Reformulating Antitrust Rules to Safeguard Societal Wealth
Alan J. Devlin
Latham & Watkins
Bruno L. Peixoto
Lanna Peixoto Advogados; The Brazilian Institute for Economic Analysis of Law
July 3, 2009
Stanford Journal of Law, Business, and Finance, Vol. 13, p. 225, 2008
Myopic application of the antitrust laws has produced two perverse effects: it has halted increases in aggregate social wealth and erroneously sanctioned business practices that cause significant societal welfare losses. Thus, current competition rules give rise to a society deprived of resources it would otherwise enjoy. Present antitrust rules may appear to be formulated with the well-being of capital-constrained consumers in mind, but such is not the case. This Article debunks the consumer welfare standard, the current antitrust lodestar. We show that the competition laws currently draw an unwarranted distinction between producer and consumer wealth, subordinating the former to the latter. They do so absent sound distributional reasons justifying the promotion of one form of wealth-generation over the other.
This Article shows that the consumer welfare standard does not accurately reflect principles of Rawlsian justice and may, in fact, result in highly imperfect and possibly unjust redistribution. We defend a monotheistic approach to antitrust law, extinguishing the artificial division of society in the distinct and opposed classes of consumers and producers. We favor an antitrust policy in which expanding society's aggregate welfare and efficiently allocating resources in production are the sole goals. We argue that even if significant wealth transfers from the bottom of the social pyramid to its top occur because of the novel standard, redistribution should occur more efficiently through enhanced private mechanisms aimed at sharing increased wealth. We show which, and how, antitrust rules should be reformulated to both sanction Kaldor-Hicks efficient transactions and block welfare-reducing practices. Finally, we argue that legal and practical objections to the adoption of a standard focused on sharing increased wealth are easily surmountable.
Number of Pages in PDF File: 61Accepted Paper Series
Date posted: July 4, 2009 ; Last revised: July 6, 2009
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