Not Treble Damages: Cartel Recoveries Are Mostly Less Than Single Damages

Author:John M. Connor & Robert H. Lande
Position:Senior Fellow, American Antitrust Institute and Professor Emeritus, Purdue University/Venable Professor of Law, University of Baltimore School of Law; and a Director of the American Antitrust Institute
Pages:1997-2023
SUMMARY

Antitrust law provides treble damages for victims of antitrust violations, but the vast majority of private cases settle. The average or median size of these settlements relative to the overcharges involved has, until now, been only the subject of anecdotes or speculation. To ascertain what we term “Recovery Ratios,” we assembled a sample consisting of every completed private U.S. cartel case... (see full summary)

 
FREE EXCERPT
1997
Not Treble Damages: Cartel Recoveries
Are Mostly Less Than Single Damages
John M. Connor* & Robert H. Lande**
ABSTRACT: Antitrust law provides treble damages for victims of antitrust
violations, but the vast majority of private cases settle. The average or median
size of these settlements relative to the overcharges involved has, until now,
been only the subject of anecdotes or speculation. To ascertain what we term
“Recovery Ratios,” we assembled a sample consisting of every completed
private U.S. cartel case discovered from 1990 to mid-2014 for which we could
find the necessary information. For each of these 71 cases we collected, we
assembled neutral scholarly estimates of affected commerce and overcharges.
We compared these to the damages secured in the private cases filed against
these cartels. Our main findings are that the victims of only 14 of the 71
cartels (20%) recovered their initial damages (or more) in settlement. Only
seven (10%) received more than double damages. The rest—the victims in
57 cases—received less than their initial damages. In four cases the victims
received less than 1% of damages and in 12 they received less than 10%.
Overall the median average settlement was 37% of single damages. The
unweighted mean settlement (a figure that gives equal weights to the cartels
that operated in large markets and to those that operated in small markets)
was 66%. However, because plaintiffs tend to be rewarded relatively poorly
in the largest cases, the weighted mean (a figure that weights settlements
according to cartels’ sales) was only 19%. The mean and median average
Recovery Ratios are higher (81.2% and 52.4%, respectively) for the 36 cases
that followed criminal convictions of U.S. antitrust law. The conclusion of
this Essay briefly discusses some of the implications of these findings.
* Senior Fellow, American Antitrust Institute and Professor Emeritus, Purdue University.
** Venable Professor of Law, University of Baltimore School of Law; and a Director of the
American Antitrust Institute. The authors are grateful to Joshua Davis, Albert Foer, Herbert
Hovenkamp, and Daniel Mogin for their extremely helpful suggestions, and to Graham Bennie
for his valuable research assistance.
1998 IOWA LAW REVIEW [Vol. 100:1997
I. INTRODUCTION ........................................................................... 1998
II. ALMOST EVERY SUCCESSFUL ANTITRUST DAMAGES ACTION
SETTLES....................................................................................... 1999
III. ARE SETTLEMENTS LIKELY TO BE AT THE “RIGHT LEVEL? ........ 2002
IV. ANALYSIS OF THE SETTLEMENTS: THE RECOVERY RATIO ............ 2008
V. ANTITRUSTS NEED FOR MULTIPLE DAMAGES ............................ 2014
VI. CONCLUSIONS ............................................................................. 2018
APPENDIX .................................................................................... 2023
I. INTRODUCTION
In theory, victims of antitrust violations receive treble damages.1 In
practice, however, almost every successful antitrust damages action settles.
Because final verdicts in antitrust cases are exceptional, it may be more
accurate to describe the antitrust damages level not as “treble” damages, but
as the average or median percentage of damages successful antitrust cases
actually settle for.
Until now the actual average or median size of antitrust settlements has
only been a matter of speculation. To bring empirical analysis to this issue, we
assembled a sample of 71 cartels for which we could find the necessary
information. We believe that the sample includes every completed private
U.S. cartel case since 1990. For each cartel a neutral scholar calculated the
firms’ United States overcharges. We compared these results to the damages
secured in the private cases filed in the United States against these cartels. We
find that the victims of only 14 of the 71 cartels (20%) recovered their initial
damages (or more) in settlement; of these, only seven (10%) received at least
double damages. The rest—the victims in 57 cases—received less than their
initial damages. Four received less than 1% of their damages and 12 received
less than 10%. Overall, the median average settlement was 37% of single
damages. Because the distribution of settlement percentages is so skewed, the
weighted mean (a figure that weights settlements according to their sales) is
much lower (19%) than the unweighted mean settlement of 66% (which
gives equal weights to the cartels that operated in large markets and those that
operated in small markets), because plaintiffs tend to be rewarded relatively
poorly in the biggest cases.
1. 15 U.S.C. § 15(a) (2012). Successful victims also receive “the cost of suit, including a
reasonable attorney’s fee.” Id.

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