The Federal Trade Commission (FTC) voted on July 1 to withdraw its pubic affirmation of consumer welfare as the guiding principle for antitrust enforcement. While this change is symbolic at this point, it weakens the agency’s public commitment to an objective consumer-based approach to antitrust. The result opens the door to politicized and unprincipled antitrust enforcement that will ultimately hurt rather than benefit consumers.
The FTC is the nation’s primary consumer protection agency, focused on ensuring a healthy market that avoids the dangers of monopolistic practices. The statement on the agency’s antitrust enforcement had been uncontroversial up to this point. A bipartisan group of commissioners passed the statement in 2015—during the Obama Administration—and the statement primarily clarified that the FTC’s antitrust enforcement under Section 5 of the FTC Act concerning the agency’s authority over unfair and deceptive trade practices was guided by consumer welfare. In other words, the FTC would focus on those acts that cause or are likely to cause harm to consumers, based on objective economic analysis rather than the effects of business moves on competition itself or other policy standards. The statement sought to provide clarity to consumers and businesses, and in fact, the sole vote against it was on the basis that the statement was too abbreviated to provide meaningful guidance.
Despite these uncontroversial origins, on Thursday at a hastily announced open meeting, the current FTC voted 3-2 to withdraw this statement. The withdrawal of the FTC’s statement is the latest signal that antitrust policy, particularly at the FTC, is shifting away from focusing on consumers and using the consumer welfare standard. Instead, there are now real concerns the FTC will enforce antitrust policy in a way that promotes competitors or ideology at consumers’ expense.
Most specifically, rejecting the consumer welfare standard signals the FTC may apply its enforcement power in more subjective ways based in changing political motives and policy preference, as was seen in earlier eras of antitrust enforcement. For example, if not focused on the consumer welfare standard, the FTC could act against some of the largest tech companies to break them up or prevent mergers even though consumers were not harmed—or were even helped—by these changes in the market. This shift would have three specific, if related, implications.
First, it would undermine confidence among consumers in the FTC’s actions. It is far less clear now by what standards antitrust enforcement will be guided and if they are truly objective. As a result, it is unclear what the purpose behind enforcement is.
Second, such expansive enforcement could diminish the options available to consumers. Without the consumer welfare standard, aggressive antitrust enforcement could lead to regulatory interventions in competitive and dynamic markets apart from a data-based and consumer-focused analysis. The result of such unnecessary enforcement could be to raise costs or eliminate products, preventing consumers from having access to products they enjoy or face higher prices, not because of unfair or anti-competitive behavior but because of political animus against a particular industry.
Finally, this shift away from the consumer welfare standard is likely to result in inefficient markets. Unprincipled or politically motivated enforcement could result in some products and services never making it to consumers. In other cases, markets may find certain “competitors” kept alive past their value, or other markets could remain with few choices because companies fear that entrance would be considered anticompetitive. Without the consumer welfare standard, misguided notions of concentration or “bigness” could result in a less beneficial market and instead benefit competitors with inferior products that would not have otherwise survived—all to the detriment of consumers.
When regulators move away from an objective, consumer-focused approach to antitrust, it is ultimately the consumers who are harmed in the form of higher prices, inferior products, and less innovation. As Commissioner Christine Wilson stated prior to the vote, “If the Commission is no longer focused on consumer welfare then consumers will be harmed.”
In my latest column for The Hill, I consider that dangers of government gambling our tax dollars on risky industrial policy programs. I begin by noting:
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