Private Recovery Actions in the United States: Reducing - and Recouping - the 'Cartel Tax'
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In the United States, private antitrust litigation serves two vital needs that cannot be adequately addressed through government enforcement alone - increased (though still sub-optimal) deterrence for anti-competitive activity and direct recovery to injured consumers. While detractors of the American system argue that the prevalence of private suits effectively forces US businesses to pay a "litigation tax",1 there is in fact a growing consensus that private enforcement of antitrust laws, both within the US and abroad, is necessary to reduce and partially recoup what might be called the 'cartel tax' - the higher costs and inefficiencies unlawfully imposed on society by colluding cartelists. This article summarises the policy behind providing meaningful private rights of legal redress in the competition field for the primary victims of cartels. It will also describe the types of suits brought in the US to enforce those rights, the obstacles to maintaining such cases and the outlook for increased private enforcement of those rights in the US and abroad.
The 'cartel tax': why private antitrust recovery is necessary
As EC Competition Commissioner Neelie Kroes stated, "Cartels are a scourge.... and will not be tolerated."2 Indeed, the deleterious effect of cartels on world markets is enormous. According to one noted antitrust economist, in 2005 alone, sales affected by global cartels totalled approximately $2.1 trillion.3 The primary effect of cartels is to increase prices above competitive levels, thereby transferring resources from consumers to the colluders and impeding economic efficiency.4 However, they broadly and negatively affect markets in many other ways. They distort the allocation of a society's resources by incentivising companies to produce fewer goods than they would in a competitive environment.5 They also cause firms to devote fewer resources to innovating and improving their products or services. These effects can even spill over to non-participants in the conspiracy.6 Governments therefore have a substantial policy interest in deterring cartels.
Despite this interest, the inability of government enforcement alone to adequately detect and deter cartel activity has been well- documented. Half of the world's antitrust laws came into being after 1990, and many authorities lack the expertise and political support to adequately enforce them.7 Even among countries with long-standing laws, governments often withhold the resources and political support to enable their competition authorities to effectively enforce their laws.8 Within the US, government resources can be limited, and are often stretched by merger review obligations.9 Some have argued that agencies' enforcement priorities are further influenced by political agendas or a culture of bringing only those cases that they are more likely to win at trial, regardless of the merits.10 It is therefore not surprising to see estimates that less than half of cartel activity is ever detected.11
Even where cartels are successfully discovered and prosecuted, however, current penalties are insufficient. In the vitamins cartel, for example,12 fines totalled approximately $2.2 billion in the US and overseas, and the defendants settled civil lawsuits with domestic plaintiffs for approximately $2.4?billion.13 But even the historically unprecedented $4.6 billion in total payments by the defendants is dwarfed by their estimated profits during the 1990s, which, adjusted for inflation, were approximately $18 billion by the conclusion of the American litigation.14 The vitamins example is not an outlier. According to a recent study, total worldwide sanctions (including both fines and settlements) amounted to approximately 21 per cent of global overcharges for detected cartels.15 Even cartel members that are caught and convicted often become recidivist cartelists.16
Thus, most global cartel activity goes undetected and those cartels that are detected and prosecuted still often retain a share of their ill-gotten profits. If we assume that the two key factors for determining the adequacy of deterrence are the probability of detection (and conviction) and the aggregate amount of fines and restitution17 it is not surprising that recent studies have determined that global sanctions "are, on the whole, still inadequate".18
In the US, private enforcement of the antitrust laws has been recognised by courts as necessary to improve detection and decrease cartel profitability in order to improve deterrence.19 Yet, despite the availability of treble damages and class action procedures, most scholarship suggests that American private enforcement mechanisms are insufficient to optimally deter violations.20 More must be done, both in the US and abroad, to prevent collusion.
Increasingly, other countries are recognizing the need for meaningful private enforcement to buttress government efforts, particularly nations in the European Union.21 Even sceptics have come to accept that there may be a need not only to permit and encourage private actions, but to create or amend court procedures to permit aggregation of private antitrust claims in order to provide market-wide restitution for victims of price-fixing cartels.22
Indeed, the notion of private antitrust enforcement did not originate with modern academics or policy makers. It derived from the English common law principle that remedies from anti-competitive conduct should flow to the wronged, rather than the state - a principle that predated modern competition laws and government enforcement.23 The principle is equally relevant and applicable to the modern-day cartel, which unlawfully exacts an enormous price on markets and consumers. The "supreme evil of antitrust ... [is] collusion"24 and providing an effective means of private recovery of 'cartel taxes' is mandatory.
