Antitrust and Unfair Competition Law

Competition: Fall 2014, Vol. 23, No. 2


By Kyle W. Mach and Bradley E. Markano1


Violations of the antitrust laws can have serious consequences for consumers and other players in the US economy. Understandably, federal and state legislatures have imposed significant penalties for those who commit such violations, and particularly for those who do so deliberately. These include not only criminal penalties, such as monetary fines and prison time, but also very substantial civil liabilities, with some allowing plaintiffs to recover treble damages.

Standing alone, any one of these types of actions—federal or state, criminal or civil—could serve as a strong deterrent to illegal behavior, and rightly so. But antitrust actions often do not come one-by-one. Instead, overlapping regulatory schemes allow concurrent enforcement by federal prosecutors, state attorneys general, and a long list of private plaintiffs, which can simultaneously hit defendants with enormous overlapping liabilities for the same conduct. Taken together, these liabilities create what Judge Richard Posner has called a "cluster-bomb effect" on the subject defendant,2 in which the costs of the anti-competitive conduct are borne repeatedly through related litigation of many different types in many different fora.

Some would argue that even "excessive" antitrust damages are justifiable.3 The goal of the antitrust laws is not merely to redress plaintiffs’ losses on a case-by-case basis, but also "to further a State’s legitimate interests in punishing unlawful conduct and deterring its repetition."4 In some cases, these interests could be best served through fines and other liabilities that exceed the amount of ill-gotten gain and the amount of the harm caused.5 Some argue that extra-compensatory damages may actually be necessary for effective deterrence in certain circumstances, because potential malefactors will discount the expected value of punishment by the probability that they might "get away with it."6 Large recoveries may also encourage private civil litigants to pursue claims which might otherwise have too little value to merit litigation. In appropriate circumstances, this could alleviate the burden on government regulators while enhancing deterrence.7

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But there is a limit to how far these arguments can take us. Grossly elevated liabilities raise the risk of undesirable over-deterrence. Industries may respond to the risk of excessive antitrust liability by raising prices or leaving the business entirely.8 Thus, windfall recoveries for relatively few plaintiffs could result in unnecessarily inflated prices for the general population—precisely the opposite of what antitrust laws are intended to achieve.9

Furthermore, excessive liability may be simply unjust. The potential for extreme punishment could encourage firms to settle even insubstantial claims, rather than betting the company on a jury trial on the merits. In part to prevent precisely this kind of inequitable result, the Supreme Court has held that the Due Process clause of the Constitution forbids repeat payment of the same debt and imposes a cap on excessive punitive damages.10

Needless to say, it can be difficult for some to feel sympathy for those accused of antitrust violations, particularly willful antitrust violations. But a full accounting of the total liabilities that threaten antitrust violators reveals that, in many cases, the total liability is unjustifiably high. As this article discusses, the "cluster-bomb" that threatens antitrust defendants leads to a risk of liability that in many cases violates practical, and perhaps constitutional, limits on excessive damages, and tilts the scales unfairly against defendants.

In this article, we begin by briefly discussing four separate, but overlapping, forms of antitrust liability: criminal prosecution, federal civil claims, state civil claims, and claims brought by the state acting on behalf of citizens in parens patriae. Reviewing the intersections between these four types, we show how easily a single antitrust violation can result in multiple liabilities for defendants. Then, we briefly assess the public policy and potential constitutional problems that arise from this explosion in liability. Finally, we conclude by introducing a few plausible methods by which litigants, courts and legislatures could mitigate the worst excesses of the current system.


To establish the weight of antitrust penalties under the status quo, consider a fictional entity, Corporation X, which participates in illegal, collusive price fixing that results in overcharges (prices exceeding the non-collusive "but for" price) in an aggregate amount of 100 million dollars. Corporation X is based outside of the U.S., and its products only reach the market after being integrated into assorted other more complex units, in a chain of intermediate buyers and sellers that spans several other non-U.S. jurisdictions. Some of these products are sold without any knowledge of their ultimate destination or use, and with little expectation of liability in the United States. Although this may appear to be a highly stylized scenario, antitrust practitioners will recognize its similarity to a substantial number of recent cases.

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Throughout the chain of distribution, there are numerous customers who can claim to have been injured, and multiple regulatory entities that may seek to punish the alleged antitrust violator. The result is a staggering degree of liability, which is rarely considered at a single time, or even before a single court. We summarize here some of the most prominent sources of that liability.

A. Federal Criminal Charges

Under federal law, both civil and criminal antitrust violations are governed by the Sherman Act, which proscribes "[e]very contract, combination . . . or conspiracy" in restraint of interstate or foreign commerce.11 As with an alleged civil violation, criminal prosecutors must show "(i) an agreement to concerted action, such as a combination or conspiracy formed by two or more entities; (ii) that the agreement unreasonably restrained trade or commerce; and (iii) that the restrained trade or commerce is interstate or international in nature."12 In addition, criminal claims require prosecutors to establish subjective intent—but courts have sometimes found that the burden of proof for this element is quite low.13

Although violation of the Sherman Act was once a misdemeanor, punishable by fines limited to $50,000 and up to one year’s imprisonment, Congress reclassified such violations as felonies in 1974, and since then "potential criminal fines have increased dramatically."14

