Consumer Surplus as the Appropriate Standard for Antitrust Enforcement

In antitrust enforcement as in cost-benefit analysis neoclassical economics may be interpreted as arguing for the use of a total welfare standard whose implementation treats transfers as welfare-neutral. Several recent papers call for antitrust agencies to move in the direction of this version of a total welfare standard for enforcement. However as Williamson (1968) noted horizontal mergers typically result in transfers that may greatly exceed in magnitude any deadweight loss or efficiency gain so that a decision to ignore transfers may be quite important. I argue that such transfers are likely overall to be quite regressive and thus that a consumer surplus standard rather than a total welfare standard may be appropriate for antitrust. Two common arguments against this standard a that most mergers are in markets for intermediate goods and that a consumer welfare standard implies a tolerance for monopsony a are examined and found wanting. I argue in addition that even if a total welfare standard is used both the finance literature on merger outcomes and the structure of the U.S. enforcement agencies suggest that the use of a consumer surplus standard by the agencies is more likely to achieve that goal.