Antitrust Reformers Should Consider the Consequences of Mandatory Treble Damages

By Henry J. Hauser & Tiffany Lee (Perkins Coie LLP); Thomas G. Krattenmaker

The debate over antitrust reform is reaching a crescendo. Several proposals have been introduced in Congress and state legislatures to expand the scope of substantive antitrust rules governing marketplace behavior. Missing from the current discussion, however, is consideration of whether these new rules should incorporate an antitrust damages process that has remained unchanged for over a century. As legislators grapple with antitrust reform, it is important to examine the implications of importing the mandatory treble damages framework to new causes of action.

Mandatory treble damages incentivize private antitrust enforcement and deter anticompetitive conduct, but they also produce social and economic costs. We apply simple behavioral models to analyze two effects of mandatory treble damages on law firms and judges. First, mandatory trebling can drive law firms to overinvest in filing antitrust cases. Second, it may create a judicial bias against plaintiffs because judges, behaving as rational actors seeking to minimize error costs, have an incentive to avoid triple-magnitude Type I errors (erroneous rulings for plaintiffs) by leaning toward single-magnitude Type II errors (erroneous rulings for defendants). Failure to appreciate these effects risks undermining reformers’ core objectives.

We argue that legislators should consider the impacts of mandatory treble damages on law firms and judges before importing them from century-old antitrust laws into proposed reforms. Reformers might consider recasting their substantive antitrust changes as amendments to Section 5 of the Federal Trade Commission Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce” but does not provide for private rights of action or mandatory treble damages. This could enable legislators to extend antitrust law without unintentionally creating incentives for law firms to overinvest in antitrust litigation, or for courts to water down these reforms through narrow judicial interpretations.

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