The Scope and Limitations of Incorporating Externalities in Competition Analysis within a Consumer Welfare Approach

The failure to fully internalize externalities from production and consumption, including on future generations, is supposed to be the core of the perceived failure to ensure ecological sustainability within the realm of antitrust enforcement. As policymakers put increasing pressure on competition agencies to account for sustainability in their enforcement practice, it becomes pivotal to define whether and, if so, how such externalities can be incorporated into competition analysis. In this paper we explore this question. We rely on the consumer welfare approach and expound in what way it can be extended to incorporate externalities and what possible limitations for such an approach must be observed. Our paper makes a key distinction between an individualistic and a collective consumer welfare analysis. Within an individualistic consumer welfare analysis, we explore various ways how to extend its boundaries, such as eliciting willingness-to-pay in different contexts or incorporating (anticipated) changes in social norms and preferences. We also point out, however, when an increasing incorporation of externalities risks compromising consumer sovereignty. In a collective consumer welfare approach, consumers may express their willingness-to-pay also for the choices of others, which goes beyond traditional concepts of willingness-to-pay measurement within a competition analysis. The same applies to an elicitation (or emulation) of consumer preferences that is based on the posit that consumers transcend their self-interest.