Antitrust Injury Research Articles

The Propriety and Inevitability of Netting in Antitrust Class Actions

How to define “antitrust injury” is an issue that has been the source of much debate among judges, lawyers, and academics alike. Specifically, a disagreement exists as to whether participation in a single transaction, which a defendant has allegedly tainted via anticompetitive behavior, is sufficient to constitute antitrust injury. Complicating this area of jurisprudential and doctrinal uncertainty are cases in which a plaintiff who has alleged injury as a result of anticompetitive conduct later reaped offsetting gains resulting from that very same conduct. The disagreements regarding the role of these net beneficiaries, and the netting process necessary to identify them, in antitrust suits implicate matters that extend far beyond legal theory. This Note outlines the multitude of ways in which the foregoing consequences manifest. It then highlights the propriety of a contextual approach in which courts are more willing to engage in nuanced and substantive class certification analyses that balance the interests of the litigants and the goals of the antitrust laws. The Note uses financial markets, and variations among the instruments therein, as a specific instantiation of these principles and a context in which a nuanced approach is especially compelling. It concludes by demonstrating that, regardless of whether a court incorporates netting into its definition of antitrust injury, it will have to contend with netting principles during the class–certification process.

Antitrust Anachronism: The Interracial Wealth Transfer in Collegiate Athletics Under the Consumer Welfare Standard

Under an illusory nexus to education, intercollegiate athletics in the United States represents a multibillion-dollar enterprise that extracts economic rents from the majority Black athlete labor to the benefit of overwhelmingly White constituencies. Under the aegis of “amateurism,” member universities of the National College Athletic Association (NCAA) collude to fix maximum athlete compensation at cost-of-attendance and strip athletes of the economic rights over their own name, image, or likeness. While this anticompetitive restraint encumbers all athletes competing under the NCAA umbrella, it imposes a disparate impact on Black and other minority athletes who represent a majority of the labor in the largest revenue sports: football and basketball. Although White coaches are the most visible beneficiaries of this anticompetitive restraint, the scope of amateurism’s interracial distributional effects has largely remained uncovered. This article seeks to fill this gap in the literature. Leveraging data from multiple sources, including institutional financial reports and the NCAA Demographics Database from 2007–2020, this article quantifies the NCAA’s wealth transfer away from primarily Black athlete labor to institutions and overwhelmingly White constituencies. Under the NCAA’ restraint, we estimate that Black football and men’s and women’s basketball athletes at the Division I Power 5 Conference level have lost approximately $17 billion to $21 billion in compensation from 2005 to 2019 or roughly $1.2–$1.4 billion per year. The antitrust status quo’s failure to enjoin the NCAA’s collusive wage-fixing restraint, which causes such obvious antitrust injury and harm to athlete labor, underscores the fundamental shortcomings of using the consumer-welfare standard as the exclusive lodestar to investigate and enjoin anticompetitive conduct; it also exposes the divergence between “amateurism” as described in Board of Regents and the modern-day realities of college athletics.

Apple's Mounting App Store Woes

By making the App Store the only official channel for iPhone owners to buy apps, Apple has created the only market in which iPhone owners and app developers may transact their business. Apple exploits the bottleneck that it creates by imposing a 15 percent or 30 percent commission on transactions between iPhone owners and app developers. The array of Apple litigation elicited by this conduct may pose a case of first impression, since there does not appear to be a pigeonhole for Apple’s conduct. Apple neither buys nor sells third-party apps and therefore it does not exercise monopsony or monopoly power. If plaintiffs frame their antitrust challenges correctly, a court will have to determine whether Apple’s conduct—use of its proprietary technology and threats aimed at both app developers and iPhone owners—offends Section 2 of the Sherman Act. If the court finds that Apple has violated Section 2 of the Sherman Act, then it must also decide who has suffered antitrust injury and who has standing to sue under Section 4 of the Clayton Act. We offer an economic analysis of these issues.

