Randy Stutz writes that the Biden administration has recalibrated antirust policy by devoting more equal enforcement attention to competition in buyers’ markets and sellers’ markets, thereby promoting the welfare of both suppliers and consumers. The shift raises questions about whether courts should engage in “multi-market balancing”—the weighing of harms in one market against benefits in a different market—when the interests of suppliers and consumers diverge.
This ProMarket symposium prompts us to wonder whether we are in the midst of a paradigm shift in antitrust law that might lead to new evidentiary standards in antitrust litigation, including new principles for weighing potentially conflicting evidence.
For about four decades, our evidentiary standards were shaped by a widely held view that consumer welfare is the singular goal of antitrust law. During that time, consumer welfare has meant different things to different people. It has been associated with total welfare, consumer surplus, trading partner welfare, the competitive process, or a combination of these concepts.
The Biden antitrust enforcers have espoused a pluralistic view of antitrust law’s goals, rejecting the view that consumer welfare—however defined—is a singular goal. In practice, their approach has resulted in comparatively greater enforcement attention to competition in input markets, including competition among firms on the buyer side of input markets, which reside in the middle of the supply chain. This may involve, for example, competition among manufacturers to source raw materials from upstream suppliers or competition among employers to hire and retain workers.
In a well-functioning input market, competition among buyers usually benefits suppliers by increasing demand and raising the price of the inputs. But the higher input prices sometimes can raise the buyers’ overall costs, leading to pass-on in the form of higher prices for end-products sold to consumers in the output market. Absent a singular value choice to prioritize competitive sellers’ markets and consumer welfare over competitive buyers’ markets and supplier welfare (or vice versa), a balance will inevitably be struck, whether consciously or unconsciously.
This begs the question: What should judges do when evidence of competitive effects in both input and output markets is introduced during litigation?
The Supreme Court has made clear that judges deciding antitrust cases generally should not try to balance competitive harms in one market against claimed benefits in a different market. The reasons are juridical rather than economic: Courts have no justiciable criteria to resolve the essentially political question of whether one group of citizens should subsidize another group by sacrificing competition in one portion of the economy for the sake of another portion. The reasons are also practical: Once one starts weighing conduct’s effects on the injured against its effects on the uninjured, what is the principled stopping point short of undertaking a general equilibrium analysis of effects on everyone in the economy? Netting out ripple effects would make litigation a costly and unpredictable snarl where the party with the burden of proof always loses.
This article argues that the increased enforcement attention on buyer competition in input markets warrants ongoing vigilance by federal judges to reject invitations to engage in multi-market balancing. Absent further guidance from Congress or the president on appropriate criteria for making trade-offs, the balancing exercise remains “a sea of doubt” and a morass for judges. Before making that case, the article discusses antitrust law’s goals and means, which are intertwined with the law’s standards for weighing conflicting evidence.
Protecting competition by creating rights and remedies
While the goal(s) of antitrust law have received extensive (some would say excessive) attention, the means have received much less. The antitrust laws protect competition by proscribing enumerated categories of business behavior, but they also create rights. They create rights by creating remedies. The Clayton Act allows “any person” to sue for an injury to business or property caused by an antitrust violation, meaning every person has a right to be free from competition’s displacement, whether by trade restraint, monopolization, or another enumerated practice.
Functionally, the consumer welfare goal in antitrust law has served implicitly to delimit competition rights. While a literal interpretation of the goal would subordinate other market participants’ competition rights to consumer rights entirely, the federal courts have not gone to that extreme. But modern judges often resolve doubts about the scope of antitrust protections by prioritizing evidence of harmful welfare effects in output markets as the principal basis for establishing liability under the rule of reason.
The Supreme Court has said, in nine majority opinions and two dissents, and the lower federal courts have repeated over 1,400 times, that the antitrust laws were enacted “for the protection of competition, not competitors.” Leave to the side, for a moment, what this says the Progressive Era Congress did not wish to protect and consider what it says it did. When Congress used the word “competition” in early drafts of the Sherman Act and later in the enacted text of the Clayton and FTC Acts—well before modern conceptions of economic efficiency first appeared in the economics literature—it could only have defined it as both economists and lay people did then and as lay people today still do. At the turn of the last century, and for most ordinary modern Americans, competition meant and still means “rivalry,” usually in a contest of some kind.
