Question

Why does the author of the lysene article believe that damages for antitrust are too small?

Answer 1

In theory, victims of antitrust violations receive treble damages.

In practice, however, almost every successful antitrust damages action settles. Because final verdicts in antitrust cases are exceptional, it may be more accurate to describe the antitrust damages level not as “treble” damages, but as the average or median percentage of damages successful antitrust cases actually settle for.

Until now the actual average or median size of antitrust settlements has only been a matter of speculation. To bring empirical analysis to this issue, we assembled a sample of 71 cartels for which we could find the necessary information. We believe that the sample includes every completed private U.S. cartel case since 1990. For each cartel a neutral scholar calculated the firms’ United States overcharges. We compared these results to the damages secured in the private cases filed in the United States against these cartels. We find that the victims of only 14 of the 71 cartels (20%) recovered their initial damages (or more) in settlement; of these, only seven (10%) received at least double damages. The rest—the victims in 57 cases—received less than their initial damages. Four received less than 1% of their damages and 12 received less than 10%. Overall, the median average settlement was 37% of single damages. Because the distribution of settlement percentages is so skewed, the weighted mean (a figure that weights settlements according to their sales) is much lower (19%) than the unweighted mean settlement of 66% (which gives equal weights to the cartels that operated in large markets and those that operated in small markets), because plaintiffs tend to be rewarded relatively poorly in the biggest cases.

The global Lysine cartel operated in the United States from 1992 to 1995, generating affected sales of $495 million. A posted economic study concluded that overcharges were $80 million. Direct purchasers recovered $55 million and indirect purchasers recovered $27.5 million.

The Recovery Ratio = ($55 + $27.5)/?$80 = 1.03

Our analysis of the 71 cartel cases shows that the victims of only 14 cartels enjoyed Recovery Ratios of 100% or higher, and only seven received more than 200%. The rest—the victims in 57 cases—failed to recover the amount the cartels initially overcharged them.

Overall, the average (i.e., the simple arithmetic mean average) Recovery Ratio is 66%.

However, when one plots the probability densities of the settlement/?overcharges percentages, it is immediately apparent that these ratios look nothing like the usual bell-shaped curve of a “normal” distribution. In fact, the distribution is highly skewed, with the number of very small percentages much greater than the number of large percentages (see Appendix). Under such circumstances, the median average is a better representation of central tendency than is the mean average. And the median Recovery Ratio is considerably lower, 37%