Private Merger Challenges Under § 16 of the Clayton Act: Caution Post-JELD-WEN

Private merger enforcement is a minefield: there is considerable potential downside for industry because in many cases, the motives of private plaintiffs in a merger challenge will not align with the purpose of the antitrust laws; and it is risky for plaintiffs because they will rarely win. So rarely that, in a Fourth Circuit case decided in February of 2021, the court stated “private suits seeking divestiture are rare and, to our knowledge, no court had ever ordered divestiture in a private suit before this case.” Section 16 claims have been historically underdiscussed, in large part because plaintiffs are (almost) always unsuccessful. But the Fourth Circuit grant of divestiture to a private plaintiff just this year affords us an opportunity to evaluate this oft overlooked corner of antitrust law. Should private plaintiffs be able to mold the shape of industries to such a degree? This comment explores the concerns unique to private merger enforcement under § 16 of the Clayton Act, and maintains that despite the JELD-WEN ruling, courts should continue to review these suits with a critical eye. I acknowledge that private merger enforcement is part of the overall antitrust enforcement schema designed by Congress, and that the importance of private plaintiffs in the overall system has been echoed by the Supreme Court. I then detail counterbalancing concerns unique to private merger enforcement under section 16 of the Clayton Act. Ultimately, I argue that despite the JELD-WEN ruling, courts should continue to review these suits with a critical eye. When evaluating private merger challenges, courts ought to consistently apply the antitrust injury doctrine, give preference consumer plaintiffs over competitor plaintiffs, and be wary of unrecoverable waste resulting from divestiture in post-merger consummation challenges.

State of New York v. Deutsche Telecom AG. Brief of Amici Curiae Nicholas Economides, John Kwoka, Thomas Philippon, Robert Seamans, Hal Singer, Marshall Steinbaum, and Lawrence J. White in Support of Plaintiffs

As economists with significant experience in competition, telecommunications, and regulatory matters, we have filed the attached brief in the case of State of New York v. Deutsche Telecom supporting the plaintiffs, who have sued to prevent the merger of T-Mobile and Sprint. We explain why the proposed merger of Sprint and T-Mobile and the elimination of Sprint as a competitor, even in the presence of the U.S. Department of Justice's proposed remedy (as embodied in the DOJ's Proposed Final Judgment), would predictably inflict serious antitrust injury on consumers and competition.

Assessing DOJ’s Proposed Remedy in Sprint/T-Mobile: Can Ex Ante Competitive Conditions in Wireless Markets Be Restored?

As economists with significant experience in competition and regulatory matters, we offer comments on the remedies proposed by the Department of Justice to address the competitive effects flowing from the proposed merger of Sprint and T-Mobile, as recognized by the DOJ’s Complaint. We find that the Proposed Final Judgment cannot and will not address the anticompetitive harms identified in the Complaint, or restore the ex ante competitive conditions in the affected antitrust product markets. By eliminating Sprint as an independent competitor, the Sprint/T-Mobile merger, even in the presence of DOJ’s proposed remedy, would inflict serious antitrust injury on consumers and competition.

Posner on Vertical Restraints

This Essay, part of a symposium honoring Richard Posner’s thirty-six years on the bench, considers the influence of Judge Posner’s opinions about antitrust law. I focus on vertical restraints on distribution, an area of doctrine that was transformed over thirty years from a flat (per se) prohibition to a more lenient evaluation under the rule of reason. I identify several strategies that Judge Posner employed in support of this transformation. Some were drawn from his academic work, including a sustained effort to harmonize the legal treatment of restraints whose economic effects suggest they should be treated alike. A further, less appreciated tactic was to focus attention upon the question of antitrust injury — whether a plaintiff has suffered an injury of the type the antitrust laws are intended to prevent. One of Posner’s first antitrust opinions, Jack Walters & Sons Corp. v. Morton Building, Inc., considered an allegation of unlawful maximum resale price maintenance, which at the time was subject to per se liability. In concluding that plaintiffs had suffered no antitrust injury, Posner opened up a new avenue for criticizing per se liability on economic grounds and a new form of inconsistency between the scope of recovery (narrow) and the scope of liability (broad). Jack Walters paved the way for the eventual demise of per se liability and the use of similar tactics elsewhere in the law.

The Role of Market Definition in Assessing Anti-Competitive Harm in Ohio v. American Express

This article shows that the Supreme Court reached the right outcome in Ohio et al. v. American Express. The District Court had found that American Express was a two-sided transaction platform that provided joint services simultaneously to cardholders and merchants. But it then chose, by adopting a single-sided merchant services market, to analyze the effect of the anti-steering provisions at issue solely on one side of these simultaneous transactions. That decision appears to have prevented the lower court from seeing that the plaintiffs’ evidence of anticompetitive harm to merchants was weak. The District Court also decided that case law prevented it from considering the effect of the conduct on the other half of the transactions even at the second-stage of the rule of reason. The Supreme Court did not discuss the limitations of the plaintiffs’ theory and evidence at length but simply and properly found that the plaintiffs had failed to prove antitrust injury to platform competition for transactions. This article also shows that criticisms of the Supreme Court decision seem to be based on the rejection or misunderstanding of the economics literature on multi-sided platforms on which the District Court, the Appeals Court, and the Supreme Court all relied.

