Gotta Get Those Ill-Gotten Gains: Improving the FTC's Authority to Seek Disgorgement in Antitrust Cases.

AuthorBuggs, Kathryn

Table of Contents Introduction I. An Overview of Antitrust, Disgorgement, and Disgorgement in an Antitrust Context A. Statutory Overview B. A Quick Word on Standing C. Types of Remedies in Antitrust Cases D. Disgorgement Generally E. Disgorgement's Place in the Remedy Landscape F. Disgorgement as an Antitrust Remedy II. The Constricted Role of Disgorgement Today A. Federal Trade Commission B. U.S. Department of Justice (DOJ) Antitrust Division C. State Attorneys General III. Confirming and Clarifying Disgorgement as an Antitrust Remedy A. Establishing Clear Statutory Authority and a Qui Tam Provision B. Disgorgement Within the Realities of Multidistrict Litigation. C. Distribution of Relief D. What to Do with Existing Statutory Authority? IV. Addressing Common Concerns A. Will Disgorgement Lead to Duplicative Recovery? B. Will Disgorgement Allow Indirect-Purchaser Plaintiffs to Evade Illinois Brick? C. Will Disgorgement Be Difficult to Calculate? D. Will Disgorgement Incentivize Overzealous Enforcement? E. What Does Disgorgement Mean for Existing Antitrust Remedies? Conclusion Introduction

Antitrust enforcement in the United States has been the subject of increased attention in recent years, with concern over growing concentration in major industries and the rise of new technologies that defy existing statutory remedies. There are calls to overhaul the current framework of antitrust enforcement, including affirming or expanding the authority of antitrust enforcers and updating antitrust laws and regulatory guidance to reflect an ever-changing economy. (1)

Although it may not feature prominently in popular news coverage of antitrust enforcement, a common complaint among antitrust practitioners and consumer advocates is the complexity and inefficiency of the current framework for awarding monetary damages. (2) An alternative remedy available to antitrust enforcers (but one not often used by them) is disgorgement, which requires a defendant to give up the ill-gotten gains resulting from anticompetitive conduct. (3) Rather than focus on the amount by which a plaintiff was harmed--as the damages remedy does--disgorgement focuses solely on the amount by which a defendant benefited. (4)

Disgorgement can be simpler to calculate and a more effective deterrent than damages, which often underestimate the true harm of anticompetitive conduct. (5) Antitrust enforcers have sought disgorgement in the past with some success, but courts are often hostile to disgorgement as a remedy or worry that it will lead to multiple liability for defendants. (6) Recent calls by antitrust enforcers to affirm and shore up disgorgement authority, particularly for the Federal Trade Commission (FTC), have found support in Congress and the White House. (7)

This Note has two goals. First, it seeks to consolidate the most compelling justifications for disgorgement and address the common concerns and misconceptions that have prevented the remedy from being widely used as a deterrent mechanism in antitrust enforcement. Second, this Note proposes a system for making disgorgement a more workable remedy for the FTC in future cases, including through use of a qui tam provision that would allow private plaintiffs to bring disgorgement claims on behalf of the FTC. (8) Rather than approach disgorgement as an alternative remedy to damages, this Note focuses on the potential for disgorgement to serve as a top-up mechanism ensuring that defendants pay back the full amount of ill-gotten gains, even when a traditional damages calculation is lower. This proposed system is based wholly on existing structures and practices within the U.S. justice system that are already familiar to judges who handle antitrust litigation. (9) It will allow for more efficient and complete remedies for antitrust violations, which will in turn better deter future violations. (10)

Part I discusses disgorgement as a remedy generally, how disgorgement fits into the broader remedy landscape, policy justifications for disgorgement, and why disgorgement is a necessary remedy for antitrust enforcement. Part II outlines the current authority of the FTC, Department of Justice (DOJ) Antitrust Division, and various state attorneys general to seek disgorgement in antitrust actions. Part III proposes expanding the FTC's statutory authority to seek disgorgement for antitrust claims and adding a qui tam provision for state attorneys general and private plaintiffs to seek disgorgement on the FTC's behalf when the FTC declines to act. Part III also proposes procedures for managing disgorgement claims to avoid duplicative recovery, including using multidistrict litigation, staying disgorgement claims until outstanding claims for actual damages have been fully adjudicated, and holding disgorged profits in escrow until the statute of limitations has run on any potential additional claims for actual damages.

