Monday, August 31, 2009
Posted by D. Daniel Sokol
Alan Devlin, and Bruno L. Peixoto, Lanna Peixoto Advogados, The Brazilian Institute for Economic Analysis of Law have a paper on Reformulating Antitrust Rules to Safeguard Societal Wealth.
ABSTRACT:Myopic application of the antitrust laws has produced
two perverse effects: it has halted increases in aggregate social wealth and
erroneously sanctioned business practices that cause significant societal
welfare losses. Thus, current competition rules give rise to a society deprived
of resources it would otherwise enjoy. Present antitrust rules may appear to be
formulated with the well-being of capital-constrained consumers in mind, but
such is not the case. This Article debunks the consumer welfare standard, the
current antitrust lodestar. We show that the competition laws currently draw an
unwarranted distinction between producer and consumer wealth, subordinating the
former to the latter. They do so absent sound distributional reasons justifying
the promotion of one form of wealth-generation over the other.
This Article shows that the consumer welfare standard does not accurately reflect principles of Rawlsian justice and may, in fact, result in highly imperfect and possibly unjust redistribution. We defend a monotheistic approach to antitrust law, extinguishing the artificial division of society in the distinct and opposed classes of consumers and producers. We favor an antitrust policy in which expanding society's aggregate welfare and efficiently allocating resources in production are the sole goals. We argue that even if significant wealth transfers from the bottom of the social pyramid to its top occur because of the novel standard, redistribution should occur more efficiently through enhanced private mechanisms aimed at sharing increased wealth. We show which, and how, antitrust rules should be reformulated to both sanction Kaldor-Hicks efficient transactions and block welfare-reducing practices. Finally, we argue that legal and practical objections to the adoption of a standard focused on sharing increased wealth are easily surmountable.