The wisdom of a statutory choice to indiscriminately protect and promote rivalry is questionable at best. As every successful monopolization case challenging exclusionary conduct shows, businesses sometimes take rivalry too far. To take two examples, in 1996 U.S. Tobacco hired henchmen to destroy the convenience store display racks of a rival snuff manufacturer’s products to increase its own tobacco sales, and in 2011 two managers of a Florida Domino’s burned down a nearby Papa John’s to attract more pizza customers. Had it been 1890 and 1914, respectively, both of those acts would have been called competition—a particularly fierce kind of competition.
To call anybody’s welfare the goal of antitrust law is to filter the Progressive Era concept of competition through an imaginary strainer. It is to say the antitrust laws protect only effective competition—the kind that leads to a better state of affairs. When courts are told, as they often were from roughly 1980-2020, to pursue consumer welfare as a singular goal, they usually rely on welfare effects to decide whether or not to call something “competition.” The business rivalry that promotes consumer welfare is the competition “on the merits” that antitrust law protects, and inefficient business rivalry is no longer called competition.
As this rhetorical trick may begin to suggest, a consumer welfare approach to antitrust law is not without its discomfitures. For one thing, it requires a Herculean reading of the antitrust laws’ legislative history and statutory text. We must convince ourselves that Congress premised its passage of competition laws on an economic rationale that quite literally did not exist—had not yet been discovered by economists—when the laws were passed.
For another thing, it relies on consequentialism to assess business behavior. When we use consumer welfare to guide liability determinations, we render ourselves permanently incapable of ever knowing competition when we see it happening in real time. Instead, we become dependent on hindsight bias: Only after the behavior’s ex post welfare effects have materialized in evidentiary form can we reliably call it competition on the merits.
All that said, a consumer welfare standard offers one way of achieving something that Congress, if it had any common sense, surely would have wanted. It prevents the antitrust laws from promotingthuggery by snuff manufacturers, arson by pizza franchisees, and other similarly unhealthy expressions of business rivalry.
Input Markets and the Consumer Welfare Prescription
Although the Biden antitrust enforcers have relegated consumer welfare to one goal among several, they have still relied on evidence of welfare effects and credited their probative value in characterizing conduct as “procompetitive” or “anticompetitive” under the Sherman and Clayton Acts and “fair” or “unfair” under the FTC Act. They have brought cases showing that a richer conception of protectable competition is available notwithstanding that current precedent relies heavily on welfare-driven evidentiary standards. Nowhere has this been clearer than in the buyer-market cases, including the labor cases, the antitrust agencies have pursued in court or Part III proceedings. They have challenged mergers or conduct that threaten to create, enhance or maintain buyer power and harm the welfare of the sellers (or employees) on the other side of the market.
Antitrust enforcement in buyers’ markets has become a flashpoint in debates over the goal(s) of antitrust law because it suggests the laws protect sellers to the same extent they protect consumers—enough to deprive consumers of the savings when a guilty monopsonist would have passed on its monopsony profits in the form of lower product prices. But protecting and promoting business rivalry that improves the welfare of sellers should not be especially controversial. In a well-functioning input market, preventing buyer power abuses that artificially reduce input prices typically benefits consumers in the long run.
More importantly, the statutory text and case law are clear that consumers and sellers share co-equal competition rights. The Supreme Court said so, expressly, in Mandeville Island Farms (1948), and it has since ratified, in Weyerhaeuser (2007), predatory bidding claims where the predator lacks market power downstream and cannot recoup its losses there. Going back decades, and again in its most recent merits case—NCAA v. Alston (2021)—the Court has validated numerous claims and made countless statements that implicitly or explicitly recognize sellers’ rights to recover for harm to buyer competition in input markets regardless of the impact or lack thereof on consumers.
Instead of holding that the antitrust laws give consumers special preference over the competition rights of sellers, the Supreme Court has called the antitrust laws a “consumer welfare prescription,” invoking a metaphor. When a doctor writes a prescription instructing a pharmacist to dispense medicine to a sick patient, she gives the patient means of getting well but not wellness itself. The prescription metaphor implies that consumers are the patient and consumer welfare is wellness. Competition is the unspoken thing prescribed—the medicine.