Part IV addresses concerns with disgorgement as an antitrust remedy and implications for reaffirming the FTC's power to seek it. Specifically, it discusses why properly adjudicated claims for disgorgement need not lead to duplicative recovery, why disgorgement is not harder to calculate than the actual damages that courts handle routinely, why disgorgement is necessary even in cases where some plaintiffs could seek actual damages, why disgorgement need not conflict with limitations on indirect-purchaser standing, and why disgorgement need not lead to overzealous agency enforcement of antitrust laws.

In summary, this proposal relies less on a radical statutory overhaul than on making a conscious effort to harness the tools already available to the justice system--multidistrict litigation, qui tam doctrine, and funds held in escrow by the court--to ensure that antitrust defendants no longer profit from their illegal conduct where that profit exceeds any damages already awarded. Further, this proposal builds on the FTC's existing experience in seeking disgorgement for antitrust violations and the bipartisan political momentum behind reaffirming the FTC's statutory authority in order to effectively deter future violations.

  1. An Overview of Antitrust, Disgorgement, and Disgorgement in an Antitrust Context

    Before we can assess disgorgement's role in the antitrust enforcement toolkit, we must understand how antitrust enforcement works more generally in the United States and what other remedies are available. This Part provides a brief introduction to the main antitrust laws, remedies, and roadblocks that both antitrust enforcers and private plaintiffs face. This Part then discusses disgorgement and its policy justifications, both generally and in the antitrust context.

    1. Statutory Overview

      Antitrust enforcement in the United States is shaped by three federal statutes--the Sherman Act, the Clayton Act, and the Federal Trade Commission Act--as well as by state antitrust and consumer protection statutes. (11) The Sherman Act bans unreasonable restraints of trade, including actual or attempted monopolization; the Clayton Act was intended to fill gaps that the Sherman Act did not cover, including certain discriminatory business practices and mergers deemed to illegally lessen competition; and the FTC Act bans unfair methods of competition. (12) Many states have their own antitrust laws, which are generally similar to the federal versions. (13)

      Antitrust laws are enforced by the DOJ Antitrust Division, the FTC, and state attorneys general, as well as by private plaintiffs who allege that a defendant's conduct had some specific impact on them. (14) Private plaintiffs often bring claims as part of a class action. Legal commentators have historically seen class actions as an appropriate and preferred mechanism for adjudicating antitrust claims. (15) However, courts have become increasingly hostile to antitrust class actions in recent decades and have raised class certification requirements accordingly. (16)

      Broadly speaking, cases alleging a violation of antitrust laws due to illegal conduct ("conduct cases," for the purpose of this Note) can be analyzed using three major questions: does the party bringing the case have standing to do so, does the conduct in question constitute a violation of the law, and what is the appropriate remedy? This Note focuses primarily on the question of appropriate remedies and will not discuss the various aspects of proving or defending against an alleged conduct violation. Standing merits a brief discussion because antitrust law--at least as currently enforced--places important limitations on the type of remedies certain plaintiffs may seek (and indeed, whether they have a case at all).

    2. A Quick Word on Standing

      To establish antitrust standing, a plaintiff must have suffered injury in fact, must have suffered an antitrust injury, and must be the appropriate party to bring claims under antitrust law. (17) Antitrust standing varies between federal enforcers, state enforcers, and private plaintiffs. When suing under federal antitrust law, the FTC or DOJ only needs to establish an antitrust violation (i.e., that there was some harm to competition). (18) A state attorney general bringing an antitrust claim on behalf of consumers under what is known as parens patriae authority must establish both antitrust and parens patriae standing. (19) The latter requires the state attorney general to show that the consumers in the state have a cause of action under antitrust law. (20)

      Standing for private plaintiffs is more complicated. In Illinois Brick Co. v. Illinois, the Supreme Court limited antitrust standing only to direct purchasers, which generally means those purchasers who bought the good or service at issue directly from the defendant whose conduct allegedly violated antitrust law. (21) Often, these direct purchasers are middlemen in the supply chain or retailers who simply sell the product to consumers. (22) Anyone further down the supply chain, including an end consumer...

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