The stakes of criminal prosecution were brought home in 2012 with the record-tying fine of Taiwanese corporation AU Optronics ("AUO"), which was found guilty of conspiring to fix prices on liquid-crystal display ("LCD") panels. In one of only a few major antitrust cases recently to go to trial, Judge Susan Illston of the Northern District of California fined the corporation $500 million, and sentenced each of three senior executives to three years in prison and additional $200,000 fines.15

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But even this fell far short of the penalties sought by federal prosecutors, who asked for a $1 billion fine and ten year prison terms. During sentencing, the prosecutors argued that the Alternative Fine Statute16 allows criminal fines up to twice the gain or twice the loss caused by the violation—in this case, a figure far exceeding the Sherman Act’s statutory maximum penalty of $100 million.17 And the calculations recommended by the U.S. Sentencing Guidelines suggested fines between $936 million and over $1.8 billion.18 However, Judge Illston limited the fine to the jury’s determination of actual damages, at least in part "because AU Optronics had already paid out millions to settle a class-action lawsuit and still faced other lawsuits in the United States and around the world."19

While the fines issued to AUO were exceptional even among high-profile antitrust cases, they are representative of a trend toward larger and more frequent fines.20 As of June this year, the DOJ had already issued $709 million in fines for criminal antitrust violations, and was on track to easily surpass last year’s high of $1.02 billion in total fines.21 The largest of these fines was $425 million, levied upon Japan-based Bridgestone Corp., which saw an increased penalty due to its status as a "repeat offender" after allegedly failing to disclose conspiratorial behavior in 2011.22 And criminal prosecution is very often just the first of many claims for antitrust defendants: An adverse criminal verdict may presage unfavorable civil outcomes in federal and state courts.23

B. Federal Civil Claims: Illinois Brick and Hanover Shoe

When that civil litigation comes, at least some of it will be brought under federal law. These federal claims, and the available defenses, are subject to a number of important limitations. For our purposes, the most important of these limitations originate with the Supreme Court’s decisions in Hanover Shoe24 and Illinois Brick.25

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The defendant in Hanover Shoe, a manufacturer of "complicated and important shoe machinery," maintained an illegal monopoly, which led to increased prices for the direct purchaser, a shoe manufacturer.26 However, the defendant claimed that the plaintiff had suffered no real injury, because the inflated cost of machinery had simply been passed down the chain of production in the form of higher shoe prices for consumers.27

The Supreme Court rejected the "passing-on" defense for two reasons. First was the difficulty of calculating the actual harm suffered by any given plaintiff downstream of the direct purchaser, given the "wide range of factors" at play and the concern that lawsuits would then require "long and complicated proceedings involving massive evidence and complicated theories."28 Second was the need to encourage plaintiffs to file suit, lest violators "retain the fruits of their illegality," and justice be thwarted. The fear was that antitrust defendants might be too successful in arguing that illegal overcharges were passed down, leaving the end purchasers—who may have suffered only attenuated and comparatively minimal overcharges—with the only valid cause of action.29 Therefore, the Court concluded, the direct purchaser must be considered de jure victim of 100% of the harm caused by the antitrust violation, without any need to determine whether that purchaser had actually absorbed the overcharge or passed it on to customers.

But Hanover Shoe raised a fundamental problem: what if an indirect purchaser filed suit against an antitrust violator in federal court, and successfully established that it had suffered a loss due to the defendant’s behavior? Should the court allow the plaintiff to recover, even though the defendant was already liable to the direct purchaser for 100% f all damage, plus treble damages?

In Illinois Brick,30 the Court confronted just this situation. A price-fixing conspiracy perpetrated by a concrete manufacturer had led to increased prices for concrete, inflating costs for masonry and in turn increasing the price of buildings sold to the state of Illinois. Concerned about the "risk of multiple liability for defendants," 31 and unwilling to overturn the recent decision of Hanover Shoe, the Court held that federal law did not allow the State of Illinois to recover any damages arising from illegal overcharges—even if it had in fact suffered a loss. Subsequent cases have confirmed that the Illinois Brick rule is a "rigid and expansive" bright-line rule, which applies even when damages are easily calculated and the indirect purchaser is likely to be the sole claimant.32

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The net result of Illinois Brick and Hanover Shoe is that direct-purchasers recover all of the alleged overcharges caused by the antitrust violation, plus treble damages, regardless of whether defendants can prove that those overcharges under federal law were passed on to another party. Meanwhile, indirect purchasers generally cannot recover, regardless of whether they can prove that they, and not the direct purchasers, actually absorbed the overcharge.33

The Illinois Brick rule has sat uneasily with many observers, and has met with frequent calls for judicial or legislative repeal, including one from 2007’s Antitrust Modernization Commission.34 But if we accept Hanover Shoe, then Illinois Brick makes perfect sense; contrary to Justice Breyer’s dissent, any system that allowed repeat calculation of the same overcharge in suits by indirect and direct purchasers would be certain to cause unpredictable results, especially if those suits are not in the same tribunal. And given that one of the primary goals of the antitrust laws is to deter violations, a regime that requires wrongdoers to fully compensate someone may be desirable—even if the plaintiff is not necessarily the ultimate victim.

