From the Editor: Autumn 2006

Whose welfare should competition policy protect? That is the subject of the first two articles in our Autumn 2006 edition. Is it society at large, including businesses whose profits, after all, ultimately inure to people? Or is it just those people who consume products? The fact that we are even having a debate over whether consumer or total (consumer plus producer) welfare is the right standard for competition policy is remarkable. The U.S. consensus that the antitrust laws should be about competition, not redistribution or protection of small business, is only about four decades old. And only in the last few years did the European Commission start focusing on consumer welfare as its guiding principle.

Professors Michael Katz and Joseph Farrell, and Dr. Ken Heyer consider the debate over using consumer versus total welfare as the guiding principle for merger analysis. Both papers generally favor total welfare as the right ultimate objective. However, Katz and Farrell find some of the arguments for having agencies focus on consumer welfare more persuasive than Heyer, who favors a strict focus on total welfare. Moreover, since economists do not generally set policy, this debate is not over. The debate about the goal of competition policy is followed by a six-paper symposium on state efforts to assist competitors. The EC Treaty prohibits Member States from granting aid to competitors that, roughly speaking, would distort competition in the European Community.

This principle has