After Forty Years of Antitrust Revision and Apple v. Pepper, What Now Illinois Brick?

Nineteen seventy-seven was a paradigm sifting year in antitrust law. Decisions by the Supreme Court greatly limited the type of parties who could successfully bring antitrust actions and what types of activities would violate the antitrust laws. First, in January of that year, the Court, in Brunswick v. Pueblo Bowl-O-Mat, ruled that to mount a case the plaintiff had to have suffered an antitrust injury. In other words, even if the antitrust laws were violated, the party raising the issue had to have suffered the type of harm the laws were designed to avoid. Then in a 14 day span the Court decided Continental TV v. GTE Sylvania and Illinois v. Illinois Brick. In Sylvania, the Court held that vertical restraints on distribution were to be assessed under the rule of reason as opposed to the per se standard. In so doing the Court adopted reasoning that would carry over to vertical restraints on prices and applied in the context of some horizontal restraint cases. In Illinois Brick, in a six to three decision, it held that indirect purchases could not recover from price fixing firms even if the higher prices were passed onto those purchasers by those purchasing directly from the price fixers. Of these opinions, Illinois Brick has little, if any, continuing justification. This has been true for some time but now that matter is more critical in the aftermath of the Supreme Court decision in Apple v. Pepper, which exposed after 40 years, the indeterminacy of Illinois Brick.

PRIVATE ANTITRUST AT THE U.S. INTERNATIONAL TRADE COMMISSION

This paper, drafted as an adjudicator's opinion in a recent case of nearly first impression, explores private antitrust adjudication in the Section 337 docket of the US International Trade Commission (ITC). There are several significant reasons why even a skeptic of the ITC's Anti-dumping, Countervailing Duty, and Safeguards docket (collectively, the “Title VII” docket)—as well as an antitrust skeptic—should be significantly less worried when cases normally expected to be brought in the Title VII portion of the ITC's docket as petitions are instead brought in the Section 337 portion of the ITC docket as complaints alleging ordinary violations of the antitrust laws. Private antitrust litigation fits with the plain meaning of the ITC's statute and with well-established antitrust case law. The ITC 337 docket also offers some practical benefits over courts and other agencies. The procedures do not rely heavily administrative deference; and do rely heavily on the full panoply of procedural devices ordinarily available in court for truth-testing of evidence including cross examination, all in a timeframe likely to be significantly shorter (around 18 months) than the many years typically required for antitrust litigation in federal court, and without the black box of a general jury verdict. What about the doctrine that federal courts developed called “antitrust injury?” The ITC relied on that doctrine to dismiss a case recently brought by the domestic U.S. steel industry against Chinese importers of steel. This paper explores some reasons why that doctrine does not fit the ITC 337 statute.

Deconstructing the NCAA’s Procompetitive Justifications to Demonstrate Antitrust Injury and Calculate Lost Compensation

Faced with significant antitrust scrutiny, particularly from ongoing cases, the NCAA has sought to justify, under the rule of reason, the competitive restrictions its collegiate model of amateurism imposes by claiming procompetitive benefits. This article examines the NCAA’s arguments and presents five findings: (1) the procompetitive justifications that the NCAA has offered for its restraint on athlete payments have little, if any, economic merit and do not justify the consumer injury resulting from the restraint; (2) absent the restraint, the minimum amount public P5 conference schools alone could have paid athletes is approximately $5.2 billion between 2003–2004 and 2014–2015, approximately two-thirds of which would have been used to compensate football and men’s basketball players, indicating that the consumer injury resulting from the NCAA’s restraint on trade has caused significant antitrust damages; (3) contrary to the NCAA’s claims, empirical and documentary evidence demonstrates that directly compensating FBS/D1 athletes would not result in decreased consumer demand; (4) “competitive balance,” when analyzed in an antitrust setting, does not support the NCAA’s claims; and (5) evidence, including the over one million documents released from the academic/athletic fraud investigation at the University of North Carolina at Chapel Hill, demonstrates significant consumer injury associated with the integration of academics and amateur revenue sport athletics. Such findings stand in direct opposition to the NCAA’s claim of procompetitive benefits from integrating athletics and academics under its amateur model.