However, as the next section discusses, the logic of Hanover Shoe and Illinois Brick has been severely undermined by contradictory approaches taken in state courts.

C. State Antitrust Claims

Although many states model their antitrust laws on the Sherman Act and other federal statutes,35 almost half reject the approach taken by the Supreme Court in Hanover Shoe and Illinois Brick. Under "Illinois Brick repealer" statutes, indirect purchasers may recover on the theory that the direct purchaser passed the overcharge down the supply chain.36

These variations are not preempted by federal law, but instead exist concurrently, providing an alternate set of controls over the same conduct. The Supreme Court has held that state laws allowing recovery by indirect purchasers "are consistent with the broad purposes of the federal antitrust laws: deterring anticompetitive conduct and ensuring the compensation of victims of that conduct."37 Indeed, some view "the coordination of federal and state antitrust enforcement [as] a prime example of ‘cooperative federalism.’"38

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But this coincidence of regulations has a peculiar result: federal law permits upstream plaintiffs to claim damages based on the amount of harm caused by the defendant, as though the plaintiff suffered all of the damage without passing any of the costs on to downstream buyers. Then, at the state level, a downstream plaintiff has the option to claim as much of 100% of the total damage as well, often in a separate court and before a separate jury.

Given the complexity of many modern supply chains, this does not begin to describe the degree of the problem. In many cases, there are multiple tiers of indirect purchasers that act as intermediaries on the product’s path to market, and each has the option to claim that it and it alone has suffered the full amount of the harm caused by the defendant. In the case of complex, cross-border supply chains, some of these indirect purchasers may make a huge volume of purchases, but be several steps, and perhaps several jurisdictions, removed from the defendants’ conduct. All of this multiplies the potential liability, and makes the ultimate cost of any particular violation extremely difficult to foresee.

In fact, the imbalance between plaintiff and defendant is still greater. Under the rationale of Illinois Brick, a legal system that allows indirect purchaser actions should also permit the use of the pass-through defense to avoid some of the risk for duplicative damages. Indeed, many state antitrust statutes are explicit in denying plaintiffs the option to pursue damages that have already been recovered in a different suit or different forum.39 This usually means allowing defendants in indirect purchaser suits to use the defense of "pass-on" to avert duplicative recovery.40 Some of these statutes go further, and authorize judges to consolidate cases, apportion damages, and delay disbursement of awards in order to avoid duplication.41

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But some state laws are more ambiguous, and state caselaw has not always developed sufficiently to clearly establish the permissibility of the pass-on defense. In the absence of judicial precedent or statutory guidance, some plaintiffs have argued that indirect purchase claims are not subject to a pass-on defense under state law, just as direct claims are not subject to the defense under federal law.42 Few courts seem likely to agree with this extreme position, but the issue remains open in some states. Any court to accept this position would permit an explosion in duplicative damages claims under the relevant state law.

D. Parens Patriae Actions

While many indirect purchaser suits, particularly those bringing consumer claims, are pursued as class actions, state attorneys general can in some cases pursue claims on behalf of their citizens in parens patriae. The Hart-Scott-Rodino Act ("HSRA") explicitly grants state Attorneys General the authority to pursue parens patriae claims for monetary relief under the Clayton Act on behalf of both direct and indirect purchasers.43 At present, twenty-two states allow their attorneys general to file such actions on behalf of indirect purchasers.44 However, only four of these states prevent indirect purchaser suits in other forms, meaning that there is at least a risk that defendants will be simultaneously faced with suits by indirect purchasers filing in their own capacity, and by state attorneys general who seek to vindicate similar interests.45

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E. Total Potential Liability

Returning to hypothetical Corporation X, which caused $100 million in overcharges. What does it stand to pay for its conduct?

First, federal prosecutors could hypothetically pursue penalties amounting to twice the loss caused by the antitrust activity, or up to $200 million.46 This federal prosecution may be accompanied by state criminal prosecution under similar statutes, resulting in additional fines in the relevant jurisdictions. Although state penalties are typically modest, they contribute meaningfully to the overall cost for defendants.
Second, federal civil claims brought by direct purchasers could lead to damages of $300 million—even if substantially all of the actual loss was suffered by indirect purchasers.
Finally, indirect purchasers could file suit under state law, either individually, in class actions, or represented by the state in parens patriae (or all three) leading to damages up to or exceeding $300 million, depending on how many layers of the distribution chain bring indirect purchase claims.

In the aggregate, the price tag has the potential to easily surpass $1 billion in the United States alone. And this amount does not account for additional fines levied in other jurisdictions, which can rival or even surpass United States penalties. For instance, in 2012 the European Commission alone levied a total of $1.92 billion in fines for LCD price-fixing, on top of the civil and criminal penalties issued in the U.S.47 Furthermore, the calculations above assume that Plaintiffs do not claim damages in excess of those actually suffered, and do not account for the tremendous cost and inconvenience of defending what may be dozens of suits in different courts. If plaintiffs are even moderately successful, Corporation X will be required to pay far more than the treble damages envisioned by the Sherman Act and by the many state laws which adopt similar damages provisions.

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Although there is a credible argument to be made for damages exceeding the extent of the harm caused by an antitrust violation, there are real problems with the kind of extreme deterrence that results from the current system. These problems arise both as a matter of policy and as a matter of law.

