Consumer Welfare and the European Commission

Abstract: This essay aims to answer several questions: how is consumer welfare defined in economics and by the Commission, how has the role of the concept evolved throughout the history of the Commission’s competition policy, and how do the modern problems of digital markets and sustainability affect the role of consumer welfare? It can first be stated that there exists a clear definition and a way to measure consumer welfare in economic theory. In short, it is the difference between what consumers would have been willing to pay for a good and what they actually had to pay. The Commission has however not defined the concept as precisely, rather, a broad definition is applied, now encompassing price, quality, choice, innovation, fairness, and contestability in the Digital Markets Act. Throughout history, consumer welfare did not have a prevalent role until a shift to ‘a more economic approach’ in competition policy was seen in the 1990s, where critique from experts and several other factors led to consumer welfare becoming the spoken goal of the Commission’s competition policy. However, a disconnect between statements, and decisions and guidelines can be seen, as to the importance of consumer welfare. For consumers, a broad definition of consumer welfare is beneficial, due to it taking into consideration other factors than just price, but to have sufficient protection in other areas, clear assessment criteria are necessary for the principle of rule of law to be satisfied. As sustainability considerations are becoming more prevalent in competition policy, this is of particular importance. This essay argues that the current consumer welfare standard, rooted in consumer’s willingness to pay, is unsatisfactory when applied to sustainability considerations and needs to either be adapted, or replaced with a different standard. This essay further argues that the new Digital Markets Act, while consumer welfare being an objective of the regulation, potentially does not satisfy consumer protection needs, due to primarily regulating the relationship between gatekeepers and business users. Thus, it is relying on the trickle down of effects to consumers. It is important, as we move towards a new era of competition law, focused on digital markets and sustainability, sufficient consumer protection is ensured. As of right now, the Digital Markets Act and sustainability considerations creates more uncertainty, rather than ensuring the protection of consumers in the modern world.