Private enforcementand judicial discretion in the evolution of antitrust in the United States

Journal of Competition Law and Economics

Volumn 8, Issue 1, 2012, Pages 187-230

  Rajabiun, Reza ^a  

^a RYERSON UNIVERSITY   (Canada)

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[No Author keywords available]

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EID: 84857927528     PISSN: 17446414     EISSN: 17446422     Source Type: Journal    
DOI: 10.1093/joclec/nhs003     Document Type: Article

References (193)

1. See, e.g., Sean Farhang, Congressional Mobilization of Private Litigants: Evidence from the Civil Rights Act of 1991, 6 J. EMPIRICAL LEGAL STUD. 1 (2009).
2. Eric Mongelard, Corporate Civil Liability for Violations of International Humanitarian Law, 88 INT'L REV. RED CROSS 665 (2006).
3. Tom Allen, Civil Liability for Sexual Exploitation in Professional Relationships, 59 MOD. L. REV. 56 (1996).
4. Michael J. Piore & Sean Safford, Changing Regimes of Workplace Governance: Shifting Axes of Social Mobilization and the Challenge to Industrial Relations Theory, 45 INDUS. RELATIONS 299 (2006).
5. Yolande Hiriart, David Martimort & Jerome Pouyet, On the Optimal Use of Ex Ante Regulation and Ex Post Liability, 84 ECON. LETTERS 231 (2004).
6. Wendy Naysnerski & Tom Tietenberg, Private Enforcement of Federal Environmental Law, 68 LAND ECON. 28 (1992).
7. Edward D. Cavanagh, The Private Antitrust Remedy: Lessons from the American Experience, 41LOY. U. CHI. L.J. 629 (2010).
8. Gillian Hadfield & Eric Talley, On Public versus Private Provision of Corporate Law, 22 J.L. ECON. & ORG. 414 (2006).
9. Simeon Djankov, Rafael La Porta, Florencio Lopez-de-Silanes & Andrei Shleifer, The Law and Economics of Self Dealing, 88 J. FIN. ECON. 430 (2008).
10. John Armour, Bernard Black, Brian Cheffins & Richard Nolan, Private Enforcement of Corporate Law: An Empirical Comparison of the United Kingdom and the United States, 6 J. EMPIRICAL LEGAL STUD. 687 (2009).
11. Nuno Garoupa & Daniel M. Klerman, Corruption and Private Law Enforcement: Theory and History, 6 REV. L. & ECON. 3 (2010).
12. Private parties that have not been directly injured by an illegal act, but have access to information and relatively strong incentives to enforce public regulations, can also be granted rights of standing in order to enhance the credibility of public laws (for example, environmental, human rights, consumer, or business associations; employees or competing firms with knowledge about unlawful behavior; and so forth).
13. For an analysis of different strategies in the design of private legal mechanisms necessary for identifying unlawful behavior in business organizations, see Pamela H. Bucy, Private Justice, 76 S. CAL. L. REV. 1 (2002).
14. For historical and theoretical perspectives on the tensions between public and private legal institutions, see, e.g., Katherine Fischer Drew, Public vs. Private Enforcement of the Law in the Early Middle Ages: Fifth to Twelfth Centuries, 70 CHI.-KENT L. REV. 1583 (1995).
15. Morton J. Horwitz, The History of the Public/Private Distinction, 130 U. PA. L. REV. 1423 (1982).
16. Edward L. Glaeser & Andrei Shleifer, The Rise of the Regulatory State, 41 J. ECON. LIT. 401 (2003).
17. Suzan Rose-Ackerman, Regulation and the Law of Torts, 81 AM. ECON. REV. 54 (1991).
18. Peter H. Schuck, FDA Preemption of State Tort Law in Drug Regulation: Finding the Sweet Spot, 13 ROGER WILLIAMS U. L. REV. 73 (2008).
19. Guido Calabresi, Toward A Unified Theory of Torts, 1 J. TORT L. 1 (2007).
20. For a general review of economic theories of legal procedure, see A. Mitchell Polinsky, Private versus Public Enforcement of Fines, 9 J. LEGAL STUD. 105 (1980).
21. Nuno Garoupa, The Theory of Optimal Law Enforcement, 11 J. ECON. SURVEYS 267 (1997).
22. A. Mitchell Polinsky & Steven Shavell, Public Enforcement of Law, in ENCYCLOPEDIA OF LAW AND ECONOMICS: CRIMINAL LAW AND ECONOMICS (Nuno Garoupa ed., Edward Elgar Publishing 2009).
23. Reza Rajabiun, Private Enforcement of Law, in ENCYCLOPEDIA OF LAW AND ECONOMICS: CRIMINAL LAW AND ECONOMICS (Nuno Garoupa ed., Edward Elgar Publishing 2009).