A. Duplicative Recovery Raises Substantial Public Policy Concerns

As a preliminary matter, the very risk of duplicative or excessive liability in antitrust disputes has problematic public policy implications. Three policy issues merit special discussion.

1. Excessive Punishment Can Deter Pro-Competitive Conduct

In the antitrust field, the boundaries between legal and illegal behavior can at times be hard to identify ex ante.48 The facts of these cases can be highly complex, evidence of violations is frequently unclear or circumstantial, and jury verdicts can be unpredictable in the best of situations.49 All of these factors raise the possibility of over-deterrence, in which legal, procompetitive conduct is impeded by the well-intentioned but zealous enforcement of existing law. This outcome threatens innovation and can deter aggressive, but pro-competitive, forms of competition, as businesses moderate any conduct that poses even a modest risk of antitrust scrutiny, whether the conduct is anticompetitive or not.50 The effort to punish antitrust violators can in this way harm competition and, ultimately, consumers.

The risk of over deterrence is exacerbated by our system of joint state-federal regulation, which allows local variations in antitrust enforcement to dramatically alter defendants’ liability. For example, a violator whose products make their way only through states with Illinois Brick repealer statutes will have dramatically more liability than one whose products enter only states without such statutes. However, a defendant may find that its products have entered a state in which indirect purchasers are permitted to sue only long after the first litigation is underway. The end result is that the same conduct may be subject to very different outcomes, depending on the location of indirect purchasers.51 For those making business decisions, this added uncertainly can further expand the scope of legal conduct that is deterred by the risk of antitrust liability.

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2. Excessive Liability Leads to Excessive Settlement Pressure and Undesirable Litigation

The magnitude of the potential damages also increases the already imposing pressure on defendants to settle antitrust suits. A single antitrust suit, and the accompanying treble damages, is too much for many defendants to risk at trial. Multiple suits, and multiple trials, greatly magnify this problem, and increase the chances that defendants will be intimidated into settling even meritless claims. Of course, this practice also further spurs the filing of groundless lawsuits.52

3. Excessive Liability Has Disproportionate Effects on Foreign Entities, Raising Comity Concerns

As the Supreme Court has observed, "application of [US antitrust] laws creates a serious risk of interference with a foreign nation’s ability independently to regulate its own commercial affairs."53 And, for a variety of reasons, over-enforcement of antitrust laws may also have a disproportionate effect on foreign defendants.54 In fact, thus far in 2014, the Department of Justice has only imposed fines on foreign corporations, with seven of eight fines issued going to Japanese corporations.55 As the claims and damages against foreign entities (or relating to foreign conduct) multiply, concerns about international implications increase. 56

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B. Duplicative Recovery Raises Substantial Due Process Concerns

"Common sense dictates that a defendant should not be subjected to multiple civil punishment for a single act or unified course of conduct which causes injury to multiple plaintiffs."57 But the possibility of repeat liability allowed by contradictory state and federal laws is not only bad policy; it may also be unconstitutional.

1. Due Process Bars Multiple Payment of the Same Debt

The Constitution demands "assurance" that defendants will not be required to render the same property to multiple parties. In Western Union Telephone Company v. Pennsylvania, the state of Pennsylvania sought to take possession of assorted unclaimed funds sent through Western Union’s telegraphic money order system.58 This was permitted by state statute, which stipulated that funds unclaimed after a certain period of time would escheat to the state.59 But the Court found that Due Process foreclosed Pennsylvania’s recovery, because the state could not guarantee that the defendant would be free from subsequent repeat demands for the same funds, either by senders of money orders who would not be bound by the escheat judgment, or by other states.60 Without the possibility of "a full hearing and a final, authoritative determination," the lower court lacked the constitutional authority to resolve the dispute.61 This holding has been affirmed in other cases, which have repeatedly held that "[i]t ought to be and it is the object of courts to prevent the payment of any debt twice over."62

However, the redundant recoveries allowed by contradictory state and federal laws put defendants at risk of precisely this kind of unconstitutional repeat liability. Of course, state and federal statutes are permitted to create multiple causes of action for the same activity—there is nothing controversial in having two avenues for recovery on the same antitrust behavior. But "if a federal claim and a state claim arise from the same operative facts, and seek identical relief, an award of damages under both theories will constitute double recovery."63 In cases in which direct purchasers can claim all of the damages while protected from the pass-on defense under federal law, while indirect purchasers proceed under state law and claim to have suffered the same harm, the damages are not just excessive, they are redundant, since precisely the same "damages" may be claimed by multiple plaintiffs.

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2. Due Process Bars Excessive Punitive Damages

The Due Process clause of the Fourteenth Amendment also imposes a limit on the permissible amount of punitive damages. This limit applies to statutorily prescribed damages that are not expressly "punitive," including treble damages allowed in civil antitrust claims, because such damages serve the same deterrent and retributive functions, and are legislated with the same intent as punitive damages.64

As set forth in BMW of North America, Inc. v. Gore,65 and reaffirmed in State Farm Mutual Automobile Insurance Company v. Campbell 66 the propriety of extra-compensatory damages is determined by three "guideposts":

"(1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases."67

We will assume, for the purposes of this discussion, that an antitrust violation constitutes "reprehensible" conduct, because there is no doubt that the consequences of certain violations can be significant.68 However, the other factors do not support the imposition of such extreme damages.

