A Reputational View of Antitrust’s Consumer Welfare Standard

44 Pages Posted: 29 Mar 2023 Last revised: 19 Jan 2024

See all articles by Murat C. Mungan

Murat C. Mungan

Texas A&M University School of Law

John M. Yun

George Mason University - Antonin Scalia Law School

Date Written: March 28, 2023


A reform movement is underway in antitrust. Citing prior enforcement failures, deviations from the original intent of the antitrust laws, and overall rising levels of sector concentration, some are seeking to fundamentally alter or altogether replace the current consumer welfare standard, which has guided courts over the past 50 years. This policy push has sparked an intense debate on the best approach to antitrust law enforcement. In this Article, we examine a previously unexplored potential social cost from moving away from the consumer welfare standard: a loss in the information value to the public from a finding of liability. A virtue of the current standard is the knowledge that firms who violate the antitrust laws have harmed consumers. This simple reality is a direct, easy-to-interpret signal to market participants and investors. In contrast, a broader and more nebulous standard, such as a “public interest” approach—which has been proposed by some academics and agency officials—could conceivably water down the information value of a finding of liability. In essence, the greater license that regulators and courts have to condemn a business practice beyond a finding of harm to consumers, then the noisier the signal to the public about what the verdict actually means. We can call this phenomenon “the stigma dilution effect.” To that end, we develop a formal model to gain insight into the role of reputation in the enforcement and deterrence effects of antitrust laws. The model reveals broadening the welfare standard is likely to weaken the reputational impact of antitrust violations. This dilution can, in turn, have implications which go against what the proponents of abolishing the consumer welfare standard desire. Namely, a new standard could increase, rather than decrease, the frequency of conduct they seek to deter. Thus, our analysis suggests that there may be important and underappreciated costs associated with departures from the consumer welfare standard. In fact, the presence of reputational considerations suggests that these departures can produce effects contrary to the stated goals of their proponents.

Keywords: antitrust law, antitrust reform, consumer welfare standard, public interest standard, reputation effects, stigma dilution, optimal enforcement, deterrence

JEL Classification: K2, K20, K21, K23, K29, L4, L40, L49

Suggested Citation

Mungan, Murat C. and Yun, John M., A Reputational View of Antitrust’s Consumer Welfare Standard (March 28, 2023). Houston Law Review, Vol. 61, pp. 569–611, 2024, George Mason Law & Economics Research Paper No. 23-05, Texas A&M University School of Law Legal Studies Research Paper No. 23-11, Available at SSRN: https://ssrn.com/abstract=4403344

Murat C. Mungan (Contact Author)

Texas A&M University School of Law

1515 Commerce St.
Fort Worth, TX Tarrant County 76102
United States

John M. Yun

George Mason University - Antonin Scalia Law School ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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