The Consumer Well-Being Standard – Using Capability Economics to Conceptualize the Protection of Consumer Choice in (Digital) Competition Law

Abstract The individual’s ability to make reasonable choices is a fundamental building block of free societies, both in an economic and in a political sense. It is therefore natural that both European Union (EU) and U.S. competition law increasingly focus on protecting consumers’ freedom of choice against restrictions, especially in the context of large digital platforms. The normative strand of welfare economics, which historically gave rise to the consumer welfare standard, usually assumes that preferences are complete and ‘exogenous’, meaning that they are formed ‘before’ engaging in the market and are not affected by variables internal to the model. However, many consumer software products, and much of digital content more generally, are ‘experience goods’. This implies that informed consumer choice often involves an extended process of trial and error, during which preferences can change. The prevalence of such ‘endogenous’ preferences, which can lead to intransitivity, causes a tension between an analytical framework based on utilities and the law’s goal of protecting consumer choice in digital markets. Nonetheless, an economic conceptualization of this goal is necessary to avoid arbitrary or even self-defeating policies. This article studies the contributions that capability economics can make to conceptualizing and weighing the freedom of consumer choice as a goal of (digital) competition law. It also locates the consumer choice goal within a general taxonomy of competition law’s potential goals and shows how the capabilities approach has been formalized. Lastly, the article exemplifies the wider potentials of capability economics as an analytical framework for antitrust.