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The Practical Reason for Both Antitrust and Consumer Protection Law University of Baltimore Law ScholarWorks@University of Baltimore School of Law All Faculty Scholarship Faculty Scholarship 1997 Consumer Choice: The rP actical Reason for Both Antitrust and Consumer Protection Law Neil W. Averitt Bureau of Competition, Federal Trade Commission Robert H. Lande University of Baltimore School of Law, [email protected] Follow this and additional works at: http://scholarworks.law.ubalt.edu/all_fac Part of the Antitrust and Trade Regulation Commons, and the Consumer Protection Law Commons Recommended Citation Consumer Choice: The rP actical Reason for Both Antitrust and Consumer Protection Law, 10 Loy. Consumer L. Rev. 44 (1997-1998) This Article is brought to you for free and open access by the Faculty Scholarship at ScholarWorks@University of Baltimore School of Law. It has been accepted for inclusion in All Faculty Scholarship by an authorized administrator of ScholarWorks@University of Baltimore School of Law. For more information, please contact [email protected]. FEATURE ARTICLES Consumer Choice: The Practical Reason for Both Antitrust and Consumer Protection Law Neil W. Averitt, B.A. Harvard, M.Sc. London School of Economics, J.D. By Neil W. Averitt and Robert H. Lande Harvard, is an attorney in the Office of Policy & Evaluation, Bureau of Competi­ tion, Federal Trade Commission. Mr. Averitt can be reached at <[email protected]>. This article is about the relationship between Robert H. Lande, B.A. Northwestern, antitrust and consumer protection law. Its M.P.P. Harvard, J.D. Harvard, is Professor purpose is to define each area of law, to delin­ of Law, University of Baltimore School of Law. Mr. Lande can be reached at eate the boundary between them, to show how <[email protected]>. they interact with each other, and to show how Both authors have practiced in the area they ultimately support one another as the two of trade regulation law for twenty years and components of a single overarching unity. That have made a specialty of Federal Trade overarching unity is consumer choice. Antitrust Commission law. They have made a particular study of the relationship between and consumer protection law share a common the FTC's competition and consumer purpose in that both are intended to facilitate protection missions, believing that, if this the exercise of consumer sovereignty or effec­ relationship was better understood, it tive consumer choice. Such consumer choice would lead to more rigorous legal prin­ exists when two fundamental conditions are ciples and stronger public support for each mission. The authors have explored present: (l) there must be a range of consumer aspects of this thesis in a number of options made possible through competition; and forums over the years, including presenta­ (2) consumers must be able to select freely tions to international conferences and among these options. conSUltations with overseas national law­ The boundary between antitrust and con­ revision committees. The present article is a condensation, adaptation, and update of sumer protection is best defmed by reference to Neil W. Averitt & Robert H. Lande, Con­ these two elements of consumer choice. The sumer Sovereignty: A Unified Theory of antitrust laws are intended to ensure that the Antitrist and Consumer Protection Law, 65 marketplace remains competitive, so that a ANTITRUST L.J. 713 (1997). Portions of that meaningful range of options is made available article are incorporated with the permission ofthe American Bar Association. The to consumers, unimpaired by practices such as opinions expressed in this article are solely price fixing or anticompetitive mergers. I The the authors' own, and do not necessarily consumer protection laws are intended to reflect the views of their colleagues, the ensure that consumers can select effectively Bureau of Competition, the Federal Trade from among those options with their critical Commission, or any individual Commis­ sioner. faculties unimpaired by such violations as 44 • Loyola Consumer Law Review Volume 10, number 1 deception or the withholding of material infor­ price competition. In certain sectors of the mation. Protection by both the antitrust and economy, such as high-tech or media-related consumer protection laws is needed to ensure industries, diversity of options may be far more that a market economy can continue to operate important to consumers than price competition. effectively. Third, because consumer choice is important, This protection is needed when "market consumer protection actions should be limited failures" arise, which may create or permit to conduct that has a reasonably clear effect on competition or consumer protection problems. consumers' ability to select, and such actions This article will demonstrate that antitrust should not be brought against conduct that is violations (which impair the menu of options) objectionable on less clearly defmed moral or stem from market failures in the general mar­ equitable grounds. Finally, our framework ketplace external to consumers, whereas should be useful to those countries that are