24. Merger review provides a useful illustration of the potential advantages of centralized public regimes for implementation of public laws. Private rights of legal action by aggrieved consumers or minority investors concerned about the costs of a particular transaction proposed by the management might constrain the prospects for inefficient mergers and acquisitions. However, decentralization of merger review can prevent or delay efficiency enhancing transactions.
25. For further analysis of the problems in the allocation of enforcement authority in mergers cases, see Jonathan L. Diesenhaus, Competitor Standing to Challenge a Merger of Rivals: The Applicability of Strategic Behavior Analysis, 75 CAL. L. REV. 2057 (1987).
26. Joseph F. Broadley, Antitrust Standing in Private Merger Cases: Reconciling Private Incentives and Public Enforcement Goals, 94 MICH. L. REV. 1 (1995).
27. Courage v. Crehan, C-453/99, 2001 E.C.R. I-6297,¶¶ 26 & 27 (EC) (emphasis added).
28. For discussions of the potential role of private enforcement in the development of EU competition law, see, e.g., David J. Gerber, Modernizing European Competition Law: A Developmental Perspective, 22 EUR. COMPETITION L. REV. 122 (2001).
29. Donncadh Woods, Private Enforcement of Antitrust Rules: Modernization of the EU Rules and the Road Ahead, 16 LOY. CONSUMER L. REV. 431 (2004).
30. Michael Van Hoof, Will the New European Union Competition Regulation Increase Private Litigation? An International Comparison, 19 CONN. J. INT'L L. 659 (2004).
31. Various studies have tried to draw lessons from the U.S. experience for the design of more robust enforcement institutions in other jurisdictions.
32. See, e.g., Douglas H. Ginsburg, Comparing Antitrust Enforcement in the United States and Europe, 1 J. COMPETITION L. & ECON. 427 (2005).
33. Donald I. Baker, Revisiting History: What Have We Learned About Private Antitrust Enforcement That We Would Recommend to Others?, 16 LOY. CONSUMER L. REV. 379 (2004).
34. Eur. Comm'n, Study on the Conditions of Claims for Damages in Case of Infringement of EC Competition Rules (also known as The Ashurst Report) (2004), available at http://ec.europa.eu/competition/antitrust/actionsdamages/study.html.
35. For an analysis of impediments to the development of decentralized mechanisms for the enforcement of national and EU competition laws, see Reza Rajabiun, Strategic Considerations in the Emergence of Private Action Rights, 32 WORLD COMPETITION 409 (2009).
36. Attempts to enhance private rights of action in the past few years have been more successful in some EU countries than others.
37. See Helmut Brokelmann, Enforcement of Articles 81 and 82 EC under Regulation 1/2003: The Case of Spain and Portugal, 29 WORLD COMPETITION 535 (2006)
38. Selene Rosso, Ways to Promote Workable Private Antitrust Enforcement in Italy, 32 WORLD COMPETITION 305 (2009).
39. Andreas Klees, Breaking the Habits: The German Competition Law After the 7th Amendment to the Act Against Restraints of Competition (GWB), 7 GERMAN L.J. 399 (2006).
40. Wolfgang Wurmnest, A New Era for Private Antitrust Litigation in Germany? A Critical Appraisal of the Modernized Law Against Restraints of Competition, 6 GERMAN L.J. 1173 (2005).
41. Marc A. Sittenreich, The Rocky Path for Private Directors General: Procedure, Politics, and the Uncertain Future of EU Antitrust Damages Actions, 78 FORDHAM L. REV. 2701 (2010).
42. R. Shyam Khemani, Application of Competition Law: Exemptions and Exceptions, presented at the United Nations Conference on Trade and Development (No. UNCTAD/DITC/CLP/ Misc. 25, 2002).
43. For a theoretical analysis of the interplay between information and fixed costs in institutions for the production of public goods, see Gerven Fearon & Lutz-Alexander Busch, Auditing and Competitive Bidding in the Public Sector, 90 J. PUB. ECON. 657 (2006).
44. Hannah L. Buxbaum, The Private Attorney General in a Global Age: Public Interests in Private International Antitrust Litigation, 26 YALE J. INT'L L. 219 (2001).
45. Frank H. Easterbrook, The Limits of Antitrust, 63 TEX. L. REV. 1 (1984).
46. Maarten Pieter Schinkel & Jan Tuinstra, Imperfect Competition Law Enforcement, 24 INT'L J. INDUS. ORG. 1267 (2006).
47. Alan Delvin & Michael Jacobs, Antitrust Error, 52 WM. & MARY L. REV. 75 (2010).
48. Gary S. Becker, Crime and Punishment: An Economic Approach, 76 J. POL. ECON. 169 (1968).
49. Michael K. Block & J. Gregory Sidak, The Cost of Antitrust Deterrence: Why Not Hang a Price Fixer Now and Then? 68 GEO. L.J. 1131 (1980).
