Antitrust Experts Say FTC Is Right to Scrutinize Consumer Welfare Standard
FTC antitrust staff is right to scrutinize the consumer welfare standard, experts said in interviews. If the agency ultimately delivers related antitrust guidance, as Chairman Joe Simons suggested, some expect it in 2020. Critics claim the standard contributed to lax antitrust enforcement, but one expert said that narrow discussion is distracting from broader antitrust doctrine concerns, which led to enforcement failings. The FTC didn’t comment Monday.
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The agency plans a “fresh look” at the consumer welfare standard and potential alternatives for antitrust enforcement, Simons said in November (see 1911180054). He also noted agency plans to issue antitrust guidance for digital markets. DOJ Antitrust Division Chief Makan Delrahim expressed interest in collaborating on joint guidance. Commissioner Rebecca Kelly Slaughter agreed with the need for review, saying there could be better standards to drive enforcement. The agency hosted policy hearings in 2018, with much discussion on consumer welfare (see 1809210056).
The major concern is the standard leads to undue focus on price, which is problematic given free models from “free” services like Google and Facebook, said Public Knowledge Senior Policy Counsel Charlotte Slaiman. The standard is supposed to include impacts on innovation, consumer choice and quality of product features like privacy. A related guidance document could be the result of what the agency learned from the 2018 hearings.
Claims the consumer welfare standard focuses entirely on price and doesn’t account for innovation are “plainly” wrong, said Stanford University law professor Doug Melamed. Given importance of the political controversy over the principle, it makes sense Simons offered his “fresh look” comments, Melamed said, and maybe it makes sense to study the standard further. But the consumer welfare standard is “working fine,” and the discussion about it is a distraction from broader enforcement issues, said Melamed. The standard has been implemented with an excessive unwillingness to run a risk of false positives to avoid any risk of false negatives, he said.
Strengthening competition enforcement might require new laws, potentially a new agency, to focus directly on big tech, Slaiman said. Another alternative is establishing new authorities within the existing agencies.
The standard has evolved for decades, so expect it to continue evolving, said International Center for Law & Economics Associate Director Kristian Stout. The standard is working as intended, but it’s part of the common law process that has characterized antitrust since the 1890 Sherman Act, he emailed: “The core value of the standard is that it focuses enforcers' attention on how both business practice and enforcement affects consumers ultimately -- that’s the right metric and I expect the FTC will continue to use that as its guide star.”
Given the overlap between privacy and free models, maybe it makes sense to develop a regulatory regime that can directly apply to big tech models, said antitrust lawyer Alicia Downey. She noted antitrust guidance is influential but nonbinding and won’t dictate the outcome of litigation. If the FTC delivers guidance, expect it in 2020, she said: It's key the FTC and DOJ are in agreement because the most important thing to business is clarity on enforcement.