Antitrust Litigation Research Articles

Private Antitrust Enforcement in the US and the EU - A Comparison of Key Issues

This paper explains how the EU has adopted some elements from the US system of private enforcement but has made very different policy choices with respect to other elements. The paper begins with a glimpse at the origins of private enforcement and a consideration of two of the biggest challenges to a comparison, namely the federal legal structures in the US and the EU and the different purposes of private enforcement (compensation v. deterrence). The core of this paper is a comparison of nine key issues of private antitrust litigation, including, among others: standing, passing-on, collective actions and discovery.

NCAA Amateurism as an Anticompetitive Tying Restraint

Antitrust litigation against the NCAA has focused on its members’ collusive restraint on athlete compensation at levels below marginal revenue product. The recent O’Bannon v. NCAA and In Re NCAA Grant-in-Aid Cap Antitrust Litigation have both prescribed a relevant market for “college education” where schools compete for athlete labor by offering tuition and fee or cost-of-attendance offsets. This article argues that this unitary definition conflates two separate products, academic education and athletic participation, that NCAA members offer as a bundled tie. The NCAA has mandated purchase of the tied product, academic education, as a pre-requisite for access to intercollegiate athletics participation, the tying product. Paradoxically, the NCAA has then argued that this bundled tie, which this article argues violates the Supreme Court’s three-pronged ‘quasi’ per-se rule prohibiting tying arrangements, represents a claimed ‘pro-competitive justification’ by integrating athletics and academics. This article offers evidence that this tying arrangement serves no legitimate pro-competitive purpose under the NCAA model of amateurism. Rather, it extracts consumer surplus, enhances dominant cartel members' market power, and forecloses competition not only from non-members but also from smaller NCAA member-schools. As such, the NCAA model of amateurism violates antitrust law governing tying arrangements and should be enjoined.

Post-Cartesian Antitrust

The Supreme Court’s 2018 opinion in American Express v. Ohio is among the most important – and divisive – antitrust opinions in the modern era of antitrust law. The simplest statement of Justice Thomas’s opinion for the majority is that it saw a 5 Justice majority of the Court fully embrace the relatively new economic understanding of two-sided markets. Supporters of the majority opinion almost uniformly view it as an obviously-correct application of important and generally-accepted recent development in economic theory. Those more amenable to Justice Breyer’s dissenting opinion do not necessarily reject the theory of two-sided markets but instead would treat arguments premised on this theory as a pro-competitive justification (that is, a defense) to what could reasonably be understood as potentially anticompetitive conduct under prevailing antitrust economics. The central argument of this paper is that both perspectives miss the forest for the trees. The Court’s American Express opinion is not narrowly about whether (or how) antitrust law should embrace the theory of two-sided markets. Rather, I argue, this opinion is part of the Court’s ongoing efforts to understand how antitrust law should evaluate markets that are not neatly “horizontal” or “vertical. I call these efforts to understand competition in markets that are not clearly horizontal or vertical “post-Cartesian” antitrust, and describe these markets as “messy markets.” The important antitrust cases today do not fit neatly into the mold of either horizontal or vertical conduct. Simple horizontal or vertical market structures are not often the subject of antitrust litigation today. We see this in cases ranging from Apple v. Pepper (and the earlier Apple e-books litigation), to the AT&T-Time Warner merger litigation, from Leegin to Actavis, and of course in American Express. Indeed, the market structures in these cases are so different from horizontal and vertical markets that the tools developed for analysis of horizontal and vertical markets are as inapposite to them as SCP methodologies are to markets for differentiated products, markets characterized by rapid innovation, entry, or network effect, and high fixed costs.

Measuring Antitrust Damages in the Presence of Foreign Government Regulation

The U.S. Supreme Court on June 14, 2018, reversed the Second Circuit’s 2016 decision to vacate a $147 million judgment against two Chinese companies, who allegedly fixed vitamin C prices. The high court held that courts should give foreign governments’ statements “respectful consideration” but are not bound by another country’s description of its own laws. Going forward, courts will need to evaluate a foreign government’s statements when defendants claim a contradiction between U.S. law and foreign regulations as a defense. When government regulation and private cartelization overlap, complications arise because the foreign companies may be liable for their anticompetitive conduct that was beyond the requirement of and might even have influenced foreign government policies. Using two illustrative cases ( In Re Vitamin C Antitrust Litigation and Resco Products v. Bosai Minerals), we analyze the impact of the price floor and export quotas and propose a new, workable methodology for measuring antitrust damages attributable to the private cartel in the presence of foreign regulation.

