In the December Faculty Seminar, Head of Department Professor Nicolas Petit and Professor Lazar Radić (IE University) will discuss his working paper.
Why did antitrust law in most jurisdictions adopt the consumer welfare standard (CWS)? A popular explanation, which we term the Political Economy Theory (PET) pretends that the CWS reflects the triumph of conservative, anti-enforcement free-market ideology. The PET asserts that neoliberals like Robert Bork and his acolytes cajoled US courts into believing that antitrust law application required a narrow focus on economic evidence of consumer harm. By limiting the universe of injuries cognizable under antitrust law and raising plaintiffs’ burden of proof, the CWS achieved the neoliberals’ intended purpose: to enucleate antitrust law of any social and political relevance. This minimalist version of antitrust law was subsequently globalized as part of the standard neoliberal ideological package, under the auspices of US hegemony.
The Political Economy Theory is a fable. First, the CWS is not a plant of Robert Bork and the Chicago School. Antitrust history shows footprints of a CWS as far back as the common law of the seventeenth century, in the first cases of the US Supreme Court, and in antitrust legislation in the US and the EU decades before the ascent of neoliberalism. Second, the proposition that the CWS is slanted against antitrust enforcement cannot be reconciled with the multitude of demonstrable instances in which the CWS leads to more antitrust law intervention, not less. In fact, proponents of more antitrust enforcement in the 1980s favored the CWS over more laissez-faire alternatives.
What explains the success of the CWS is a more mundane, practical need for endowing real life cases with the weight of empirical evidence. By adding an evidential filter, the CWS makes sense of an absurdly vast statute that could, on its face, condemn everything from law firm partnerships to wedding contracts. The CWS limits two types of decisional errors of antitrust laws focused on the protection of competition or the competitive process. First, the CWS reduces the type 1 error of false conviction when straight limitations of competition like collusion, monopolization, or mergers do not translate in welfare losses. Second, the CWS reduces the type 2 error of false acquittal when there is no straight evidence of a limitation of competition. Of course, the benefits of reducing type 1 and 2 errors comes with costs. Those costs relate mainly to the uncertainty of having to grapple with hard economic evidence in the face of ambiguous business conduct. These costs must be acknowledged, since one of the main welfare benefits of antitrust law lies in its predictability. But the existence of uncertainty further proves that the CWS is not a deterministic standard wedded to an anti-enforcement conservative agenda, as the PET suggests. If it were, non-enforcement would be assured, as no antitrust cases would be brought. However, this is inconsistent with the dynamics of antitrust enforcement and litigation over the past fifty years.
We conclude that it is a judicial interest in the truth about market competition, not a socially constructed power structure propelled by the skullduggery of a neoliberal conspiratory cabal, which better explains the emergence and endurance of the CWS in US antitrust law. This view further suggests that it would have been plausible for antitrust law to orient itself towards a CWS without Robert Bork.