The Stigler Center’s 2023 Antitrust and Competition conference seeks to answer the question: what lays beyond the consumer welfare standard? In advance of the discussions, ProMarket is publishing a series of papers with proposed alternatives to the infamous consumer welfare standard. This piece is part of that debate.
Debates about the proper goals of antitrust focus mainly on what aims antitrust agencies should seek to achieve when applying their law enforcement powers. This comment offers no view on what goals an antitrust system should pursue. It discusses how agencies should go about implementing a chosen goals framework.
Good process can increase the legitimacy and effectiveness of an antitrust system; it presses toward the development of a goals structure that is responsive to important societal needs and lends itself to effective application by enforcement agencies and courts. Good process can also increase the coherence of a goals framework by forcing enforcement agencies to address tensions that arise when the framework instructs them to accomplish a broader range of objectives.
The foundation of good process is the meaningful disclosure of enforcement aims and accomplishments at a high level and in individual enforcement decisions. Whatever an agency chooses to do, good process dictates that, in the spirit of the instructions for a mathematics examination, the agency show its work. Sketched below are the ingredients of meaningful agency disclosure.
Annual Statement of Strategy, Priorities and Programs
Meaningful disclosure begins with the publication each year of the agency’s enforcement strategy, its priorities for applying its resources, and the specific projects that will help realize its aims. The essential foundation for this document is the agency’s recital of the objectives that underpin its mandate. Where the agency presents multiple aims, it should identify what it regards to be the hierarchy of objectives and, where conflicts may emerge, to describe the methodology the agency intends to use to reconcile tensions among its objectives.
It is unremarkable that statutes sometimes incorporate diverse and sometimes conflicting aims. The adoption of statutes can require compromises that give legislators with dissimilar views a reason to vote for a specific measure. These compromises often assign agencies and courts responsibility for harmonizing dissonant aims. Some conflict among aims is acceptable and perhaps inevitable; suppressing the fact of tradeoffs and obscuring the calculus used to make them is inappropriate but commonplace.
The strategy and priorities statement also sets out the programs the agency will pursue – the continuation of existing projects and the launch of new initiatives – to achieve them. All projects, old and new, are linked to the attainment of the agency’s stated aims.
The agency should release its annual statement in draft form for public comment, conduct public consultations, and publish a final version. Performed in this manner, the annual exercise of preparing and presenting the agency’s enforcement strategy, priorities, and programs facilitates public examination of the aims and means of public policy.
Historical Foundations
Awareness of the agency’s past work should inform its preparation of its strategy, priorities, and programs in the present. By studying the development of enforcement policy and programs over time, the agency can understand which objectives have motivated its choice of enforcement initiatives, and how specific projects have accomplished their intended ends.
Careful review of past practice may reveal that a variety of objectives, some stated explicitly, and others pursued implicitly, inspired the choice of cases and non-litigation projects. Rather than rely on rough guesses about earlier practice, the systematic study of past cases might illuminate, for example, how often dynamic innovation concerns influenced agency decision making and reveal the techniques the agency used to take these concerns into account.
Historical awareness also alerts the agency to contradictions embedded in a specific goals structure and helps guide efforts to resolve them.Enforcement experience might provide an informative perspective on how an agency can realize the attainment of multiple goals simultaneously. Cases challenging bid rigging and related forms of misconduct in public procurement provide an example. Efforts to challenge bid rigging on public tenders generally can be justified simply by reason of their likely efficiency benefits, such as the reduction in prices paid for products or services and improvements in the quality provided to public purchasing agencies. Their distribution and equity advantages also may be substantial.
A great deal of public procurement expenditures supports vital social services – for instance, education and public health programs – that have special significance for the less affluent. Wealthy citizens can bypass the deficiencies of public services by sending their children to private schools and purchasing private health care; poor citizens cannot. The results of defective procurement systems often are immediately visible to citizens; thus, they see firsthand the consequences of having badly maintained roads. Such deficiencies erode civic trust. By improving the performance of a procurement system, antitrust enforcement can help sustain faith in public administration. A strong program to challenge misconduct in government procurement might deserve priority because it advances so many public policy goals at once.
The systematic study of antitrust policy within specific sectors can facilitate the creation of “antitrust biographies” that trace the influence of antitrust enforcement and related competition policy measures on the evolution of individual sectors. The preparation of sectoral antitrust biographies might help identify how changing conceptions of competition policy shape industry behavior and structure and clarify the economic, intellectual, and political forces that determine the ascent or decline of various goals structures.
Prioritization and Project Selection Criteria
Antitrust enforcement agencies should publish the criteria they use to set priorities and to select specific projects. A core element of the prioritization and project selection criteria is a statement of what importance the agency attaches to the attainment of its stated goals. This provides agency staff and external audiences guidance about what the agency will look for in deciding whether to pursue enforcement programs and to approve specific matters within those programs.
When it begins a program or launches a specific project (i.e., a case, a study, or a rule), the agency should state how the initiative will advance its goals. Suppose the agency has committed itself to improving economic performance, achieving a more equitable distribution of economic benefits, strengthening the position of small and medium enterprises, increasing rivalry that gives workers better wages and working conditions, and generally creates an environment conducive to democracy.
An ideal announcement would describe how the matter at hand, by applying existing legal principles or creating new principles, will realize these ends. The announcement might describe the world as it will exist once the program or specific initiative is put in place. What developments will unfold that indicate that the stated aims are closer to realization? What changes in industry and society should we expect to observe as the agency carries out its plans? By what observable measures will we know that the agency’s initiatives are succeeding in fulfilling the aims that determined the formulation of the agency’s program?