50. Gary S. Becker, Noble Prize Lecture: The Economic Way of Looking at Behavior, 101 J. POL. ECON. 385 (1993).
51. David D. Friedman, Why Not Hang Them All? On the Virtues of Inefficient Punishment, 107 J. POL. ECON. 259 (1999).
52. Mats Persson & Claes-Henric Siven, The Becker Paradox and Type I versus Type II Errors in the Economics of Crime, 48 INT'L ECON. REV. 221 (2007).
53. While Australia has developed a limited system of private access since the 1970s, private actions against anticompetitive practices are rare in legal systems of other English-speaking countries, such as Canada and the United Kingdom.
54. See R. Jack Roberts, International Comparative Analysis of Private Rights of Access (commissioned by Industry Canada, Competition Bureau, 2000).
55. Kent Roach & Michael J. Trebilicock, Private Enforcement of Competition Laws, 34 OSGOODE HALL L.J. 461 (1997).
56. Mahmud Jamal, Constitutional Issues in Competition Litigation, 41 CAN. BUS. L.J. 66 (2004).
57. Karen Yeung, Privatizing Competition Regulation, 18 OXFORD J. LEGAL STUD. 581 (1998).
58. On the importance of devolving regulatory authority in developing countries, see Jean Tirole, The Institutional Infrastructure of Competition Policy, presented at the World Bank-CAE Conference on Governance, Equity, and Global Markets (1999)
59. For a broad and updated review of recent developments in private antitrust law around the world, see THE INTERNATIONAL HANDBOOK ON PRIVATE ENFORCEMENT OF COMPETITION LAW (Albert A. Foer, Jonathan W. Cuneo, Randy Stutz & Bojana Vrcek eds., Edward Elgar Publishing 2010).
60. This suggests that the damage multiplier under section 4 of the Clayton Act (15 U.S.C. § 15) does not fully explain why private enforcement incentives are relatively strong in the United States compared with other countries with statutory or general tort private rights of action. The statutory damage multiplier in the United States remains the source of significant controversy in the application of the Sherman Act.
61. See Mitchell A. Polinsky, Detrebling versus Decoupling Antitrust Damages: Lessons from the Theory of Enforcement, 74 GEO. L.J. 1231 (1986).
62. Jaynie L. Randall, Does De-Trebling Sacrifice Recoverability of Antitrust Awards?, 23 YALE J. ON REG. 311 (2006).
63. Edward D. Cavanagh, Detrebling Antitrust Damages in Monopolization Cases, 76 ANTITRUST L.J. 100 (2009).
64. John D. Guilfoil, Private Enforcement of U.S. Antitrust Law, 10 ANTITRUST BULL. 747 (1965).
65. William F. Shughart II, Private Antitrust Enforcement Compensation, Deterrence or Extortion?, 3 REGULATION 53 (1990).
66. There are some inconsistencies between historical accounts of the number of private antitrust cases filed before World War II, potentially because of differences in compiling the data from original courts documents. These inconsistencies do not change the overall picture of judicial resistance to private enforcement of statutory prohibitions against anticompetitive practices.
67. Long-term data on private and public enforcement used in this article have been compiled from a number of different sources. The older figures on the federal agencies were part of a project to take an inventory of historical activities and are available from the American Antitrust Institute. More recent data are from the Office of the Superintendent of U.S. Courts and compilations of the sourcebook of legal statistics put together at SUNY Albany Law School. There are discrepancies between these and other data sources, since filings can be counted differently and documentation on original data collection methodology is not available. For this reason, we focus on changing patterns rather than absolute numbers, using consistent sources where possible.
68. The erosion of legal constraints against anticompetitive agreements and monopolistic practices in the 1980s and 1990s is usually viewed in terms of a growing aversion to false positive errors by scholars and jurists associated with the Harvard and Chicago schools of antitrust thought.
69. William H. Page, The Chicago School and the Evolution of Antitrust: Characterization, Antitrust Injury, and Evidentiary Sufficiency, 75 VA. L. REV. 1221 (1989).
70. William E. Kovacic, The Intellectual DNA of Modern U.S. Competition Law for Dominant Firm Conduct: The Chicago/Harvard Double Helix, COLUM. BUS. L. REV. 1 (2007).
71. HOW THE CHICAGO SCHOOL OVERSHOT THE MARK: THE EFFECT OF CONSERVATIVE ECONOMICS ON U.S. ANTITRUST (Robert Pitofsky ed., Oxford Univ. Press 2008).
72. For discussions of basic elements and implications of the rule-of-reason, or economic, approach to antitrust liability, see William H. Page, Antitrust Damages and Economic Efficiency: An Approach to Antitrust Injury, 47. U. CHI. L. REV. 467 (1980).
