Class Actions and Private Antitrust Litigation

37 Pages Posted: 7 Feb 2019 Last revised: 8 Feb 2019

See all articles by Albert H. Choi

Albert H. Choi

University of Michigan Law School

Kathryn E. Spier

Harvard University - Law School - Faculty; National Bureau of Economic Research (NBER)

Date Written: February 4, 2019

Abstract

The paper analyzes the effect of private antitrust litigation on firms' ability to collude and charge supra-competitive market prices. When the cost of litigation is below a threshold, firms charge high market prices, accommodate lawsuits, and accept the litigation costs as just another cost of doing business. By contrast, when the cost of litigation is above the threshold, the firms charge lower market prices and deter litigation. We model the class action as a mechanism that allows plaintiffs to lower their litigation costs, and show that class actions may or may not be privately and socially desirable. We also show that the firms' private incentives to block class action lawsuits may be either aligned with the social incentives, socially excessive, or socially insufficient. Various extensions, such as settlement, contingent fee compensation, fee shifting (loser-pays-all rule), and damage multipliers (treble damages), are also examined.

Keywords: Antitrust Lawsuits, Class Actions, Class Action Waivers

JEL Classification: D21, K12, K21, K41, L41

Suggested Citation

Choi, Albert H. and Spier, Kathryn E., Class Actions and Private Antitrust Litigation (February 4, 2019). Virginia Law and Economics Research Paper No. 2019-01; Virginia Public Law and Legal Theory Research Paper No. 2019-05. Available at SSRN: https://ssrn.com/abstract=3329316

Albert H. Choi (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

HOME PAGE: http://www.law.umich.edu/FacultyBio/Pages/FacultyBio.aspx?FacID=alchoi

Kathryn E. Spier

Harvard University - Law School - Faculty ( email )

1575 Massachusetts
Hauser 302
Cambridge, MA 02138
United States
(617) 496-0019 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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