Coordinating private class action and public agency enforcement of antitrust law
| Author | David Rosenberg and James P. Sullivan |
| Pages | 47-79 |
COORDINATING
PRIVATE
CLASS
ACTION
AND
PUBLIC AGENCY
ENFORCEMENT
OF
ANTITRUST
LAW
David Rosenberg*
and
James
P.
Sullivant
A.
INTRODUCTION
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
lacobucci
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
Harvard
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
support.
Richard
A.
Posner, Antitrust Law,
2d ed.
(Chicago: University
of
Chicago Press,
2001)
at 266
[second emphasis
added].
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.
47
*
1
2
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-
building."
48
LITIGATING
CONSPIRACY:
AN
ANALYSIS
OF
COMPETITION
CLASS
ACTIONS
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
supplementary 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
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.
LJ.
1163.
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,
(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.
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
atr/public/speeches/9928.pdf>.
5
6
7
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