The consumer welfare standard employs a collective consumer in its model when evaluating possibly anticompetitive behavior. This aggregated approach fails to recognize that such market behavior, even if found to be nominally procompetitive, often disproportionately harms minority and low-income communities. A community welfare standard would enable antitrust to consider the disproportionate effects that possibly anticompetitive activities have on minority communities.
The Stigler Center’s 2023 Antitrust and Competition conference seeks to answer the question: what lays beyond the consumer welfare standard? In advance of the discussions, ProMarket is publishing a series of papers on the infamous consumer welfare standard. This piece is part of that debate.
A community welfare standard as an alternative to today’s consumer welfare standard could begin to address antitrust’s failure to acknowledge the effects of anticompetitive practices and concentrated markets on certain (and vulnerable) segments of the population—especially people of color. Our proposal, asserted in our 2023 paper Race-ing Antitrust in the Michigan Law Review, seeks to remedy the problems with the consumer welfare standard’s facade of “colorblindness.” Not only do we assert that antitrust is an ideal regime to redress structural inefficiencies such as systemic racism, but we shed light on how monopolies and trade restraints have often—with little attention—disproportionately harmed minority communities.
Consider a few examples. Historically, law schools prevented non-white students from enrolling so that white people could monopolize the legal profession, while labor unions banned Black workers from their ranks. More recently, people of color have found themselves the unintended victims of anticompetitive practices. Mergers of grocery stores may result in better and cheaper foods for affluent, predominantly white communities, though in poorer areas, mergers have shuttered local stores to the degree that many low-income neighborhoods lack a single place to buy fresh foods. And as dollar stores replace grocery stores, “food deserts” have spread throughout minority communities. Along the same lines, bank mergers have improved welfare in affluent areas but closed branches in minority neighborhoods. As a result, poor people—disproportionately of color—often have little choice but to patronize predatory payday lenders and check-cashing stores.
Despite these race effects, the question of whether an anticompetitive act has harmed people of color is absent from antitrust’s framework. Per antitrust’s “consumer welfare” standard, exclusionary conduct must raise prices, lower quality, or economically harm consumers in the aggregate to offend antitrust law. If consumers writ large gained a benefit (e.g., the market is now more innovative), then no violation of antitrust law has typically taken place. Further, antitrust assumes that most restraints of trade promote consumer welfare, which has generally enabled defendants to win antitrust cases, including in cases resulting in disparate racial harms. By assessing consumers monolithically, antitrust law has often protected those with market power and anticompetitive acts while turning a blind eye to the welfare of minority communities.
To illustrate, consider the higher switching costs levied on people of color and low-income groups. If a company monopolizes a pharmaceutical market, affluent patients can typically acquire the drug via their insurance plan or pay higher prices. By contrast, less well-off individuals—again, disproportionately people of color—are more likely to: 1) forego healthcare due to monopoly rates, 2) sacrifice other necessities to do so, or 3) turn to self-medication. The effect is that people of color must often adopt their worst-case scenario—i.e., a greater switching cost—yet courts have typically assessed potentially anticompetitive conduct by whether monopoly prices impacted consumers as a collective unit. At best, this framework implicitly assumes that minorities suffer (or benefit) from trade restraints in the same ways as dominant groups.
Further, by measuring the welfare of consumers collectively, a court would likely find a challenged act to be procompetitive if the majority of consumers benefited. If a minority group incurs net costs when the majority group gained wealth, antitrust’s framework may declare the conduct to be legal. It is, in other words, a numbers game in which antitrust tends to value majorities over minorities. Even more, some courts and scholars follow the “total welfare” model whereby antitrust’s analysis includes the monopolist’s welfare in judging whether an act violated antitrust law, further diminishing the welfare of minority groups—here, if the monopolist gains more than all consumers have lost, then the act survives the rule of reason.
