This country-specific Q&A provides an overview to competition litigation laws and regulations that may occur in The United States.
This Q&A is part of the global guide to Competition Litigation. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/competition-litigation/
What types of conduct and causes of action can be relied upon as the basis of a competition damages claim?
A number of federal statutes prohibit anti-competitive conduct and are relied upon as the basis of competition damages claims. While the federal regulatory regime sets the floor for US antitrust law, individual states may enact more restrictive antitrust laws.
Key federal statutes regulating competition and providing for a private right of action include:
- Section 1 of the Sherman Act of 1890, which prohibits all agreements, contracts, and conspiracies that unreasonably restrain trade and impact interstate commerce. 15 USC § 1 . Violations of Section 1 are the most common basis for private competition claims in the United States.
- Section 2 of the Sherman Act, which creates a private right of action for creating or attempting to create a monopoly through anticompetitive acts. 15 USC § 2 . Such claims require a court to determine whether the defendant does in fact have monopoly power and if it has acted wilfully to acquire or maintain that power through conduct such as unjustified refusals to deal, predatory pricing, or filing baseless lawsuits against competitors.
- Section 3 of the Clayton Act of 1914, which prohibits tying arrangements, where multiple products or services are inseparably bundled and must be purchased together, and anticompetitive exclusive dealing, where a distributor agrees with a supplier not to sell the products of other suppliers. 15 USC § 14 .
- Section 8 of the Clayton Act, which prohibits competing corporations from having “interlocking directorates,” where directors overlap on two or more competing corporations. 15 USC § 19 .
- The Robinson-Patman Act of 1936, which prohibits price discrimination in the sale of goods to equally-situated distributors. 15 USC § 13 .
The Federal Trade Commission [FTC] Act of 1914 gives the FTC the ability to prohibit acts that would violate the Sherman Act before they have occurred, including invitations to collude which would constitute agreements violating Section 1 of the Sherman Act if accepted, and practices allowing competing companies to coordinate prices without explicit agreements. 15 USC §§ 41 – 58.
Section 1 of the Sherman Act has been interpreted broadly, and thus an “agreement” need not be explicit. American Tobacco Co v United States, 328 US 781, 810 . Rather, an agreement may be determined to exist if the accused engaged in parallel business conduct and other “plus factors” (eg a motive to conspire and actions against its self-interest, if the defendant had acted alone) are present. Bell Atlantic Corp v Twombly, 550 US 544 .
Courts examining claims brought under Section 1 of the Sherman Act must also determine if the alleged conduct “unreasonably” restrained trade. Analysis of this element is divided into two subcategories: (i) per se illegal restraints on trade, and (ii) restraints on trade that must be further analysed under the “rule of reason” test. State Oil Co v Khan, 522 US 3, 10 . Activities deemed per se illegal do not require further analysis into the reasonableness of the restraint on trade and are considered to be violations of the Sherman Act. See generally NYNEX Corp v Discon, Inc, 525 US 128, 133 . Such activities include price fixing, rigging bids, and allocation of markets or customers.
Under the “rule of reason” test, courts analyze “specific information about the relevant businesses, its condition before and after the restraint was imposed, and the restraint’s history, nature and effect.” State Oil, 522 US at 10. If a defendant can show that the alleged anticompetitive activity served a legitimate business purpose or was motivated by a legitimate business aim, it can defeat claims of agreements that unreasonably restrain trade under Section 1 and attempts to monopolise in restraint of trade under Section 2 of the Sherman Act. See, eg, Times-Picayune Pub Co v United States, 345 US 594, 627 .
A plaintiff initiating an action under Section 2 of the Sherman Act must show that the defendant possessed “monopoly power in the relevant market” and acquired or maintained that power through means beyond having “a superior product, business acumen, or historic accident.” United States v Grinnell Corp, 384 US 563, 570–71 . Alternatively, a plaintiff can allege that a defendant attempted to monopolise if the plaintiff can show that the defendant engaged in certain anticompetitive acts intended to create a monopoly, had the specific intent to monopolise, and had a dangerous probability of success. Spectrum Sports, Inc v McQuillan, 506 US 447, 459 .
Claims of price discrimination under the Robinson-Patman Act must include allegations of two or more completed sales by the same seller to two or more buyers of products that are of similar quality at differing prices within a reasonably small window of time which may harm competition in interstate commerce. See Volvo Trucks North America, Inc v Reeder-Simco GMC, Inc, 546 US 164 .
What is required (e.g. in terms of procedural formalities and standard of pleading) in order to commence a competition damages claim?
Civil suits, including private antitrust actions, are generally commenced via the filing of a complaint and service of process in accordance with applicable state or federal civil procedure rules. For cases brought in the federal courts of the United States, plaintiffs must state a plausible claim for relief under Rule 8 of the Federal Rules of Civil Procedure when filing suit, leading to a “reasonable expectation that discovery will reveal [the necessary] evidence,” or be subject to a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Twombly, 550 US at 545; see also Ashcroft v Iqbal, 556 US 662 . A plaintiff’s complaint must be accompanied by factual allegations, rather than mere legal conclusions. Ashcroft, 556 US at 662.
To state a viable claim for relief under Section 1 of the Sherman Act, a plaintiff must allege the existence of an agreement in restraint of trade, and that the agreement produced anti-competitive effects (such as reduced output, increased priced, reduced quality, or by showing that the defendants possessed market power) within a relevant product and geographic market.