Types of private antitrust recovery actions in the US
Because private antitrust actions are among the most complex and expensive litigations in the American civil justice system and because the individual claims of any plaintiff injured by an antitrust conspiracy are usually too small to justify the risks and expenses of such a massive litigation, class actions are typically the preferred vehicle for plaintiffs. Indeed, because the key relevant issues such as a conspiracy's participants, nature, duration and effects are generally the same for all plaintiffs, antitrust cases have been singled out by some courts as uniquely suitable for class treatment.25 Because there is a separate chapter in this volume devoted entirely to discussions of American antitrust class actions, we will not describe the relevant rules and procedures here. However, in light of the prevalence of such actions in the US, each of the further varieties of private recovery actions described below might best be viewed as an alternative to a class action for those parties whose situation or special interests make them less suited for class participation.
Under American class action procedures, potential plaintiffs are typically given an opportunity to 'opt out' of a class. This opportunity arises after a class has been certified by the court, ie, deemed appropriate for class treatment, but before the case proceeds to trial. Any companies or individuals opting out of a class action will receive none of the benefits of the class process, including the right to participate in any settlement or verdict, and will retain their right to bring an independent lawsuit, either as an individual plaintiff or as part of a group of plaintiffs that opted out of the class. Determinations of liability from the class case will not be binding on opt-out plaintiffs.
The process of opting out of a class action is fairly straightforward. Immediately after certification, a formal notice is sent to all members of the class who can be identified through reasonable effort.26 This is often supplemented by publishing the notice in a relevant trade publication, on defendants' websites, or even a popular periodical or newspaper.27 In the event of an early class settlement, a 'settlement class' will typically be certified and notices will include the amount of the settlement.28 The certification notice will include an address to which any requests for exclusion must be sent as well as a deadline for such requests and an explanation of the form that the requests should take. Requests for exclusion need only contain sufficient information to identify the party and a simple signed statement that the party does not wish to participate in the class action. No reasons for exclusion need be supplied.29
Deciding whether to opt out of a class action can be a bit more complicated. It is usually in the interests of class members to stay in a class, primarily because it is costless to participate in a class action as an unnamed plaintiff while the significant expense of the litigation is borne by class counsel or the named plaintiffs. Furthermore, class members can be confident that they are being fairly represented and their positions zealously advocated insofar as courts may not certify a class until they have evaluated the adequacy of proposed class counsel to confirm that they have the requisite experience and reputation to manage a significant class litigation, that there are no apparent conflicts of interest within the class, and that the representative clients are well-positioned to fairly and adequately represent the interests of the class.30 Still, there are situations where parties reasonably determine that their interests are best served by excluding themselves from the class.
Opt-out cases are typically brought by the organisations that believe, because of their purchase size, they sustained greater impact from the anti-competitive activity at issue. Such parties often have sufficient potential recoveries to justify the litigation expenses associated with an individual or small group antitrust litigation, and may feel that they may leverage their unique importance to the defendants' businesses into a premium settlement position that permits a recovery above and beyond their pro rata share of a class settlement. Alternatively, opt-out plaintiffs may enjoy sufficient ongoing business with defendants that a change in trading terms, whether in the form of a price or non-price concession, may benefit both parties more than a single, lump-sum payment. Opt-out counsel may be able to tailor their representation to balance and maintain the specific and often delicate supplier relationships that will both pre-date and outlive the litigation.
While there are a few not insignificant examples of opt-out settlements that exceed the pro rata shares of settlements that plaintiffs would have received had they stayed in the class, there are numerous counter examples where opt-out plaintiffs ended up with less than what they would have received as a class member: situations where opt-out plaintiffs later abandoned their claims without recovery, and opt-out plaintiffs who lost their claims at trial.
Once the decision is made to opt out of a class, any filed case will proceed identically as would any other individual or non-class action. Plaintiffs may not generally avail themselves of helpful rulings in any parallel or previous class proceedings, nor are they bound by adverse determinations.31
Other individual and group actions
There is a wide variety of circumstances that may give rise to private individual and group antitrust actions. Some of the most typical examples are as follows:
Participants in niche industries, where there are not enough direct purchasers to maintain a class action, might bring an individual or group Sherman Act section 1 case, where price fixing, bid rigging, market allocation or other horizontal conspiracies are alleged.
Former, current or potential competitors may bring a Sherman Act section 2 case alleging abuse of monopoly power, tying, or predatory pricing. While the Sherman and Clayton Acts are often said to protect "competition not competitors", competitors may have standing to maintain such actions provided they can establish that the acts complained of also harmed purchasers.32
Distributors or potential distributors may bring suits against suppliers for resale price maintenance or exclusive dealing arrangements, provided they can show that such policies were not justified by pro-competitive business reasons.33
Whether a private suit is brought on behalf of a class or individually, the substantive elements of the claims remain the same and the plaintiff bears the burden of proof to establish antitrust injury and damages.
