Antitrust data reveals vital role of private actions, illustrates need to pass FAIR Act

The recently released 2018 Antitrust Annual Report found that private antitrust lawsuits settled in federal courts since 2013 have recovered $19.3 billion on behalf of victims of antitrust violations, with settlements in 2018, alone, totaling $5 billion. The Report, produced by the University of San Francisco School of Law and Huntington National Bank, demonstrates that many billions of dollars are lost by U.S. consumers and small and other businesses to criminal antitrust conspirators. Private antitrust lawsuits are the primary way victims receive compensation for their losses and provide a strong deterrent to future wrongdoing.

Antitrust conspiracies can result in billions of dollars of overcharges affecting millions of consumers and small and other businesses. Two large antitrust class actions that settled in 2018 illustrate the scale of such illegal conduct. In one, the alleged decade-long conspiracy to rig foreign currency prices by the world’s largest banks overcharged public pension funds and other investors by many billions of dollars. A second case involved a criminal conspiracy to fix the prices of auto parts that raised prices for American auto dealers and consumers. Private class actions recovered billions of dollars for the victims of these criminal conspiracies, delivering compensation to thousands of consumers and small businesses and replenishing retirement funds for workers across the U.S. While government regulators and prosecutors also took action against the perpetrators, the victims of the conspiracies had to rely on private lawsuits to be compensated for their losses.

The U.S. system relies heavily upon private enforcement to compensate victims and hold violators accountable. But a recent Supreme Court decision (American Express v. Italian Colors Restaurant) would allow corporations that violate antitrust laws to insulate themselves from private lawsuits by inserting forced arbitration clauses and class action waivers into their contracts.

In the “Italian Colors” case, a restaurateur filed a class action lawsuit on behalf of himself and others challenging the heavy-handed, monopolistic behavior of American Express in forcing expensive conditions upon merchants for using its credit cards. Because of a little-noticed arbitration clause, the lawsuit was tossed from courts before its merits could be considered. 

By contrast, similar suits against MasterCard and Visa were not subject to forced arbitration agreements and were successfully prosecuted in federal courts with victimized small businesses now poised to recover billions of dollars in losses. Because of the arbitration clause, American Express escaped full accountability for alleged antitrust violations similar to those of its competitors.

Arbitration clauses are buried in the fine print of everything from nursing home admissions forms and credit card contracts to online click-through “agreements.” Often consumers and small businesses unwittingly give up their right to go to court to hold wrongdoers accountable and recover their losses. Instead, victims are forced to seek redress before secret arbitration panels chosen and paid for by the very corporations that break the law.

To level the playing field, Congress is considering the Forced Arbitration Injustice Repeal Act (FAIR Act, H.R. 1423 and S. 610), which would protect consumers and small businesses from being forced into arbitration for antitrust disputes. At a recent hearing before the House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law, former senior litigation counsel for Consumer Financial Protection Bureau, Deepak Gupta, explained what is at stake: “Forced arbitration is unavoidable. You can't avoid it if you want to live in modern society, not if you want a mobile phone, or a credit card, or a bank account. Forced arbitration replaces the laws that are written by Congress with private legislation written by corporations into the fine print of contracts that nobody reads and that nobody can negotiate. That is not what's supposed to happen in a democracy. Forced arbitration also robs us of our constitutional right to a jury trial.”

I couldn’t agree more. The FAIR Act simply outlaws any forced arbitration clause which requires consumers and small businesses to give up legal rights and protections before they’ve been hurt. Congress should pass it.

Joshua Paul Davis is Professor of Law and director of the Center for Law and Ethics at the University of San Francisco School of Law.