workers, suppliers, and rivals.

3

And they also targeted corporate clout in the political

system. Informed by republican ideology, they recognized that concentrated corporate power threat-

ened the maintenance of democratic governance.

4

Congress enacted the antitrust laws to protect consumers and sellers from the power of monopolies

and trusts. As Robert Lande has detailed, the framers of the principal antitrust laws wanted to protect

consumers from the tribute exacted by corporations with pricing power.

5

Monopolistic and cartelistic

prices were described as unjust wealth transfers and condemned as “robbery”

6

and “theft.”

7

They

2. Id.

3. E.g., Christopher Grandy, Original Intent and the Sherman Antitrust Act: A Reexamination of the Consumer-Welfare

Hypothesis,53J.E

CON.HIST. 359 (1993); James May, Antitrust in the Formative Era: Political and Economic Theory in

Constitutional and Antitrust Analysis, 1880-1918,50O

H.ST. L.J. 257 (1989); John J. Flynn, The Reagan Administration’s

Antitrust Policy, “Original Intent” and the Legislative History of the Sherman Act,33A

NTITRUST BULL. 259 (1988).

4. David Millon, The Sherman Act and the Balance of Power,61S.CAL.L.REV. 1219 (1988).

5. Robert H. La nde, Wealth Transfer s as the Original and Prima ry Concern of Antitrust: T he Efficiency Interp retation

Challenged,34H

ASTINGS L.J. 65 (1982).

6. 21 CONG.REC. 2614 (1890) (statement of Rep. Coke); id. at 4103 (statement of Rep. Fithian).

7. 51 CONG.REC. 13223 (1914).

480 The Antitrust Bulletin 64(4)