Sustaining a private antitrust recovery action
Section 4 of the Clayton Act provides that a treble-damage antitrust claim may be brought by "[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws".34 The Supreme Court has noted that the breadth of this language "reflects Congress' 'expansive remedial purpose' in enacting [section] 4: Congress sought to create a private enforcement mechanism that would deter violators and deprive them of the fruits of their illegal actions, and would provide ample compensation to the victims of antitrust violations."35 Consistent with this broad congressional purpose, the Court has stated a disinclination to "engraft artificial limitations on the [section] 4 remedy."36
Despite this disinclination, however, the Supreme Court, in a long line of evolving jurisprudence, has developed (but not strictly defined) certain limitations on antitrust recovery, namely the doctrine of "antitrust standing",37 requirements for directness of injury38 and a recent refinement of the pleading standard.39
Establishing "antitrust injury"
In Brunswick Corporation v Pueblo Bowl-O-Mat, the Supreme Court made clear that antitrust plaintiffs must prove "antitrust injury[, ...] which is to say injury of the type the antitrust laws were intended to prevent . . . The injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation."40 In that case, three bowling centres sued one of the largest manufacturers of bowling equipment and operators of bowling centres, alleging that its acquisition of failing bowling centres in plaintiffs' area denied plaintiffs an anticipated increase in market share and profits based on a reduction of competition.41 The Court reasoned that, even if the acquisitions were unlawful, "[t]he antitrust laws . . . were enacted for the protection of competition not competitors," and that "[i]t is inimical to the purpose of these laws to award damages" caused to a plaintiff by the vigorous competition that the antitrust laws were designed to protect.42
The touchstone for antitrust injury is whether plaintiff's harm derives from an exclusionary, or competition-reducing, as opposed to pro-competitive, aspect or effect of defendant's conduct.43 However, this burden should not be onerous44 as courts have repeatedly found that such injury may flow even from common-law business torts against a single competitor if such conduct is "of the type that tends to impair the opportunities of rivals based on something other than competition on the merits."45
Establishing directness of the injury
In addition to antitrust injury, the Supreme Court has read the common-law doctrine of proximate cause into section 4 of the Clayton Act.46 This requirement demands some direct relation between the injury asserted and the misconduct alleged and includes consideration of factors such as the potential for duplicative recovery, the complexity of determining damages, and the existence of better situated victims.47
Concern regarding these factors led the Supreme Court, in Illinois Brick Co v Illinois,48 to hold that indirect purchasers of a price-fixed product could not maintain a federal antitrust damages action. This broad bar on indirect purchaser actions has been greatly criticised for "prevent[ing] consumers, a key-protected group under the antitrust laws, from redress through private" suits and undermining the deterrent effect of private enforcement action.49 Indeed, more than 25 states have circumvented this prohibition by permitting indirect purchaser suits under state antitrust law.50 However, Illinois Brick has not forestalled all federal antitrust recovery for derivative injuries. Specifically, the Court has held that recovery is appropriate where concerns about duplicative recovery are not present and the plaintiff's injury, while indirect, was "clearly foreseeable."51
Recent developments: the near future of private enforcement actions
Bell Atlantic Corporation v Twombly
The Supreme Court's recent decision in Bell Atlantic Corporation v Twombly 52 raises the question of whether the Court has imposed another significant obstacle on private antitrust recovery. In Twombly, the Court held that, in order to state a claim of injury based on an antitrust conspiracy, the complaint must contain sufficient factual matter to "plausibly suggest", rather than merely be "consistent with", an unlawful agreement. 53 The Court went on to dismiss the claim in that case because the complaint merely alleged "lawful parallel conduct", which "fail[ed] to bespeak an unlawful agreement."54 However, the Court made clear that its requirement of "plausible grounds to infer an agreement" did not "impose a probability [or heightened pleading] requirement . . . it simply calls for enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of [an] illegal agreement."55
While the impact of this decision cannot yet be fully gauged, subsequent lower court opinions have read it narrowly. For example, the Second Circuit found that the Court merely imposed "a flexible 'plausibility standard,' which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible."56 The standard, as understood by the Second Circuit, should have limited reach in cases against global cartels. Specifically, it should be infrequent "where such [factual] amplification is needed to render the claim plausible" in such cases. Claims against global cartels are often initiated or simultaneously furthered by public authorities of the US or another nation that have amnesty or leniency applicant programmes. In these instances, whether or not the facts provided by that applicant may be publicly filed at the time the complaint is drafted, the mere existence of an entity who has essentially confessed guilty participation in a cartel should render the plausibility standard moot. Moreover, economic evidence in the form of higher prices or limited capacity that cannot be explained by normal considerations of supply and demand in a competitive market would also meet this flexible standard. Thus, Twombly's impact may be essentially limited to the facts of that case, where no more than parallel conduct could be substantiated in a market, the highly regulated nature and economies of which failed to exclude independent self-interested conduct as an explanation for the parallel actions.57
The reach of private enforcement must expand to consider the global nature of cartels and the need for global recovery. Specifically, considerations of deterrence, consistency, efficiency and equal access to justice require an effective mechanism to allow the victims of a global cartel, regardless of domicile, to bring comparable suits to obtain comparable relief, ideally in a single forum.