If protecting competition in input markets sometimes deprives consumers of artificially low prices from monopsony pass-on, that is because even the best medicines sometimes cause patients to experience unwanted side-effects. Antitrust enforcement that protects worker or supplier welfare by protecting competition may make consumers nominally worse off in the short-run by depriving them of infra-competitive prices attributable to a manufacturer’s buyer power, but that is not a type of injury the antitrust laws were designed to prevent. For consumers, having to pay competitive rather than infra-competitive prices should be recognized as a necessary side effect of a law that protects competition.
Once one accepts that monopsony pricing is analytically the same as monopoly pricing and so treated by the law, it becomes obvious why multi-market balancing is problematic in this context. When a defendant can prove that in-market benefits outweigh in-market harms and that the benefits will be passed on to the plaintiffs, it at least can show a type of restitution to the plaintiffs for infringing on their effective competition rights. But allowing the defendant to rely on out-of-market benefits affords certain antitrust victims a right without a remedy and compensable injury without redress. Chief Justice Marshall explained in 1803 in Marbury v. Madison why that cannot be so:
It is a general and indisputable rule, that where there is a legal right, there is also a legal remedy by suit or action at law, whenever that right is invaded. . . . For it is a settled and invariable principle in the laws of England, that every right, when withheld, must have a remedy, and every injury its proper redress.
For a law that protects competition regardless of downstream pass-on, to rob a supplier of his remedy because a consumer is made better off is to do what Marbury forbids.
Are there really any alternatives to a rule against multi-market balancing?
Several courts, including some appellate courts, have allowed defendants to offer evidence of out-of-market consumer benefits as a defense to competitive harm in input markets. But none expressed awareness of a conscious choice to engage in multi-market balancing or an appreciation of its implications. More recently, several district courts, including the court in FTC v. Meta (2024), have signaled awareness but often precious little appreciation. Paradigm shift or not, this issue seems destined for the Supreme Court, which identified it in Alston but held it in reserve, citing to an amicus brief filed by the American Antitrust Institute.
Until recently, there was a consensus against multi-market balancing. The Supreme Court rejected it in both merger and conduct cases, and commentators from Robert Bork to Robert Pitofsky were similarly aligned. Whether because it is impractical, unseemly, unlawful, or unnecessary (given the single-market efficiency defense), most rejected it as well. But during the last ten years, other commentators have argued for a more flexible rule that still discourages multi-market balancing in most cases but permits it in limited, carefully prescribed circumstances.
One major concern is that a small number of victims who suffer a small injury caused by harm to effective competition in one market could prevent many individuals from realizing large-scale efficiency gains in a different market. For example, a harm to effective competition in a small, local labor market that injures a small number of workers could be used to enjoin a merger that would create large efficiencies in a national product market benefitting a large number of consumers.
Notwithstanding this problem of lopsided, divergent competitive effects, I remain skeptical of asking judges to engage in multi-market balancing, at least with respect to trading off harms in buyers’ markets against benefits in sellers’ markets (or vice versa). First, there are some alternative solutions to the divergent-effects problem when it occurs across buyers’ markets and sellers’ markets. Second, I see no good solutions to the juridical and practical problems associated with multi-market balancing in this context.
The primary alternative solutions to the divergent-effects problem are forbearance and bargaining. The federal antitrust agencies have already said, in merger guidelines and competitor collaboration guidelines, that they will exercise prosecutorial discretion to forbear from bringing suit when lopsided, divergent effects would render enforcement a poor use of limited government resources. Their discretionary judgments are checked by their political accountability to Congressional oversight bodies, the executive branch that appoints and may remove their leadership, and the public.
Private litigants should not be expected to be as public-minded, but several checks are in place to discourage misguided claims. First, claims involving both small competitive harms in buyers’ markets and large cost savings passed on to consumers in sellers’ markets often will be litigated under the rule of reason, where empirical studies show plaintiffs who do not settle lose at the first step 97% of the time. Most rational actors will not pursue a small claim when they stand a 3% chance of advancing to the second step on a grueling four-step path to a small recovery. They should be expected to exercise their prosecutorial discretion to pursue more lucrative claims under friendlier liability standards.