73. J. Gregory Sidak, Rethinking Antitrust Damages, 33 STAN. L. REV. 329 (1981).
74. William M. Landes, Optimal Sanctions for Antitrust Violations, 50 U. CHI. L. REV. 652 (1983).
75. William H. Page, The Scope of Liability for Antitrust Violations, 37 STAN. L. REV. 1445 (1985).
76. The erosion of per se rules continues to be an important issue in the United States. For instance, in 2007, the U.S. Supreme Court overruled the long-operative precedent established in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911), prohibiting resale price maintenance on a per se basis. In Leegin Creative Leather Products, Inc. v. PSKS, Inc., 127 S. Ct. 2705 (2007), the Court declared that minimum price agreements may benefit consumers and hence should be subject to case-by case-analysis. Proponents of the rule-of-reason in the courts tend to emphasize the costs of false positive errors in a system based on per se rules and private rights of action.
77. See Maurice E. Stucke, Does the Rule of Reason Violate the Rule of Law?, 42 U.C. DAVIS L. REV. 1375 (2009).
78. Although most studies separate the analysis of substantive and procedural elements of the law, the idea that the credibility of public laws depends on their substantive design can be traced to the seminal contribution by CESARE BECCARIA, ON CRIMES AND PUNISHMENTS (1764). He argued that, to prevent crimes, one needed to "make sure that the laws are clear and simple and that the whole strength of the nation is concentrated on defending them." The reason for this conjecture was that, [i]n a nation indolent from the nature of the climate, the uncertainty of the laws confirms and increases men's indolence and stupidity. In a voluptuous but active nation, this uncertainty occasions a multiplicity of cabals and intrigues, which spread distrust and diffidence through the hearts of all, and dissimulation and treachery are the foundation of their prudence. In a brave and powerful nation, this uncertainty of the laws is at last destroyed, after many oscillations from liberty to slavery, and from slavery to liberty again.
79. See James M. Buchanan & Dwight R. Lee, Private Interest Support for Efficiency Enhancing Antitrust Policies, 30 ECON. INQUIRY 218 (1992).
80. See, e.g., ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF (Basic Books, Inc. 1978).
81. William J. Baumol & Janusz A. Ordover, Use of Antitrust to Subvert Competition, 28 J. L. & ECON. 247 (1985).
82. Edward A. Snyder & Thomas E. Kauper, Misuse of the Antitrust Laws: The Competitor Plaintiff, 90 MICH. L. REV. 551 (1991).
83. Warren F. Schwartz & Abraham L. Wickelgren, Optimal Antitrust Enforcement: Competitor Suits, Entry, and Post-entry Competition, 95 J. PUB. ECON. 967 (2011).
84. For a review of empirical evidence on the economic implications of the U.S. antitrust system, see Gregory J. Werden, Assessing the Effects of Antitrust Enforcement in the United States, 156 DE ECONOMIST 433 (2008).
85. For recent cross-country studies on the links between competition regulations and market outcomes, see Hiau Looi Kee & Bernard Hoekman, Imports, Entry and Competition Law as Market Disciplines, 51 EUR. ECON. REV. 831 (2007).
86. Stefan Voigt, The Effects of Competition Policy on Development: Cross-Country Evidence Using Four New Indicators, 45 J. DEV. STUD. 1225 (2009).
87. Keith N. Hylton & Fei Deng, Antitrust Around the World: An Empirical Analysis of the Scope of Competition Laws and Their Effects, 74 ANTITRUST L.J. 271 (2007).
88. Although evidence supporting private interest theories of the antitrust may be weak, it is important to note that there is also little systematic evidence on the public benefits of antitrust in terms of consumer welfare in the United States.
89. See Robert W. Crandall & Clifford Winston, Does Antitrust Policy Improve Consumer Welfare? Assessing the Evidence, 17 J. ECON. LIT. 3 (2003).
90. William H. Page & Roger D. Blair, Controlling the Competitor Plaintiff in Antitrust Litigation, 91 MICH. L. REV. 111 (1992).
91. For a given set of institutional arrangements, there is usually a tradeoff between Type I & II errors. Institutional adaptations that mitigate the costs of both types of decision errors tend to be rare and hard to replicate by other jurisdictions. In fact, an efficient adaptation in one jurisdiction may not be optimal for another. Differentiation in existing components of the system is a common process in evolutionary adaptations.
92. For an analysis of optimal substantive differentiation in the design of competition laws, see Arndt Christiansen & Wolfgang Kerber, Competition Policy with Optimally Differentiated Rules Instead of "Per se Rules vs. Rule of Reason", 2 J. COMPETITION L. & ECON. 215 (2006).
93. For overviews of economic and legal scholarship on the evolution of institutions, see Avner Greif, Commitments, Coercion and Markets: The Nature and Dynamics of Institutions Supporting Exchange, in HANDBOOK OF NEW INSTITUTIONAL ECONOMICS (Claude Ménard & Mary M. Shirley eds., Springer 2005).
