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Not Treble Damages: Cartel Recoveries Are Mostly Less Than Single Damages

2015; University of Iowa College of Law; Volume: 100; Issue: 5 Linguagem: Inglês

0021-0552

John M. Connor, Robert H. Lande,

Legal and Constitutional Studies

I. INTRODUCTIONIn theory, victims of antitrust violations receive damages.1 In practice, however, almost every successful antitrust damages action settles. Because final verdicts in antitrust cases are exceptional, it may be more accurate to describe the antitrust damages level not as treble damages, but as the average or median percentage of damages successful antitrust cases actually settle for.Until now the actual average or median size of antitrust settlements has only been a matter of speculation. To bring empirical analysis to this issue, we assembled a sample of 71 cartels for which we could find the necessary information. We believe that the sample includes every completed private U.S. cartel case since 1990. For each cartel a neutral scholar calculated the firms' United States overcharges. We compared these results to the damages secured in the private cases filed in the United States against these cartels. We find that the victims of only 14 of the 71 cartels (20%) recovered their initial damages (or more) in settlement; of these, only seven (10%) received at least double damages. The rest-the victims in 57 cases-received less than their initial damages. Four received less than 1% of their damages and 12 received less than 10%. Overall, the median average settlement was 37% of single damages. Because the distribution of settlement percentages is so skewed, the weighted mean (a figure that weights settlements according to their sales) is much lower (19%) than the unweighted mean settlement of 66% (which gives equal weights to the cartels that operated in large markets and those that operated in small markets), because plaintiffs tend to be rewarded relatively poorly in the biggest cases.Our analysis of the Recovery Ratios (i.e., size of antitrust settlements relative to damages) will proceed in the following parts. Part II briefly explains why almost every antitrust case settles. Part III analyzes whether these settlements are likely to be at the right levels. Part IV analyzes our sample of cartel settlements and the size of the damages recovered by plaintiffs in these cases. Part V shows that both the deterrence and the compensation goals of antitrust necessitate damages that significantly exceed the violations' actual damages. Finally, in Part VI, we present some conclusions and implications of our work. Throughout this Essay we will use cartels as an example, although we also will discuss how these results might apply to different types of antitrust violations.II. ALMOST EVERY SUCCESSFUL ANTITRUST DAMAGES ACTION SETTLESAlmost every successful antitrust damage action settles.2 We expect this to happen.3 We expect that most parties would settle for a sum that might be expressed as the discounted present value of the expected probabilities that various recovery amounts would constitute the final verdict if the case went to trial and survived appeal.4 Of course, this would be true only if a number of conditions held, including rationality on the parts of both plaintiffs and defendants, adequate and symmetric information, risk neutrality, an equal view of the strength of the plaintiffs' case, and no compelling short-term need on the part of either party.5 If these assumptions hold, and if the parties share an assessment of the likely underlying parameters, then-in light of the extreme cost, risk, and time involved in litigation-both parties have a strong incentive to settle.6We know of no reliable data on the percentage of antitrust cases that settle or that go to final verdict, either for cartels or for other types of antitrust cases. We do know, however, that final verdicts in cartel cases are extremely rare. In an earlier study, we searched antitrust cases since 1890 for final verdicts in cartel damages actions that calculated an overcharge amount and were not overturned on appeal. We found only 25.7 Our search surely missed cases, and final verdicts in other areas of antitrust might well be more common. …