Thread by @elhauge

While the way court have applied the consumer welfare standard has led to underenforcement, DOJ Antitrust Head Kanter’s proposal to replace it with a “competition and the competitive process” test raises concerns discussed in my new piece. A thread: 1/18 promarket.org/2022/05/24/sho…

Kanter is right that antitrust law protects “competition and the competitive process”. But the consumer welfare standard was never an alternative to that legal test. It was only a method to resolve deep ambiguities about what “competition and the competitive process” meant.2/18

To take a concrete case, suppose a merger between 2 firms in a 10-firm market makes the merged firm more efficient. Does that decrease “competition” because it eliminates one competitor or increase it because we now have more vigorous competition among the 9 that remain? 3/18

Kanter defines “competition” to mean “rivalry”, i.e., the existence of competitors, and “the competitive process” to mean the “freedom to choose” among those competitors. Given his definitions, his test could mean one of three things, none of which is helpful. 4/18

First, Kanter’s definitions could mean that his test bans conduct that reduces the number of competitors and choices. But then antitrust law would ban two plumbers in a market with 1000 plumbers forming a partnership to offer better services. He can’t mean that. 5/18

Second, Kanter’s definitions could mean that his test protects only the existence of some competitors and choice, and thus allows any conduct other than a merger or cartel that results in a 100% monopoly. He can’t mean that either, since his goal is to increase enforcement. 6/18

The third alternative is that he means that his test bans conduct that does not leave “enough” competitors and choice. But how do we know what is enough and how to choose between having better choices and more choices? Kanter provides no metric for determining that. 7/18

Indeed, Kanter expressly rejects using not only CW but any substantive standard to resolve what “competition and the competitive process” means, insisting that the analysis “starts and ends” with his test. His test thus amounts to a conclusory I-know-it-when-I-see-it test. 8/18

Kanter offers various defenses. First, he argues that all legal tests require the exercise of judgment in close cases. Fair enough. We all know what “baldness” means even if we cannot define precisely how many hairs one needs to lose before one turns bald. 9/18

But Kanter’s test is not just vague at the margins, but conclusory in almost all cases. In the 10-to-9 merger case, it cannot even determine whether subtracting one firm increases or decreases competition. It is like a baldness test that cannot determine what hair is. 10/18

Second, Kanter argues that the consumer welfare standard is also uncertain because antitrust experts disagree about what it means. This sort of “whataboutism” argument provides no response to the concern that his own test is utterly conclusory. 11/18

Further, although Kanter is right that experts disagree about the meaning of the consumer welfare standard, none of those meanings is conclusory and they generally lead to the same conclusions, including focusing on the same factors in the 10 to 9 merger case. 12/18

Any disagreements about what the consumer welfare standard means are best resolved by choosing the meaning that is best or changing to an alternative standard that is better. Either is preferable to a conclusory I-know-it-when-I-see-it test. 13/18

Third, Kanter argues that the consumer welfare standard is substantively bad and leads to underenforcement. Again, this amounts to a form of whataboutism. If the consumer welfare standard is bad, the solution is to improve it or replace it with a better standard. 14/18

Kanter’s objections that the consumer welfare standard is too uncertain and does not address noneconomic values can be addressed by greater use of rules and presumptions, both of which are consistent with a consumer welfare standard, as I show in my piece. 15/18

Kanter is also mistaken that the consumer welfare standard cannot protect workers and farmers. Any anticompetitive harm to upstream suppliers will suppress upstream output, whose downstream effect can only be to reduce downstream output, which harms consumer welfare. 16/18

Kanter’s approach is also a dubious legal strategy. By committing to the proposition that the consumer welfare standard does not protect workers and farmers, he is making it more difficult to win cases for them since that standard is enshrined in 6 SCT cases. 17/18

Kanter argues that one of those 6 SCT cases, Reiter, is dicta. Maybe, but highly persuasive dicta since it states the SCT view on statutory purpose. Anyway, in 4 other SCT cases, adoption of the consumer welfare standard was clearly not dicta, as my piece shows. END. 18/18

Actually 8 SCT cases have adopted consumer welfare test because Leegin language was repeated in Amex and NCAA v Alston. Thanks to John Kirkwood for pointing that out.