94. LAW, ECONOMICS AND EVOLUTIONARY THEORY (Peer Zumbansen & Gralf-Peter Callliess eds., Edward Elgar 2010).
95. DAVID D. FRIEDMAN, LAW'S ORDER: WHAT ECONOMICS HAS TO DO WITH LAW AND WHY IT MATTERS 225-29 (Princeton Univ. Press 2000).
96. David D. Friedman & William Sjostrom, Hanged for a Sheep: The Economics of Marginal Deterrence, 22 J. LEGAL STUD. 345 (1993).
97. If individuals are risk neutral, it might be desirable to set the probability of punishment as low as possible (to save on enforcement costs) and impose maximal punishments. In the presence of risk aversion, the optimal fine is generally less than the maximal, and the optimal probability will approach one as the costs of enforcement go to zero. The first corner solution is suboptimal, while the second one may not be feasible due to the costs of enforcement.
98. See A. Mitchell Polinsky & Steven Shavell, The Optimal Tradeoff between the Probability and Magnitude of Fines, 69 AM. ECON. REV. 880 (1979).
99. I.P.L. Png, Optimal Subsidies and Damages in the Presence of Judicial Error, 6 INT'L REV. L. & ECON. 101 (1986).
100. For perspectives on the direct costs of errors, see Richard A. Posner, An Economic Approach to Legal Procedure and Judicial Administration, 2 J. LEGAL STUD. 39 (1973).
101. GORDON TULLOCK, TRIALS ON TRIAL: THE PURE THEORY OF LEGAL PROCEDURE (Columbia Univ. Press 1980).
102. A growing aversion to the direct and indirect costs of false positive errors helps explain why heavy punishment and low probability strategies have been more or less abandoned by modern democratic societies. Nevertheless, it is important to point out that hang-them-all strategies that do not account for the costs of false positive errors can persist with democratic political support when the costs of the false positives are targeted at particular sub-groups of the population.
103. David D. Friedman, Efficient Institutions for the Private Enforcement of Law, 13 J. LEGAL STUD. 379 (1984).
104. Since enforcement is costly, catching all offenders will not be feasible, and the actual probability of identification and deterrence will be less than one. In this case, the optimal punishment would be the net external harm and enforcement costs, multiplied by the probability that unlawful activities are not detected and punished. This helps explain why a damage multiplier might be necessary for deterring activities that are difficult to identify. Nevertheless, higher punishments can also generate higher false positive errors.
105. A. Mitchell Polinsky & Steven Shavell, Contribution and Claim Reduction Among Antitrust Defendants: An Economic Analysis, 33 STAN. L. REV. 447 (1981).
106. In theory, a strong aversion to the risks of false negative errors or under-enforcement implies that the magnitude of the optimal penalty could approach the maximal (that is, the wealth of the offender in the case of fines) when the costs of false positive errors is small.
107. Gary S. Becker & George J. Stigler, Law Enforcement, Malfeasance and Compensation of Enforces, 3 J. LEGAL STUD. 1 (1974).
108. Nuno Garoupa, & Daniel Klerman, Optimal Law Enforcement with a Rent Seeking Government, 4 AM. L. & ECON. REV. 116 (2002).
109. Nuno Garoupa & Mohamed Jellal, A Note on Optimal Law Enforcement Under Asymmetric Information, 14 EUR. J.L. & ECON. 5 (2002).
110. The potential for bypassing regulators through the courts can increase the costs of regulatory capture facing potential offenders and explains why private rights of action can function as a tool against corruption..
111. Jean-Jacques Laffont & David Martimort, Transaction Costs, Institutional Design, and the Separation of Powers, 42 EUR. ECON. REV. 673 (1998).
112. Zhijun Chen, Private Enforcement Against Collusion in Mechanism Design (MPRA Paper No. 873, 2006).
113. For an analysis of the limits of private enforcement against different classes of corrupt behavior, see Andrew Samuel, Preemptive Collusion Among Corruptible Law Enforcers, 71 J. ECON. BEHAV. ORG. 441 (2009).
114. See Michael K. Block, Frederick C. Nold & J. Gregory Sidak, The Deterrent Effect of Antitrust Enforcement, 89 J. POL. ECON. 429 (1981).
115. For basic elements of the argument against private enforcement, see William M. Landes & Richard A. Posner, The Private Enforcement of Law, 4 J. LEGAL STUD. 1 (1975).
116. William Breit & Kenneth G. Elzinga, Private Antitrust Enforcement: The New Learning, 28 J.L. & ECON. 405 (1985).
117. Benefits of coordination (for example, scale economies and reduced duplication in enforcement costs) can be attained in both public and private monopolies.
118. See, e.g., David Rosenberg & James P. Sullivan, Coordinating Private Class Action and Public Agency Enforcement of Antitrust Law, 2 J. COMPETITION L. & ECON. 159 (2006).
