The Controversies of the Consumer Welfare Standard

Abstract

This article deals with the consumer welfare standard in competition law enforcement. It explores the inherent economic and legal 'geography' of this notion by looking beyond the borderlines of competition rules. While the consumer welfare standard has been widely discussed as a legal and economic notion of competition law, this article approaches this concept from a new angle by making use of its interpretation in consumer law. In competition law the primary role of the consumer welfare standard is to verify the goals of competition policy and to delineate the general legal framework of competition law enforcement by establishing the basis for the standard of proof. In consumer law consumer welfare stands for correcting market failures in order to improve the consumer's position in market transactions. Consumer welfare is concerned with efficient transactions and cost-savings but it is also directed at social aspects of the market such as the safety and health of consumers. Consumer welfare is an economic concept with relevant socio-political and legal implications. However, the economic rationale seems to be often overridden by a political rationale, which is to legitimize the enforcement work of competition authorities' and to reflect society's preferences on income distribution. This article addresses the implications of the consumer welfare standard in welfare economics, political economy and law. The analysis points out to what extent the enforcement of competition law can prevent (final) consumer harm and make (final) consumers better off and what the inherent limits of the promotion of consumer interests are in competition law. Such comparisons clarify and identify the function of this standard and delineate the borderlines between the two disciplines, the possible gaps and unnecessary overlaps they create in regulating markets.

Keywords: Competition law, Consumer welfare, Consumer harm

JEL Classification: K21, L40