Antitrust Outline (Page)
PROCEDURES FOR ENFORCING THE ANTITRUST LAWS
Criminal Punishment
Violations of the Clayton Act and the FTC act are not crimes.
Violations of §1 §2 of the Sherman Act, are criminal.
Three years in prison
$350,000 fine (individual)
$10 million fine (Corporation)
Frequency; government practice
Primary targets of criminal prosecution
“Hard-core” per se violations
Price fixing
Bid rigging
Schemes for market allocation
Appropriateness of criminal Law
Would the defendant be convicted of a crime even if acting in good faith
Nash v. U.S. (1913): It was agreed that defendants where to be convicted only if the jury found the conspiracy for which they ere indicted unreasonable.
With respect to corporate antitrust defendants, criminal punishment is not necessarily more severe that a civil penalty or treble damages.
Differentiating antitrust offenses according to remedy?
Statutory Language:
Substantive Sherman act offenses (Criminal): §1 and §2.
Prerequisite for equitable relief in a government suit is a violation of §1or §2.
Criminal offense distinguished:
Sup. Ct. has recognized the Sherman Act as “a charter of freedom” with “a generality and adaptability comparable to that found to be desirable in constitutional provisions
Sherman Act (used for both criminal and civil litigation!?!)
i. §1 applied to tying and exclusive dealing arrangements
1. Non-criminal Clayton Act §3
ii. §2 applied to monopolists
1. monopolists against whom criminal penalties would not likely be entertained
1978 Gypsum Decision:
i. Harmonized these concerns by divorcing the Sherman Act’s criminal sanctions from its civil sweep.
ii. Requisite mental state
1. knowledge that the consequences of one’s conduct would be anticompetitive or a specific intend to violate the law
a. Regardless of whether an anticompetitive result actually occurred.
iii. Gypsum offers no relief from criminal convictions for those who offend those clear standards of illegality that antitrust law sometimes provides.
Behavioral prerequisite for damages:
Criminal intent requirements saves the innocent monopolist subject to injunction from criminal sanctions
No behavioral prerequisite for Treble damages (They do not carry the stigma of imprisonment or its deprivation of liberty; nor do they entail the costs of running the prison system)
Consolidated Express v. New York Shipping Assn. (1979) the court imposed a more restrictive test for the award of damages than it would have imposed for an injunction.
Denying some private equity actions:
Clayton Act § 16: expressly subjects private injunctive relief to “the same conditions and principles” applied by courts of equity
Equitable remedies are discretionary and not automatically available to an injured person.
Equitable Relief
Proceeding in equity
Jurisdiction
Sherman act §4 and Clayton act §15 confer jurisdiction on the federal courts,
“to prevent and restrain violations of this act”
Direct the gov. “to institute proceedings in equity to prevent and restrain [antitrust] violations/”
Courts will forbid the continuation of illegal acts and may also force the defendant to surrender the fruits of its wrong and ensure competitive conditions.
Cts. discretion in choice of remedy (ANTITRUST DECREES)
Order defendants to:
Dispose of subsidiary companies,
Create a company with appropriate assets and personnel to compete effectively with defendant,
Make patents, trademarks, trade secrets, or know-how available to competitors at reasonable royalties or even without any royalties,
Provide goods and services to all who wish to buy,
Revise the terms on which defendant buys or sells, and
Cancel, shorten, or modify outstanding agreements with competitors, suppliers, or customers.
Retain jurisdiction to
Modify the decree
Require the defendant to submit certain reports
Give the DOJ visitorial rights into defendant’s affairs
Long term supervision by the government and the courts
Private suits in equity
Clayton Act §16: permitted private persons to obtain injunctive relief against actual or threatened antitrust injuries
Standing:
Private litigant must demonstrate a significant threat of injury to itself
If D’s behavior would warrant an injunction from a gov. suit, the ct may well proscribe the D’s activity w/o close scrutiny of the harm claimed by the private plaintiff.
Private plaintiffs may seek divestiture
Preliminary injunctions are also available to private plaintiff where they would be available to the government.
Consent decrees
Nature and significance
Settlement with the court.
May occur at anytime
Do not reflect the state of the law
Offers advantages for both the defendant and the government
Modification
“grievous injury test” or Swift Test: generally applied to government motions for modification.
i. U.S. v. Swift (1932): Nothing less than a clear showing of grievous wrong evoked by new and unforeseen conditions should lead us to change what was decreed after years of litigation with the consent of all concerned.