What remedies are available to claimants in competition damages claims?
Section 4 of the Clayton Act makes treble damages available to all private plaintiffs except for foreign governments. 15 USC § 15 . Plaintiffs, including natural persons and businesses, may also sue for injunctive relief against a threatened loss caused by violation of the antitrust laws provided they can show “that the danger of irreparable loss or damage is immediate.” 15 USC §§ 25–26 . ¬
What is the measure of damages? To what extent is joint and several liability recognised in competition damages claims? Are there any exceptions (e.g. for leniency applicants)?
Private plaintiffs are entitled to treble damages if they prevail on their federal antitrust claims. 15 USC § 15 . In addition to recovering their attorney’s fees, plaintiffs may also recover interest on actual damages “if the court finds that the award of such interest … is just in the circumstances.” Id.
Plaintiffs are not required to sue all alleged conspirators when bringing an antitrust claim under federal law, as antitrust conspirators are “jointly and severally liable for all damages caused by the conspiracy.” William Inglis & Sons Baking Co v ITT Continental Baking Co, 668 F2d 1014, 1052–53 [9th Cir 1981]. Moreover, under federal antitrust laws, a defendant does not have a right of contribution from other defendants if found liable for antitrust violations.
The US Department of Justice [DOJ] Antitrust Division’s leniency policy provides full criminal immunity to the first company or individual involved in a conspiracy to self-report its illegal conduct. The Antitrust Criminal Penalties Enhancement and Reform Act [ACPERA], Pub L No 108-237, § 213(a)-(b), 118 Stat 661, 666-668 [June 22, 2004], as amended by Pub L No 111-190, 124 Stat 1275 [June 9, 2010], codified as amended at 15 USC § 1, adds that an antitrust leniency applicant that has provided “satisfactory cooperation” to civil plaintiffs is responsible for only the actual damages attributable to the commerce done by the applicant in the goods or services affected by the violation, and is otherwise exempt from treble damages and joint and several liability.
What are the relevant limitation periods for competition damages claims? How can they be suspended or interrupted?
For actions under federal law, private plaintiffs must bring claims within four years after the cause of action accrued. 15 USCA § 15(b) . Claims, therefore, must be brought within four years from of last alleged anticompetitive overt act of the defendant. See, eg, Maricopa County v American Pipe & Construction Co, 303 F Supp 77 [D Ariz 1969], aff’d 431 F2d 1145 [9th Cir1970]. Some courts interpret this as four years from when the injury occurred, while other courts see it as four years from the time when a victim could have reasonably discovered it was injured. Compare Zenith Radio Corp. v. Hazeltine Research, Inc., 401 US 321, 338 ( with In re Processed Egg Prods. Antitrust Litigation, 931 F Supp 654, 657 [ED Pa 2013].
A continuing conspiracy exception to the statute of limitations exists if the defendant engages in new and independent acts that inflict new injury on the plaintiff. See Champagne Metals v Ken-Mac Metals, Inc, 458 F3d 1073, 1088 [10th Cir 2006]. Some acts, such as the performance of a pre-existing but allegedly anticompetitive contract, will not constitute a new predicate act extending the limitations period. See In re Ciprofloxacin Hydrochloride Antitrust Litigation, 261 F Supp 2d 188, 229 [EDNY 2003]. Conversely, continued price increases may constitute new and independent acts giving rise to the continuing violation exception to the tolling period, allowing plaintiffs to file suit beyond four years after the initial act. See In re Wholesale Grocery Products Antitrust Litigation, 722 F Supp 2d 1079, 1087–88 [D Minn 2010].
For criminal antitrust actions, however, the statute of limitations is five years. See 18 USCA § 3282 .
Which local courts and/or tribunals deal with competition damages claims?
Federal district courts have jurisdiction over antitrust claims involving interstate commerce. 15 USC § 15 . Antitrust claims based on state law may also be brought in state courts and federal courts sitting in diversity jurisdiction.
How does the court determine whether it has jurisdiction over a competition damages claim?
Generally, in order to exercise jurisdiction over a case, a court must have both jurisdiction over the parties (ie personal jurisdiction) and jurisdiction over the subject matter. For antitrust claims brought in federal court,
- Subject matter jurisdiction is present where either (i) the case involves rights or obligations arising from the Constitution or federal laws such as the federal antitrust statutes, 28 USC § 1331, or (ii) the amount in controversy exceeds $75,000 and the parties are diverse in citizenship or state of incorporation. 28 USC § 1332. Relevant federal antitrust statutes conferring subject-matter jurisdiction in the federal courts include (i) the Sherman Act, which invests jurisdiction in the district courts of the United States to prevent and restrain violations of the Act, 15 USC § 4; (ii) the Clayton Act, which allows the recovery of damages by ‘any person … injured in his business or property by reason of anything forbidden in the antitrust laws.’ 15 USC § 15; and (iii) the Foreign Trade Antitrust Improvement Act [FTAIA], which governs antitrust suits involving non-import trade or commerce with foreign nations.
- Personal jurisdiction may be exercised over an out-of-state defendant who has certain minimum contacts with the state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. International Shoe Co v Washington, 326 US 310 . General personal jurisdiction (ie over any and all claims) may be exercised over foreign corporations when their affiliations with the State are so “continuous and systematic” as to render them essentially at home in the forum state. Goodyear Dunlop Tires Operations, SA v Brown, 564 US 915, 919 . Accordingly, general personal jurisdiction will exist in a corporation’s state of incorporation or in the state of its principal place of business (ie headquarters). If general personal jurisdiction is unavailable, specific personal jurisdiction may arise in a particular case depending on the “affiliation between the forum and the underlying controversy,” Id.
