Consumer welfare should be the sole standard for antitrust law.
Last month, the Department of Justice and Federal Trade Commission published a draft of proposed new guidelines for mergers and acquisitions. Sounds like a problem reserved for people who sit in board rooms, right? Not exactly. Such rules will affect all of us.
Despite the common handwringing over corporate mergers and acquisitions, they should be subject to free market forces. And if there is a role for the government to superintend mergers, the guiding standard should be consumer welfare — the prices we all pay, as well as the quality and quantity of the products being made available to us — rather than politicians’ belief that bigger equals bad or the perception of unelected officials that all mergers are problematic.
The project is driven by controversial FTC Chair Lina Khan and designed to greatly enlarge government-erected barriers to mergers and acquisitions. In doing so, the guidelines would ignore decades of counterintuitive academic findings about how firm concentration can have a positive impact on consumers’ welfare.
Meanwhile, as prior officials at the FTC and DOJ explained back in 2006, horizontal mergers — when a firm merges with a competitor — often help companies better compete to please customers domestically and overseas.
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