Smith’s insight that an economy’s purpose is to serve consumers seems self-evident—but not to today’s Federal Trade Commission (FTC). In three antitrust cases and a change in policy direction, the agency seems to be losing interest in consumers’ preferences.

In the cases, the FTC appears to be decreasing its reliance on consumers’ choices in its decisions on whether a firm has market power. Generally, the FTC and the Department of Justice look to consumers for guidance on whether a business could exploit them. More specifically, when the agencies have been suspicious that a firm possesses market power, they study whether consumers would switch to a rival product if the firm in question were to act like a monopolist. Real consumer behavior, not regulator imagination, has driven decisions.

Read Dr. Jamison’s complete blog post at AEI.