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This paper discusses the theory and experience of United States courts concerning the quantification of harm in antitrust cases. This treatment pertains to both the social cost of antitrust violations, and to the private damage mechanisms that United States antitrust law has developed. It is submitted for the Roundtable on the Quantification of Harm to Competition by National Courts and Competition Agencies, Organization for Economic Cooperation and Development (OECD), Feb., 2011.

In a typical year more than 90% of antitrust complaints filed in the United States are by private plaintiffs rather than the federal government. Further, when the individual states in our federal system file their actions under federal antitrust law they are entitled to assert claims for damages as well. The vast majority of private antitrust actions in the United States include a claim for damages, which must be trebled. The damages measure authorized by the Clayton Act is based purely on compensation, and Congress has never seriously considered changing it. As it turns out, compensation for losses is rarely the measure that is also sufficient to produce the optimal level of deterrence of anticompetitive practices.

Even in the case of a simple naked cartel producing no efficiency gains whatsoever, the overcharge measure produces optimal deterrence only if we have some way of knowing ex ante what the probability of detection and successful prosecution is. Trebled damages under United States law would be about right if the probability of cartel detection and prosecution were .33. In all probability, however, the detection rate for naked cartels is not higher than .2, making a trebling multiplier too low. In other cases such as mergers and most vertical restraints, the probability of detection is 100% because the act is either public or else known to the plaintiff from its onset. In such cases trebled damages are probably excessive.

The indirect purchaser rule in federal antitrust law in the United States awards the entire overcharge to direct purchasers from the violator, and no damages at all to indirect purchasers except in a few atypical situations. In reality, most damages are passed on, and thus direct purchaser intermediaries are typically overcompensated. Further, nearly all of their harm results from lost output rather than the overcharge itself. As a result, in the typical situation the indirect purchaser rule both mismeasures damages and assigns the damages action to the wrong person.


Antitrust, Competition, Enforcement, Damages, Harm, Deterrence, Indirect Purchaser, Compensation