More widespread private remedies for victims of global cartels are particularly appropriate given that price-fixing is virtually universally condemned. Indeed, conspiracies to fix prices are banned by approximately 100 nations. 58 The laws of these countries generally mirror the Sherman Act's substantive provisions. In practice, however, most of these laws are simply not enforced,59 resulting in a significant enforcement "gap". 60 As the deputy head of the EC DG Comp candidly explained, "it is clear to any observer that whereas private enforcement of the competition rules is a beaten track in the United States, it is still a barely discovered mountain path in the European Union."61 The lack of private enforcement of competition laws outside the US results in under-deterrence, and thus, harm to all its victims, including those in the US. 62 Specifically, when certain victims of a cartel are denied effective recovery comparable to other victims, and the profits gained by the cartel are far outweighed by the sanctions imposed on the cartelists, effective maximum deterrence is an illusion in this country and elsewhere.
The notion of global private prosecution also furthers the aims of consistency of judgments and efficiency of the legal process. European courts have noted the advantage of having a single court hear the claims of all purchasers affected by a single cartel, whether or not they are all domiciliaries of the jurisdiction entertaining the claims, in order to prevent "irreconcilable judgments".63
It is also clear that a single court's exercise of jurisdiction over global or multi-jurisdictional claims garners efficiencies that cannot be realised if multiple jurisdictions are left to grapple individually with identical claims and issues arising from the same anticompetitive conduct. This has been recognized by courts presented with the issue of whether to grant foreign parties access to proceedings in the United States.64 Indeed, Canada's Divisional Court adopted what it described as a "laudable principle of judicial cooperation":
If both societies are to maximize the benefits of expanding free trade and open markets, the legal systems of both countries must recognize and facilitate an expeditious, fair and efficient regime for the resolution of litigation that arises from disputes in either one or both countries. 65
In the case of a global cartel, claims, regardless of the victim's nationality, will include the same or similar allegations and proofs, the same defendants, and the same type of victim and harm. Consistency and efficiency are obviously furthered by a single court's consideration of this evidence in a single proceeding with due deference to and application of all relevant substantive laws. Courts should coordinate or cooperate for the benefit of all interested parties. 66
Finally, notions of fundamental fairness and equal access to justice require the extension of current private antitrust enforcement into the multi-jurisdictional realm. Plaintiffs in other countries have purchased the same product at supra-competitive prices as those plaintiffs in the US, and have been similarly injured by similar or identical acts of the same cartelists in and outside of the US. In fact, US courts have previously accepted jurisdiction over claims of foreign purchasers where those purchases were made by a foreign subsidiary of a US parent company. 67 Where the only distinguishing factor between foreign and domestic victims of a global cartel may be their domicile, fairness should dictate that these two groups should have a similar procedural means by which to seek appropriate judicial relief for their similar injuries.
The benefits of singular or coordinated actions whereby a global cartel is held accountable for all the effects of its cartel tax to all injured parties would serve deterrence, consistency, efficiency and fairness. Thus, the near future for private recovery actions should entail more extensive and imaginative cooperation among world courts.
1 See, eg, John Heaps & Simon Jackson, 'You Say Sue, We Say Perhaps', The Times (London), 6 February 2007.
2 Press release, European Comm'n, Competition: 'Comm'n Imposes Fines of €344.5 Million on Producers of Acrylic Glass for Price Fixing' (31 May 2006), available at http://europa.eu/rapid/pressReleasesAction.do?reference=IP/06/698&format=HTML &aged=0&language=EN&guiLanguage=en.
3 John M Connor & C Gustav Helmers, 'Statistics on Modern Private International Cartels, 1990-2005', Dep't of Agric Econ, Purdue Univ, Working Paper No. 06-11 (2007), available at http://ideas.repec.org/p/pae/wpaper/06-11.html (follow the "download the selected file" hyperlink).
4 See William M Landes, 'Optimal Sanctions for Antitrust Violations', 50 University of Chicago Law Review (1983), 652, 656.
5 See Michael L Katz & Harvey S Rosen, Microeconomics (3d ed 1998), 114; see also William H Page, 'Optimal Antitrust Penalties and Competitors' Injury', 88 Michigan Law Review (1990), 2151, 2162-63 (thus "allocating inefficiency" can extend beyond cartel members to affect non-conspiring competitors).
6 See Robert H. Lande, Five Myths About Antitrust Damages, 40 SFL Rev (2006), 651, 654-55; Stephen Scallan, Proximate Cause Under RICO, 20 Southern Illinois University Law Journal (1996), 455, 502 (addressing the "umbrella effects" of cartel activity, or the incentive of non-cartelists to also raise prices).