119. R. Preston McAfee, Hugo Mialon & Sue Mialon, Private v. Public Antitrust Enforcement: A Strategic Analysis, 92 J. PUB. ECON. 1863 (2008).
120. Ben Depoorter & Francesco Parisi, Modernization of European Antitrust Enforcement: The Economics of Regulatory Competition, 13 GEO. MASON L. REV. 309 (2005).
121. Oliver E. Williamson, Credible Commitments: Using Hostages to Support Exchange, 73 AM. ECON. REV. 519 (1983).
122. Oliver E. Williamson, Delimiting Antitrust, 76 GEO. L.J. 271 (1987).
123. See generally MORTON J. HORWITZ, THE TRANSFORMATION OF AMERICAN LAW: 1780-1860 (Harvard Univ. Press 1977).
124. Lawrence M. Friedman, Civil Wrongs: Personal Injury in the Late 19th Century, 12 AM. BAR FOUNDATION RES. J. 351 (1987).
125. LAWRENCE M. FRIEDMAN, A HISTORY OF AMERICAN LAW (Simon & Schuster 2005).
126. WILLIAM LETWIN, LAW AND ECONOMIC POLICY IN AMERICA: THE EVOLUTION OF THE SHERMAN ANTITRUSTACT (Univ. Chicago Press 1956).
127. For an elegant treatment of the economic rationale for the use of public laws to structure market behavior in this era, see, John Bates Clark, The Modern Appeal to Legal Forces in Economic Life, Presidential Address at the 7th Meeting of the American Economic Association (1894).
128. For instance, no specific funds were allocated to antitrust enforcement between 1890 and 1904. The average number of cases in this period was less than two per year.
129. For basic information on the evolution of public enforcement, see U.S. Dep't of Justice, Timeline of Antitrust Enforcement Highlights at the Department of Justice, http://www.justice.gov/atr/timeline.htm.
130. William E. Kovacic, Private Monitoring and Antitrust Enforcement: Paying Informants to Reveal Cartels, 69 GEO. WASH. L. REV. 766 (2000).
131. Cecile Aubert, Patrick Rey & William E. Kovacic, The Impact of Leniency and Whistle-Blowing Programs on Cartels, 24 INT'L J. INDUS. ORG. 1241 (2006).
132. Charles D. Kolstad, Thomas S. Ulen & Gary V. Johnson, Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements?, 80 AM. ECON. REV. 888 (1990).
133. Keith N. Hylton, When Should We Prefer Tort Law to Environmental Regulation?, 41 WASHBURN L.J. 515 (2001).
134. Sean Farhang, Public Regulation and Private Lawsuits in the American Separation of Power System, 52 AM. J. POL. SCI. 821 (2008).
135. William L. Letwin, Congress and the Sherman Antitrust Law: 1887-1890, 23 U. CHI. L. REV. 221 (1956).
136. Thomas J. Dilorenzo, The Origins of Antitrust: An Interest Group Perspective, 5 INT'L REV. L. & ECON. 73 (1985).
137. Sanford D. Gordon, Attitudes Towards Trusts Prior to the Sherman Act, 30 S. ECON. J. 156 (1963).
138. The Tariff Act of 1890 (the McKinley Tariff) was passed just three months after the Sherman Act and was sponsored by Senator Sherman. In a speech, which was later withdrawn from the Congressional Record for "revision," Senator Sherman confirmed this point and expressed concern about the potential anticompetitive impact of the tariffs.
139. For discussions of the critical importance of the concept of the relevant market in the application of antitrust law, see Gregory J. Werden, The History of Antitrust Market Delineation, 76 MARQ. L. REV. 123 (1992).
140. Robert Pitofsky, New Definitions of Relevant Market and the Assault on Antitrust, 90 COLUM. L. REV. 1805 (1990).
141. Adriaan Ten Kate & Gunnar Niels, The Relevant Market: A Concept Still in Search of a Definition, 5 J. COMPETITION L. & ECON. 297 (2009).
142. For an analysis of the volatility of antitrust enforcement and its impact of particular firms before the adoption of the Clayton Act, see George Bittlingmayer, The Stock Market and Early Antitrust Enforcement, 36 J.L. & ECON. 1 (1993).
143. Standard Oil of New Jersey v. U.S., 221 U.S. 1 (1911).
144. For historical studies of the role of public antitrust in the regulation of the energy industry, see IDA M. TARBELL, THE HISTORY OF THE STANDARD OIL COMPANY (McClure, Phillips 1904).
145. DANIEL H. YERGIN, THE PRIZE: THE EPIC QUEST FOR OIL, MONEY, AND POWER (Simon & Schuster 1991).
146. Standard Oil and a number of other high-profile cases from the late 19th century to the early 20th century often obscure the fact that the federal governments of that period had limited incentives to enforce the Sherman Act in a systematic manner, as is documented by historical measures of public cases.
