Article by Edward D. Cavanagh
Since the passage of the Sherman Act in 1890, successful plaintiffs in private antitrust actions have been entitled to recover three times the actual damages awarded. Originally embodied in section 7 of the Sherman Act, the mandatory treble damages provision was later incorporated into section 4 of the Clayton Act and made applicable to all actions in which private plaintiffs sought recovery under the federal antitrust laws. In the century since the Sherman Act became law, the antitrust debate has concentrated largely on issues of substantive liability. While the desirability of the mandatory treble damages remedy has been challenged from time to time since 1890, scholars did not seriously focus on antitrust remedies until the 1970s. In the last decade, mandatory trebling has come under intense attack from economists and legal scholars. The debate has broadened, and the detrebling movement has gathered momentum. Most recently, the Reagan Administration unveiled a package of legislative proposals calling for sweeping changes in the antitrust laws, including detrebling of damages for most antitrust violations.
The fundamental question explored in this Article is whether mandatory treble damages remain a useful tool in enforcement of the antitrust laws. A number of factors underscore the need to reexamine mandatory trebling. The historical justification for mandatory trebling is unclear. Moreover, the antitrust laws are somewhat imprecise; the line between what is permitted and what is forbidden is often blurred. The treble damages remedy may pose a trap for the unwary individuals who think they are complying with the antitrust laws and may not only deter socially beneficial conduct but also encourage inefficiency by discouraging traders from ‘playing it too close to the line,’ thereby increasing costs and lowering output. Mandatory trebling thus raises serious questions of fairness, may lead to economically counterproductive conduct, and may result in awards which far exceed the harm caused by the defendant's malfeasance. Finally, trebling may encourage prosecution of baseless suits by parties seeking to use the antitrust laws as a whipsaw to effect a quick settlement. On the other hand, the wisdom of detrebling may be questioned, especially at a time when government enforcement efforts are narrowly directed at a few readily identifiable types of misconduct and courts, through the use of doctrines such as standing and antitrust injury, are making it more difficult for plaintiffs to recover. In addition, this Article will examine possible alternatives to mandatory treble damages and analyze whether any such alternatives provide a viable replacement for the present system.
The anaysis set forth below utilizes the empirical studies on treble damages actions conducted by Richard Posner, the National Economic Research Associates (‘NERA’), and the Georgetown Conference on Private Treble Damages Actions. While the data generated by these studies provide useful insights, they are, nonetheless, limited and do not provide any definitive guidance as to whether the treble damages remedy should be retained. In particular, these studies do not address the fundamental question of the fairness of multiple damages in antitrust matters.
About the Author
Edward D. Cavanagh. Professor of Law, St. John's University School of Law; A.B. 1971 University of Notre Dame; J.D. 1974 Cornell Law School; LL.M. 1986 Columbia Law School.
Citation
61 Tul. L. Rev. 777 (1987)