Chapter VII. Settling State Antitrust Cases

• Pages: 199-259

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CHAPTER VII

SETTLING STATE ANTITRUST CASES

A. Introduction

In many antitrust cases, it is advisable for the litigants (both

defendants and enforcement authorities) to develop a settlement strategy

as part of their overall litigation strategy. The majority of antitrust cases

are resolved through settlement. One study found that more than 70

percent of antitrust cases brought by government agencies between 1973

and 1983 were resolved through settlement.1 A more recent study

estimated that 70 percent to 90 percent of cases brought by federal

enforcement agencies between 1987 and 1996 were resolved through

settlement.2 Understanding the settlement process, including both

strategic issues and the nuts and bolts of settlement agreements and

consent decrees, is thus crucially important for practitioners.

Settlement takes on added importance in antitrust cases because of

the heavy litigation burdens that antitrust cases impose on litigants and

because of the scale of treble antitrust damages. Trebling produces very

large damage awards and settlements. According to one study, the

average settlement or judgment in an antitrust multidistrict litigation case

between 1973 and 1984 was almost $90 million in 2007 dollars.3

Antitrust settlements and judgments in the hundreds of millions of

dollars are not at all uncommon today.

Settlement agreements, of course, are only partly about agreeing to

an amount of money to be paid by a defendant. Antitrust settlements

might also include ongoing limitations on the conduct of the defendant,

1. Jeffrey M. Perloff & Daniel L. Rubinfeld, Settlements in Private Antitrust

Litigation, in PRIVATE ANTITRUST LITIGATION 149, 163 (Lawrence J.

White ed., 1988).

2. See Lloyd C. Anderson, United States v. Microsoft: Antitrust Consent

Decrees and the Need for a Proper Scope of Judicial Review, 65

ANTITRUST L.J. 1, 4 (1996); see also Antitrust Div., U.S. Dep’t of Justice,

Workload Statistics FY 1997-2006 (2007), available at

http://www.usdoj.gov/atr/public/workstats.htm (stating current figures).

3. See Steven C. Salop & Lawrence J. White, Economic Analysis of Private

Antitrust Litigation, 74 GEO. L.J. 1001, 1009, 1012 (1986) (reporting a

figure of $44.5 million in 1984 dollars). Although the Salop & White

study is more than 20 years old, it remains the best large-scale,

quantitative analysis of antitrust litigation.

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the impact of which can be significantly greater than the impact of the

monetary terms. Equally critical is the scope of the release negotiated,

including not only the claims released, but also the protections afforded

to officers, directors, and employees and the potential preclusive effect

on other plaintiffs. Finally, state attorneys general can issue settlement-

related press releases that might generate good will among constituents.

This chapter focuses on (1) some issues to consider when one

develops a settlement strategy, (2) the different forms that a defendant’s

settlement payments can take, (3) specific issues with respect to merger

consent decrees, (4) the process of obtaining court approval for a

settlement, and (5) the nuts and bolts of specific settlement provisions.

The chapter discusses fed eral law on many of these issues because

federal law tends to be more developed than state law and because most

states consider federal antitrust precedents persuasive. Indeed, many

state attorneys general bring enforcement actions in federal court to take

advantage of the Sherman and Clayton Acts. This chapter focuses

primarily on settlement of civil claims. State criminal antitrust

enforcement is discussed in Chapter IV.

Many of the settlement agreements referred to in this chapter are

available in the Settlements section of the Web site of the State

Enforcement Committee of the ABA Section of Antitrust Law.4

B. Strategic Considerations

1. Factors That Favor Settlement

a. The Time and Expense of Antitrust Litigation

According to one well-regarded study of antitrust litigation in the

federal courts, done by Steven C. Salop and Lawrence J. White, the

average multidistrict antitrust litigation between 1973 and 1983 lasted

approximately 5.7 years and had 968 docket entries per consolidated

case.5 Antitrust litigation remains lengthy and complex today. The study

also estimated that a large antitrust case generated, on average, legal fees

4. See http://www.abanet.org/antitrust/committees/state-antitrust [herein-

after State Enforcement Committee Web site]. The list of settlement

agreements on the State Enforcement Committee Web site sometimes

includes citations to decisions that approve the settlements.

5. See Salop & White, supra note 3, at 1009. One example of a particularly

protracted case is Matsushita Electric Industrial Co. v. Zenith Radio

Corp., 475 U.S. 574 (1986), in which 12 years elapsed between th e filing

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of over $800,000 in 2007 dollars.6 Given how much legal fees have

increased over the past 20 years, a significant antitrust case today will

routinely generate more than a million dollars in legal fees.

Indeed, the above figures might understate the time and expense of

antitrust litigation, because the data deal only with civil litigation in the

federal courts. Many defendants also face related investigative or

criminal proceedings and separate civil actions in state courts. To this

must be added the not-insignificant costs of economic and other experts,

whose involvement is almost mandatory in antitrust cases today. Finally,

the indirect costs to a defendant of executive time consumed by antitrust

litigation might well be on the same scale as direct legal fees.7

Avoiding the costs and burdens of litigation is a significant incentive

for the settlement of antitrust cases. This incentive applies not only to

defendants but also to antitrust enforcers, whose resources are often more

limited than those of large corporate defendants.8 On the other hand,

some states can and do retain outside counsel on contingent fees to

prosecute antitrust lawsuits.9

b. The Threat of Enormous Damages

The most powerful settlement incentive for an antitrust defendant

remains the sheer size of the potential damages in most antitrust cases.

The threat of treble damages, in particular, can create substantial

litigation risk even where a plaintiff’s clai m is weak. Some

commentators suggest that treble damages provide such a powerful

incentive to settle that parties bring weak, or even baseless, suits in the

hope of settling based on the potential damages exposure alone.10

of the original complaints and a decision by the Supreme Court that

upheld summary judgment for the defendants.

6. See Salop & White, supra note 3, at 1012-13 (stating a fee average of

$400,000 in 1984 dollars).

7. See Robert H. Lande, Are Antitrust “Treble” Damages Really Single

Damages?, 54 OHIO ST. L.J. 115, 142-43 (1993).

8. See 5 JULIAN O. VON KALINOWSKI ET AL., ANTITRUST LAWS AND TRADE

REGULATION § 96.01[1] (2007).

9. See, e.g., 15 ILL. COMP. STAT. ANN. 205/4b (authorizing retention of

private counsel); OHIO REV. CODE ANN. § 109.81 (same).

10. See Edward Cavanaugh, Detrebling Antitrust Damages: An Idea Whose

Time Has Come?, 61 TUL. L. REV. 777, 780 (1987).