An Economic Assessment of the Administration's Detrebling Proposal

• Author: Gregory J. Werden,Marilyn J. Simon
• DOI: 10.1177/0003603X8603100403
• Date: 01 December 1986
• Published date: 01 December 1986
• Subject Matter: Symposium on the Reagan Administration's Legislative Proposal

The Antitrust Bulletin/Winter 1986

An economic assessment

of

the Administration's

detrebling proposal

BY GREGORY J. WERDEN and MARILYN J. SIMON*

935

Section 4

of

the Clayton Act provides that any person injured "by

reason

of

anything forbidden in the antitrust laws" may sue and

recover threefold the damages sustained. IUntil 1940 there were

few actions for recovery

of

treble damages. The frequency of

such actions increased, however, through the 1950s and 1960s,

reaching an annual average of over a thousand cases in 1970. The

annual number

of

treble damage actions peaked in the mid-1970s,

but remains in excess

of

athousand.' The growth in importance

of the treble damage remedy naturally led to scholarly critiques

and proposals for reform. These proposals ranged from the

introduction of judicial discretion into the determination

of

the

Economists, Antitrust Division, U.S. Department of Justice.

AUTHORS'

NOTE: The views expressed herein are not purported to reflect

those

of

the U.S. Department

of

Justice.

EDITOR-IN-CHIEF'S NOTE: This symposium on the Reagan Administra-

tion's legislative initiatives was guest edited by Gregory J.

Werden.

15 U.S C. §15 (1982).

2See Gallo, Craycraft &Bush, Guess Who Came to Dinner:

An

Empirical Study

of

Federal Antitrust Enforcement

for

the Period 1963-

1984, 2 REV.

IND.

ORG.

106, 109 (1985); Posner, A Statistical Study

of

Antitrust Enforcement, 13

J.L.

&Ecox. 365, 371 (1970).

Cc

1987 by Federal Legal Publications, Inc.

936 The antitrust bulletin

damage multiplier for dealing with special cases' to the complete

elimination

of

private enforcement.4Several commentators advo-

cated reducing the damage multiple for certain types

of

offenses.'

In 1983, the Reagan Administration proposed to limit trebling to

cases involving "plainly anticompetitive" conduct," and more

recently, the Administration has proposed to allow trebling only

of

damages caused by overcharges and underpayments.' We

review the economic issues relating to the choice

of

a damage

multiple and to the design

of

an enforcement system and use

economic teachings to evaluate the Administration's latest pro-

posal. We also briefly discuss alternative approaches to the

reform

of

the private treble damage remedy.

2P.

AREEDA

&D.

TURNER,

ANTITRUST

LAW

149-51 (1978).

4Breit &Elzinga, Antitrust Enforcement and Economic Effi-

ciency: The Uneasy Case for

Treble

Damages, 17

J.L.

&

ECON.

329

(1974).

See also W.

BREIT

&K.

ELZINGA,

ANTITRUST

PENALTY

REFORM:

AN

ECONOMIC

ANALYSIS

(1986); K.

ELZINGA

&

W.

BREIT,

THE

ANTITRUST

PENALTIES:

A

STUDY

IN

LAW

AND

ECONOMICS

(1976); Breit &Elzinga,

Private Antitrust Enforcement: The New Learning, 28

J.L.

&

ECON.

405

(1985).

5See R.

POSNER,

ANTITRUST

LAW:

AN

ECONOMIC

PERSPECTIVE

221-31

(1976) (multiple damages only for concealable offenses); Easterbrook,

Detrebling Antitrust Damages, 28

J.L.

&

ECON.

445 (1985) (treble

damages only for customers

and

suppliers); Baker, Reagan Administra-

tion Proposal Opens Debate on

Treble

Damages,

NAT'L

L.J.,

May 9,

1983, at 20, col. 2 (treble damages only for "covert agreement[s] among

competitors to fix prices or to allocate customers, territories, or mar-

kets").

6See Reagan Administration Approves Proposal

for

Antitrust,

Intellectual Property Bill,

[Jan.-June]

ANTITRUST

&

TRADE

REG.

REP.

(BNA) No. 1108, at 681,713-14 (Mar. 31, 1983). See also Baker, supra

note 5; Sullivan, Breaking Up the

Treble

Play: Attacks on the Private

Treble

Damage Antitrust Action, 14

SETON

HALL

L.

REV.

17, esp. 67-69

(1983).

7See Text

of

Administration's Proposals in Antitrust Reform,

[Jan.-June]

ANTITRUST

&

TRADE

REG.

REP.

(BNA) No. 1253, at S-4 (Feb.

20, 1986).