The Competitive Process Standard

Introduction

Whether U.S. antitrust law is governed by the “consumer welfare standard” is doubtful, but an ongoing antitrust policy debate is framed as whether antitrust law should abandon that standard. This latest round of the standards debates began with an attack on antitrust orthodoxy by the New Brandeis Movement, and it heated up with the appointment of Jonathan Kanter as assistant attorney general in charge of the Antitrust Division of the Department of Justice.

In written responses to questions from members of the Senate Judiciary Committee, prior to his confirmation hearing, Mr. Kanter stated:

I have voiced concerns that the application of the consumer welfare standard has been inconsistent, vague, and insufficient to keep pace with market realities. Effective antitrust enforcement requires a deep understanding of market realities and facts to determine whether the conduct at issue harms competition and the competitive process. Enforcement authorities should use state-of-the-art analytical tools to analyze key facts and empirical evidence with the aim of protecting competition and the competitive process.

In his responses to the Committee, Mr. Kanter commented: “Antitrust law protects the competitive process. A healthy and competitive economy can yield a wide range of benefits for all Americans.”

In one of his first speeches after taking office, Assistant Attorney General (AAG) Kanter set out “five pillars of an effective civil antitrust enforcement regime,” the first of which was recognizing that “the purpose of antitrust law is to protect competition.” He argued that the “antitrust community lost its North Star” by diverting its focus to “welfare effects” and trying “to decide who should win and lose rather than allowing competition and competitive markets to govern that determination.” He asserted that “Congress has chosen the values we are to preserve, and it has squarely settled on upholding a competitive process in free markets.”

A few weeks later, AAG Kanter directly attacked the consumer welfare standard. He argued that “consumer welfare is a catch phrase, not a standard,” and he explained that it “is a mistake to confuse . . . goals with the standard courts are to apply.” He also argued that the “overarching problem” with the consumer welfare standard “is that it does not reflect the law as passed by Congress and interpreted by the courts. The legislated goals of the antitrust laws are clear—Congress sought to protect competition and the competitive process.”

This article elaborates the “competitive process standard” and dispels assertions by its opponents that it is a “slogan,” “mantra,” “cipher,” or that it is “nebulous.” This article also responds to recent advocacy of the consumer welfare standard prompted by the New Brandeis Movement and by AAG Kanter’s speeches.

The consumer welfare standard and the competitive process standard are alternative ways to focus antitrust law. In economic terms, the competitive process standard focuses on market structure and conduct, while the consumer welfare standard focuses on market performance. In legal terms, the competitive process standard focuses on the first few links of the causal chain connecting suspect conduct to its ultimate effects, while the consumer welfare standard considers the whole chain but focuses on the last link.

The competitive process standard first analyzes the essential nature of suspect conduct. If conduct is not unambiguously procompetitive or anticompetitive, the competitive process standard assesses the proximate effect of the conduct on incentives and opportunities to engage in marketplace competition. This limited assessment employs many of the same tools of economic analysis as the consumer welfare standard, but demands less from them because the effects of interest are not ultimate effects on price, output, or consumer welfare.

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