Informative Agency Decisions
When they take formal decisions, agencies should prove an honest statement of the aims that motivated their action. There is no reason to apologize for the difficulties that can arise in deciding specific cases, and there is no shame in acknowledging uncertainties in how to effectuate a single objective, or collection of aims. Sound practice requires a good faith effort to set out the motivating objectives, to identify the weight given to each aim in the resolution of a matter, and to describe how tradeoffs among competing goals were made.
Truly informative decision making could bring valuable discipline to policymaking. For example, when an agency accepts a settlement, it should describe how the settlement will realize the stated goals of the antitrust system. This description should provide the agency’s best assessment of how markets – and society – will change by reason of the settlement. This gives external observers a report card to grade the quality of the agency’s intervention. Even though the effects of intervention cannot be anticipated completely, the exercise of setting out the agency’s predictions of future effects sharpens the development of the case (why, exactly, are we brining this case?) and sets up a baseline that aids the ex post assessment of agency decision making and enforcement outcomes.
An agency lapses into poor practice when it seeks to obscure the full range of factors that influenced a decision, refuses to acknowledge how the attainment of different goals can point to different policy outcomes, or fails to disclose how it carries out tradeoffs that shaped the result. When an agency finds it awkward or embarrassing to fully show its work, that is a reliable sign that it may be time to refine the goals framework. If nominally significant goals are routinely overlooked, perhaps the law should be amended to withdraw them. If shadow goals not set out in the statute are guiding decisions, perhaps these hidden aims should be incorporated into the law.
The requirement for honest revelation of the bases for decision making applies to decisions not to intervene as well as to decisions to intervene. Whether established by agency custom or a statutory mandate, the practice of issuing informative closing statements can promote accountability, legitimacy, and effectiveness.
Annual Report on Fulfillment of Aims
The publication of a strategic plan begins the cycle of the agency policy making year, and a report on actions taken to realize the plan ends it. At the close of the annual reporting period, good practice dictates that the agency set out what it has done in the year since the publication of the strategic plan and describe how its projects advanced the attainment of the plan’s objectives. One can envision a segment of the annual report that identifies the framework of antitrust goals and discusses how the agency’s projects helped to realize each goal. The issuance of this annual review could be accompanied by public consultations in which agency outsiders can give their own assessment of how well the agency’s programs fulfilled its mandate.
Ex Post Evaluation
The annual review suggested immediately above is one step in a process through which an agency, through its own efforts or in cooperation with external observers, evaluates how much its projects have achieved their intended aims. The development of an evaluation program provides valuable discipline to the formulation of agency projects by forcing the agency to study the connection between its aims and activities – to ask how one can measure whether a case, report, a rule, or advocacy measure – is working as intended. An ex post evaluation program could include deeper examination of individual cases to explore how agencies accounted for different policy objectives in deciding to intervene or to withhold intervention. In general, the study of actual outcomes should lead to the refinement of the agency’s case selection methodology.
More broadly, ex post evaluation provides one means for determining the value of antitrust intervention as a tool for realizing specific goals. What aims have lent themselves most readily to attainment through antitrust intervention? Which goals tend to elude realization even when agencies strive to attain them? This inquiry is perhaps most important when the goals in question require some stretching of the agency’s mandate to respond to economic or social problems not ordinarily considered to fall within the bounds of competition policy. Most generally, how do we know that antitrust works?
Legislative Restatements of Aims
The proposals for systematic efforts to develop greater historical awareness about the evolution of antitrust policy and to document the results of specific initiatives would facilitate legislative deliberations about modifications of the antitrust system. It may be sensible for Congress periodically to examine experience with statutes adopted in 1890, 1914, and 1950 to see if the aims that motivated adoption of those statutes reflect contemporary congressional views about competition policy. This type of periodic assessment might lead legislators to restate their intentions. Even without such a restatement, periodic deliberations about the aims of antitrust policy would engage Congress in useful discussions about how antitrust enforcement is affecting the economy and is promoting the attainment of larger social purposes.
Routine Public Consultations
As suggested in the discussion above, meaningful disclosure calls for regular public consultations – in the form of conferences, workshops, and hearings – to examine the assumptions that guide agency’s formulation of strategy and its selection of programs and projects, and to assess the effects of agency policy choices. The convening of these events can serve important substantive and symbolic ends. In practical terms, public consultations can provide useful insights into the definition of goals and the choice of techniques to accomplish them. At a higher symbolic level, public consultations make agencies more accountable and increase their legitimacy by exposing them to public debate about how they have defined their policy roles and how well they have executed their mandates.
Conclusion: The Broader Significance of Meaningful Disclosure
As suggested above, meaningful disclosure serves important purposes beyond the implementation of a chosen goals structure. Assertions that antitrust agencies require some degree of autonomy from political pressure – at least in making decisions to prosecute or decisions about liability – collide with demands that agencies be accountable to the democratic processes that give them power and public resources. Meaningful disclosure provides a means for reconciling this tension.
An agency provides the requisite degree of accountability by committing itself to disclose honestly how it has used its discretion. By writing informative decisions, by revealing its enforcement plans, by showing how policy interventions sought to achieve state goals, by subjecting its decisions to ex post assessment, and by engaging in regular public consultations, the agency facilitates external assessment of its work and invites public debate. In doing so it commits itself to make needed improvements. This is perhaps the best assurance an “independent” regulator can give the public that it is exercising delegated authority in a way that serves the ends the public, expressing their will through elected officials, intended it to achieve.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