Amicus Curiae Brief in Gelboim v. Bank of America (Libor Manipulation Litigation) on Behalf of Financial Markets Law Professors in Support of Plaintiffs-Appellants

This amicus brief, filed with the Second Circuit Court of Appeals in Gelboim v. Bank of America (LIBOR Manipulation Litigation), primarily aims to help the Court by providing relevant background information. Many of the plaintiffs in this case are bringing antitrust claims based on defendant banks' alleged collusion while selling plaintiffs over-the-counter derivatives. To evaluate these plaintiffs’ allegations, one must understand the nature of these derivative transactions, the economics of the over-the-counter derivatives market, and the specific role that the London Interbank Offer Rate (“LIBOR”) plays in that market. This brief provides that information. With this background in place, it becomes clear that these plaintiffs have properly alleged an antitrust injury. Plaintiffs allege that defendants, who controlled the over-the-counter derivatives market, conspired to manipulate LIBOR in order to increase their profits in the over-the-counter derivatives market. Plaintiffs allege that they, in their capacity as defendants’ customers in the over-the-counter derivatives market, suffered an injury as a result of defendants’ collusive LIBOR-setting behavior. Taking plaintiffs’ allegations as true, this is a classic antitrust injury.Accordingly, this court should reverse the district court’s opinion and remand for further proceedings.

Weyerhaeuser

Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co. could have been influential in three ways. First, the Court directly addressed the standard for predatory buying and, consequently, could have influenced the likelihood antitrust plaintiffs will rely on that theory. Second, its express recognition of the similarities between the buying and selling sides of markets could have encourage increased reliance on monopsony-based theories of liability. Finally, the decision could have created the impetus for refining the analysis of a number of issues when they arise in monopsony contexts. These include monopsony tying, the use of monopsony power to gain power on the selling side of markets, as well as standing and antitrust injury. This study finds that its impact has been to discourage use of the predatory buying theory and, perhaps, of monopsony theories generally. Interestingly, it has encouraged defendants to claim plaintiffs are making Weyerhaeser-like claims in hopes of being granted a dismissal.

Using the Economics of the Pass-Through in Proving Antitrust Injury in Robinson-Patman Cases

We analyze and summarize microeconomic theory of pass-through rates. We start by analyzing a monopolist firm in a standard frictionless market, then add more nuances to the model, including, but not limited to, oligopolistic competition, menu costs, price points, endogenous quality and package size choices, and consumer search costs. We proceed to show how each of these factors affects pass-through rates.

Weyerhaeuser: An Epilogue

Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., could have been influential in three ways. First, the Court directly addressed the standard for predatory buying and, consequently, has undoubtedly had an impact on whether plaintiffs will rely on that theory. Second, its express recognition of the similarities between buyers and sellers may encourage increased reliance on monopsony-based theories of liability. Finally, the decision could have created the impetus for refining the analysis of a number of issues when they arise in monopsony contexts. These include monopsony tying, the use of monopsony power to gain power on the selling side of markets, as well as standing and antitrust injury. This study of post-Weyerhaeuser events demonstrates that it is a narrow opinion perhaps only economically suitable for very few special fact patterns. It is frequently ignored although sometimes relied upon by defendants who attempt to reframe their cases as Weyerhaeuser-like in hopes of a dismissal.

In Re Libor: More Light, Please! -- Questions and Observations as the Decision Dismissing Antitrust Claims for Lack of Antitrust Injury Now Faces Appellate Review

In Re Libor: More Light, Please! -- Questions and Observations as the Decision Dismissing Antitrust Claims for Lack of Antitrust Injury Now Faces Appellate Review