How does the court determine what law will apply to the competition damages claim? What is the applicable standard of proof?
The standard of proof in any US civil case is a ‘preponderance of the evidence,’ as compared with the criminal standard of “beyond a reasonable doubt.” Under the preponderance standard, a claim is proven if it is more likely than not that the claim is true and the defendant did in fact do the wrong that caused the damage.
If a federal district court is presiding over a claim arising out of a federal question (such as a federal antitrust statute), the court will apply federal law. If, however, the court is exercising diversity jurisdiction, it is required to apply the substantive law of the forum state in which it sits.
Under Section 4 of the Clayton Act, a direct purchaser antitrust plaintiff must prove, by a preponderance of the evidence, the existence of a causal connection between the defendant’s antitrust violations and the plaintiff’s injury. This requires the establishment of the following four elements:
i. The defendant violated the antitrust laws;
ii. The plaintiff suffered actual economic injury;
iii. The defendant’s illegal behavior caused the injury; and
iv. The antitrust violation as a material and substantial cause of the plaintiff’s loss.
Once a private antitrust plaintiff successfully proves by a preponderance of the evidence the fact of its injury, it faces a lesser standard in establishing the amount in damages. In a damages calculation, a jury ‘may make a just and reasonable estimate of the damage based on the relevant data.’ Bigelow v RKO Radio Pictures, 327 US 251, 264-65 . However, the calculation cannot be based upon speculation or guesswork. Id.
To what extent are local courts bound by the infringement decisions of (domestic or foreign) competition authorities?
A criminal conviction for an antitrust offense is prima facie evidence of liability in all parallel civil cases. 15 USC § 16(a) (2018).
The Full Faith and Credit Clause of the US Constitution provides that each court must recognise the rulings of other courts. Further, 28 USC § 1738 provides, in relevant part, that state judicial decisions ’shall have the same full faith and credit in every court within the United States … as they have by law or usage in the courts of such State … from which they are taken.’ In Migra v Warren City School District. Board of Education, the Supreme Court stated that a federal court must give a state court decision the same preclusive effect as that same judgment would be given under that state’s law. 465 US 75, 80 . Additionally, an emerging pattern of cases has shown that federal courts find that state court judgments on state antitrust claims may collaterally estop litigation of federal antitrust claims if the same underlying facts are present. Clough v Rush, 959 F2d 182, 187-88 [10th Cir 1992]; Eubanks v Getty Oil Co, 896 F2d 960, 964 [5th Cir 1990].
Further, the Supreme Court has held that res judicata principles may apply to administrative agencies and federal courts may give preclusive effect to decisions of such agencies, such as the FTC, when: (1) that agency acts in its judicial capacity; (2) the agency resolves disputed issues of fact properly before it; and (3) the parties had an adequate opportunity to litigate those issues. United States v Utah Construction & Mining Co, 384 US 394, 421 .
Absent any treaties or agreements between the United States and foreign nations, foreign competition authorities’ infringement decisions would not be binding on US courts. For example, the European Union cooperates with United States competition authorities [the DOJ and the FTC] based on the following agreements:
- 1991 EU/US Competition Cooperation Agreement;
- 1998 EU/US Positive Comity Agreement; and
- 2011 EU/US Best Practices on Cooperation in Merger Investigations.
These agreements seek to promote cooperation and uniformity amongst competition authorities.
Further, in Animal Science Products, Inc v Hebei Welcome Pharmaceutical Co, the Supreme Court held that ‘a federal court should accord respectful consideration to a foreign government’s submission, but it is not bound to accord conclusive effect to the foreign government’s statements.’ 585 US _, 138 SCt 1865, 1869 . In this class action antitrust suit, the Court determined that a federal court, in determining foreign law, may consider ‘any relevant material or source,’ but does not have to give conclusive weight to foreign law or decisions. Id.
To what extent can a private damages action proceed while related public enforcement action is pending? Is there a procedure permitting enforcers to stay a private action while the public enforcement action is pending?
Commonly, private antitrust litigation will follow the commencement of a government enforcement action.
In some circumstances, a private antitrust case will be stayed when federal prosecutors are investigating the same defendant(s) in a criminal action. The DOJ must request the presiding court to stay the proceedings, at the court’s discretion. Similarly, courts may stay proceedings pending the resolution of an independent proceeding where the resolution in that forum may lead to issue preclusion. Hawaii Children’s Blood & Cancer Group v Hawai’i Pacific Health, Civ No 03-00708 [SOM/LEK], 2009 WL 62418 [D Haw Jan. 8, 2009].
What, if any, mechanisms are available to aggregate competition damages claims (e.g. class actions, assignment/claims vehicles, or consolidation)? What, if any, threshold criteria have to be met?
Antitrust cases are typically brought as class actions in the United States.
