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Author: Jarod Bona

Thanks to a 1977 US Supreme Court case called Illinois Brick v. Illinois, class-action-antitrust plaintiff claims may look strange.

You might expect to see named plaintiffs for a class of allegedly injured parties suing defendants (and it is usually multiple defendants) under the federal antitrust laws for damages. And you do see that—those are usually called the “direct purchasers.”

But what is unexpected is that you also often see another separate group of putative class members suing for the same alleged anticompetitive conduct in the same federal court, except they are suing under state antitrust laws—but only some state antitrust laws—for damages. These are usually called the “indirect purchasers.” And they can sue for antitrust damages under the state antitrust laws of what are called the “Illinois Brick repealer states.”

(The indirect purchasers also often sue for injunctive relief under federal antitrust law.).

This doesn’t seem to make much sense. What is going on here?

Good question.

I’ll do my best to explain.

But first, I want to remind you that even though Bona Law represents both plaintiffs and defendants in antitrust litigation, we do not typically represent class action plaintiffs in antitrust cases, and in fact, represent defendants in antitrust class actions. Indeed, this has been a large part of my career, going back to my time at Gibson, Dunn and DLA Piper. So—for that reason—I may be biased on these plaintiff antitrust class action v. defendant issues. That bias could seep into my description and explanations below.

Let’s use an antitrust price-fixing case to illustrate how this works (as many large antitrust class action cases involve price-fixing anyway):

So let’s say that the world figures out that the Antitrust Division of the Department of Justice is investigating three companies, making up an industry, for price-fixing. How did the world figure that out? Well, maybe DOJ obtained criminal indictments or a public company had to make note of it in its SEC filing?

You will then often see a blizzard of antitrust filings in federal courts throughout the country by an industry of antitrust class action plaintiff lawyers. As described above, some of these will be for direct purchasers and some for indirect purchasers.

Simply stated, a direct purchaser is someone that purchased a product directly from a defendant. An indirect purchaser is someone that purchased the product that came from a defendant, but not directly—instead, through some intermediary like a retailer or distributor.

If both direct purchasers and indirect purchasers are part of the same lawsuit or suing a single group of defendants under the same claim, there is this sticky question of, even conceding that there was price-fixing, who was damaged and by how much? That is, the price-fixing may have increased the prices that the direct purchasers literally paid compared to the but-for world without price-fixing, but what if the direct purchasers were retailers or distributors that merely passed along all or some of that overcharge to people that purchased from them (i.e. indirect purchasers)? Then the direct purchasers weren’t really injured or their damages were less than the amount of the overcharge from defendants’ price fixing.

What do you do with that?

Well, in 1968, the Supreme Court in Hanover Shoe, Inc. v. United Shoe Machinery Corp. said you had to ignore that problem. That is, the Supreme Court forbid antitrust defendants from raising as a defense that the direct purchasers had passed on any overcharge.

Okay, well, sometimes if you ignore a problem, it will go away.

But then indirect purchasers began suing under the federal antitrust laws and defendants were thus potentially subject to paying damages twice: Once to direct purchasers that had passed on overcharges (they couldn’t use that as a defense) and a second time to indirect purchasers who had received the overcharge from direct purchasers.

This hardly seemed fair, so the United States Supreme Court in the classic case of Illinois Brick v. Illinois decided in 1977 to put a stop to it: Henceforth, indirect purchasers could no longer sue for damages under the federal antitrust laws. So—again—the Supreme Court essentially said that we were just going to ignore the problem of pass-through from direct purchasers to indirect purchasers.

The Illinois Brick Court actually described three primary reasons for refusing to allow indirect purchaser suits for damages under the federal antitrust laws. First, doing so would allow for more effective enforcement of the antitrust laws (as splitting rewards for the overcharge among two different classes might dilute incentives of one or the other to file federal antitrust claims). Second, prohibiting indirect purchaser federal antitrust claims would avoid complicated damages calculations. And finally, allowing both direct and indirect purchaser federal antitrust claims would create the potential for duplicative damages against defendants.