Why Has Antitrust Law Failed Workers?

In the last several years, economists have learned about an antitrust problem of vast scope. Far from approximating the conditions of perfect competition as long assumed, most labor markets are characterized by monopsony — meaning that employers pay workers less than their productivity because workers lack a credible threat to quit and find a higher-paying job in the same market. Yet while antitrust law regulates labor monopsony in the same way as it regulates monopoly on the product market side, antitrust litigation against employers is rare. We document both the magnitude of labor monopsony and the paucity of cases, and argue that this “litigation gap” exists because antitrust case law, which has developed through product-side litigation, is poorly tailored to labor-side problems. We conclude with four proposals for reform of antitrust law so it can better deter labor monopsony.

Du Pont Turns 150: Corporate Culture as Public Culture

This article details the ways in which the executives of Du Pont used the chemical company’s 150th-anniversary festivities in 1952 and its associated sponsored media as an opportunity to explicitly link the history of the company with the history of the nation. This was an attempt to legitimatize the company’s existence and its ultraconservative worldview, espouse free trade, and fight antitrust litigation. This article explores the conflation of private and public history in Du Pont-sponsored anniversary materials to illustrate how corporate public relations meant for private corporate consumption reverberated into a shared American public culture.

Enabling and Incentivizing Standalone Private Antitrust Actions in Hong Kong — Lessons from the United States

In 2012, Hong Kong passed its Competition Ordinance which provides a right of follow-on action, but no right of standalone action to private parties. Through reviewing the legislative history, this article found that such right is absent primarily because small and medium-sized enterprises (SMEs) worried that large companies would strategically file excessive, or even baseless, suits against them. The U.S., which has many private antitrust suits, is cited as an example to support this concerns. This article attempts to shed light on this matter by (1) identifying why there are so many private antitrust suits in the U.S., (2) rethinking whether the U.S. model is one that Hong Kong should avoid and (3) highlighting how the U.S. regime prevents baseless suits. After addressing these matters, this article articulates (1) why enabling a standalone right of action to private parties itself would not open the floodgates of antitrust litigations in Hong Kong, (2) why it might be harmful to Hong Kong if there are insufficient private antitrust suits, especially when baseless suits are expected and (3) whether Hong Kong is prepared to enable a standalone right of action while expecting frivolous and baseless suits.

Supply Chains and Antitrust Governance

Antitrust regulations are meant to promote fair competition in the market, but balancing administrative and legal costs with enforcement can be difficult when multi-layered supply chains are involved. The canonical example of this challenge is the landmark Illinois Brick ruling, which limits antitrust damages to only the direct purchasers of a product; for instance, consumers can file antitrust claims against colluding retailers but not against colluding manufacturers -- only retailers can file claims against manufacturers. This controversial ruling was meant to reduce legal costs, but it can clearly lead to missed enforcement opportunities. In this paper we demonstrate how the Illinois Brick ruling interacts with contracts adopted in the supply chain and we show that otherwise equivalent supply chain arrangements can have markedly different effects. In particular, we find that wholesale price, minimum order quantity, revenue-sharing and quantity discount contracts lead retailers to take legal action against manufacturers in the event of collusive behavior. However, the wholesale price plus fixed fee contract structure (a.k.a. a two-part tariff or slotting fee contract) facilitates collusion among the manufacturers with retailers compensated by the fixed fee and not filing the antitrust litigation. We further demonstrate that collusion is more likely under high demand uncertainty and high competition at the retail level but is less likely under high competition at the manufacturer level. Our paper helps public enforcers identify market conditions conducive to antitrust violations.

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.