To certify a class, Rule 23 of the Federal Rules of Civil Procedure requires (1) numerosity (ie the class is so numerous that joinder is impracticable), (2) commonality (ie there are questions or law or fact common to the class), (3) typicality (ie the claims or defenses of the representative parties are typical of the claims or defenses of the class), and (4) adequacy of representation by the class representative (ie the represent will adequately protect the interests of the class). In addition, a plaintiff must show that certification as a class is appropriate for at least one of the following reasons: (1) to avoid prejudicing certain parties; (2) the defendant has acted or refused to act on grounds generally applicable to the class so that equitable relief is appropriate, or (3) common issues of law or fact predominate and class treatment is a superior means of adjudication. These elements must be satisfied through evidentiary proof.
The transfer of related claims for consolidated or coordinated pretrial proceedings is appropriate where there are common issues of fact, and consolidation and centralization would ‘serve the convenience of the parties and promote the just and efficient conduct of litigation.’ 28 USC § 1407. The Judicial Panel on Multidistrict Litigation, created by Congress in 1968, considers several factors when determining whether centralization and transfer is appropriate. Conspiracy allegations in antitrust cases are commonplace and exist as questions of fact that justify centralization and transfer. Further, the Panel considers whether the actions involve overlapping putative classes, and in such cases, centralization is essential to prevent inconsistent ruling on class certification. The Panel also considers whether centralization of the actions will eliminate duplicate discovery.
Are there any defences (e.g. pass on) which are unique to competition damages cases? Which party bears the burden of proof?
In a competition damages claim, the following affirmative defenses may be available to the defendants:
- No actual injury to plaintiff, in which the defendant argues that even if all of the claims against him are true, the plaintiff suffered no damages;
- Statute of limitations;
- Speculative damages, in which a plaintiff seeking to recover damages cannot definitively ascertain an amount in lost profits or economic harm. Andrx Pharmaceuticals, Inc v Biovail Corp International, 256 F3d 799, 815 [DC Cir 2001];
- The defendant’s conduct was not the material cause of the plaintiff’s actual or threatened injury. El Aguila Food Products v Gruma Corp, 131 F. App’x 450, 453 [5th Cir 2005]. ‘The required causal link must be proved as a matter of fact and with a fair degree of certainty,’ Alabama v Blue Bird Body Co, 573 F2d 309, 317 [5th Cir 1978];
- Failure to mitigate damages, in which a damages award is reduced when the plaintiff takes no action to avoid or reduce its damages. Litton Systems v AT&T Corp, 700 F2d 785, 820 [2d Cir 1983];
- Plaintiffs cannot seek punitive damages. Brown v Presbyterian Healthcare Services, 101 F3d 1324, 1332 [10th Cir 1983]; ‘Punitive damages beyond the statutory trebled damages cannot be awarded for an antitrust violation. The enhancement of damages in an antitrust case is the damages trebled.’ McDonald v Johnson & Johnson, 722 F2d 1370, 1381 [8th Cir 1983];
Additional affirmative defenses unique to private antitrust claims include:
- Legitimate business justifications. Mozart Co v Mercedes-Benz of North America, Inc, 833 F2d 1342 [9th Cir 1987]. The Supreme Court has recognised that antirust defendants may show a business justification for an otherwise per se illegal arrangement. Id. at 1349. This requires a showing that no less restrictive alternative is available. Id.
- Unclean Hands Doctrine, in which a plaintiff is not entitled to damages due to the plaintiff’s own illegal or unethical behavior. Doe v Deer Mountain Day Camp, Inc, 682 F Supp 2d 324 [SDNY 2010].
- Lack of antitrust standing. In order to establish antitrust standing, a plaintiff must prove:
a. That the plaintiff suffered antitrust injury. This means an antitrust violation caused injury to the antitrust plaintiff. State of Alabama v Blue Bird Body Co, 573 F2d 309, 317 [5th Cir 1978];
b. That the plaintiff’s injury is not too remote. An injury must be direct for a plaintiff to have standing under § 4 of the Clayton Act. Blue Shield of Virginia v McCready, 457 US 465 ;
c. That the plaintiff is not an indirect purchaser. In Illinois Brick Co v Illinois, 431 US 720 , the Supreme Court held that a plaintiff must be a direct purchaser in order to have standing to sue for damages under § 4 of the Clayton Act. 431 US at 720.
Federal antitrust law does not provide for a pass-on defense following Illinois Brick, however, the defense may still be invoked in certain state law antitrust actions in which indirect purchasers are allowed to recover damages.
Affirmative defenses require a showing of facts beyond those claimed by the plaintiff, as the party who asserts an affirmative defense bears the burden of proof.
Is expert evidence permitted in competition litigation, and, if so, how is it used? Is the expert appointed by the court or the parties and what duties do they owe?
Expert testimony and evidence, particularly from economists, plays a key role in competition litigation. Parties can utilise their own experts, but if they do so they must disclose the identity of any expert witnesses to be used at trial at least 90 days before trial, unless otherwise directed by the court. See Fed R Civ P 26(a)(2). Additionally, the court may appoint any expert of its own choosing. However, the court may only appoint someone who consents to act.
Rule 706(b) of the Federal Rules of Evidence stipulates that the expert: (1) must advise the parties of any findings the expert makes; (2) may be deposed by any party; (3) may be called to testify by the court or any party; and (4) may be cross-examined by any party, including the party that called the expert.
