As businesses of all sectors face an unprecedented shift in legislation and enforcement from Congress and the FTC, lawmakers and policymakers must keep in mind the importance of the Consumer Welfare Standard (CWS), an antitrust philosophy backed by decades of legal precedent.

Here’s what you need to know:

— The CWS is the time-tested, bipartisan gold standard because it provides a basis for objective enforcement of antitrust laws.

— The CWS has sparked a golden age of innovation concentrated in the U.S. 

— Recent antitrust bills and regulatory enforcement that strays from the CWS would hurt consumers.

The Consumer Welfare Standard Is The Bipartisan Gold Standard For Competition Policy Because It Provides A Basis For Objective Enforcement Of Antitrust Laws

FTC Commissioner Christine Wilson expressed the importance of centering consumer welfare, saying the FTC should be “laser focused on protecting consumers.” “Now more than ever, the agency should be laser focused on protecting consumers — but the insertion of additional goals into our Strategic Plan means that, by definition, consumer welfare will not be maximized.”

Former Treasury Secretary Larry Summers said that moving the focus of antitrust policy away from what’s best for consumers would “do grave damage to the American economy.” “Ultimately, an efficient economy that serves consumers well is the right criteria for antitrust policy. Any attempt to change the goal of antitrust policy to be protecting competitors rather than protecting competition I believe will do grave damage to the American economy.”

Former FTC Commissioner Joshua Wright said antitrust policy that focuses on factors besides competition and consumer welfare have “performed exceptionally poorly.” “[A]ntitrust law has performed exceptionally poorly when it fails to focus exclusively upon issues of competition and consumer welfare, and is instead distracted by socio-political goals. Attempting to distort the consumer welfare focus of the modern antitrust laws by incorporating socio-political goals led historically to an antitrust regime that fostered corporate welfare over consumer welfare, perversely favoring corporations at the expense of individual consumer.”

Stanford Antitrust Law Professor Douglas Melamed underscored that the Consumer Welfare Standard is “perfectly capable” of addressing harms. “I think, with some degree of conviction, that the attack on the consumer welfare standard is a complete red herring. It is a rhetorical device that is used by the populists to discredit antitrust law in pursuit of a very different objective. If you’re focusing on economic welfare, the consumer welfare standard… is perfectly capable of addressing non-price harms, innovation harms, quality harms, and harms in buy-side markets.”

The Consumer Welfare Standard Has Sparked A Golden Age Of Innovation Concentrated In The U.S.

The most recent Global Startup Ecosystem report from Startup Genome found that startups are seeing “an impressive leap” in investment over the last several years. “More than 300 North American tech startups achieved unicorn status in 2021, an impressive leap from fewer than 100 in 2020 and a large proportion of the 540 total global tech unicorns. The region saw 105% growth in $50 million+ exits from 2020 to 2021. Early-stage funding increased 43% since 2020, but Series B+ saw a much bigger increase at 140% in the same period.”

In fact, average enterprise tech VC valuations spiked over the last two years, with PitchBook Data valuing enterprise tech VCs at $384.9 million and $450.4 million on average in 2021 and 2022, respectively.

Furthermore, innovation is concentrated in the U.S., as FDI Intelligence reported that 5 of the top 6 global companies ranked by R&D spending in 2021 were U.S. tech companies.

Recent Antitrust Bills And Regulatory Enforcement That Strays From The CWS Would Hurt Consumers

According to The American Consumer Institute, recently proposed antitrust legislation “could leave consumers with fewer choices and higher prices.” “For consumers, this shows lawmakers have deprioritized them from antitrust law. Consumers should be most concerned that AICO[A] would prohibit many practices that have enabled them to access high-quality goods and services for little or no cost. By decentering consumer welfare, AICO[A] could leave consumers with fewer choices and higher prices.”

Chamber of Progress CEO Adam Kovacevic explained that services like Amazon Prime could “face an uncertain future” due to bills like AICOA. “Were Klobuchar’s bill to become law, non-FBA [Fulfillment By Amazon] merchants would immediately complain to the FTC or state Attorneys General that Prime and FBA were ‘materially harmful’ to their ability to compete, based on the arguments above. You’d then see multiple legal cases play out for years, where Amazon would argue that Prime and FBA were a ‘core functionality of the covered platform’ and merchants would argue the programs ‘harmed the competitive process.’ Under the bill’s new murky legal standards, it could be a legal jump ball. And the bill would levy a penalty of 15% of Amazon’s US revenue for each infraction. During that time, Amazon Prime — which again, nearly half of Americans have chosen to use — would face an uncertain future.”

Sean Heather of the U.S. Chamber of Commerce explained that AICOA was a “significant departure” from precedent, straying from the CWS, which has allowed the U.S. to “lead the world in technological innovation and investment.” “AICOA is a significant departure from the history of American antitrust legislation which has long been based on the consumer welfare standard. Only when consumers, not competitors, are negatively impacted in terms of price or service is antitrust enforcement appropriate. That consumer-based standard has allowed the United States’ private sector to lead the world in technological innovation and investment.”

FTC Commissioner Christine Wilson explained that the Commission’s distancing from the CWS “is ill-advised.” “As a policy matter, the choice to pivot from a consumer welfare standard is ill-advised, particularly during a period of record inflation. Now more than ever, the agency should be laser focused on protecting consumers — but the insertion of additional goals into our Strategic Plan means that, by definition, consumer welfare will not be maximized.”