7 See Joel I Klein, principal deputy assistant attorney general, Antitrust Division, US DoJ, 'International Antitrust: A Justice Department Perspective', Address Before the Fordham Corporate Law Institute (26 October 1995), at 5 (http://www.usdoj.gov/atr/public/speeches/0459.htm).
9 See also statement of Robert Pitofsky, Chairman, Federal Trade Commission, 64 Antitrust LJ (1996), 756, 757 (during the 1990s, the Antitrust Division of the DoJ and the FTC were forced to spend at least two-thirds of their limited budgets on pre-merger review and enforcement, leaving precious few resources for all non-merger enforcement).
10 See Suzanne Weaver, Decision to Prosecute: Organization and Public Policy In the Antitrust Division (1978), 171-72.
11 See Organization for Economic Cooperation and Development (OECD), 'Hard Core Cartels' (2000), at 27 (http://oecd.org/dataoecd/39/63/2752129.pdf); see also Andrew I Gavil, William E Kovacic & Jonathan B Baker, Antitrust Law In Perspective: Cases, Concepts and Problems In Competition Policy (2002), 1044.
12 See Staff and agencies, 'Vitamin cartel fined for price fixing', Guardian Unlimited, 21 November 2001 (http://www.guardian.co.uk/medicalscience/story/0,,603206,00.html); US DoJ, 'Antitrust Division Selected Criminal Cases, April 1, 1996 through September 30, 1999' (http://www.usdoj.gov/atr/public/4523d.htm) ("The vitamin cartel is the most pervasive and harmful criminal antitrust conspiracy ever uncovered by the Division.").
13 'Br. of Amici Curiae economists Joseph E. Stiglitz & Peter R. Orszag in Support of Respondents', F Hoffman-LaRoche, Ltd v Empagran SA, 542 US 155 (2004) ("Empagran"), available at http://www.esjpc.com/Empagran-Amicus-Final.pdf at 9-11.
15 See Connor and Helmers, supra n3, at 35.
16 See Practising Law Institute, 'The Practical Aspects of Corporate Antitrust Compliance Programs' (July 2004), 913.
17 See Gary S Becker, 'Crime and Punishment: An Economic Approach', J Pol Econ (Mar/Apr 1968), 169, 183-184 (further noting, that where deterrence is inadequate and government enforcement costs are significant, penalties for violations must be increased).
18 See, eg, OECD, 'Recommendation of the Council Concerning Effective Action Against Hard Core Cartels' (25 March 1998), at 3, http://webdomino1.oecd.org/-horizontal/oecdacts.nsf/Display/287EEB70E8B80915C1256-E5800028BA4?OpenDocument.
19 See Zenith Radio Corp v Hazeltine Research, Inc, 395 US 100, 130-31 (1969) (discussing the need for "private attorneys general" to supplement government efforts); Joseph E Brodley, 'Antitrust Standing in Private Merger Cases: Reconciling Private Incentives and Public Enforcement Goals', 94 Mich L Rev (1995), 1, 12-13, n41-46 (citing cases).
20 See, eg,William Landes, 'Optimal Sanctions for Antitrust Violations', 50 U Chi L Rev (1983), 652; John M Connor & C Gustav Helmers, supra note 3; Robert H Lande, 'Are Antitrust "Treble" Damages Really Single Damages ' 54 Ohio St L J (1993), 115; Joseph E Brodley, 'Critical Factual Assumptions Underlying Public Policy', in Private Antitrust Litigation, New Evidence, New Learning (L White ed, 1988), 252.
21 See European Commission, Green Paper: 'Damages Actions for Breach of the EC Antitrust Rules' (19 December 2005) ("Green Paper"), at 4, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52005DC0672:EN:NOT ("Facilitating damages claims for breach of antitrust law will not only make it easier for consumers and firms who have suffered damages arising from an infringement of antitrust rules to recover their losses from the infringer, but also strengthen the enforcement of antitrust law . . . . Private as well as public enforcement of antitrust law is an important tool to create and sustain a competitive economy.").
22 See, eg, 'Accepting the Ambulance Chasers: Be Nervous About American-Style Collective Lawsuits Coming to Europe, But Don't Stop Them', The Economist (15 February 2007), 52 ("By allowing individuals with a common grievance to share costs, they make the law more affordable for the little guy. Such an improvement in justice is in itself a powerful argument for class-action suits....Until proven otherwise, class actions deserve a cautious welcome.").