The disparity between actual damages and damages awarded can be great under the current system, and could be unconstitutionally excessive under the Supreme Court’s test in Gore. The Court has held that punitive damages in a given case "must have a nexus to the specific harm suffered by the plaintiff."69 While this test is broad, the Court has made clear that the ratio between compensatory and punitive damages should only rarely exceed a single digit, and that damages calculations should account for legislative decisions to impose "double, treble, or quadruple damages to deter and punish."70 For instance, in Campbell, the Court struck down a punitive damages award of $145 million which accompanied compensatory damages award of $1 million, finding that such damages were excessive, and contrary to the Due Process Clause of the Fourteenth Amendment.

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The total amount at risk for our imaginary Corporation X—$1 billion or more for $100 million of damages—may be excessive under these standards. But if this is the case, then what is the "right" amount of damages? The answer is indicated in the third State Farm factor: the appropriate damages are those that the legislature has authorized: at most, treble damages.71 The current system of multiplying these damages by allocating them to both direct and indirect purchasers may violate the Constitution in extreme cases and, when compounded with fines levied in foreign jurisdictions, the risk of harmful over deterrence is hard to ignore, even if the result was not constitutionally problematic.


In his dissent in Illinois Brick, Justice Brennan argued that judges had adequate procedural means at their disposal to avoid duplicative liability, even absent repeal of Hanover Shoe.72 Among the mechanisms he suggested were consolidation of cases, application of the Sherman Act’s four year statute of limitations, and use of statutory interpleader under 28 U.S.C. § 1335.73 And in addition to those the Justice mentioned in the opinion, many of the states that have enacted Illinois Brick repealers have included provisions intended to reduce the risk of duplicative recovery. For example, Minnesota’s antitrust statute provides that "the court may take any steps necessary to avoid duplicative recovery against a defendant."74

But in spite of modern pre-trial consolidation tools, existing law provides no easy method of bringing cases together from state and federal court, or of accounting for potential future lawsuits by absent plaintiffs. Some, like state claims brought in parens patriae, are not subject to removal under CAFA and therefore cannot be easily consolidated with actions pending in Federal Court.75 And in any case, the Eleventh Amendment may obstruct use of statutory interpleader to resolve claims among the states.76 To overcome such obstacles, more creative solutions may be necessary—including potentially by going so far as to notify and "vouch in" absent parties, or by exploring other ways in which subsequent claimants may be bound by earlier judgments.

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Any efforts in this vein are likely to be both controversial and constitutionally problematic, to say the least. But the alternative option—allowing cases to proceed toward trial or settlement under the threat of redundant and excessive damages—is untenable. Therefore, both courts and legislatures should take action to bring sanity and stability back to antitrust law. In the meantime, defendants in such cases should use all existing tools as early and as aggressively as they can, in order to limit the impact of the current arrangement.

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1. Kyle Mach is an attorney at Munger, Tolles & Olson LLP in San Francisco. Bradley Markano is a Summer Associate at Munger, Tolles & Olson LLP in Los Angeles, and a law student at New York University. The views expressed herein are those of the authors, who do not speak for their firm, clients, or anyone else.

2. Richard Posner, Antitrust in the New Economy, 68 Antitrust L.J. 925, 940 (2001) ("No sooner does the Antitrust Division bring a case, but the states, and now the European Union, are likely to join the fray, followed at a distance by the antitrust plaintiffs’ class-action bar. The effect is to lengthen the original lawsuit, complicate settlement, magnify and protract the uncertainty engendered by the litigation, and increase litigation costs.").

3. See, e.g., Robert H. Lande, Five Myths About Antitrust Damages, 40 U.S.F. L. Rev. 651, 669 (2006) (arguing that a reduction in statutory damages "would lead to less deterrence than currently exists, would be more complicated, and . . . would lead to less business certainty.").

4. BMW of N. Am. v. Gore, 517 U.S. 559, 567 (1996).

5. See William Landes, Optimal Sanctions for Antitrust Violations, 50 U. Chi. L. Rev. 652, 653-57 (1983) (evaluating the economic balancing required to achieve optimal antitrust deterrence).

6. See id.

7. As is discussed below, the legislature’s "longstanding policy of encouraging vigorous private enforcement of the antitrust laws" has weighed particularly heavily in judicial interpretation of these laws. Ill. Brick Co. v. Ill., 431 U.S. 720, 745 (1977).

8. See Landes, supra note 6, at 655 ("[T]he purpose of penalties . . . is to deter inefficient offenses, not efficient ones. Stated differently, the optimal level of offenses is generally greater than zero.").

9. For a discussion of the special problems that overdeterrence presents in the antitrust context, See, e.g., Micheal K. Block & Joseph Gregory Sidak, The Cost of Antitrust Deterrence: Why Not Hang a Price Fixer Now and Then?, 68 Geo. L.J. 1131 (1980).