Judging Monopolistic Pricing: F/RAND and Antitrust Injury

In a 2013 opinion in Microsoft v. Motorola, Judge James Robart calculated “reasonable and nondiscriminatory” or RAND royalties that Motorola could lawfully charge Microsoft for licenses to use Motorola patents that were essential to two industry standards. Although the case involved only a claim for breach of contract, Judge Robart’s opinion regulated monopoly pricing, a task courts try to avoid in other contexts, claiming institutional incapacity. In this instance, however, Judge Robart identified standards that he believed adequately guided him in the task. He recognized that the economic purposes of the RAND commitment were to prevent owners of standards-essential patents from, first, holding up licensees by exploiting the additional monopoly power that the standard conferred and, second, inefficiently stacking royalties with other essential patents. In estimating rates consistent with these purposes, he used as starting points the rates charged by two patent pools associated with the standards. Throughout, Judge Robart presented the process of estimation in terms of a hypothetical negotiation between a prospective licensee and the owner of the standard-essential patent. In this paper, however, I argue that Judge Robart’s approach, and the process of calculating RAND or FRAND royalties generally, can be better understood as comparable to the calculation of the overcharge caused by a monopolistic exclusionary practices — a form of antitrust injury. In both contexts, courts compare actual prices with those in counterfactual, but-for world free from improper exploitation of monopoly power.

The Noerr-Pennington Problem: How Cartels Enforced Through Patent Litigation Can Escape Antitrust Claims

An antitrust exam starts with the following problem: president of A calls the president of B and says, 'Unless you agree to keep prices at $10 a widget we will raise your costs to the point you will no longer be able to stay in business.' If you were a student sitting for the exam you would think this is the easiest question in the world. A is attempting to create a cartel engaging in a conspiracy to restrain trade with an enforcement mechanism. The question goes on: Company B refuses to participate in the price fixing scheme and A makes good on its promise to raise costs. B cannot compete due to its raised costs and subsequently goes out of business. Does B have an antitrust claim against A? Again this sounds simple, B has sustained an injury that antitrust law is meant to protect against. B should have a claim. However, what if the professor adds in one fact: Company A increases the costs of B through patent infringement suits. The Noerr-Pennington Doctrine prevents legal costs from being the basis of an antitrust injury except in certain narrow cases. Without an injury B will even have the standing to make a claim.Unfortunately, this is just a hypo on an antitrust law exam. The above scenario has already happened. In 2007 Steve Jobs, the CEO of Apple, called Ed Colligan, the CEO of Palm, and threatened Palm with patent litigation unless Colligan agreed to make unsolicited calls to Apple employees in order to make job offers. This agreement was an obvious agreement to suppress employee wages. Colligan refused to enter into the agreement in an email to Jobs, citing the fact that the agreement was not only wrong, but likely illegal. In response, Jobs told Colligan I'm sure you realize the asymmetry in the financial resources of our respective companies and to take a look at our patent portfolio before you make a final decision here. This no-poaching agreement was stopped by the FTC and is now the subject of a private antitrust suit by former software engineers who worked at various tech firms that had made this agreement. The question this paper seeks to ask, however, is what legal protections would Palm have had in this situation if Apple (and perhaps other tech companies) made good on its threats. The paper will first examine the current state of the law. Then the paper will analyze how the law applies to the above scenario. Finally the paper will offer potential solutions to Palm's lack of legal protections from Apple.

Private Antitrust Enforcement in the United States and the European Union: Standing and Antitrust Injury

This paper discusses and compares the implications of U.S. and E.U. standards for antitrust standing and antitrust injury with respect to private enforcement. In the U.S. these concepts are relatively well defined. In the E.U. they are still subject to a period of interpretation. The comparison is complicated by the difference in emphasis in the two systems. In the U.S. private actions are designed principally to have a deterrent effect. In the E.U. the goal is more compensation oriented. The article concludes that as a result of treble damages, the U.S. system is more consistent with both goals and that more liberal standards in the E.U. are unlikely to overcome the absence of a punitive element in antitrust recoveries.

Stand-alone private antitrust damages: (how) should competition authorities react?

The European Commission has recently set up a framework that facilitates the access to the courts by victims of antitrust injury, even in the absence of a ruling by a competition authority (so-called stand-alone private damages, or SPD, actions). Here, I study a game where both public and private antitrust enforcement play a role. Plaintiffs face information acquisition costs (evidence-gathering) if they want to bring an SPD action, but they do not internalise the opportunity cost of the courts’ resources. First, I show that any gain in deterrence has to be traded off against costly litigation and enforcement costs, and that these tradeoffs are heterogeneous across market sizes. Second, taking the competition authority’s actions as exogenous, SPDs can improve welfare only if the competition authority is sufficiently effective: private damages are a complement to (good) public enforcement, not a substitute. Third, a resource-constrained competition authority, upon the introduction of SPDs, should investigate a larger proportion of industries (even at the cost of a higher error rate). That is, whilst a “hands-off” approach might have been warranted absent SPDs, this is no longer true once stand-alone actions are introduced.