Voices for Reason - “Consumer Welfare” = Producer Sacrifice | The Ayn Rand Institute

“Consumer Welfare” = Producer Sacrifice

The more you read about antitrust cases, the more you hear that the laws’ goal is to improve “consumer welfare.” Decades ago, Robert Bork popularized the idea that a desire for “consumer welfare” lay behind the Sherman Act of 1890 and subsequent statutes. These days the matter is hotly debated, but even the combatants acknowledge that the Supreme Court treats “consumer welfare” as antitrust’s North Star.

And who could be against “consumer welfare”? The term’s rosy connotations seem to foreclose debate before it can begin. But let’s pause and look at two radically different meanings that term can have.

The objective meaning of consumer welfare is the state of prosperity that results when producers flood the market with attractive goods and services for sale. When Apple develops the iPod and iPhone — when Uber offers an app to connect drivers and passengers — when GoPro offers tiny cameras for daredevils to record their exploits — consumers can acquire through trade the means to achieve their own personal values, in ways they could never manage on their own.

On a free market, each purchase and sale is a win/win transaction that benefits producer and consumer alike. Neither party’s interests are sacrificed to the other’s. The consumer gets a product he values more than the money paid. Similarly, the seller gets money it values more than the product delivered. Because everyone involved is acting according to his own judgment, it doesn’t occur to anyone that coercion is necessary.

Antitrust’s version of “consumer welfare” is a vicious corruption of the genuine concept. It consists of sacrificing producers to consumers, by means of legal coercion. Just look at some examples:

  • Apple offers ebooks for sale on its iPad, at prices set by the ebooks’ publishers. But antitrust declares that “consumer welfare” will be enhanced if those prices are reduced. This supposedly justifies a court order voiding the Apple-publisher contracts, thus sacrificing the producers’ right to price their own goods and services.
  • The Keurig company offers a new generation of coffee machines and one-cup capsules to an eager clientele. But antitrust declares that “consumer welfare” will be enhanced if Keurig’s rivals can sell capsules that fit the new machines. This supposedly justifies a court order forcing Keurig to open its machines to competitors, thus sacrificing Keurig’s right to profit through innovation.
  • Google makes money advertising its own services on its immensely popular search result pages. But antitrust declares that “consumer welfare” will be enhanced if Google’s rivals are featured more prominently on that screen real estate. This supposedly justifies
    an order mandating “equal placement,” thus sacrificing the producer’s property rights.

There are no win/win transactions here. In every case, the producer loses — not by a mistaken judgment, but through legal coercion that replaces his judgment with a court’s dictate. In this way, antitrust attacks the very source of material values, the producer’s independent thinking, without which there can be no actual consumer welfare.

Whenever antitrust coercion is justified on “consumer welfare” grounds, a sneaky masquerade is at work. The very term is meant to disarm critical thinking, by conjuring the image of prosperity associated with a free market full of voluntary, mutually beneficial transactions. But when you look closer, there’s nothing but producers on the chopping block, being sacrificed for the welfare of no one.