If an especially zealous or uniquely aggrieved plaintiff nonetheless were to pursue such a claim, the law and economics literature suggests the party with the lower transaction costs—in this case the defendant—should simply settle the claim and pay the damages of the injured suppliers, perhaps passing on the costs to the out-of-market beneficiaries. While that solution prevents the out-of-market consumers from realizing the maximum possible benefit owing to the defendant’s pass-on of efficiency gains, again that outcome is best understood as a necessary side effect of a law that protects competition. Competition policy should not concern itself with seeing to the consumers’ supracompetitive benefits, only to their competitive benefits.
While the out-of-market consumers theoretically could have to forego more savings than competition requires because of the Clayton Act’s treble damages remedy, the empirical reality is that antitrust claims almost always settle for less than single damages. Perhaps an opportunistic plaintiff might threaten to sue for injunctive relief to extract a larger settlement that reflects hold-up value, mindful of the large out-of-market benefits at stake, but the threat would be empty. Judges sitting in equity must weigh the public’s interest in injunctive relief, not just the parties’ interests, and the lopsided, divergent-effects scenario only raises competition policy concerns if the suit is not in the public interest, in which case injunctive relief should not issue.
If all of those checks fail, as a last resort Congress can exercise its authority to create an antitrust exemption. That is admittedly a difficult and remote solution, but cases involving divergent, lopsided effects across buyers’ and sellers’ markets that go unresolved by other checks on socially undesirable claims should be a commensurately remote and low-probability problem. It is hard to think of any real-world examples in the 134-year history of antitrust law.
Even if these alternatives to multi-market balancing were not available, relaxing the evidentiary rule against multi-market balancing would still force judges to answer non-justiciable questions. How, for example, should courts weigh harm to suppliers or workers that is “small” by quantitative standards but large by qualitative standards against benefits for consumers that are “large” by quantitative standards but small by qualitative standards?
One can imagine quantitatively small harms in a local labor market that have devastating personal consequences for the affected workers and their families weighed against quantitatively large aggregate cost savings spread thin in national leisure goods markets, which reduce the price of luxury items by a few pennies for wealthy consumers who won’t notice. When judges have to weigh the out-of-market consumer benefits against the labor-market harms, those who prioritize utilitarian macroeconomic values and those who prioritize Rawlsian economic equality will come to different conclusions. Even if they do not reach the fourth balancing step in applying the rule of reason, they are invariably forced into making political trade-off decisions when they decide whether to go from step two to step three of the rule of reason despite unredressed injuries in the upstream market where prima facie harm was established.
Conclusion
Prioritizing and balancing competitive effects across buyers’ and sellers’ markets is an unavoidable but political task. If the judiciary is to be enlisted in the project, then it needs to be given administrable guidance on making trade-off decisions. New legislation—or perhaps a substantive competition rulemaking—that specifies criteria for trading off competition rights across buyers’ and sellers’ markets could either advance the paradigm shift or validate a version of the consumer welfare standard. And the choice need not be permanent. It could be structured to be flexible, allowing politically accountable actors to adapt trade-off policy to the country’s current economic and political needs and preferences, which may change over time.
Until then, however, judges have no chart or charter to navigate this sea of doubt. They should protect effective competition where they find it, whether in buyers’ markets or sellers’ markets.
Author Disclosure: Randy Stutz is President of the American Antitrust Institute (AAI), which is an independent nonprofit organization devoted to promoting competition that protects consumers, businesses, and society. AAI is funded by annual sponsors and occasionally receives donations, grants, or cy pres awards. A list of AAI’s sponsors and its policies on independence and transparency are available on the support tab of AAI’s website, www.antitrustinstitute.org. From 2023-2024 Stutz worked in the Office of Policy Planning at the Federal Trade Commission.
Author Note: The views expressed are his own and do not necessarily reflect the views of AAI, its staff, its Board of Directors, or any of its Advisors.
He thanks several friends and colleagues for sharing comments.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
