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1 1 (July 21, 2022)

handle is hein.crs/goveihy0001 and id is 1 raw text is: Congressional Research Service Informing the Iegitive debate since 1914 Updated July 21, 2022 Antitrust Law: An Introduction Recent years have witnessed a resurgence of both popular and political interest in antitrust. This renewed attention has produced a flurry of legislative activity, with several Members of Congress introducing proposals to reform various elements of competition law. This In Focus provides an overview of antitrust doctrine and selected antitrust legislation pending before Congress. The Goats of Antitrust The antitrust laws are designed to protect economic competition. At that level of generality, there is little controversy. However, there is profound disagreement about antitrust's more specific goals. Safeguarding competition can mean a variety of things, and disputes about the appropriate targets of antitrust policy have persisted since its inception. Economists tend to approach this issue with similar discussions of the effects of market power-the ability of a firm to profitably charge prices above levels that would prevail in a competitive market. Economic theory identifies two relevant effects. First, market power can produce allocative inefficiency: when prices exceed competitive levels, some consumers who would have purchased a product at the competitive price choose to forgo it or substitute less desired alternatives. Thus, market power can lead to suboptimal allocations of scarce resources. Second, market power can result in wealth transfers: consumers who buy a product at an uncompetitive price are poorer than they would be in a competitive market, while the seller is richer. Today, antitrust is principally concerned with preventing anticompetitive conduct that enables firms to exercise market power. However, the distinct effects of market power highlight a fissure in the debate over antitrust's more foundational goals. In a narrow subset of cases, efficiency and consumer welfare may pull in opposite directions. For example, some mergers may lower production costs, but also increase market power. Some commentators- advocates of a total welfare standard-maintain that antitrust should permit such transactions as long as the gains in productive efficiency outweigh the losses in allocative efficiency and consumer welfare. By contrast, defenders of the consumer welfare standard advocate blocking such deals when they are likely to effectuate a wealth transfer from consumers to producers. Although the competition laws of some countries embrace the total-welfare standard, U.S. antitrust doctrine prioritizes consumer welfare and does not typically permit producer gains to offset downstream harms. While the consumer-welfare standard thus plays a central role in contemporary U.S. antitrust, some have suggested that it is both descriptively and normatively incomplete. One point of contention involves anticompetitive conduct by buyers, which most directly harms sellers rather than end consumers. Whether-and how-such harms are relevant under the consumer-welfare standard is a complicated question. In some cases, reductions in buy-side competition do harm consumers. For example, a merger that gives a firm the ability to depress input prices by purchasing less may harm consumers by leading to lower output. In other buy-side cases, however, injuries may be limited to sellers. For example, a merger might increase a firm's bargaining leverage with suppliers without giving it incentives to purchase fewer inputs. In that case, the main effect of diminished competition may be a wealth transfer from sellers to the powerful buyer, without any effects on final output. Powerful buyers may even benefit consumers by passing along some of their cost savings. Some commentators have appealed to these fact patterns to argue that trading partner welfare or safeguarding the competitive process represent more descriptively accurate and normatively desirable benchmarks for antitrust policy than consumer welfare. The possible tension between these goals and the consumer-welfare standard may become increasingly salient as antitrust enforcers take a greater interest in labor markets, where workers rather than consumers are the most direct victims of anticompetitive conduct. The above discussion does not exhaust the possible ends that antitrust can serve. There is a long-standing debate over whether antitrust should promote noneconomic objectives like personal liberty, protecting small entrepreneurs, or preserving the integrity of the political process. Although there has recently been a resurgence of interest in such goals among some antitrust commentators, those considerations have not played an explicit role in the development of antitrust decision rules for several decades. The Key Statutes The persistence of disputes over antitrust's goals may be partially attributable to the sparseness of the key federal antitrust statutes. The three core provisions-Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act- are succinct and vague, effectively granting the federal courts common law authority to fashion competition policy based on prevailing economic theories. Section 1 of the Sherman Act: Restraints of Trade Section 1 of the Sherman Act prohibits contracts in restraint of trade. Under Section 1 doctrine, a few types of agreements are per se illegal because they almost always harm competition. The per se category now encompasses horizontal price fixing, horizontal market allocation, and some horizontal boycotts. (In antitrust parlance, agreements

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