The trial judge is conferred the task ‘of ensuring that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand’ under Rule 702. Daubert v Merrell Dow Pharmaceuticals, Inc, 509 US 579 . The judge thereby serves a ‘gatekeeping’ function and ‘general acceptance’ by the relevant scientific community is not a necessary or dispositive condition to the admissibility of scientific evidence (although it is certainly relevant). Daubert discussed ‘four factors—testing, peer review, error rates, and ’acceptability’ in the relevant scientific community’ which help guide a judge in his or her determination as to whether certain scientific evidence is admissible. Kumho Tire Co v Carmichael, 526 US 137, 137 .
Describe the trial process. Who is the decision-maker at trial? How is evidence dealt with? Is it written or oral, and what are the rules on cross-examination?
Jury trials are available in suits for damages; however, suits for equitable relief are tried by the court. In a jury trial, parties file requests for the jury instructions they wish the court to give.
In a federal court, admissibility of evidence is governed by the Federal Rules of Evidence. Evidence may be either written [ie documentary] or oral [through the testimony of fact or expert witnesses], and under Rule 401 of the Federal Rules of Evidence ‘evidence is relevant if: (a) it has any tendency to make a fact more or less probable than it would be without the evidence; and (b) the fact is of consequence in determining the action.’
Under Federal Rule of Evidence 614, each party is entitled to cross-examine witnesses. Additionally, the Rules provides that the court may examine a witness regardless of who calls the witness, subject to the parties’ objections.
How long does it typically take from commencing proceedings to get to trial? Is there an appeal process? How many levels of appeal are possible?
The amount of time it takes to get to trial from commencing proceedings can vary significantly from case to case. A lawsuit has the potential to last for several years depending on the breadth of the discovery stage of the proceedings.
The federal courts allow for two levels of appeal from a decision of a district court: to the courts of appeal for various circuits [ie groupings of district courts] and from then on to the Supreme Court of the United States. A similar appellate hierarchy exists for the state courts in each state. Both federal and state court systems provide a mechanism for interlocutory appeals from interim decisions of the lowest courts.
According to Rule 3 of the Federal Rules of Appellate Procedure, an appeal may be taken only by filing a notice appeal with the district clerk within specified time limits. The notice of appeal must specify the party or parties taking the appeal, designate the judgement, order, or part thereof being appealed, and name the court to which the appeal is taken.
Do leniency recipients receive any benefit in the damages litigation context?
Individuals and companies can enter the DOJ’s antitrust leniency program by being the first to self-report a criminal antitrust violation and fully cooperating with the DOJ investigation. By doing so, leniency applicants can be exempted under ACPERA from the treble damages and joint and several liability which otherwise applies in private antitrust litigation.
According to Section 213 of ACPERA, an antitrust leniency applicant or cooperating individual satisfies the eligibility requirements for leniency with respect to a civil action if the court determines that the applicant or cooperating individual has cooperated satisfactorily. This cooperation entails:
- providing a full account to the claimant of all facts known to the applicant or cooperating individual that are potentially relevant to the civil action;
- furnishing all documents or other items potentially relevant to the civil action that are in the possession, custody, or control of the applicant or cooperating individual, as the case may be, wherever they are located;
- in the case of a cooperating individual, making himself or herself available for such interviews, depositions, or testimony in connection with the civil action as the claimant may reasonably require; and responding completely and truthfully, without making any attempt either falsely to protect or falsely to implicate any person or entity, and without intentionally withholding any potentially relevant information, to all questions asked by the claimant in interviews, depositions, trials, or any other court proceedings in connection with the civil action; or
- in the case of an entity, using best efforts to secure and facilitate from cooperating individuals covered by the agreement the cooperation described above.
How does the court approach the assessment of loss in competition damages cases? Are “umbrella effects” recognised? Is any particular economic methodology favoured by the court? How is interest calculated?
A plaintiff is only entitled to damages likely caused by the defendant’s antitrust violation. Thus, damages are calculated by determining what the plaintiff’s experience would have been ‘but for’ the antitrust violation, and then comparing that to its actual experience.
In some contexts, the measure of damages is typically the plaintiff’s lost profits. The majority of courts limit recovery to lost net profits. However, lost gross profits may be recovered on some occasions where the difference between gross and net profits is minimal. Where the plaintiff’s business is totally or partially destroyed, damages can be ascertained by the ‘going concern’ value of the plaintiff’s business.
‘Umbrella damages’ are not recognised in competition damages cases. Plaintiffs cannot recover damages for transactions with parties that are not part of a purported antitrust conspiracy. Indirect and ‘direct purchasers from competitors of defendant manufacturers [are] not entitled to sue on a theory that defendants' anticompetitive activity made it possible for their competitors to charge higher prices and thereby injure purchasers’ Mid-W Paper Products Co v Continental Group, Inc, 596 F2d 573 [3d Cir 1979].
Two prominent methodologies for proving damages that have been broadly accepted by the courts are the ‘before and after’ and ‘yardstick’ theories. The ‘before and after’ theory compares a plaintiff’s profits or the prices it paid during the period of violation with its profits earned or prices paid before the beginning of the violation period or after its termination. The ‘yardstick’ approach compares profits earned or prices paid by a plaintiff with the corresponding data from a firm or in a market unaffected by the violation.
Prejudgment interest is generally unavailable to private antitrust plaintiffs. Under Section 4(a) of the Clayton Act, however, the court may award simple interest on actual damages for the period beginning on the date of service of such person’s pleading setting forth a claim under the antitrust laws, and ending on the date of judgement, or any shorter period of time, if the court finds that the award of such interest is just given the circumstances. In ascertaining whether the award is just given the circumstances, the court considers three factors: (1) whether either party or its representative made motions or defenses so lacking in merit as to show that such party or representative acted intentionally for delay or otherwise acted in bad faith; (2) whether either party or its representative violated any provision providing sanctions for dilatory behaviour or providing for expeditious proceedings; and (3) whether either party or its representative engaged in conduct primarily for the purpose of delaying the litigation or increasing the cost thereof.
