Comparative Deterrence from Private Enforcement and Criminal Enforcement of the U.S. Antitrust Laws

Article excerpt

I. INTRODUCTION

The purpose of this article is to determine which type of antitrust enforcement deters more anticompetitive behavior: the U.S. Department of Justice ("DOJ") Antitrust Division's criminal anticartel enforcement program or private enforcement of U.S. antitrust laws. The answer to this question - and answers to related questions concerning deterrence and compensation issues - could have important implications for the United States, pertaining both to appropriate antitrust remedies and to the course of litigation of private antitrust cases. Those answers also could influence other nations considering either adopting or changing criminal penalties for competition law violations, or allowing private rights of action by the victims of competition law violations.

Anti-cartel enforcement by the DOJ long has been the gold standard of antitrust enforcement worldwide. If a country were to have only one type of antitrust violation, surely it would be against horizontal cartels, and surely this law would be enforced by that country's government officials. Even critics who believe that monopolization and vertical restraints never or rarely should be challenged almost always believe in strong anti-cartel enforcement.1 People in the antitrust world disagree about many things, but it is extremely difficult to find responsible critics who do not applaud the U.S. government's anti-cartel program.2 We strongly agree with this almost-unanimous consensus and are second to no one in our appreciation of the DOJ's anti-cartel activity. In terms of taxpayer dollars well spent, the program surely is one of the most outstanding in all of government.

By contrast, private antitrust enforcement under U.S. antitrust laws gets little respect and much criticism. Indeed, it is difficult to find many people other than members of the plaintiffs' bar willing to say much good about private enforcement. For example, even moderates like FTC Commissioner J. Thomas Rosch believe that treble damage class action cases "are almost as scandalous as the price-fixing cartels that are generally at issue .... The plaintiffs' lawyers . . . stand to win almost regardless of the merits of the case."3 Due to these widespread beliefs, former FTC Chairman William E. Kovacic recently summarized the conventional wisdom about private enforcement succinctly: "private rights of actions U.S. style are poison."4

Given these criticisms, it may come as a surprise - even a shock - that a quantitative analysis of the facts demonstrates that private antitrust enforcement probably deters more anticompetitive conduct than the DOJ's anti-cartel program.5 This deterrence effect is, of course, in addition to its virtually unique compensation function.6 If this article's conclusion about the importance of private enforcement for deterrence is true, private antitrust enforcement also should receive much of the praise given to DOJ anti-cartel efforts. Further, private enforcement should be encouraged in the United States rather than hampered through new legislation7 or through restrictive judicial interpretation of existing law.8 And the United States' version of private antitrust enforcement should be something for other countries to consider.9

Part II of this Article analyzes the deterrence effects of DOJ anticartel efforts by studying DOJ cases filed from 1990 to 2007. Part III compares these results to the cumulative deterrence effects of a sample of forty large private cases that ended during this same period. (We do not compare the DOJ with the deterrence effects of every private case filed during this period, however, because we were unable to obtain this information).

Before coming to any policy conclusions based on this comparison, we address some criticisms of private enforcement. Few commentators dispute that most DOJ anti-cartel prosecutions involved anticompetitive conduct or that most DOJ cartel cases should have been brought. …