The “DOGMAS” of Antitrust Actions: A New Perspective

• Author: Allan N. Littman,Ronald E. Van Buskirk
• DOI: 10.1177/0003603X7902400402
• Published date: 01 December 1979
• Date: 01 December 1979
• Subject Matter: Article

The Antitrust Bulletin/Winter 1979

THE

IIDOGMAS

II

OF

ANTITRUST ACTIONS:

A

NEW

PERSPECTIVE

by

ALLAN

N.

LITTMAN

and

RONALD

E.

VAN

BUSKIRK*

In his classic book, The

Common

Law, Oliver Wendell

Holmes,

Jr.,

long before he became a justice of the Supreme

Court of the United States, wrote:

Any legal standard must, in theory, be one which

would apply to all men, not specially excepted under the

same circumstances.

It

is not intended

that

the

public

force should fall upon an individual accidentally, or

at

the

whim of any body of men.'

This principle has been ignored in the

antitrust

law, where

the combination of a number of "doctrines" does permit enor-

mous damage claims to be concentrated upon a single business,

at the whim of plaintiffs and their lawyers. The purpose of

this article is to examine these doctrines, and to suggest

that,

individually, they are either unsound or overbroad, and their

combined effect has distorted the just administration of the

antitrust laws.

The doctrines to be considered are as follows:

1. Pretrial procedures will effectively exonerate innocent

defendants without undue burden, expense or risk.

*Members of the Bar, San Francisco, California.

AUTHORS' NOTE: The authors express their appreciation to Mr. Wil-

liam O. Fisher and Mr. John Deacon for their invaluable research in

preparing this article.

1Holmes, The

Common

Law (1881), 44th printing, at 110.

(cj

1980 by Federal Legal Publications, Inc.

687

688 THE ANTITRUST BULLETIN

2. Only slight evidence is necessary to connect a person

with a conspiracy, once a conspiracy is shown.

3. Conspirators are liable for damages caused by other

conspirators before they joined the conspiracy.

4. Conspiracies are usually self-concealing, and the theory

of fraudulent concealment easily extends the four-year

statute of limitations for antitrust actions.

5. A corporation is vicariously liable for all of its employ-

ees' acts.

6. Antitrust defendants have no rights of apportionment

of damages.

7. Antitrust defendants have no rights of contribution.

8. Mere allegations of an antitrust conspiracy justify class

actions against any alleged member of the conspiracy.

These doctrines are being applied in antitrust cases in a

pattern

that

has become familiar to antitrust practitioners.

Private antitrust class action complaints filed on behalf of

thousands of purchasers, naming as defendants most of the

manufacturers in an entire industry, have now become com-

mon. They allege in very general terms

that

the defendants

conspired to fix, raise, maintain or stabilize prices;

that

the

conspiracy caused injury and damages to the class over a pe-

riod of 10 to 20 years; and

that

during this period the defen-

dants "fraudulently concealed" their conspiracy. The damage

theory of such complaints is frequently

that

defendants' con-

duct increased prices by "X" percent (say, 3 percent) on all

sales by all manufacturers in the entire industry, including

those of nonconspirators. Therefore, it is claimed

that

as the

sales of

the

entire industry were approximately $1,000,

000,000 a year, the treble damage claim per year is $90,000,

000, or $900,000,000 for 10 years, and $1,800,000,000 for 20

years!

It

is also claimed

that

each individual defendant may be

held jointly and severally liable for this

entire

amount.

"DOGMAS" OF ANTITRUST ACTION 689

When the management, accountants and auditors of a com-

pany named in such a complaint ask for their lawyers' opinions

of the merits of the case, and whether the company should

settle or defend, they are often surprised to learn

that

the

merits are immaterial. Any chance of losing $1,800,000,000,

however small, requires management to consider the risk of

virtual destruction of its business. A 90 percent chance of

winning a lawsuit should normally dictate resistance on princi-

ple, and to deter other such actions. Faced with a 10 percent

chance of losing the entire company should a jury disagree

with a company's belief

that

it is innocent, prudence, however,

may dictate settlement of what would otherwise be a plainly

unmeritorious case.

Such huge claims serve primarily as a threat to induce

large settlements. The threat is based on the assumption

that

defendants cannot risk a trial. That assumption in turn is

based on the premise

that

the antitrust laws permit huge

aggregations of treble damage claims to be collected from any

single defendant who may be found to have been a "conspira-

tor,"

regardless of

that

defendant's individual responsibility for

the damages alleged.

It

is also based on the premises

that

the

only effect of a settlement in an antitrust case is a deduction

of the settlement payment from the trebled claim or judgment,

and

that

there are no rights of contribution among defendants

in antitrust cases.

Against the background of such risks, a plaintiffs settle-

ment strategy is often implemented by announcing

that

a "dis-

count" will be given to quick settlers, based on the multi-

plication of an arbitrary dollar figure per "market share" by

the defendant's share of sales.' Once the initial settlements are

2For example, suppose

that

of 20 defendants named in a private

trebel damage antitrust class action claiming $900,000,000 in trebled

damages, the top four have market shares of 20 percent, 15 percent,

10 percent and 5 percent:

that

none of the remaining defendants has

over 5 percent, and

that

some have a market share below 1 percent.

Plaintiffs counsel may offer $2,000,000 "per point" for the first

settlements, with the threat of higher demands for later settlements.