10. See infra, notes 54-58 and accompanying text.

11. 15 U.S.C. § 1 (2006). Federal prosecutors also have authority to regulate antitrust behavior under sections 1 and 2 of the Sherman Act, section 3 of the Robinson-Patman Act, and section 14 of the Clayton Act. See generally Bahadur S. Khan, Nickolas H. Barber, Antitrust Violations, 50 Am. Crim. L. Rev. 639, 680 n.8 (2013) (summarizing criminal antitrust regulations).

12. Id. at 640-41.

13. Id. at 651-52.

14. Stephen Calkins, An Enforcement Official’s Reflections on Antitrust Class Actions, 39 Ariz. L. Rev. 413, 428 (1997).

15. See Don Clark & Brent Kendall, AU Optronics Fined $500 Million in Price-Fixing Case, Wall Street Journal (Sept. 20, 2012),

16. 18 U.S.C. § 3571.

17. 15 U.S.C.A. § 1.

18. See United States’ Sentencing Memorandum at 23, United States v. AU Optronics Corp., 09-CR-0110 SI, 2012 WL 2120452 (N.D. Cal. June 11, 2012), available at

19. Associated Press, Taiwan Company Fined $500 Million for Price-Fixing, New York Times(Sept. 20, 2012),

20. For a record of the 115 corporate defendants fined over $10 Million for violation of the Sherman Act, see DOJ Antitrust Division, Sherman Act Violations Yielding A Corporate Fine of $10 Million or More, available at The DOJ records 26 defendants fined $100 million or more—all of them in 1999 or later. Id.

21. Global Antitrust Enforcement 2014 Mid-Year Report, Allen & Overy (June 24, 2014),

22. See id. at 4.

23. At the start, whether Corporation X faces any liability at all will likely depend on whether federal prosecutors think the case worth their time. The initial investigation and discovery for antitrust cases can be resource-intensive, and so individual plaintiffs often (though by no means always) wait for the state to make the first strike. See Spencer Weber Waller, The Incoherence of Punishment in Antitrust, 78 Chi.-Kent L. Rev. 207, 236 (2003) ("Frequently, but not always, . . . civil suits are preceded by government criminal prosecutions of the defendants, enabling the plaintiffs to take advantage of a statutory provision making any verdict in a government antitrust case prima facie evidence in subsequent private litigation.").

24. Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481 (1968).

25. Ill. Brick Co. v. Ill., 431 U.S. 720 (1977).

26. Hanover Shoe, Inc., 392 U.S. at 483-84.

27. Id. at 487-88.

28. Id. at 492-93.

29. Id.

30. Ill. Brick Co., 431 U.S. at 728.

31. Id. at 731.

32. See Kan. v. UtiliCorp United, Inc., 497 U.S. 199 (1990) (White, J., Dissenting) (objecting to denial of recovery to indirect purchasers in the highly-regulated gas market).

33. Note that the Illinois Brick rule is subject to certain "limited exceptions" which are beyond the scope of this article. See, e.g., In re ATM Fee Antitrust Litig., 686 F.3d 741, 749 (9th Cir. 2012) cert. denied, 134 S. Ct. 257 (2013).

34. See Antitrust Modernization Comm’n, Report and Recommendations 18 (2007), available at

35. See State v. Sterling Theatres Co., 394 P.2d 226, 228 (Wash. 1964) (noting "nearly identical wording" of a Washington state statute and the Sherman Act); Jonathan T. Tomlin, Dale J. Giali, Federalism and the Indirect Purchaser Mess, 11 Geo. Mason L. Rev. 157, 161 (2002) (observing that "state and federal antitrust laws generally proscribe the same type of conduct").

36. A few other states have accomplished the same end without resorting to formal legislation, by rejecting the Illinois Brick rule through judicial interpretation, even without a legislated repealer. See id. (describing this phenomenon (citing Comes. v. Microsoft Corp., 646 N.W.2d 440 (Iowa 2002); Bunker’s Glass Co. v. Pilkington, 47 P.3d 1119 (Ariz. Ct. App. 2002J; Hyde v. Abbott Labs., Inc., 473 S.E.2d 680, 684 (N.C. Ct. App. 1996)).

37. Cal. v. ARC Am. Corp., 490 U.S. 93, 102 (1989) (citing Ill. Brick Co., 431 U.S. at 746).

38. Younger v. Jensen, 26 Cal. 3d 397, 405 ( 1980).

39. See e.g., Ark. Stat. Code Ann. § 4-75-212(b)(1)(B) ("The court shall exclude from the amount of monetary relief awarded in the action any amount which duplicates amounts that have been awarded for the same injury already"); Cal. Bus. & Prof. Code § 16760(a)(1) ("The court shall exclude from the amount of monetary relief awarded in the action any amount of monetary relief (A) which duplicates amounts which have been awarded for the same injury, or (B) which is properly allocable to (i) natural persons who have excluded their claims . . . , and (ii) any business entity."); Fla. Stat. Ann. § 542.22(2) (in parens patriae action, "[t]he court shall exclude from the amount of monetary relief awarded in such action any amount of monetary relief which: (a) [d]uplicates amounts which have been awarded for the same injury"); Or. Rev. Stat. § 646.775(1)(b)(A) (similar); R.I. Gen. Laws § 6-36-12(g) (similar).

