Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged

Abstract

Chicago School antitrust policy rests upon the premise that the sole purpose of antitrust is to promote economic efficiency. This article shows that this foundation is flawed. The fundamental purpose of antitrust is to protect consumers. To protect purchasers from paying supracompetitive prices when they buy goods or services. This is the "wealth transfer," "theft", "consumer welfare" or "purchaser protection" explanation for antitrust.

The article shows that the efficiency view originated in a detailed analysis of the legislative history of the Sherman Act undertaken by Robert Bork. Bork purported to show that Congress only cared about enhancing economic efficiency.

To analyze Bork's arguments, this article first explains the underlying economic concepts, including Bork's misleading definition of the term, "consumer surplus" when he should have used the term "total surplus". This article then analyzes the legislative histories of the Sherman Act, Clayton Act, Celler-Kefauver Act, and FTC Act. This analysis demonstrates that Congress's overriding concern when it enacted each law was with protecting consumers from paying supracompetitive prices. Congress did this because it believed that illegally acquired supracompetitive pricing constituted an "unfair" transfer of purchasers' property to firms with market power. Economic efficiency was only a secondary concern.

The only exception is the law's goal of protecting small sellers from anticompetitive behavior by buyers with illegally gained monopsony power. This limited concern, however, is just the mirror image of Congress' desire to protect purchasers from exploitation. In both buy-side and sell-side cases, the overarching goal is the same - preventing firms that have unfairly acquired power from imposing noncompetitive prices or non-price terms on those they do business with. In both cases these firms "unfairly" acquire wealth.

When conduct presents a conflict between the welfare of consumers and total welfare (e.g., a merger that raises prices but reduces costs), courts should choose purchaser protection over economic efficiency. This conclusion supports a more aggressive approach to many areas of antitrust.

Keywords: wealth transfers, antitrust, legislative history, legislative intent, efficiency interpretation, monopoly, Chicago School, consumers, competition, consumer welfare, price

JEL Classification: K19, K21, K29, L40, L44, L49