23 See William L Letwin, 'The English Common Law Concerning Monopolies' 21 U Chi L Rev (1954), 355.
24 Verizon Commc'ns, Inc v Law Offices of Curtis V Trinko, LLP, 540 US 398, 408 (2004).
25 See, eg, Alabama v Blue Bird Body Co, 573 F2d 309, 320 (5th Cir 1978) ("antitrust price-fixing cases are particularly suited for class action treatment"); In re Carbon Black Antitrust Litig, No. 03-10191-DPW, MDL No. 1543, 2005 WL 102966, at *9 (D Mass 18 Jan 2005) ("The allowance for treble damages in antitrust actions was designed to encourage private enforcement of the antitrust laws by offering generous recompense to those harmed by the proscribed conduct and simultaneously to erect a deterrent to those contemplating similar conduct in the future. . . . [C]lass actions are a particularly appropriate mechanism for achieving such enforcement...and, therefore, courts resolve doubts in favor of certifying the class.").
26 See Eisen v Carlisle & Jacquelin, 417 US 156, 166-67 (1974).
27 See id. at 167; see also In re "Agent Orange" Prod Liab Litig, 818 F2d 145, 168 (2d Cir 1987) ("Rule 23, of course, accords considerable discretion to a district court in fashioning notice to a class."); Berland v Mack, 48 FRD 121, 129 (SDNY 1969) ("Rule 23 contemplates cooperative ingenuity on the part of counsel and the court in determining the most suitable notice in each case.").
28 Of course, such notices may afford sophisticated plaintiffs enough information to estimate their likely recovery if they participate in the settlement.
29 Objections to settlements may be heard by the court overseeing the settlement at the final approval hearing, but the procedure for opting out is distinct from the process of objecting to a settlement. The detailed notice sent to prospective class members should explain both.
30 See Fed R Civ P 23(a)(4) & (g)(1).
31 See Parklane Hosiery Co v Shore, 439 US 322, 331 (1979) ("[t]he general rule should be that in cases where a plaintiff could easily have joined in the earlier action or where … the application of offensive estoppel would be unfair to a defendant, a trial judge should not allow the use of offensive collateral estoppel."); see also, Premier Elec Constr Co v Nat'l Elec Contractors Ass'n, 814 F2d 358, 367 (7th Cir 1987) (applying Parklane in class action context); Becherer v Merrill Lynch, 193 F3d 415 (6th Cir 1999) (en banc) (unfair to bar opt-out plaintiffs claims based on adverse class determination); In re Brand Name Prescription Drugs Antitrust Litig, 115 F3d 456, 457 (7th Cir 1997) (same); In re Corrugated Container Antitrust Litig, 756 F2d 411, 418-19 (5th Cir 1985) (same).
32 See, supra notes 46-51 and accompanying text.
33 See Leegin Creative Leather Prods, Inc v PSKS, Inc, 127 S Ct 2705 (2007).
34 15 USC section 15.
35 Blue Shield of Va v McCready, 457 US 465, 472 (1982). See Brunswick Corp v Pueblo Bowl-O-Mat, Inc, 429 US 477, 486 n10 (1977) ("Treble damages were provided in part for punitive purposes, but also to make the remedy meaningful by counterbalancing the difficulty of maintaining a private suit against a combination such as is described in the Act.") (internal quotation marks and citations omitted).
36 McCready. 457 US at 472.
37 See Associated Gen Contractors of Cal, Inc v Cal State Council of Carpenters, 459 US 519, 535 n31 (1983). The doctrine of antitrust standing is distinct from the constitutional doctrine, which requires merely that the plaintiff suffer an actual, particularised injury that is "fairly traceable" to the defendant's conduct and is likely to be redressed by a favorable decision. See Lujan v Defenders of Wildlife, 504 US 555, 560-61 (1992).
38 Anza v Ideal Steel Supply Corp, 126 S Ct 1991, 1996 (2006).
39 Bell Atl Corp v Twombly, 127 S Ct 1955, 1965 (2007).
40 Brunswick Corp, 429 US at 488-89 (antitrust injury is read into section 4 because a plaintiff is not injured "by reasons of anything forbidden in the antitrust laws" if injury derives from increased or continued competition). See Atl Richfield Co v USA Petroleum Co, 495 US 328, 334 (1990) (plaintiff fails to show antitrust injury unless it is attributable to an anti-competitive aspect of the conduct alleged "since [i]t is inimical to [the antitrust] laws to award damages for losses stemming from continued competition.") (internal quotation marks omitted).
41 Brunswick Corp, 429 US at 488.
42 Idem. See also Abcor Corp v AM Int'l, Inc, 916 F2d 924 (4th Cir 1990) (course of aggressive competition that may include sporadic acts of deception of tortuous conduct is insufficient to substantiate an antitrust violation).