40. See D.C. Code § 28-4509(b) ("a defendant shall be entitled to prove as a partial or complete defense to a claim for damages that the illegal overcharge has been passed on to others who are themselves entitled to recover so as to avoid duplication of recovery of damages."); Haw. Rev. Stat. § 480-13(c) (2) (same); N.Y. Gen. Bus. Law § 340(6) (same); N.M. Stat. Ann. § 57-1-3(C) ("any defendant, as a partial or complete defense against a damage claim, may, in order to avoid duplicative liability, be entitled to prove that the plaintiff purchaser or seller in the chain of manufacture, production, or distribution who paid any overcharge . . ., passed on all or any part of such overcharge"); N.D. Cent. Code Ann. § 51-08.1-08(4).

41. See D.C. Code § 28-4509(c) (permitting courts to "delay disbursement of damages to avoid multiplicity of suits and duplication of recovery of damages"); Haw. Rev. Stat. § 480-13(c)(5); Minn. Stat. Ann. § 325D.57 (authorizing courts to "take any steps necessary to avoid duplicative recovery against a defendant"); Miss. Code Ann. § 75-21-9 (authorizing antitrust suits for both direct and indirect injuries, and stating that "[a]ll recoveries herein provided for may be sued for in one suit"); N.Y. Gen. Bus. Law § 340(6) (requiring that "the court shall take all steps necessary to avoid duplicative recovery, including but not limited to the transfer and consolidation of all related actions"); Vt. Stat. Ann. tit. 9 § 2465(b) ("The court shall take all necessary steps to avoid duplicate liability, including but not limited to the transfer or consolidation of all related actions.").

42. For example, in the TFT-LCD Antitrust Litigation, certain retailer plaintiffs took the position that a number of state laws permitted indirect purchase claims but did not permit a pass-on defense to those claims. Fortunately (for the defendants, anyway), the court rejected this argument. See In re TFT-LCD (Flat Panel) Antirust Litigation, No. 07-1827 SI, Dk. No. 315 (Dec. 26, 2012).

43. 15 U.S.C. § 15c.

44. See Cal. Bus. & Prof. Code § 16750 (West 1997 & Supp. 2002); Colo. Rev. Stat. § 6-4-111(3) (West 2002); Conn. Gen. Stat. § 35-32 (West 1997 & Supp. 2002); Del. Code Ann. tit. 6, § 2107 (1999); D.C. Code Ann. § 28-4507 (2001); Fla. Stat. Ann. § 542.22 (West 2002); Haw. Rev. Stat. § 48014 (2002); Idaho Code § 48-108 (Michie 1997 & Supp. 2002); 740 Ill. Comp. Stat. 10/7 (2002); Kan. Stat. Ann. § 50-103 (1994 & Supp. 2001); Md. Code Ann. [Com. Law 1] § 11-209 (2000 & Supp. 2002); Minn. Stat. Ann. § 325D.59 (West 1995); Neb. Rev. Stat. § 59-828 (2002); Nev. Rev. Stat. § 598A.160 (1999); Ohio Rev. Code Ann. § 109.81(A) (Anderson 2001); Okla. Stat. Ann. tit. 79, § 205 (West 2002); Or. Rev. Stat. § 646.775 (1999); R.I. Gen. Laws § 6-36-12(g) (2001); S.D. Codified Laws § 37-1-33 (Michie 2000); Utah Code Ann. § 76-10-916 (1999); Vt. Stat. Ann. tit. 9, § 2458 (1993 & Supp. 2002); Va. Code Ann. § 59.1-9.15 (Michie 2001); W. Va. Code § 47-18-17 (1999).

45. See id. This possibility of redundant trials may be exacerbated by the Supreme Court’s recent decision of Mississippi ex rel. Hood v. AU Optronics Corp., which held that a parens patriae suit on behalf of state residents is not subject to the same removal requirements as a class action by those same residents under the Class Action Fairness Act ("CAFA"). 134 S. Ct. 736 (2014). At best, this disparity in treatment raises the threat that antitrust defendants will be required to simultaneously defend functionally similar claims in both federal and state courts, depending on whether those claims are brought by class plaintiffs or state representatives.

46. Note that under the Federal Sentencing Guidelines, calculation of damages is a somewhat more complex process. Rather than merely applying a set multiplier to the estimated harm caused, fines are calculated based on a series of factors, including the size of the organization, the affected volume of commerce, and whether the defendant is a repeat offender. See U.S. Sentencing Guidelines Manual § 1B1.1 (2013).

47. See James Kanter, Europe Fines Electronics Makers $1.92 Billion, New York Times (Dec. 5, 2012),

48. See Tomlin & Giali, supra note 35, at 173 ("The borderline between legitimate, productive competitive behavior and anticompetitive behavior is not always well defined, such as the distinction between (illegal) price fixing and (not-illegal) tacit collusion.").

