Bernardo: The interconnection between welfare services and the market in the United States with a focus on the elderly: the application of antitrust law to nonprofits
It is widely acknowledged that the US welfare system evolved differently from other industrialized countries’ welfare regimes. From a neutral standpoint, scholarly works evidence that the US social service framework cannot be compared to the welfare states implemented in Western Europe over the 20th century−which remain in place. This is due to the different approaches to welfare objectives. The prominent role of private organizations and nonprofits is one of the US system’s defining features, although public authorities’ action (or, better said, government intervention) has not been set aside completely.
The underlying rationale of the US welfare system largely relies on two premises: first, welfare benefits qualify as commodities that can be delivered by private entities (i) operating in the market; and thus (ii) able to meet the existing demand. Second, social service recipients or, where appropriate, welfare officials, have somewhat free choice to a certain extent regarding the services, which, also, would be available to anyone.
However, note that these ideas regarding the efficient operation of social service markets might not be true in practice. In fact, often there are market failures, i.e., the price, quantity or quality of the delivered social services may be unsuitable or simply not enough to meet society’s needs. The most common market failures in the field of social services, although not the only ones, are the so-called “informational market failures” or information asymmetries. If they lack information, welfare recipients can hardly assess the quality and value for money of welfare services. Ultimately, users are unable to choose correctly between services. These and other market failures trigger government intervention, which relies on two instruments: (i) regulation; and (ii) antitrust law. As for (ii), it is worth noting that it qualifies as a paramount example of indirect economic regulation. In the United States, the scope of antitrust law covers a wide range of social services, insofar as their provision is totally or partially subject to market conditions. By fining anticompetitive practices and behaviors, public authorities indirectly enhance the system, since the fines have a positive impact on the price and quality of services.
Within the field of US welfare, public action has been somewhat superseded by private entities’ initiatives (including both companies and nonprofits) and market-based management. This poses several challenges and concerns. Does the protection provided by antitrust law cover the activity of non-profit organizations? We will answer this question below. This paper examines (i) the development of strictly assistance-based services or benefits in the US (section 2.1); (ii) their current legal framework (section 2.2) with regards to other social services, particularly those catering to older adults (section 2.3); and (iv) the positive and negative outcomes (section 3.1) and oversight (section 3.2) of private initiatives, including not-for-profit action (section 3.3).
Lloyd Mayer