43 See Atl Richfield Co, 495 US at 344.
44 The fact of a cognisable antitrust injury is distinct from establishing an appropriately specific measure of damages. See Story Parchment Co v Paterson Parchment Paper Co, 282 US 555, 562 (1931); Bigelow v RKO Radio Pictures, Inc, 327 US 251, 265-66 (1946). For the latter, the Supreme Court has endorsed a relatively lenient standard of proof: while a plaintiff may not rely on mere "speculation or guesswork," it is sufficient for the plaintiff to demonstrate the extent of damages as a matter of just and reasonable inference even if the result is merely approximate. See Bigelow, 327 US at 264. The Court has deemed this standard appropriate because "the wrongdoer shall bear the risk of the uncertainty which his own wrong has created." Idem at 265. Any other rule would provide "inducement to make wrongdoing so effective and complete in every case as to preclude any recovery, by rendering the measure of damages uncertain." Idem at 264.
45 Taylor Publ'g Co v Jostens, Inc, 216 F3d 465, 481 (5th Cir. 2000) (quoting in part Aspen Skiing Co v Aspen Highlands Skiing Corp, 472 US 585, 605 (1985)). See Conwood Co v US Tobacco Co, 290 F3d 768 (6th Cir 2002) (defendant's pervasive removal of plaintiff's retail racks and point of sale advertising and provision of misleading information to retailers constituted violation of section 2 of Sherman Act); United States v Microsoft Corp, 253 F3d 34 (DC Cir 2001) (defendant's deception to developers regarding the incompatibility of their applications to other operating systems violated section 2 of the Sherman Act); Caribbean Broad Sys, Ltd v Cable & Wireless PLC, 148 F3d 1080 (DC Cir 1998) (false advertising and sham objections to competitor's broadcast license constituted antitrust violation); Nat'l Ass'n of Pharm Mfrs, Inc v Ayerst Labs, 850 F2d 904 (2d Cir 1988) (false and misleading statements may constitute antitrust violation if effect is not de minimus).
46 Anza, 126 S Ct at 1996.
47 Idem at 1996-98.
48 431 US 720, 746 (1977). The Court carved out two narrow exceptions to this general rule. An indirect purchaser would have standing to sue if (i) the direct purchaser was assured of selling a fixed quantity regardless of price because of a cost-plus contract; and (ii) the direct purchaser is owned or controlled by a seller accused of an antitrust violation. Idem at 730-35. Illinois Brick has been held not to apply in suits for injunctive relief. See Mid-West Paper Prods Co v Cont'l Group, Inc, 596 F2d 573 (3d Cir 1979).
49 See Lawrence A Sullivan and Warren S Grimes, The Law of Antitrust: An Integrated Handbook (2d ed 2006), 973-74 (citing commentary).
50 Idem at 973. The Supreme Court has held that these laws are not preempted by federal law, notwithstanding the federal rule limiting recovery to direct purchasers. California v ARC Am Corp, 490 US 93 (1989). Interestingly, the recently enacted Class Action Fairness Act of 2005, 28 USC sections 1332, 1453, 1711-15 (2000 & Supp IV, 2004), provides for federal court adjudication of state law based class actions, including the state law antitrust claims of indirect purchasers. Thus, contrary to the mandate articulated in Illinois Brick, it is now possible for direct and indirect purchasers to each seek treble-damage recovery from a single cartel in a coordinated federal proceeding, thereby theoretically exposing the cartelists to sanctions totaling six times the actual loss.
51 See Blue Shield of Va v McCready, 457 US 465, 479 (1982). In McCready, the Supreme Court held that a health insurance subscriber had standing to maintain an action alleging damages based on a conspiracy among the health care plan and psychiatrists to reduce competition by refusing to reimburse for psychotherapy performed by psychologists while providing reimbursement for comparable treatment provided by psychiatrists. In so holding, the Court acknowledged that the alleged conspiracy was "aimed" against psychologists, not the health insurance subscriber, or, in other words, that the plaintiff was not in the "target area" of the alleged antitrust conspiracy, but noted that "[t]he availability of the [section] 4 remedy to some person who claims its benefit is not a question of the specific intent of the conspirators." Idem at 478-79 & n14.
52 127 S Ct 1955 (2007).
53 Idem at 1965-66.
54 Idem at 1966.
55 Idem at 1965.
56 Iqbal v Hasty, 490 F3d 143, 157-58 (2d Cir 2007). See also In re Intel Corp Microprocessor Antitrust Litig MDH No. 05-1717JJF, 2007 WL 2028113, at *2 n2 (D Del, 12 July 2007) (applying the Second Circuit's "flexible plausibility" standard: "The Court understands Twombly to primarily be a decision aimed at bringing the standard back to its 'roots' by undoing the literal reading of Conley v Gibson, 355 US 41 (1957), engaged in by some courts . . .").
57 See Twombly, 127 S Ct at 1971-72 ("a natural explanation for the noncompetition alleged is that the former Government-sanctioned monopolists were sitting tight, expecting their neighbors to do the same thing").
