The Proposed Damages Legislation: Don't Believe the Critics

Abstract

The Commission’s proposed Directive concerning private enforcement of Competition Law certainly would be beneficial for victims of anticompetitive conduct because it would allow some victims to obtain a certain degree of compensation. It does not, however, go far enough. Because it does not allow opt-out class action or contingent fee cases it will continue to leave most victims uncompensated. Some critics claim the proposed Directive will move Europe closer towards a US-style of private antitrust enforcement that they characterise in almost apocalyptic terms. An extremely negative view of US private enforcement is indeed the accepted wisdom in the international competition community. Proponents of expanded private rights in Europe are forced to go to great lengths to demonstrate they are not proposing a US-style system. Nevertheless, anyone interested in learning lessons from the US experience should take note that these critics have never offered reliable proof of its alleged defects. If you examine their assertions carefully you will see that their ‘evidence’ consists only of anecdotes (which often are self-serving), hypotheticals, and opinions. Critics of private enforcement tend to make two (largely inconsistent) claims: that it does too little—it fails to provide meaningful recovery to victims—and that it does too much—it forces defendants to settle even groundless claims. Neither assertion has empirical support. As to compensation, the best data show that private antitrust enforcement in the United States has produced tremendous benefits for victims of anticompetitive behavior. Professor Joshua Davis and I recently completed a study of 60 large private US antitrust cases demonstrating that victims recovered more than $33 billion dollars. Only an overall average of 19 per cent of recoveries went for attorneys fees and claims administration expenses. At least $6–8 billion was recovered from non-US companies, including more than $3 billion in cases against members of the vitamins cartels. These totals do not include recoveries of products, discounts, coupons, or the value of injunctive relief or legal precedent. Thus the $33 billion seriously understates the true benefits of these cases. And, of course, we studied only 60 of the many hundreds of private cases filed in recent years. See Joshua P. Davis & Robert H. Lande, ‘Defying Conventional Wisdom: The Case for Private Antitrust Enforcement’ (2013) 48 Georgia Law Review 1, available at ,http://papers.ssrn.com/sol3/papers.cfm?abstract_id= 2217051.. Critics also claim that in the USA plaintiffs often receive huge sums in meritless cases and that private antitrust actions often amount to ‘legalized blackmail’. Since almost every private recovery is a settlement one fairly might ask, for example, whether the 60 cases Professor Davis and I studied involved anticompetitive conduct. Although opinions about specific cases naturally will vary, it is significant that in 17 of these cases there also was a criminal penalty, in 17 the government obtained civil relief, in 15 defendants lost at trial in the same or in a related case, in 14 plaintiffs survived or prevailed at summary judgment or judgment as a matter of law, etc. Only seven of 60 cases didn’t have at least one of these indicia of validation (and none contained evidence of a lack of merit; the seven cases settled too early for a substantive evaluation of their merits). While none of this is proof these cases involved anticompetitive conduct, what evidence do critics provide to show private actions lack merit? Essentially . . . nothing. Only anecdotes, hypotheticals, and opinions. No studies, statistics, or reliable evidence. It is ironic that the conventional wisdom about the lack of merit of US private antitrust enforcement itself lacks merit. It is true that today European victims can sometimes recover in suits filed under the laws of EU member states. Would the proposed Directive therefore lead to over-compensation of victims? Very unlikely. The US experience strongly suggests overcompensation will not