Rather than an accident, antitrust’s inattention to race and other differences—its self-imposed blindness—is a notable feature. Courts, enforcers, and scholars have described antitrust as an egalitarian body of law due to how it ostensibly treats all consumers the same. When Robert Bork discussed antitrust’s driving goal, he asserted that the standard of consumer welfare “treat[s] all members of society equally.” To him, consumer welfare reflected the “total welfare” of society “as a class,” meaning that the analysis is supposed to tabulate everyone’s change in welfare to determine whether a net gain or loss occurred. In this sense, antitrust law is intended to gauge all consumers in the same, colorblind way.
Even though modern antitrust does not adhere to all aspects of Bork’s vision, it remains faithful to colorblindness. As a result, when anticompetitive practices inflict greater costs on communities of color, courts have ignored this form of harm as beyond antitrust’s scope. FTC v. Superior Ct. Trial Laws. Ass’n illustrates this landscape. At issue was whether a group of lawyers who provided court-appointed legal representation to indigent defendants in District of Columbia criminal cases had entered a boycott that constituted anticompetitive conduct. In their defense, the lawyers noted that their boycott was the only way to protest the District of Columbia’s practice of under-paying lawyers to represent indigent defendants. The affected attorneys further pointed out that this practice of underpaying lawyers almost certainly harmed the quality of legal representation offered to their clients, who were primarily indigent and Black—an observation which the Supreme Court accepted. The Court also acknowledged that the lawyers would have been unable to increase their fees without the boycott—and thus the boycott would likely benefit indigent defendants. But it did not matter. Antitrust law must condemn the boycott. Backed by precedent, Justice John Paul Stevens wrote that “[t]he social justifications proffered for respondents’ restraint of trade thus do not make it any less unlawful.” To the Court, the plight of poor, mainly Black defendants was irrelevant to antitrust law.
In fact, scholars have identified certain segments of the population comprising vulnerable people and communities of color who have incurred the disproportional costs of anticompetitive practices. Most notably, immigrants and undocumented workers have been described, and excluded, as a type of “unfair competition.” Consider also student-athletes, imprisoned people, and low-skilled labor who entail less powerful yet especially exploitable populations.
But cracks have begun to form in antitrust’s framework as enforcers notice the disparate experiences of minorities. In 2020, Commissioner Rebecca Slaughter of the Federal Trade Commission noted that antitrust’s “value-neutral” stance is “bizarre.” She cited healthcare as an industry in which porous competition has caused Black consumers to incur greater costs, such as inadequate treatment, concluding that antitrust must become anti-racist rather than adhering to the facade of neutrality. And in 2021, President Joe Biden sought to increase antitrust enforcement via executive order, acknowledging that some restraints inflict disproportionate costs on “communities of color.”
That said, observers have discussed and even justified antitrust’s lack of concern for race. For instance, Slaughter’s comments about recognizing the race effects of enforcement drew a backlash, including from one anonymous antitrust practitioner: “I’m disappointed that [Slaughter] felt the need to do this… If there are race issues that need to be resolved here, I’d find other ways to address them” and “[n]o. That’s not what the antitrust tools are to be used for.” One article published in the University of California, Berkeley’s Competition Policy Center explained that antitrust law cannot currently solve distributional issues because no precedent exists for it to place greater weight on poorer members of society relative to affluent consumers. When antitrust courts assess a merger in the healthcare industry, for example, they have equally weighed the utility of consumers generally regardless of whether a specific consumer is rich or poor, high or low risk. Indeed, “unless the [FTC and Department of Justice Antitrust Division] adopted an alternative notion of consumer welfare standard,” they must equally measure a merger’s impact on all patients, “despite its negative impact on the vulnerable populations that need access,” notes Theodosia Stavroulaki.
The point is that antitrust’s framework is founded on a “colorblind” approach, which has led courts and scholars to reject consideration of race or other socioeconomic differences. While premising antitrust law in economic theory was supposed to make enforcement more rigorous, it has also fostered the interests of dominant groups while failing marginalized people.