147. ELLIS WAYNE HAWLEY, THE NEW DEAL AND THE PROBLEM OF MONOPOLY: A STUDY IN ECONOMIC AMBIVALENCE (Fordham Univ. Press 1995).
148. The sudden rise in the level of criminal case filings in the late 1930s can be attributed to the growing utilization of antitrust law against cartels based in other industrialized countries after the appointment of Thurman Arnold to the Antitrust Division of the Department of Justice.
149. See TONY ALLAN FREYER, ANTITRUST AND GLOBAL CAPITALISM, 1930-2004 (Cambridge Univ. Press 2006).
150. Consequently, despite the apparently larger number of criminal filings, the federal government continued to lack commitment to domestic enforcement. Wilson D. Miscamble, Thurman Arnold Goes to Washington: A Look at Antitrust Policy in the Later New Deal, 56 BUS. HIST. REV. 1 (1982).
151. Alan Brinkley, The Antimonopoly Ideal and the Liberal State: The Case of Thurman Arnold, 80 J. AM. HIST. 557 (1993).
152. Harold Cole & Lee Ohanian, New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis, 112 J. POL. ECON. 779 (2004).
153. However, others have found that the impact of these policies on the production of cartelized industries was negative during the depression. Evidence from the 1930s in the United States contradict the "efficient cartel" hypothesis.
154. See Jason E. Taylor, The Output Effects of Government Sponsored Cartel During the New Deal, 50 J. INDUS. ECON. 1 (2002).
155. Richard B. Wilson, The Eisenhower Antitrust Policy: Progressivism or Conservatism?, 12 POL. RES. Q. 559 (1959).
156. Theodore P. Kovaleff, The Antitrust Record of the Eisenhower Administration, 21 ANTITRUST BULL. 589 (1976).
157. The growing reliance on economic analysis of effects in merger review increased demands on the public enforcers starting in the late 1960s. The legal basis for the need to shift resources from civil case filings to merger analysis can be found in the Supreme Court decision in United States v. Von's Grocery Co., 384 U.S. 270 (1966), argued by Richard Posner for the United States. While the majority of the Court upheld the administrative decision against the merger, Justice Stewart dissented: "The sole consistency that I can find is that in litigation under [section] 7, the Government always wins."
158. Hart-Scott-Rodino Antitrust Improvements Act, 15 U.S.C. § 18a (as amended 1976).
159. See also Joe Sims & Deborah P. Herman, The Effect of Twenty Years of Hart-Scott-Rodino on Merger Practice: A Case Study in the Law of Unintended Consequences Applied to Antitrust Legislation, 65 ANTITRUST L.J. 865 (1996).
160. Relatively active merger policies during the 1990s in the United States appear to have had a positive economic impact by promoting specialization and export performance in the manufacturing industry.
161. See Josef A. Clougherty & Anming Zhang, Export Orientation and Domestic Merger Policy: Theory and Some Empirical Evidence, 38 CAN. J. ECON. 778 (2005).
162. Some observers of antitrust history point out that mandatory trebling of damages may have in fact made the courts more reluctant to award damages to plaintiffs in the pre-World War II period. Changes in the manner in which the courts calculated damages may have been a factor in increasing private antitrust incentives in the initial stages of the transition to a mixed regime in the 1950s.
163. See Homer Clark, The Treble Damage Bonanza: New Doctrines of Damages in Private Antitrust Suits, 52 MICH. L. REV. 363 (1954).
164. Steven C. Salop & Lawrence J. White, Economic Analysis of Private Antitrust Litigation, 74 GEO. L.J. 1001 (1986).
165. The level of private case filings represents the broadest indicator of enforcement activity and can be viewed as a good proxy for the evolution of legal constraints against anticompetitive practices. However, the aggregate level of case filings has an important limitation, since multiple filings can be later consolidated in a single case. Unfortunately, narrower measures of litigation than case filings were not compiled in a systematic manner for the period under analysis in this Part. For the 1980s and 1990s, the last Part of this article provides a more detailed analysis of private enforcement at different stages of the judicial process. 101 As documented in the last Part of this article, public civil actions were on a declining path since the early 1970s, as resources were increasingly focused on merger review and criminal prosecutions. Criminal cases initially increased in the late 1940s, but they remained stable. until the early 1980s, when they became increasingly common.
166. See infra Figures 1 & 6.
167. Ping Lin, Baldev Raj, Michael Sandfort & Daniel Slottje, The U.S. Antitrust System and Recent Trends in Antitrust Enforcement, 14 J. ECON. SURV. 255 (2000).
168. For a discussion of the evolving functions of the judicial system during the growth of private actions, see James Willard Hurst, The Functions of Courts in the United States, 1950-1980, 15 L. & SOC'Y REV. 401 (1981).