28 USC § 1961 governs the award of post-judgment interest in competition litigation. Post-judgment interest is calculated from the date of the judgment, including trebled damages, and is imposed at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date of the judgment. Post-judgment interest is computed daily and compounded annually. The interest is calculated on attorneys’ fees and costs as well as on damages.
Can a defendant seek contribution or indemnity from other defendants? On what basis is liability allocated between defendants?
Courts have applied the tort doctrine of joint and several liability in antitrust actions as a method of deterrence. In order to maximise deterrence, courts have denied a right of contribution in competition litigation. In Texas Industries v Radcliff Materials, Inc, the Supreme Court unanimously held that an antitrust defendant has no right of contribution from co-defendants and that federal courts ‘are not empowered to fashion a federal common-law rule of contribution among antitrust wrongdoers’ 451 US 630 .
In what circumstances, if any, can a competition damages claim be disposed of (in whole or in part) without a full trial?
There are two primary mechanisms to dispose of civil damages claims, including competition damages claims, without a full trial: (i) a motion to dismiss; and (ii) a motion for summary judgment.
Motion to Dismiss
In federal cases, Rule 12 of the Federal Rules of Civil Procedure provides the standard for motions to dismiss. Claims can be dismissed on procedural grounds – eg, lack of personal or subject matter jurisdiction and insufficient service of process [Fed R Civ P 12(b)] – or on substantive grounds, for failing ‘to state a claim upon which relief can be granted.’ Fed R Civ P 12(b)(6). In other words, under Rule 12(b)(6), if the facts the plaintiff has alleged are such that, even assuming their truth, they do not satisfy the elements of the law(s) on which the plaintiff has relied, then it is appropriate for a judge to order dismissal of such claims.
In the context of antitrust claims, specifically, the case of Twombly is particularly informative. 550 US at 544. It stands for the proposition that a mere ‘allegation of parallel conduct’ is insufficient for a conspiracy claim to withstand a 12(b)(6) motion. Id. at 557. After Twombly, plaintiffs must show in their pleadings that the surrounding ‘context’ could lead one to reasonably believe that the ‘parallel conduct’ is the result of an agreement to so act. Id. Importantly, even though parallel conduct alone cannot shield a plaintiff from a motion to dismiss, if it is alleged in conjunction with ‘plus factors’ that are probative of an underlying agreement as opposed to independently-made rational decisions, a court will be more likely to reject a motion to dismiss. See, eg, In re Flat Glass Antitrust Litigation, 385 F3d 350, 360 [3d Cir 2004]. Such ‘plus factors’ include, but are not limited to, ‘(1) evidence that the defendant had a motive to enter into a price fixing conspiracy; (2) evidence that the defendant acted contrary to its interests; and (3) “evidence implying a traditional conspiracy.”’ Id. (quoting Petruzzi’s IGA Supermarkets, Inc v Darling-Del Co, 998 F2d 1224, 1244 [3d Cir 1993]).
Motion for Summary Judgment
The standard for summary judgment in federal cases is set forth in Rule 56 of the Federal Rules of Civil Procedure, which provides that it is appropriate for a court to ‘grant summary judgment [ie, rule on the merits of the case] if the movant shows that there is no genuine dispute as to any material fact.’ Fed R Civ P 56. It is, arguably, more difficult for a plaintiff to survive a motion for summary judgment than a motion to dismiss, as the court will not presume the veracity of the claims made in his or her pleadings. Rather, in evaluating a motion for summary judgment, a judge will look not only at the pleadings, but will also require that the plaintiff provide evidence that supports the allegations made therein. Thus, although the movant has the burden of proof to ‘show that there is no genuine dispute as to any material fact,’ the plaintiff still must proffer evidence that such a dispute indeed exists. Id.
For example, in a conspiracy case, to survive a motion for summary judgment, the plaintiff must proffer ‘evidence “that tends to exclude the possibility” that the alleged conspirators acted independently.’ Matsushita Electric Industrial Co v Zenith Radio Corp, 475 US 574, 588  (quoting Monsanto Co v Spray-Rite Service Corp, 465 US 752, 764 ). Much more is thus required of a plaintiff defending against a motion for summary judgment than a motion to dismiss wherein it ‘need only allege “enough factual matter (taken as true) to suggest that an agreement was made.”’ Starr v Sony BMG Music Entertainment, 592 F3d 314, 321 [2d Cir 2010] [quoting Twombly, 550 US at 556].
Finally, practically speaking, a motion for summary judgment is different from a motion to dismiss in that summary judgment motions typically are not brought in competition cases until discovery has concluded, which is often a lengthy and expensive process.
What, if any, mechanism is available for the collective settlement of competition damages claims? Can such settlements include parties outside of the jurisdiction?
