Chapter 1: On the Choice of Welfare Standards in Competition Law
Louis Kaplow* INTRODUCTION 1 The interpretation and application of competition law to horizontal restraints, mergers, and exclusionary (abusive) practices by dominant firms depends on what the laws’ goals are deemed to be. Increasingly, and especially in the United States, a concern for economic welfare is taken to be central. As a result, much attention has been devoted to determining which rules best advance welfare. There nevertheless remains dispute over whether total welfare should be the objective, as is conventional under a welfare economic approach, or only consumer welfare should count.1 This chapter examines two sets of issues that bear on this choice. First, supposing that society is concerned with the equality of the distribution of income, does it make sense to employ competition law in pursuit of this aim, in particular by giving primary or exclusive weight to consumer welfare, downgrading or ignoring producer welfare? Second, what are the * Finn M W Caspersen and Household International Professor of Law and Economics, Harvard University, and Research Associate, National Bureau of Economic Research, United States of America. This chapter derives from a lecture that was the keynote address for the Fifth Annual Conference of the Academic Society for Competition Law, on ‘Goals of Competition Law’, and the inauguration for the Center for Advanced Studies in Law and Economics at the University of Bonn. The first part of this chapter grows out of suggestions in L Kaplow and C Shapiro (2007), ‘Antitrust’, in AM Polinsky and S Shavell, Handbook of Law and Economics,...
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