Consumer Sovereignty : A Unified Theory of Antitrust and Consumer Protection Law

This article is about the relationship between antitrust and consumer protection law. Its purpose is to define each area of law, to delineate the boundary between them, to show how they interact with each other, and to show how they ultimately support one another as the two component parts of an overarching unity: effective consumer choice (also called consumer sovereignty). Consumer choice only is effective when two fundamental conditions are present. There must be a range of consumer options made possible through competition, and consumers must be able to choose effectively among these options. The antitrust laws are intended to ensure that the marketplace remains competitive, unimpaired by practices such as price fixing or anticompetitive mergers. The consumer protection laws are then intended to ensure that consumers can choose effectively from among those options, with their critical faculties unimpaired by such violations as deception or the withholding of material information. Protection at both levels is needed to ensure that a market economy can continue to operate effectively. Legal protection of this sort is required only when the free market is not working properly. This article will demonstrate that antitrust violations stem from market failures in the general marketplace external to consumers, whereas consumer protection violations flow from market failures that take place, in a sense, "inside the consumer's heads." This approach provides a coherent theoretical platform from which antitrust and consumer protection law may be better understood and applied. It also has significant practical consequences, many of which are explored in this article. This article is a companion piece to "Using the Consumer Choice to Antitrust Law," 74 Antitrust Law Journal 175 (2007), which can be found at http://ssrn.com/abstract=1121459