LP #39: The Progressive Case for the Consumer Welfare Standard

By: Gary Winslett

In 1936, Congress passed an antitrust bill (the Robinson-Patman Act) aimed at A&P, a pioneer in large-scale grocery retail. The bill ended up making struggling people pay more for groceries. Antitrust policy that ignores consumers hurts poor people. Whatever it is, it is not progressive.

Over the next four decades after Robinson-Patman, antitrust policy again and again failed to prioritize the consumer. Since the late-1970s however, antitrust thinking has been centered on what is called the Consumer Welfare Standard. This standard says that the central purpose of antitrust policy is to promote the interests of consumers. It says that if businesses collude to raise prices or if a merger is going to create a monopoly that will raises prices, that should be stopped by government but the government should not automatically view big as bad.

This consumer welfare standard is under attack from a group of populist left scholars, journalists, and government officials called the Neo-Brandeisians. These include Barry Lynn (executive director of the Open Markets Institute and one of the most prominent think-tank critics of Big Tech), Tim Wu (a member of the National Economic Council as special assistant to the president for technology and competition policy), Matt Stoller, and most notably Lina Khan, current chair of the FTC. They would like to convince you that the consumer welfare standard is a deeply conservative giveaway to big business foisted on the American people by Robert Bork and free market fundamentalists from the Chicago School and that the properly progressive viewpoint on antitrust is to return to the thinking of people like Louis Brandeis and Wright Patman (the Patman in Robinson-Patman) who prioritized anti-bigness over the consumers’ interest. That’s wrong. There is a strongly progressive case for holding fast to the consumer welfare standard.

An Ignored History

Support for re-centering antitrust policy around consumers in the 1970s was not at all limited to the political right. Mark Green and Ralph Nader both said that the central purpose of antitrust should be lower consumer prices with Green saying “efficient production and distribution- not the local farmer, local druggist, or local grocer” should take priority and Nader saying that the most important aspect of antitrust was what effect it had on “the prices people pay for their bread, gasoline, auto parts, prescription drugs and houses.”[1] Cost of living was voters’ top concern every single year from 1973 to 1981.[2] The American people were screaming for the government to do something about runaway inflation and antitrust thinking had, for decades, given short shrift to consumers’ interests.

Many of the populist narratives about the trajectory of antitrust put almost all of their emphasis on the emergence of the consumer welfare standard to the Chicago School and to Bork but Democrats were a big part of that too. Pro-consumer deregulation started under Carter, not Reagan, and had considerable help from Ted Kennedy. As Michael Sandel explains, “For Progressives of old, the chains had been the villains, cut-throat competitors whose discounts would destroy the small, independent druggists and grocers and small businessmen on whom democracy depended. For modern liberals, the discounters had become the heroes, whose low prices enabled consumers to avoid paying the Bloomingdale’s price.”[3] It was not just Reagan and other Republicans who supported this standard. The Clinton and Obama administrations understood that people like shopping at Costco because doing so allows them to avoid paying the Bloomingdale’s price.

A Rotisserie Chicken for Every Pot, A Supercomputer for Every Pocket

The central cleavage in antitrust thinking is not big vs. small as the Neo-Brandeisians would have you believe but rather is large producers and consumers on one side versus small producers on the other. Consumers win when they can get the $5 rotisserie chicken at Costco instead of having antitrust policy force them to pay the artisanal price at a smaller vendor. This is particularly the case for working-class and low-income people who progressives say they care about. There is possibly no more progressive thing government can do than help people with tight budgets stretch those budgets further; abandoning the consumer welfare standard is inimical to that.

Most people do not have careers, they have jobs. That is, they do not go to work for self-actualization but instead do their jobs so that they can purchase the goods and services that they want. You do not help workers but driving up those costs. Even apart from their laborer identities, consumers are people. They want to buy back-to-school clothes for their children. They want to be able to buy decent housing. They want nice televisions and good dishwashers. They’d like to be able to purchase health insurance and college tuition and occasionally a vacation. When and where corporate consolidation raises those prices, the government should work against that, but when and where economies of scale are helping to lower prices for everyday people, those economies of scale should be cheered on. Helping people as consumers is every bit as progressive as helping them as workers.

The large technology firms that Neo-Brandeisians have aimed much of their ire at have been tremendously good for consumers. The average person has, more or less, the same phone in their pocket as Elon Musk. Via Google, they have access to the world’s information, for free. Social media is free. Consumers love Amazon’s free two-day shipping, Google’s suite of tools, and Apple’s iPhone. That shows up in public opinion polling too. Amazon for example has the second highest favorability of any institution in America (72-19), behind only the military. Big Tech is responsible for essentially none of the inflation that has been negatively affecting the U.S. economy in 2020 and 2021. In fact, one could make the case that the Big Tech firms, and especially Amazon, have helpfully kept prices down for consumers.

A Check on Cronyism and Arbitrary Power

Compared to producers, consumers are a diffuse group and tend to be much less well organized. To the extent that progressives worry about special interest groups slinking about the halls of power advancing their own interests at the expense of the public, those groups are almost always producers of some kind and not consumers, and so prioritizing consumers acts to check cronyism.

As importantly, the consumer welfare standard acts as a bulwark against state power being weaponized against politically disfavored businesses. Without it, government officials can more easily fabricate reasons to attack companies they dislike. In 2018, the Department of Justice tried to block AT&T from acquiring Time Warner; many people at the time worried that this was motivated by Donald Trump’s personal animus toward CNN which was owned by Time Warner. Imagine what culture warriors like Ron DeSantis or Josh Hawley would do with carte blanche to attack firms that stand up for minority or LGBT rights.

So in sum, the consumer welfare standard has a more robust history of progressive support than the Neo-Brandeisians imply, it helps people and particularly low-income and working class people afford a better life, and it stands as a barrier against cronyism and vindictive government. Rather than attack it, progressives should insist that it remain at the heart of antitrust thinking.

-GW

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[1] Michael Sandel. 1996. Democracy’s Discontent: America in Search of a Public Philosophy. Harvard University Press: Cambridge. p. 246.

[2] Gregor Aisch and Alicia Parlapiano. “What Do You Think is the Most Important Problem Facing This Country?” The New York Times. February 27, 2017.

[3] Sandel. 1996. Democracy’s Discontent. p. 248.