Are people willing to pay more for a social experiment in antitrust policy in the interest of potential benefits that are hard to measure? That is the question facing proponents of the neo-Brandeis movement, named for the aggressive proponent of antitrust intervention and Supreme Court Justice Louis Brandeis. Neo-Brandeisians seek to replace the consumer welfare standard with a more nebulous standard that considers more (and often competing) factors. Although called neo-Brandeis, this movement is not new and was already rejected in the 1960s.
The consumer welfare standard has been the guiding principle of modern antitrust law for one simple reason: Antitrust enforcement under the consumer welfare standard produces a measurable benefit to consumers and is administrable by courts that need solid evidence on which to base their decisions. The consumer welfare standard asks whether the behavior being challenged leaves consumers worse off by making them pay more, get less, or miss out on innovation that they would otherwise have if the behavior did not occur. If consumers are worse off on balance, then the anticompetitive behavior can be challenged under the antitrust laws.
The consumer welfare standard means that antitrust laws punish anticompetitive behavior and not “big” behavior. Anticompetitive behavior will leave consumers worse off, but big behavior is different. When a company wants to win big, the most direct approach is to beat their competitors with better products, prices, or innovation. A company that is swinging for the fences is looking to wow customers with something amazing, and to capitalize on this success through earning a big market share. We’ve seen this repeatedly in technology industries in the form of leapfrogging rivals’ technology or figuring out ways to put out the same product at a dramatically reduced price – often free. Big behavior is encouraged by the consumer welfare standard as long as it doesn’t stray into anticompetitive behavior.
Ditching the consumer welfare standard means that consumers will inevitably pay more and get less quality and innovation as the result of the enforcement of antitrust law. That’s a tough sell. The problem comes from the fact that when you change from a standard with one clear goal to a more general standard with multiple goals, like a public interest standard, you will run into situations where pursuing one goal will come at the cost of another. Antitrust luminary Herb Hovenkamp puts the neo-Brandeis problem another way: “As a movement, [neo-Brandeis] antitrust often succeeds at capturing political attention and engaging at least some voters, but it fails at making effective – or even coherent – policy. The coherence problem shows up in goals that are unmeasurable and fundamentally inconsistent, although with their contradictions rarely exposed.” MORE »