Coordinating Private Class Action and Public Agency Enforcement of Antitrust Law

AuthorDavid Rosenberg and James P. Sullivan
David Rosenberg* and James P. Sullivan†
But whether antitrust policy is sound depends on the enforcement
machinery as well as on legal doctrine. It is not enough to have good
doctrine; it is also necessary to have enforcement mechanisms that
ensure, at reasonable cost, a reasonable degree of compliance with the
law. Antitrust is deficient in such mechanisms.1
In this essay, we sketch a new approach to ameliorating the problem
of coordinating the disparate array of public and private enforcers of
American antitrust law.2 Our focus is on the mainspring of the federal
* Lee S. Kreindler Professor of Law, Harvard Law School.
John M. Olin Fellow in Law and Economics, Harvard Law School; B.A., Rice
University (2003); J.D., Harvard Law School (expected 2006). For helpful
comments on presentations and earlier drafts of this article, the authors wish
to thank Edward Iacobucci and the other participants at the symposium on
competition class actions sponsored by the Faculty of Law at the University
of Western Ontario, and also our colleagues at Har vard Law School: David
Abrams, David Cope, Morgan Hector, Kenneth Reinker, Kathleen Saunders,
John Scanlon, Hal Scott, Steven Shavell, and Mark Veblen. James Sullivan also
thanks the John M. Olin Center for Law, Economics, and Business for financial
1 Richard A. Posner, Antitrust Law, 2d ed. (Chicago: University of Chicago Press,
2001) at 266 [second emphasis added].
2 The basic federal antitrust law is comprised of the Sherman Act, 15 U.S.C. §§
1 et seq., enacted in 1890; the Clayton Act, 15 U.S.C. §§ 12 et seq., enacted in
1911; and the Federal Trade Commission Act, 15 U.S.C. §§ 41 et seq., enacted in
1911. In distinguishing between “public” and “private” enforcers we focus on
the salient functional features of the source of enforcement funds and the situs
of discretion over the scale, scope, and intensity of enforcement investment
and effort. In particular, public enforcers generally rely on public tax and other
sources of funding and lodge prosecutorial discretion in government agents.
enforcement mechanism: the “tag team” consisting of public policing,
conventionally through criminal sanctions and injunctive remedies, by
the Federal Trade Commission (FTC) and the Antitrust Division of the
Justice Department (DOJ), and of privately litigated class actions primar-
ily seeking treble damages.3 Characteristic of a general American enforce-
ment strategy, the antitrust system enlists the “entrepreneurial” incentives
and resources of private enforcers as a counterpoise and a complement
to public enforcement efforts. Thus, private antitrust class actions not
only provide an efficient means for augmenting public enforcement and
overcoming its structural, financial, and other limits. They also serve as a
hedge against the potential (real or perceived) for under-enforcement by
public agencies vulnerable to bureaucratic slack and stagnation, political
and personal conflicts of interest, and chronic under-funding.4 However,
Private enforcers tap private sources of financing civil litigation and determine
the scale, scope, and intensity of their enforcement investment and effort based
on rational choice of the most profitable course of action.
3 See Stephen Calkins, “An Enforcement Official’s Reflections on Antitrust Class
Actions” (1997) 39 Ariz. L. Rev. 413 at 440. The FTC exclusively enforces the
provisions of the Federal Trade Commission Act and primarily pursues injunc-
tive remedies. The DOJ is authorized to seek penalties of imprisonment and
fines, and also injunctive remedies. The remedial options available to private
enforcers include injunctive relief and divestiture as well as treble damages. As
Posner points out, policy makers and commentators typically err by analyzing
the public and private components of the amalgamated antitrust enforcement
mechanism: Posner, above note 1 at 47. The error is to evaluate each com-
ponent separately. Rather, the enforcement mechanism must be judged and
designed in the aggregate. The performance of any system of law enforcement
must be considered and shaped functionally according to the way its opera-
tion will and properly should affect the behaviour of enforcement targets. In
particular, firms “aggregate the expected punishments and discount (multiply)
them by the probability of their imposition to determine the expected punish-
ment”: ibid. It follows that the effectiveness of the antitrust legal regime must
be judged and reformed from an aggregate perspective; that is, in terms of how
all of the various public and private pieces can be fit and operated together to
achieve the optimal joint level of enforcement.
4 These conditions can also, by design or effect, produce excessive public
enforcement. High-profile prosecutions, especially those that may capture
public attention or pander to its fears, can lead to higher budgets and enlarged
jurisdiction, promotions within bureaucratic ranks, and political, judicial, and
private-sector career opportunities. See generally Daryl J. Levinson, “Empire-
Building Government in Constitutional Law” (2005) 118 Harv. L. Rev. 915.
While our proposal does not directly address the coordination problem of over-
zealous public enforcement, it will, as we note in concluding remarks, likely
have a salutary effect on incentives for such personal and bureaucratic “empire-
COORDINATING enforcement of antitrust law 49
a basic flaw in this system of checks and balances is its one-sided nature.
It not only ignores the danger of deficient private enforcement that results
from economic or legal impediments to the effective use of class actions,
but it also fails to check the potential for excessive private enforcement.
Indeed, there is significant risk of class actions over-enforcing anti-
trust laws. A major reason is that many antitrust class actions merely
“piggy-back” on public enforcement outcomes and work product.5 These
class actions usually add little or nothing new to the existing public
enforcement effort, while their threat of treble damage awards signifi-
cantly magnifies sanctions.6 It is an empirical question whether, in any
given case or on average, these class actions adequately supplement or
grossly overshoot the amount of private enforcement needed to achieve
the optimal enforcement level overall. More generally, recent increases
in maximum criminal fines and prison terms also may have reduced the
need for the supplementar y deterrent from trebled class action damages.
Supplementation may also be undesirable in many cases as public enforc-
ers place greater reliance on programs and strategies of trading leniency
for agreement by firms and individuals to confess, cease, and remedy
their illegal conduct and to provide evidence and otherwise cooperate in
the prosecution of claims against others.7 Further, as modern economic
5 See Thomas E. Kauper & Edward A. Snyder, “An Inquiry into the Efficiency of
Private Antitrust Enforcement: Follow-on and Independently Initiated Cases
Compared” (1986) 74 Geo. L.J. 1163.
6 The problematic nature of follow-on class actions results in part from the fact
that private enforcers often benefit from the presumption, established by sec-
tion 5(a) of the Clayton Act, that mandates treating a final criminal or civil
judgment obtained by the United States as “prima facie evidence” against the
same defendant in a private civil action. In recent years, private enforcers have
also been able to invoke offensive collateral estoppel against such a defendant.
Compare Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322 (1979). Of course,
courts could exert some useful control over unnecessary follow-on class actions
by adjusting class counsel fees to reflect the actual social value added by the lit-
igation effort. However, as a practical matter, courts lack the resources needed
to carry out this function effectively. The high cost of providing them with
relevant information includes determining the optimal investment class counsel
should make in relation to the optimal investment the public enforcer should
make and did make.
7 The leniency program used by DOJ to police international cartels is described
by the Director of Criminal Enforcement, Antitrust Division, in Scott D.
Hammond, “Detecting and Deterring Cartel Activity through an Effective
Leniency Program” (paper presented to the International Workshop on Cartels,
November 2000), online: United States Department of Justice

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