Comparing Parent Company Liability in EU and US Competition Law

It is a well-established principle of EU competition law that parent companies can be fined for antitrust infringements by their subsidiaries. Under the new EU Directive on Antitrust Damages Actions, parent company liability is likely to be extended to private antitrust litigation. In the United States, in contrast, no fines are imposed on parent companies unless they are directly involved in an antitrust infringement. Moreover, US courts are reluctant to hold parent companies directly or indirectly liable in private damages suits. Against this background, I explore in this article the striking difference between EU and US competition law with regard to parent company liability. I show that one of the main purposes of holding parent companies liable in EU competition law is to solve an underdeterrence problem that occurs when subsidiaries lack sufficient assets to pay for fines or damages. I argue that the same function is fulfilled in US antitrust law by other enforcement instruments, in particular, the individual liability of managers and employees. On this basis, I conclude that primarily the existence of these functional substitutes explains why a need for parent company liability has not arisen in US antitrust law.

EU Competition Law Put to the Brexit Test: What Impact Might the Exit of the UK from the Union Have on the Enforcement of the Competition Rules?

This contribution examines some of the consequences of the UK’s exit from the European Union for the enforcement of the competition rules. It reflects on the impact that Brexit is going to have on future transnational antitrust litigation in Britain and Europe. Thereafter it analyses the challenges that Brexit is likely to present for cooperation in public competition enforcement and suggests solutions for future development.

Rejected! Antitrust Economists As Expert Witnesses in the Post-Daubert World

Economists regularly appear as expert witnesses in antitrust litigations. The paper analyzes how their models and methodologies have performed vis-a-vis the standards of relevance and reliability affirmed by the US Supreme Court in its 1993 Daubert decision. Some tentative explanations for the economists’ troubles when facing a Daubert challenge in antitrust cases are provided.

IP and Antitrust Policy: A Brief Historical Overview

The history of IP/antitrust litigation is filled with exaggerated notions of the power conferred by IP rights and imagined threats to competition. The result is that antitrust litigation involving IP practices has seen problems where none existed. To be sure, finding the right balance between maintaining competition and creating incentives to innovate is no easy task. However, the judge in an IP/antitrust case almost never needs to do the balancing, most of which is done in the language of the IP provisions. The role of antitrust tribunals is the much more limited one of ensuring that any alleged threat to competition is real. At the same time, however, antitrust judges should not be reluctant to condemn IP practices once a real threat to competition is found, unless the practice has a clear justification in the IP statutes themselves or the explicit policies that the Supreme Court has derived from those statutes.

Coping With Concentration.

Provider market power is a powerful driver of high health care costs in the United States. Despite decades of antitrust litigation and regulatory interventions, the problem has worsened and threatens to undermine the benefits of market-based policies. A critical but neglected challenge for all health care reform proposals relying on market competition to address costs is finding effective tools to address the extant market power of dominant hospitals, hospital systems, and many specialty physician practices. This article analyzes the principal market-oriented approaches that have been used in the past and proposed for the future. It argues that antitrust law has an important but constrained role to play and has proved to be especially inept in dealing with extant market power. It finds serious deficiencies in the conduct decrees imposed by some courts and in open-ended regulatory regimes such as those established by Certificate of Public Advantage laws. Although not without administrative complications, policies that target providers who possess market power by capping prices may be the most effective means to control costs and retain the benefits of a competitive delivery system.

The Effectiveness of Private Enforcement and Class Actions to Secure Antitrust Enforcement

The U.S. system has relied heavily on antitrust class actions as a means of ensuring compensation and deterrence. Although this tool seems sensible in theory, the reality is that it remains highly controversial. On the one hand, commentators argue that class actions force defendants to settle cases lacking merit. Even if a settlement agreement is assumed to have a merit, class actions are accused of doing a poor job in compensating victims and deterring wrongdoers. On the other hand, the proponents of class actions claim that there is no reliable empirical evidence proving that class action schemes caused negative effects on antitrust litigation. The public debate about the effectiveness of class actions illustrate the controversial nature of American class actions fairly well. Therefore, using comparative insights from the predominant controversies, this study will determine how well antitrust class actions fulfill compensation objectives and to what extent they can facilitate deterrence.