One mechanism to achieve a collective settlement of competition damages claims is a class action settlement. Class action settlements are governed by Rule 23 of the Federal Rules of Civil Procedure, and must be approved as fair, reasonable, and adequate by the judge before they can bind absent class members. Under Federal Rule of Civil Procedure 23(a), a class can be certified for settlement provided that certain elements are met, including (i) that the class is sufficiently numerous for collective treatment; (ii) the claims of the named class members are sufficiently common and typical of the claims of the class as a whole; and (iii) class counsel can adequately represent absent class plaintiffs. Plaintiffs must also show that ‘questions of law or fact common to class members predominate over any [individual questions] and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.’ Fed R Civ P 23(b)(3); see also Wal-Mart Stores, Inc v Dukes, 564 US 338, 361-65 .
Such settlements may include parties outside of the jurisdiction. The Supreme Court has held that absent plaintiff class members suffer a less imposing burden in an out-of-state class action than do defendants. Phillips Petroleum v Shutts, 472 US 797, 811 . Thus, the absent class members are not required to have the ‘minimum contacts with the forum’ state that would otherwise be mandated for a state to have ‘personal jurisdiction over [an out-of-state] defendant.’ Id. Moreover, for a court to have jurisdiction over absent class members, they are not required to ‘affirmatively consent,’ or ‘opt in’, to its jurisdiction. Id. at 811-812. In damages class actions, the only requirement under the Due Process Clause is that the absent class members be afforded the ability to opt out of the litigation. Id. at 811-812. Thus, so long as absent class members are afforded notice of the action, notice of their rights, and informed that they can choose to opt out of the class by ‘returning an “opt out” or “request for exclusion” form,’ a court properly exercises jurisdiction over all class members who choose not to opt out. Id. at 812. Thereafter, a court-approved settlement will be binding as to those absent class members. Id.
What procedures, if any, are available to protect confidential or proprietary information disclosed during the court process? What are the rules for disclosure of documents (including documents from the competition authority file or from other third parties)? Are there any exceptions (e.g. on grounds of privilege or confidentiality, or in respect of leniency or settlement materials)?
Even though a party usually must provide to the other side information that falls within the scope of discovery under Rule 26(b) of the Federal Rules of Civil Procedure, a party still can move the court for a protective order so that the party’s opponent is precluded from publicly disclosing the information. A court ‘may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense’ by, for example, ‘designating the persons who may be present while the discovery is conducted’ or ‘requiring that a deposition be sealed and opened only on court order.’ Fed R Civ P 26(c)(1)(E)-(F).
For a party to compel disclosure, the document in question must fall within the scope of discovery under Rule 26(b). Namely, the document must relate to a ‘nonprivileged matter that is relevant to any party’s claim or defense and’ the costs associated with the discovery of said document must be ‘proportional to the needs of the case.’ Fed R Civ 26(b). If the document meets these requirements, then it must be disclosed through the procedures set forth in Rule 34. Rule 34(a) provides that the ‘responding party’ must:
‘produce and permit the requesting party … to inspect, copy, test, or sample … any designated documents or electronically stored information … stored in any medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form….’
Fed R Civ P 34(a)(1)(A).
It is also important to note that when producing documents, ‘[a] party must [do so] as they are kept in the usual course of business or must organise and label them to correspond to the categories in the request.’ Fed R Civ P 34(b)(2)(E)(i). For ‘[e]lectronically [s]tored [i]nformation,’ specifically, a party, ‘[u]nless otherwise stipulated or ordered by the court… must produce it in a form… in which it is ordinarily maintained or in a reasonably usable form….’ Fed R Civ P 34(b)(2)(E)(ii).
Regarding government documents, litigants are permitted to use subpoenas to demand their disclosure so long as the information is (i) ‘nonprivileged’ and (ii) probative of a ‘party’s claim or defense.’ Fed R Civ P 26(b). Regarding third party documents, Rule 34(c) grants litigants the power to subpoena them so long as the subpoena complies with Rule 45’s requirements. Namely, Rule 45 provides that a valid subpoena must not ‘subject a person to undue burden.’ Fed R Civ P 45(b). Importantly, even if the subpoena complies with Rule 45, a party seeking documents from a third party faces the added hurdle that the court may refuse to compel discovery unless the documents meet an even more stringent version of the normal Rule 26(b) relevance requirement. See Zukoski v Philadelphia Electric Co, Civ A No 93-4780, 1994 WL 637345, at *3 [ED Pa Nov. 14, 1994].
Several types of privilege may prevent the disclosure of documents. These include (i) the attorney-client privilege, which protects communications between the attorney and their client (but not the underlying facts) (ii) the work product privilege, which protects attorney work product created in anticipation of litigation; and (iii) the common interest doctrine, which allows attorneys representing different clients with a common legal interest to maintain the attorney-client privilege while still sharing privileged information between each other. In the antitrust context there are two primary ways that the common interest privilege is invoked: (i) when entities are merging, counsel for each entity can share their respective analyses of the regulatory obstacles that might result from the merger while still maintaining the privilege (see, eg, Hewlett-Packard Co v Bausch & Lomb, Inc, 115 FRD 308 [ND Cal 1987]); and (ii) through joint defense agreements. See, eg, Sony Electronics, Inc v Soundview Technologies, Inc, 217 FRD 104 [D Conn 2002].
Can litigation costs (e.g. legal, expert and court fees) be recovered from the other party? If so, how are costs calculated, and are there any circumstances in which costs recovery can be limited?
Under Section 4 of the Clayton Act, ‘any person who [has been] injured in his business or property by reason of anything forbidden in the antitrust laws [ie, the Sherman Act, Clayton Act, and Robinson Patman Act,]’ is entitled to treble damages ‘and the cost of suit, including a reasonable attorney’s fee.’ 15 USC § 15(a).