Fed. Rule of Civ. Pro. 60(b)(5): More Relaxed Approach
Third-party interests
May not maintain an action for damages or initiate contempt proceedings for a D’s violation of a consent decree
Clayton Act §5(a): allows a litigated decree to be used as prima facie evidence of liability in subsequent private actions against the D,however, it explicitly prohibits such use of pretrial consent decrees.
i. Consent decree is neither an adjudication on the merits nor an admission of liability on the part of defendant
Clayton Act§§5(b)-5(h) (Tunney Act): consent process cannot ignore third-party interests.
i. Settlement negotiations remain private
ii. Proposed decree must be published 60days before its effective date
iii. Publication must include:
1. “any other materials and documents which the US considered determinative in formulating such proposal”
iv. Competitive impact statement
1. states the alleged violation
2. explains the proposed consent decree and its anticipated effects on competition,
3. notes the private remedies that might be available,
4. describes the procedure available for public comment and possible modification of the proposed decree, and
5. evaluates the alternative decrees actually considered by the government.
Judicial role:
The Tunney Act
i. Allows the court to:
1. review the public comments filed
2. take testimony,
3. use special master or consultants
ii. The court is not to enter a consent judgment unless:
1. doing so is in the public interest
Controversy: IBM and Microsoft indicate that the Tunney Act will play only a limited role in policing prosecutorial discretion.
Cease and desist orders
FTC is empowered to issue cease and desist orders
These orders carry no criminal or civil penalties for past conduct, not do they assess damages
They undo and prevent further unlawful action
No private right of action for violations of the FTC Act or Commission orders.
§ 11 provides for FTC enforcement of §2,§3,§7, and §8 fo the Clayton Act:
These administrative jurisdictions are concurrent with that of the DOJ and the courts under §15
FTC Jurisdiction
FTC Act §5: forbids “unfair methods of competition
FTC may enforce the Clayton Act directly, and
under §5 it may condemn conduct that
i. offends the Sherman Act,
ii. violates “the spirit” of the Sherman or Clayton Acts, or
iii. is otherwise “unfair”
FTC proceedings
5 members appointed by Pres. Confirmed by the senate for 7yr terms
Most proceedings are disposed of before reaching formal adjudication.
When proceedin
ut, greatly enlarges its penalties, and helps discourage illegal conduct
Treble damages are usually a deductible business expense for federal income tax purposes (IRS code162(g))
proving damages:
To establish lost profits
i. P’s actual profits may be compared to its profits before and after defendant’s violations or to the profits of competitors or firms in relation business unaffected by the violations.
ii. P may seek to prove hypothetical profits through the testimony of experts knowledgeable about the industry.
joint and several liability; contribution
Policy question, up to legislature to decide.
Standing and related doctrines: an introduction
Limitations
Limitation reasons
Fear of endlessly proliferating recoveries
Judges w/o discretion over the trebling of damages may hesitate to punish a defendant whose transgression was minor or undertaken in good faith.
i. May hesitate most when the suit is brought by a relative “stranger” whose interests are not at the core of antitrust concerns.
Judges may be reluctant to subject the D and themselves to the burdens of a lengthy trial on elusive issues at the instance of such strangers
many antitrust complaints may seem insubstantial, and yet contain sufficient allegation to survive dismissal.
Endorsed limitations
Limitations concerning the directness of damages, noting in particular limitations on:
i. Recoveries by consumers who do not purchase directly from price-fixing conspirators, provisions for states to sue in their “parens patriae” capacity, and
ii. Contrasting requirements in suits seeking only equitable relief and
The evolving requirement that plaintiffs must allege “antitrust injury” as a requisite to bringing suit.
Standing and limitations concerning the directness of injury
Introduction
The court can and should terminate the suit whenever it appears that:
i. damages are unlikely to be proved,
ii. Incapable of proof with reasonable judicial economy, or,
iii. If proved, would not flow from the doctrinal reasons for finding that the defendant’s conduct violates the antitrust laws.
Passing on and consumer recoveries
Hanover Shoe, the D will not normally be allowed to prove that the plaintiff passed on the price increases to its customers and therefore suffered no injury
Illionis Brick, the consumer purchasing from an innocent middleman may not recover from the manufacturer who, for example, unlawfully agreed with rival manufacturers to raise prices.
i. Creates a greater incentive for Direct Purchaser to sue when there is price fixing.
ii. Eliminates duplicative damages
iii. States not congress have overturned Illinois Brick
iv. Class Action Fairness Act (suit may be removed to fed. Ct., from state ct.)