58 See Empagran, Br for Pet'rs, at 24 ("'Nearly 100 jurisdictions now have comprehensive antitrust laws,' and '[n]early all' of these 'now ban cartels either civilly or criminally.'") (quoting R Hewitt Pate, Speech Before the ABA Section of Antitrust Law, 'The DOJ International Antitrust Program - Maintaining the Momentum' (6 February 2003) at 6, 8, available at http://www.usdoj.gov/atr/public/speeches/200736.htm. Br for the United States as Amicus Curiae Supporting Petitioners, Empagran, 542 US 155 (2004), http://www.usdoj.gov/osg/briefs/2003/3mar/1ami/2003—724.mer.ami.pdf at 24; Br of the Gov'ts of the Fed Republic of Germany and Belgium as Amici Curiae in Support of Petitioners, Empagran, No. 03724, 2004 WL 226388 (3 Feb 2004) (S Ct Decision, 14 June 2004), at 12 ("It is our understanding that approximately 100 countries now have comprehensive antitrust laws. . . ."); Br. of the Fed. Republic of Germany and Belgium as Amici Curiae in Support of Petitioners, Empagran, No. 03-724, 2004 WL 226388 (Feb. 3, 2004) (S Ct Decision, 14 June 2004), at 12 ("hard-core cartels . . . are prohibited almost universally").
59 Empagran, Br. for Resp'ts, at 17, ("[O]verall anticartel enforcement levels around the world remain fairly low outside the United States.") (Quoting Int'l Comp. Pol'y Advisory Comm. Final Report to the A.G. 186 (2000), http://www.usdoj.gov/atr/icpac/finalreport.htm) (emphasis added); see also Empagran, Br. for Amici Curiae Comm. to Supp. the Antitrust Laws & Nat'l Ass'n of Sec. & Consumer Att'ys in Supp. of Resp'ts at 15.
60 Idem at 16 (quoting Eleanor M Fox, 'International Antitrust and the Doha Dome', 43 Va J Int'l L (2003), 911, 916-17). This enforcement gap is exploited by price-fixing cartels, which operate in "countries which [do] not have a competition policy and . . . engage systematically in predatory pricing or dumping whenever a developing country [is] building up a domestic industry." Idem (quoting Frédéric Jenny, 'Globalization, Competition and Trade Policy: Convergence, Divergence and Cooperation', in Competition Policy in the Global Trading System: Perspectives from the EU, Japan and the USA (Clifford A. Jones & Mitsuo Matsushita eds 2002), 315).
61 Donncadh Woods, speech at conference organized by the Institute for Consumer Antitrust Studies at Loyola University, Chicago, 'Private Enforcement of Antitrust Rules - Modernization of the EU Rules and the Road Ahead' (20 February 2004), at 5.
62 See Brief of Amici Curiae Ecomonists Joseph E Stiglitz & Peter R Orszag, Empagran, 542 US 155 (2004) ("If [the] aggregate expected punishment is smaller than the sum of the profits garnered in each nation, deterrence of the global cartel is inadequate and consumers everywhere will be harmed."), available at http://www.esjpc.com/Empagran-Amicus-Final.pdf, at 4.
63 See, eg, Provimi Ltd, v Aventis Animal Nutrition SA, (2003) ECC 29, at paragraphs 46-47 (QD (Comm Ct)).
64 In the case of Canadian plaintiffs' efforts to gain access to discovery in a US antitrust case, the court recognized that plaintiffs' access to US discovery "is not oppressive or unfair to the defendants in the Canadian proceedings" and such access is consistent with important policy objectives, such as - "facilitating access to justice, judicial efficiency and behavior modification." See Vitapharm Can LTD v F Hoffman-LaRoche Ltd  CarswellOnt 190 (Ontario, Canada), Justice Cumming's Reasons for Decision, paragraph 49 at 13 (26 January 2001) ("Cumming Decision") (emphasis added). See also In re Vitamins Antitrust Litig, No. 99-0197, MDL No.1285, 2001 US Dist. LEXIS, 25068 at *36-37 (DDC 19 Mar 2001); In re Linerboard Antitrust Litig, 333 F Supp 2d 333, 342 (ED Pa 2004).
65 Vitapharm Ca Ltd v Hoffman-LaRoche Ltd,  212 D.L.R. (4th) 563 (Ontario, Canada), Divisional Court Endorsement, paragraph 11 at 4 (April 10, 2002) (citing Cumming Decision, paragraph 27 at 10).
66 See Transcript of Proceedings in In re International Air Transportation Surcharge Antitrust Litigation, MDL No. 1793 (ND Cal, 8 Mar 2007) (court indicating that, upon willingness of the parties, it would reach out cross-jurisdictionally to ensure that "any resolution in this case is as large and encompassing as possible.").
67 See In re Vitamins Antitrust Litigation, No. 99-1097, MDL No. 1285, 2001 US Dist. LEXIS 8903 (DDC 7 June 2001).