consumer protection violations (which impair establishing or reorganizing trade regulation the individual's ability to select) flow from programs for the fIrst time. internal market failures that take place, in a The discussion of our proposed unified sense, "inside the consumer's head."2 While theory will be divided into four principal this formula appears on its face to be of Doric sections. The fIrst section introduces and simplicity, it provides a coherent theoretical defInes the concept of effective consumer framework from which antitrust and consumer choice, which requires both the existence of protection law may be better understood and consumer options and the ability to select applied. among these options. The second section This framework has not only theoretical reviews antitrust and consumer protection case interest, but also at least four significant practi­ law and shows that this law is consistent with cal consequences. First, a unified theory of (and explicable by) an option-oriented model of antitrust and consumer protection law will consumer choice. The third section identifIes assist the enforcement authorities in determin­ and discusses the economic market failures that ing when particular conduct or transactions may tend to impede the exercise of consumer should be pursued on antitrust as opposed to choice by restricting either the menu of options consumer protection grounds. Many concrete or consumers' ability to select among them. aspects and effects of a litigation vary accord­ Finally, the fourth section explores the practical ing to whether it is classified as an antitrust or a implications and consequences of our proposed consumer protection matter. For example, only framework. Among these consequences, the antitrust violations give rise to criminal sanc­ framework suggests that antitrust law should be tions and automatic treble damages, and only in construed somewhat more broadly than in the consumer protection cases is the Federal Trade past, and consumer protection law somewhat Commission ("FTC" or "Commission") re­ more narrOWly. quired to use certain rule making and investiga­ tory procedures. A unified theory will make I. An Option-Oriented Concept clear when antitrust or consumer protection laws should be utilized. Second, the importance of Consumer Choice of marketplace options in consumer choice Simply put, consumer choice or consumer suggests that antitrust should devote more sovereignty is the state of affairs that prevails attention than it now does to the role of non- 1998 Loyola University Chicago Schoolo/Law • 45 or should prevail in a modem free-market Thus, we do not simply require the maxi­ economy. It is the set of societal arrangements mum number of options. Antitrust law does not that cause that economy to act primarily in prevent all conduct or transactions that have the response to the aggregate signals of consumer effect of reducing the number of options avail­ demand, rather than in response to government able to consumers. Nor does the law affirma­ directives or the preferences of individual tively require the creation of options. Rather, it businesses. It is the state of affairs in which the prevents business conduct that artificially limits consumer is truly "sovereign," in the sense of the natural range of options in the market­ having the power to define his or her own place.4 Indeed, the law permits even some wants and the ability to satisfy those wants at artificial reductions, such as some mergers, if prices not greatly in excess of the costs borne the benefits of the action appear to outweigh by the providers of the relevant goods and the costs. Through these means, the antitrust services.3 The concept of consumer sover­ laws aim to preserve a sufficient, although not a eignty goes so far as to embody at least some perfect, array of options for consumers to implicit notions about the proper relationship choose among. between the individual and the state; it is part of Consumer protection laws are similar in the the Western world's answer to the prescriptions sense that they seek to protect the ability of of Marxism. consumers to make rational choices among The essence of consumer sovereignty is the competing options but do not necessarily strive exercise of choice. By choosing some goods or to ensure that consumers have perfect informa­ some options over others, consumers satisfy tion.5 Probably no consumer is a perfect rea­ their own wants and send signals to the soning machine, existentially free from all the economy. It is, therefore, critical that the extraneous influences of early upbringing, exercise of consumer choice be protected. cultural values, or half-remembered advertising We have already seen that effective con­ campaigns from years ago. What we ask of sumer choice requires two things: options in consumer protection law is therefore something the marketplace and the ability to select freely relatively modest. We ask that consumers be among them. To tum this conceptual paradigm enabled to make rational choices to the extent into operational policy, at least some rough that they wish to concentrate on doing so.
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