169. See infra Figure 1.
170. See infra Figures 1 & 6. Part III.C provides further analysis of potential links between public and private enforcement activity.
171. For a detailed analysis of justifications for private antitrust enforcement and reforms required to enhance its role as a complement to public enforcement, see Lee Loevinger, Private Action: The Strongest Pillar of Antitrust, 3 ANTITRUST BULL. 167 (1958).
172. For example, in his testimony to Congress in 1951, Assistant Attorney General H. Graham Morrison argued that, in the absence of private suits, public enforcers would require four times as much funding. Testimony of H. Graham Morrison, Hearings on H.R. 3408, 82d Cong., 1st Sess. 42 (1951).
173. Standard Oil of New Jersey v. U.S., 221 U.S. 1 (1911).
174. United States v. Trenton Potteries Co., 273 U.S. 392 (1927). In United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940), the Supreme Court reaffirmed this guidance.
175. Kiefer-Stewart Co. v. Seagram & Sons, Inc., 340 U.S. 211 (1951).
176. United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967); Albrecht v. Herald Co., 390 U.S. 145 (1968).
177. Vertical price fixing represents a possible exemption to this rule, since this class of restrictions had been viewed as per se illegal pursuant to the 1911 Supreme Court decision in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911). One reason for this might be that vertical price fixing can sometimes benefit both parties (that is, it can be Pareto optimal), while horizontal collusion mostly benefits the members of a cartel at the expense of downstream firms and consumers. Consequently, vertical price fixing may appear less pernicious than horizontal collusion from the perspective of firms.
178. See, e.g., Sylvain Bourjade, Patrick Rey & Paul Seabright, Private Antitrust Enforcement in the Presence of Pre-Trial Bargaining, 57 J. INDUS. ECON. 372 (2009).
179. The authors show that, in the presence of information costs, Bayesian filtering by the courts is not necessarily optimal, and some restrictions on the range of evidence that the courts can consider are necessary to induce private litigation incentives.
180. That is, offenders may be too rich or poor to care about monetary damages. For instance, declaring bankruptcy in an extreme event is a viable strategy for avoiding liability.
181. The results of this investigation are not reported here. This analysis also explored the interaction between case filing indicators and the rate of growth in gross national product (GNP), as an indicator of the broader economic environment. Public actions appear less sensitive to the macroeconomic climate than private case filings. Litigation levels appear to be higher when the economy is doing very well or very poorly.
182. Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977).
183. In this case, the state of Illinois and 700 local governments had been subject to a pricefixing conspiracy by producers of concrete blocks.
184. This possibility essentially captures the fact that, even though they have been separated in legal and economic analysis, horizontal and vertical anticompetitive arrangements can be closely linked in practice.
185. For an interesting illustration of the growing tendency of some judges to ignore restrictions imposed on case-by-case analysis with the adoption of bright-line rules in the 1960s and 1960s, see Hearings on the Nomination of Judge Robert Bork to be Associate Justice of the Supreme Court Before the Senate Comm. on the Judiciary, 100th Cong., 1st Sess. 215 (1987) (testimony of Robert Abrams, Attorney General of New York).
186. Robert Abrams, Bork's Private Agenda in Antitrust: Judicial Refusal to Enforce, 19 ANTITRUST L. & ECON. REV. 19 (1987).
187. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977); United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967).
188. Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1 (1979). The concept of antitrust injury increasingly accepted by the courts required that liability for antitrust damages be equated with the anticompetitive harm from an unlawful practice.
189. The concept of antitrust injury increasingly accepted by the courts required that liability for antitrust damages be equated with the anticompetitive aspects of the unlawful practice in order to minimize the risk of false positive errors. This approach reflected the assumption that, with risk aversion, the application of treble damages can lead to over-deterrence, requiring the courts to engage in a costly and complex process of case-by-case assessment.
190. If the evidence that the plaintiff has about prohibited behavior by the defendants is sufficiently strong, then the threat of litigation might be sufficient to motivate the parties to reach a private bargain, and filing a case may not be necessary. Nonetheless, filing a case with the courts represents an important point of escalation that is reached only after private bargaining has failed to produce a mutually acceptable private solution.
191. Data on judicial outcomes are drawn from The Database on U.S. Judicial Statistics Compiled by Theodore Eisenberg and Kevin M. Clermont (2001), available at Inter-university Consortium for Political and Social Research or Cornell Law School Library, Federal District-Court Civil Cases, All Cases, http://legal1.cit.cornell.edu:8090/fed_all.htm [hereinafter Database on U.S. Judicial Statistics].
192. Marc Galanter, The Vanishing Trial: An Examination of Trials and Related Matters in Federal and State Courts, 1 J. EMPIRICAL LEGAL STUD. 459 (2004).
193. Unfortunately, a longer set of historical data on judicial outcomes at this stage of the litigation process is not available.