There are several ways of calculating costs. One method, articulated by the 9th Circuit Court of Appeals, is a multifactor test that includes:
(1) whether plaintiff's counsel had the benefit of a prior judgment or decree in a case brought by the Government, (2) the standing of counsel at the bar— both counsel receiving the award and opposing counsel, (3) time and labor spent, (4) magnitude and complexity of the litigation, (5) responsibility undertaken, (6) the amount recovered, (7) the knowledge the court has of the conferences, arguments that were presented and of work shown by the record to have been done by attorneys for the plaintiffs prior to trial, (8) what it would be reasonable for counsel to charge a victorious plaintiff, and (9) what contribution shall be made by the defendant toward the fees of plaintiff's counsel.
Twentieth Century Fox Film Corp v Goldwyn, 328 F2d 190, 221 [9th Cir 1964]. Another method that courts use is known as the ‘lodestar’ approach. This approach uses as its basis, or lodestar, the amount of time worked on ‘matters upon which plaintiff was successful’ multiplied by the attorney’s ‘normal billing rate.’ Knutson v Daily Review, Inc, 479 F Supp. 1263, 1269-1270 [ND Cal 1979]. After the court arrives at the ‘lodestar,’ it then can apply other more ‘subjective factors’ to achieve the most equitable amount. Id. at 1270. If the plaintiff’s attorney is paid ‘on a contingency basis,’ then he or she is given more as ‘compensation for the risk undertaken.’ Id. The court will also look at the specific actions or qualities of the attorney(s) in question. Id. Actions or qualities that were ‘exceptionally positive’ would merit a greater reward than the lodestar, while those that were ‘exceptionally … negative’ would merit a lower reward. Id.
Ultimately, the judge is free to ‘reasonably exercise’ her ‘discretion’ in deciding ‘the amount of attorney’s fees to be allowed the successful plaintiff.’ Pollock & Riley, Inc v Pearl Brewing Co, 362 F Supp 335, 336 [WD Tex 1973]. Therefore, the only limit on a judge’s discretion is appellate review, applying the highly deferential ‘abuse of discretion’ or ‘clear error of law’ standard. Twin City Sportservice, Inc v Charles O Finley & Co, 676 F2d 1291, 1312 [9th Cir 1982].
Are third parties permitted to fund competition litigation? If so, are there any restrictions on this, and can third party funders be made liable for the other party’s costs? Are lawyers permitted to act on a contingency or conditional fee basis?
Today it is a common practice for third party litigation funds to financially support private antitrust actions. Traditionally, third party litigation funding was a prohibited practice known as champerty. While such a law is still in place in some states, in most jurisdictions it has been abrogated to some extent. See Hamilton Capital VII, LLC, I v Khorrami, LLP, No 650791/2015, 48 Misc 3d 1223(A), 2015 WL 4920281 [NY Sup Ct Aug. 17, 2015]. Even in those states where it is still technically good law, funders can shield themselves by not influencing any strategic choices or the general direction that the lawyer and the client wish to take the litigation. See Charge Injection Technologies, Inc v EI Dupont De Nemours & Co, CA No 7c-12-134-JRJ, 2016 WL 937400 [Del Super Ct Mar. 9, 2016]; Kraft v Mason, 668 So2d 679, 683 [Fla 4th Dist Ct App 1996].
One restriction on the use of third party funders for competition litigation is the attorney’s professional duty of loyalty to the client. Model Rule of Professional Conduct 1.7 [American Bar Association 2018]. The funder, also, cannot be overly involved in the litigation. A funder who controls the litigation such that he or she has effectively become a party, could be liable for the other side’s fees. See, eg, Abu-Ghazaleh v Chaul, 36 So3d 691, 693-94 [Fla 3d Dist Ct App 2009]. Another limit on the use of third party funders for competition litigation is the threat of inadvertently waiving the attorney-client privilege through communications with the funder. The privilege covers only communications between the client and his or her attorney (and agents). Thus, if the attorney discloses any otherwise privileged information to the third-party litigation funder, that might eliminate the protections that stem from the privilege. Most significantly, it could make it discoverable. See, eg, Leader Technologies., Inc v Facebook, Inc, 719 F Supp 2d 373, 376-77 [D Del 2010].
Under Model Rule of Professional Conduct 1.5(c), lawyers are permitted to act on a contingency or conditional fee basis, subject to some restrictions. Namely, attorneys are not permitted to charge a contingency fee when their client is a criminal defendant. Model Rule of Professional Conduct 1.5(d).
What, in your opinion, are the main obstacles to litigating competition damages claims?
As private antitrust claims are most often brought as class actions, plaintiffs often face hurdles at the class certification stage (for more information on the requirements of class certification, see the response to #11 above). For defendants in federal antitrust suits, the cost of expansive pre-trial discovery and the prospect of treble damages and joint and several liability, with no right of contribution, creates significant pressure to settle such claims.
What, in your opinion, are likely to be the most significant developments affecting competition litigation in the next five years?
An increasingly active EU Competition Commission and the growth of damages actions in the EU and elsewhere will likely have spillover effects in other jurisdictions like the US. Additionally, US lawmakers have expressed interest in scrutinizing the competition landscape of major technology and health care companies, which will likely lead to a rise in private litigation in those sectors.