We assert that antitrust is ideally suited for the task of remedying systemic inequalities in market systems. Antitrust’s concern lies with structures; just as enforcement asks whether anticompetitive conduct has made a market more or less likely to benefit consumers, antitrust law could ask whether anticompetitive conduct has altered a market’s structure to erode the welfare of specific groups. To put it another way, antitrust’s claimed purpose is to enhance consumer welfare by maximizing allocative efficiency, though it ignores the preexistence of economically inefficient racial structures such as the racially restrictive covenant and its legacy. In fact, modern antitrust enables inefficiencies insofar as it permits the misallocation of resources along lines of race rather than their most productive uses. Since racism is a structural inefficiency based on excluding certain types of actors from the market, we argue that enforcement must inquire into whether a market’s competitive structure has inflicted unreasonable costs on minorities.
All of that said, we advocate for a community welfare vision of antitrust law in which courts would resist making unnecessary distinctions of who should matter. It makes little sense for courts to defer to businesses and affluent communities with market power while excluding from antitrust considerations the multitudes of minority groups, stakeholders, workers, and community members who foreseeably suffer from exclusionary conducts, especially if the status quo privileges the most affluent and powerful. If labor, for instance, would lose under a challenged act, nothing in the Sherman Act, its legislative history or authority would suggest that this class should be denied an antitrust remedy. If a community would suffer from the closure of local, small business, or from unemployment or blight, a community welfare standard would permit a court to consider this and respond accordingly.
It is likewise critical that courts scrub enforcement of its preference for presuming that the grand majority of activities are procompetitive. At least where such conduct produces foreseeable and uneven effects on marginalized groups—such as when necessities or essential goods are involved—enforcement should adopt a seldom used standard called the “quick look.” This would effectively swap the burden, compelling those with market power to prove that the act did not actually harm consumers. By using this preexisting remedy, it would help to reprogram antitrust by stripping antitrust of its deference for those with market power and, at the same time, ignorance of marginalized groups.
Another important aspect of community welfare would be to abrogate a state’s antitrust immunity. Currently, a state is immune from antitrust review as a matter of federalism. This has enabled states and their agencies to restrain trade in markets for lotteries, carceral goods and services, African hair-braiding, immigrant street vendors, and other areas in which people of color are primarily harmed. At least when a state entails a market participant, antitrust enforcement must recognize that states wield more anticompetitive power over marginalized groups than private companies—a state can indeed erect insurmountable barriers to entry. Given this article’s objective of recognizing race and power dynamics in antitrust’s framework, it is imperative that antitrust courts review the efforts of states to extract supracompetitive wealth from low-income communities—but as it currently stands, states act within a zone of antitrust immunity.
Also importantly, an emphasis on community welfare would disaggregate the term “consumer.” Recall that antitrust’s analysis lumps consumers together in quantifying their collective welfare. But this formula, as we explained, ignores whether a minority group suffered different or greater costs, allowing a majority group’s welfare to control the analysis. We again turn to the concept of foreseeability. If a challenged act levies foreseeable harm to a certain community, it should alter the procompetitive presumption. Returning to the example of food deserts, Christopher Leslie found that grocery stores exiting poorer neighborhoods sell their lands encumbered with non-compete clauses; the logical effect concerns the dearth of grocery stores left in minority communities. When a type of anticompetitive conduct can so clearly be expected to harm specific communities, it deserves to lose the presumption of procompetitiveness found in the rule of reason. This would indeed help to disaggregate the term consumer.
We must also consider the current moment. Since the killing of George Floyd, this country has undergone a racial reckoning. Along those lines, the time is ripe for recognition of antitrust’s race problem and a re-imagining of antitrust’s possibilities. Our goal in proposing a community welfare vision is thus to restructure enforcement to benefit us all, including marginalized groups. The task, now, is simply to begin.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.