Translation devices were provided at the 10th International Seoul Competition Forum in September, but when Korea Fair Trade Commission Chairman Sang-Jo Kim began discussing the benefits that treble damages and class actions can provide to public enforcement of antitrust laws, it was clear the chairman knew how to speak the language of American competition enforcement. The chairman expressly advocated for an increase in American-style private enforcement because, he said, “public enforcement is neither perfect nor sufficient.” True.
The chairman was among a group of panelists from around the world who spoke on the topic of civil means of competition enforcement. The panelists included, from Europe, moderator Paul Nihoul, judge at the General Court of Justice of the European Union, and Chris Fonteijn, former chairman of the Netherlands Authority for Consumers and Markets; from Asia, Hong Kong Competition Commission CEO Brent Snyder (formerly a U.S. Department of Justice Antitrust Division trial attorney) and Professor Wang Xianlin of Shanghai Jiao Tong University; and me, as a representative of the United States private bar.
As Chairman Sang-Jo Kim acknowledged, most countries other than the U.S. rely primarily on administrative sanctions to detect, deter and punish cartels. Korea, however, is moving in the direction of the United States. The Korean National Assembly this year passed a statute authorizing treble damage claims, and the Assembly is expected to pass a statute permitting “opt-out class actions” for cartels this year.
In addition, the Assembly will be asked to enact a law requiring alleged cartelists to submit relevant documents to the Korea Fair Trade Commission. The chairman said these rules will help deter cartels, by increasing the expected cost of cartel detection in comparison to the expected benefits of cartel overcharges.
In the U.S., Congress enacted Section 4 of the Clayton Act, which provides a private right of action and treble damages specifically to encourage private challenges to antitrust violations. As the U.S. Supreme Court wrote nearly 40 years ago in Reiter v. Sonotone, private antitrust actions “provide a significant supplement to the limited resources available to the Department of Justice for enforcing the antitrust laws and deterring violations.”[1] In Reiter, the Supreme Court noted that nearly 20 times as many private antitrust actions were pending in the federal courts as actions filed by the Department of Justice.
The chairman and I both presented data regarding the effect of private enforcement actions in our respective countries. The data are telling. From 2012-17, an average of 755 antitrust lawsuits were filed in the U.S. each year.[2] In a study that covered 1990-2013, plaintiffs recovered some $34 billion in the top 60 private lawsuits.[3]
Nearly half of those cases were not preceded by government litigation, and some 82 percent of the cases were class actions.[4] As much as $7 billion was obtained from non-U.S. companies, and $17 billion was recovered in “rule-of-reason cases.”[5] During the same time period, the DOJ obtained $8.2 billion in fines.[6]
Chairman Sang-Jo Kim estimated that in Korea, the KFTC imposed surcharges on 43 cartel cases in 2016, out of which 13 generated private follow-on actions. Most of those cases, however, involved bid-rigging for public contracts. Excluding those bid-rigging cases, only three private damage cases were filed in 2016.
A few recent examples demonstrate how private actions help supplement the U.S. enforcement regime. In In re Urethanes Antitrust Litigation, the DOJ investigated an alleged cartel of polyurethane chemical producers, but ultimately declined to bring charges.[7] Class and opt-out plaintiffs initiated and pursued private actions. After a number of settlements, the class action lawyers took their case against one defendant, Dow Chemical, to trial.
The jury found Dow liable, and awarded $400 million damages before trebling.[8] Opt-out plaintiffs later went to trial against Dow, and settled for $400 million.[9] The private lawsuits helped deter cartels that affect U.S. consumers, and compensated victims — and did so without requiring an investment of the DOJ’s limited resources.
In In re LIBOR Antitrust Litigation, authorities around the globe imposed fines against banks accused of manipulating an interest-rate benchmark, LIBOR. In most of those cases, the fines were based on violations of commodities manipulation and other financial regulation laws. Class and opt-out plaintiffs in the U.S. brought antitrust claims alleging that the banks conspired to systematically suppress LIBOR over a period of years.
The Second Circuit ruled in 2015 that the allegations were sufficiently plausible to go forward.[10] As with Urethanes, the ongoing cases do not require an investment of the DOJ’s resources, are serving their purpose of deterring conduct that harmed U.S. consumers and are also helping to shape how antitrust laws apply in the financial industry.
Finally, in In re Vitamin C Antitrust Litigation, private plaintiffs brought antitrust claims against Chinese companies accused of fixing the prices for vitamin C to trial, and won a $54.1 million verdict, before trebling.[11] The Second Circuit reversed on jurisdictional grounds.
But, based in part on an amicus brief from the U.S. Solicitor General, the Supreme Court granted certiorari on the question of whether a court may exercise independent review of an appearing foreign sovereign’s interpretation of its domestic law, or whether a court is “bound to defer” to a foreign government’s legal statement, as a matter of international comity, whenever the foreign government appears before the court.[12] The case thus shows private plaintiffs working alongside public enforcement officials to impose rules that will deter the formation of cartels that harm U.S. consumers.
Although Chairman Sang-Jo Kim was a forceful advocate for private enforcement (as was I), other panelists were more restrained. Former Chairman Fonteijn expressed skepticism that private enforcement would, in fact, deter cartel conduct, because the potential exposure that a cartelist would face in private damage claims should reduce incentives for cartelists to voluntarily seek leniency.
Hong Kong Competition Commission CEO Brent Snyder agreed that private damage claims can interfere with parallel government proceedings, but also expressed his view that private enforcement supplements public resources, and limits the need for public authorities to treat individual victim recovery as a priority (in part by eliminating the need for economic estimates of overcharges).
Hong Kong, he said, is moving toward private enforcement on a much more limited scale than Korea. Hong Kong first allowed follow-on damage claims in December 2015. Hong Kong does not allow class actions, contingent fees or treble damages. As of September 2018, no such claims had been filed.
As Korea, Hong Kong, China and Europe move in the direction of private enforcement, we should be able to empirically observe whether that movement helps or harms competition enforcement overall.
[1] Reiter v. Sonotone, 442 U.S. 330, 344 (1979).
[2] https://lexmachina.com/lex-machina-q4-litigation-update/.
[3] Robert Lande, Class Warfare: Why Antitrust Class Actions are Essential for Compensation and Deterrence, 30 Antitrust 81 (2015-16).
[4] Id.
[5] Joshua P. Davis & Robert H. Lande, Toward an Empirical and Theoretical Assessment of Private Antitrust Enforcement, 36 Seattle U. L. Rev. 1269, 1288, 1290, 1292 (2013).
[6] Id. at 1277.
[7] https://www.law360.com/articles/47656.
[8] https://www.law360.com/articles/417240.
[9] https://www.law360.com/articles/781568.
[10] https://www.law360.com/articles/799232/16-big-banks-to-face-revived-libor-antitrust-suit.
[11] https://www.law360.com/articles/1001800/justices-to-hear-chinese-vitamin-c-price-fixing-case.
[12] Id.
