FTC Hearings #2: Debate on the Consumer Welfare Standard Continues
Last week, the FTC kicked off a series of hearings on competition and consumer protection in the 21st century. A recap of the first hearing by DisCo can be be found here. On Friday, September 21st, a second hearing took place at the Constitution Center, with the discussion revolving around the state of current U.S. antitrust law, including the consumer welfare standard, the intersection between intellectual property and antitrust, and vertical mergers.
The discussion began with an opening address by Nobel Laureate, Professor Joseph Stiglitz, followed by remarks by Professor (and former FTC Chairman) William Kovacic. Professor Stiglitz believes that antitrust law has not caught up with modern economics yet, and advocates for a change in antitrust laws because:
While we’re going to be talking a lot about lack of competition in new sectors like technology, we shouldn’t forget that there’s a lack of competition in a lot of the old sectors as well and that our antitrust laws have not worked in the new areas but also for the old ones.
In contrast, Professor Kovacic holds the view that antitrust law itself is sufficient and that the problem lies within the administrability of these laws:
If you want to adopt a broader goals framework, you will have to answer the challenge which says show me how it’s applied in a specific case. Show me the hierarchy of values. If all you are saying is to tell the judge, you figure it out, that’s an inadequate response. And I think to effectuate a change in the goal structure will require a lot of hard thinking to answer the basic question: tell me how it’s going to work in practice and don’t tell me that they’ll sort it out eventually. So on goals, administrability is a crucial consideration.
Following the introductory remarks, Friday’s main topic was a broad discussion on the current state of U.S. antitrust law. As such, the discussion concentrated on the ongoing debate surrounding the consumer welfare standard (a brief overview of the consumer welfare standard is discussed here). Are there any alternatives to the consumer welfare standard? Is the consumer welfare standard adequate in dealing with the realities of the modern economy? Should antitrust law should abandon or consider other public policy concerns?
This hearing addressed some of these questions. Some of the panelists cautioned against using antitrust law as the primary means of solving social or policy problems. Professor Dennis Carlton decried criticisms against the consumer welfare standard by arguing that “antitrust is designed to promote the process of competition. Period. It’s not designed to solve important problems like — that may well exist, it’s just not suited for that.” Debbie Feinstein, formerly director of the FTC’s Bureau of Competition, and currently a partner at Arnold & Porter Kaye Scholer LLP, wondered why privacy is even tied into competition law in the first place, and argued that privacy should be resolved through consumer protection statutes, not antitrust laws.
Several panelists expressed the view that the consumer welfare standard is and should remain the primary standard. Professor Keith Hylton commented that antitrust is in “pretty good shape” and does not believe there is any realistic and administrable substitute to the consumer welfare standard. Professor Carlton agreed, believing the current antitrust law, and therefore the consumer welfare standard, to be adequate and “up to the task of dealing with new problems.” Eric Citron, a partner at Goldstein & Russell, P.C., proposed that the consumer welfare standard should be the focus in antitrust law but other considerations may be brought into the equation.
While the consumer welfare standard was the central theme amongst the panelists, they also briefly touched upon other prevailing issues, such as the role that antitrust plays in regulating standard-essential patents. It was also clear that on the topic of vertical mergers most panelists agreed that current thought on vertical mergers must be re-examined and that Vertical Merger Guidelines should be created.
The hearing concluded with closing remarks from Maureen Ohlhausen, Commissioner at the Federal Trade Commission, who showed enthusiasm for the hearings but pointed out that debate of this nature alone is insufficient. Commissioner Ohlhausen remarked on the operation of the FTC, stating that:
The agency has been doing exactly what it was meant to do, identifying competition problems in the economy, developing proof of the problem, debating the evidence of harm and proper courses internally then leading by example outside the agency with every advocacy enforcement and regulatory tool at its disposal. And our efforts have paid off, though sometimes it takes a while. But that is often the risk of leading.
The next hearings will be held at George Mason University Antonin Scalia Law School from October 15-17. These three days will focus on the analysis of improper conduct by digital and technology-based platform businesses; the antitrust framework for evaluating acquisitions of competitors in digital marketplaces; and an antitrust evaluation of labor markets. A schedule of the coming sessions can be found here, with hearings expected to continue through January 2019.