UMBRELLA DAMAGES: TOWARD A COHERENT ANTITRUST POLICY

Price‐fixing cartels usually do not involve all members of an industry. To the extent that the nonconspiring industry members set their prices under the price umbrella of the cartel, the customers of the nonconspiring firms suffer overcharges just like customers of the conspiring firms. Whether these so‐called umbrella plaintiffs have standing to sue for antitrust damages is an unresolved policy question, because the Supreme Court has not spoken on “umbrella damages.” In this article, we identify the judicial concerns regarding umbrella damage claims, which can be traced to Mid‐West Paper and Petroleum Products Antitrust Litigation. These decisions raise concerns that the fact of injury is conjectural and the measurement of the damages is speculative. We first review the divided judicial treatment of standing for umbrella plaintiffs. Next, we describe the economics of umbrella pricing, which reveals that umbrella claims are not inherently conjectural. We then examine the econometric analysis necessary to estimate damages, demonstrating that umbrella damage estimates are not inherently speculative. We also examine some difficulties that exist in damage estimation generally and for umbrella plaintiffs in particular. Finally, we argue that granting standing to umbrella plaintiffs is consistent with the goals of antitrust policy. (JEL L1, L4, K2)

Company Cannot Treat Minority-Owned Foreign Subsidiary as Extension of Itself to Satisfy the FTAIA

In In re Refrigerant Compressors Antitrust Litigation, the Eastern District of Michigan dismissed plaintiff General Electric Corp.’s antitrust claims against defendants Danfoss A/S, Danfoss Flensburg GmbH, and Danfoss, LLC on the grounds that the claims were barred under the Foreign Trade Antitrust Improvements Act of 1982 and the Illinois Brick indirect purchaser rule. The court reasoned that GE cannot treat its minority-owned foreign manufacturing subsidiary as an extension of itself for the purposes of satisfying the FTAIA or avoiding the indirect purchaser standing rule.

The NCAA Cartel, Monopsonistic Restrictions, and Antitrust Policy

NCAA members behave like a buyer cartel and use the bylaws of the NCAA to maintain their collusive agreement. We model the NCAA as a collusive monopsony and demonstrate the impact on compensation and employment for student athletes, as well as the consequences for social welfare and distribution of surplus. Then we identify specific NCAA bylaws that restrain competition among cartel members, such as limits on the number of athletic scholarships awarded, recruiting, player transfers, and athletic housing. Lastly, we discuss the effects of the NCAA’s recent move to lift the restriction on contract durations for student athletes and the recent Agnew antitrust litigation which may have precipitated this change.

Sidelining Big Business in Intercollegiate Athletics

The world of intercollegiate sports today is characterized by an insatiable desire for money and winning. Universities are in an arms race to outspend one another on lavish facilities and coaching contracts in order to gain the upper hand in recruitment. The commercialization of college sports has created tension between the NCAA’s defense of amateurism and antitrust litigation. This Article seeks to provide a way to de-escalate the arms race while also providing a way for the NCAA to reinvest in its principle of amateurism. Specifically, this Article proposes the NCAA adopt a budgetary allocation for its member institutions’ athletic departments. This Article advocates that funds be split 50/50 between revenue programs and non-revenue programs. This will enable the NCAA and its member institutions to focus on emphasizing education and playing sports for recreation. By adopting a budgetary allocation, the NCAA will be able to balance its goals of supporting education and student athleticism while also remaining antitrust compliant. Part I of the Article focuses on the intercollegiate athletics arms race problem. Part II discusses how difficult it is to chill the arms race without violating antirust law. Part III lays out the budgetary allocation model. Part IV provides reasons why the proposed budgetary allocation works as a viable method for the NCAA. The section discusses how this Article’s proposal (1) reinforces the application of Title IX; (2) is viable under antitrust law; and (3) alleviates the pressure on the intercollegiate arms race.

Effect of National Decisions on Actions for Competition Damages in the CEE Countries

One of the main objectives of the so-called Damages Directive (2014/104/EU) was to make antitrust enforcement more effective. Although in most EU countries private antitrust enforcement has been possible subject to general rules of civil law; the number of private antitrust litigations has remained relatively low. It is presumed that the complementary roles of public and private enforcement, as well as the synergy between them, will take effect if formal decisions taken during public enforcement will have binding effect with regard to follow-on private litigations. According to the Damages Directive, final national decisions on competition infringements shall have binding effect in follow-on litigations. What is to be understood under ‘binding effect’, and the potential effects thereof, has been subject to a lively debate among academics and practitioners. It has been questioned if decisions of an executive body can bind the judiciary, and if so, to what extent. What is the evidentiary value of a formal decision of a NCA regarding national courts, but also on the court of another Member State. The article deals with the main issues and arguments presented in the general debate on the binding effect of national competition law decisions, and provides a closer look on this topic with regard to specific CEE countries.