49. See id (describing the challenges of defending modern antitrust cases).

50. As the Supreme Court has noted:

"The imposition of criminal liability on a corporate official, or for that matter on a corporation directly, for engaging in such conduct which only after the fact is determined to violate the statute because of anticompetitive effects, without inquiring into the intent with which it was undertaken, holds out the distinct possibility of over-deterrence; salutary and procompetitive conduct lying close to the borderline of impermissible conduct might be shunned by businessmen who chose to be excessively cautious in the face of uncertainty regarding possible exposure to criminal punishment for even a good-faith error of judgment."
United States v. United States Gypsum Co., 438 U.S. 422, 440-41 (1978). See also Edward D. Cavanagh, Detrebling Antitrust Damages: An Idea Whose Time Has Come?, 61 Tul. L. Rev. 777, 801 (1987) ("Fear of treble damages leads corporate managers to shy away from conduct which, although permissible, may fall close enough to the mythical line separating legality from illegality to trigger a lawsuit. The threat of treble damages, thus, deters good as well as bad conduct and may deny society the benefits of procompetitive business practices.").

51. See Tomlin & Giali, supra note 35, at 176 ("Under the current system, the confluence of factors determining pass-through and the presence of highly varying state laws lead to outcomes in which firms levying identical overcharges and causing identical reductions in social welfare can incur penalties that are dramatically different.").

52. See Richard Posner, Antitrust Law: An Economic Perspective 228 (1976) ("Students of the antitrust laws have been appalled by the wild and woolly antitrust suits that the private bar has brought—and won. It is felt that many of these would not have been brought by a public agency and that, in short, the influence of the private action on the development of antitrust doctrine has been on the whole a pernicious one."); Edward D. Cavanagh, Detrebling Antitrust Damages: An Idea Whose Time Has Come?, 61 Tul. L. Rev. 777, 809 (1987) ("The lure of treble damages may encourage the filing of baseless suits which otherwise might not have been filed.").

53. F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 165 (2004).

54. The DOJ records that of the 115 highest fines levied against criminal antitrust defendants, only 16 were issued to domestic corporations. DOJ Antitrust Division, Sherman Act Violations Yielding A Corporate Fine of $10 Million or More, available at The DOJ records 26 defendants fined $100 million or more—all of them in 1999 or later. Id.

55. Global Antitrust Enforcement 2014 Mid-Year Report, supra note 21, at 4.

56. The harmful effect on foreign corporations is exacerbated by increasingly-vigorous antitrust measures taken by other governments: at the time of this writing, both Brazil and the European Union have issued criminal antitrust fines of more than twice the amount of the U.S. Department of Justice. See id. at 2 (reporting a total of $1.95 billion in cartel fines by the European Union and $1.58 billion in fines by Brazil as of mid-2014).

57. In re N. Dist. Of Cal. "Dalkon Shield" IUD Prods. Liab. Litig., 526 F. Supp. 887, 900 (1981).

58. W. Union Tel. Co. v. Pa., 368 U.S. 71 (1961).

59. Id. at 72-73.

60. Id.

61. Id. at 80.

62. Harris v. Balk, 198 U.S. 215, 226 (1905); see also Cities Serv. Co. v. McGrath, 342 U.S. 330, 334-35 (1952) (holding that the Fifth Amendment required that defendant be allowed to recoup property seized by the U.S. government if future claims from foreign governments "would effect a double recovery against" the defendant).

63. Medina v. Dist. of Columbia, 643 F.3d 323, 326 (D.C. Cir. 2011) (citations omitted).

64. See Tex. Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 639 (1981) (refusing to find a right of contribution in antitrust law, holding that "[t]he very idea of treble damages [in antitrust] reveals an intent to punish past, and to deter future, unlawful conduct, not to ameliorate the liability of wrongdoers"); Bateman v. Am. Multi-Cinema, Inc., 623 F.3d 708, 715 (9th Cir. 2010) ("[T]he treble damages provisions in the Clayton and Sherman Acts act as statutory punitive measures in which two thirds of the recovery is not remedial and inevitably presupposes a punitive purpose." (internal quotation marks omitted)).

65. 517 U.S. 559 (1996).

66. 538 U.S. 408 (2003).

67. Gore, 517 U.S. at 575.

68. However, even this point may be subject to debate—especially when damages are extreme. In the vast majority of antitrust cases, the harm is purely economic, not physical, there is rarely disregard of health or safety, and many plaintiffs are large corporations rather than financially vulnerable individuals. This lack of "indicia of reprehensibility" suggests that courts should take care to limit punitive damages. See S. Union Co.v. Irvin, 563 F.3d 788, 791-92 (9th Cir. 2009) (reversing a punitive damage award against defendant after determining that the harm was purely economic, victim was a large corporation, and "most of the indicia of reprehensibility do not appear").

69. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 422 (2003)

70. Id. at 424 (finding such legislative awards "instructive," but not determinative).

71. In Gore, the Court held that "legislative judgments concerning appropriate sanctions" require "substantial deference." Gore, 517 U.S. at 583 (internal citations omitted).

72. Ill. Brick Co. v. Ill., 431 U.S. 720, 761 (1977) (Brennan, J., Dissenting) ("[A]s a practical matter, existing procedural mechanisms can eliminate this danger in most instances. Even though . . . no procedure currently exists which can eliminate the possibility entirely.").

73. Id. at 761-62.

74. Minn. Stat. §325D.57.

75. Miss. ex rel. Hood v. AU Optronics Corp,. 134 S. Ct. 736 (2014).

76. Cory v. White, 457 U.S. 85, 89-90 (1982).

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