Thursday, July 16, 2009
Posted by D. Daniel Sokol
ABSTRACT: In the long term, consumer welfare is about efficiency and innovation. In the short term, consumer welfare is about price, choice and access and the interrelationship between all three. For competition policy, consumer welfare therefore acts as a bridge to the greater good – namely well functioning markets – it strives to achieve.
Why did FIPRA undertake this Study? Quite simply because in our daily public affairs work, we have learned – some would say ‘the hard way’ – to consider the consumer at the beginning and at the end of the public policy outcomes and objectives that our clients ask us to help them achieve. This strategic view is therefore central to our business as it is relevant in all fields of policy, but perhaps never more so than in competition policy. As a result, we urge those looking at countless ‘cases’ to bring consumer welfare, now more broadly conceived, into its proper place in research: at the start of investigations during the market definition stage and at the end of cases in the assessment of remedies. In the following pages, we will argue that consumer behaviour needs to be built into agencies and analysis much more effectively than it is today. If competition policy continues to retreat onto an island policy fortress it is only a question of time before it loses relevance and credibility in the eyes of the consumer it claims to be protecting. In many of the cases emerging at the time of writing, the need for competition authorities to be more willing – and able – to take on vested political and departmental interests that seek to undermine competition regulation through slow or inappropriate action is nothing less than palpable. The time to act is now – and with some degree of urgency.
Consumers’ organisations too need to engage more in competition policy. Recalcitrant organisations should be spurred into action by competition authorities. Once they have proved skill and interest, consumers’ organisations should be given standing in competition cases and interventions as a matter of routine.
Much is made by commentators of the EU/US divergences of policy. One way – and perhaps the only way – to allow the different traditions at the root of those divergences to meet and to understand each other is by focussing on a more nuanced behavioural approach to consumer welfare. We need to make a concerted effort to bring efficiency and innovation criteria more firmly into the assessment of long-term consumer welfare.
It is time to return to the sort of language used to promote the first wave of competition law in the US, which used terms like ‘economic democracy’ and ‘empowering the little guy’. Such diction can place competition policy more firmly in a progressive set of policies designed to manage globalisation.