Restoring Accountability and Oversight in the Antitrust Settlement Process

42 Pages Posted: 8 Mar 2010

See all articles by Peter Hettich

Peter Hettich

University of St. Gallen; University of Basel

Date Written: December 21, 2005

Abstract

The enforcement of the antitrust laws is supposed to be a traditional task of the courts in the United States. However, the line between lawful and unlawful restraints of competition is not easily drawn. The courts struggle to assess the competitive effects of restraints, in particular outside the area of per-se unlawful restraints. Still, we are inclined to comfort ourselves by the seemingly acceptable outcomes of enforcement, achieved with the support of expert bodies like the Antitrust Division of the Department of Justice (DOJ) and later the Federal Trade Commission (FTC). Nevertheless, the authorities' resources to litigate cases in full are limited. A full litigation, with extensive discovery, with hearing of witnesses, and possibly with receipt of briefs of amicus curiae, may reveal tons of information, but the necessary knowledge for a sound, lasting decision ("root knowledge") may still not be acquired. Even if it would be theoretically possible to acquire "root knowledge", a rational actor will not try to acquire it if his efforts are subject to information and search costs. Bounded rational agents, i.e. also courts and authorities, generally experience limits in formulating and solving complex problems and in processing (receiving, storing, retrieving, transmitting) information. Enforcement results, therefore, vary, rendering Type I (false positives) and type II (false negative) errors. Given the circumstances, consent decrees – although probably more vulnerable to errors due to limited analysis – proved helpful to obtain fast relief and reduce the costs of enforcement; amicable settlements enjoy great success in antitrust enforcement. The obvious advantages of the consent decree over traditional antitrust enforcement by litigation come along with serious inherent flaws. Quite often, the settlement process is accused to be vulnerable to undue political influence and possibly corruption. The Tunney Act addressed these concerns by opening up the results of the settlement process to interested third parties and by requiring the government to reveal its justifications for settling the case. However, the Tunney Act fails to guarantee an informed decision of the court on the public interest of the proposed consent decree, and, consequently, fails also to deter participants from drafting inadequate settlements.

This paper is focused on the disregard of public interest by the use of consent decrees by the government. After describing the instrument of consent decree in the United States, the European Community and Switzerland (1.), I want to address inherent flaws of the settlement process (2.) and proposals to mitigate these flaws (3.).

Due to the lack of a conflict of interest, the integrity of settlements in private antitrust cases are hardly compromised, and will not be discussed, except as an instrument mitigating a possible perversion of public interest. Further, I will neglect the enforcement activity of the States' Attorneys General.

JEL Classification: K21, K42

Suggested Citation

Hettich, Peter, Restoring Accountability and Oversight in the Antitrust Settlement Process (December 21, 2005). U. of St. Gallen Law & Economics Working Paper No. 2010-02, Available at SSRN: https://ssrn.com/abstract=1562712 or http://dx.doi.org/10.2139/ssrn.1562712

Peter Hettich (Contact Author)

University of St. Gallen ( email )

Rosenbergstr. 51
St. Gallen, CH-9010
Switzerland

HOME PAGE: http://www.alexandria.unisg.ch/Personen/Peter_Hettich/L-en

University of Basel ( email )

Switzerland

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