Maybe now the problem would go away?

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Author: Jarod Bona

It depends. But probably not. Outside of California, courts may enforce these non-compete agreements arising out of an employment contract. Of course, most courts, no matter what the law and state, view them skeptically. In California, however, the policy against these agreements is particularly strong.

A restrictive covenant is often part of an employment agreement that restricts the employee’s actions after leaving employment. They typically prohibit the employee from competing in particular markets for a period of time after leaving the employer, but may also keep the employee from soliciting the company’s customers or even employees after leaving.

They are, unquestionably, restraints on trade. But are they unreasonable restraints on trade? In many states that is the issue—if they are reasonable, a court will enforce them. What does reasonable mean? Again, it depends. But typically, like other restraints on trade, they must usually be narrowly tailored to serve their purpose. They should contain “reasonable” limitations as to time, geographic area, and scope of activity.

The laws, of course, vary from state to state. But as a practical matter, most judges are skeptical. Some courts will actually rewrite the agreements to make them reasonable.

The purpose of these restraints is to offer protection to an employer that must necessarily share trade secrets and sensitive customer or financial information with their employees. The concern is that this information is so sensitive and easily exploited by a competitor that the employer needs the restrictive covenant to keep an employee from leaving and benefiting from the information as a competitor. It also reduces the likelihood of free-riding on training.

Despite these benefits, California law and courts take a hard stand against certain restrictive covenants. The California Supreme Court in Edwards v. Arthur Anderson LLP explained, for example, that “judges assessing the validity of restrictive covenants should determine only whether the covenant restrains a party’s ability to compete and, if so, whether one of the statutory exceptions to Section 16600 applies.” (exceptions include the sale of goodwill or corporate stock of a business).

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Author: Jarod Bona

Lawyers, judges, economists, law professors, policy-makers, business leaders, trade-association officials, students, juries, and the readers of this blog combined spend incredible resources—time, money, or both—analyzing whether certain actions or agreements are anticompetitive or violate the antitrust laws.

While superficially surprising, upon deeper reflection it makes sense because less competition in a market dramatically affects the prices, quantity, and quality of what companies supply in that market. In the aggregate, the economic effect is huge, thus justifying the resources we spend “trying to get it right.” Of course, in trying to get it right, we often muck it up even more by discouraging procompetitive agreements by over-applying the antitrust laws.

So perhaps we should focus our resources on the actions that are most likely to harm competition (and by extension, all of us)?

Well, one place we can start is by concentrating on conduct that is almost always anticompetitive—price-fixing and market allocation among competitors, as well as bid-rigging. We have the per se rule for that. Check.

There is another significant source of anticompetitive conduct, however, that is often ignored by the antitrust laws. Indeed, a doctrine has developed surrounding these actions that expressly protect them from antitrust scrutiny, no matter how harmful to competition and thus our economy.

As a defender and believer in the virtues of competition, I am personally outraged that most of this conduct has a free pass from antitrust and competition laws that regulate the rest of the economy, and that there aren’t protests in the street about it.

What has me so upset?

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Author: Jarod Bona

You may not realize this, but a lot of people don’t like lawyers. We even have our own genre of comedy that predates Shakespeare: lawyer jokes. Here is a common example: What do you call 1000 lawyers at the bottom of the ocean? A good start!

When you heard that joke for the first time, you probably laughed and laughed, shook your head and said, “funny because it’s true.”

So why do people dislike lawyers? To save you time, I’ll focus on one reason and leave the rest for others: Because lawyers spoil the fun by saying “no.”

This reason for not liking lawyers, of course, comes from the business context where companies consult either in-house lawyers or outside counsel about how or whether to proceed on a project or opportunity.

It is the lawyer’s job and duty to risk ruining the party. The business and sales people look at the opportunity and see upside: revenues, more market share, perhaps an important merger or acquisition.

It is the lawyer that must look at the opportunity to see the downside risks: the lawsuits, the disputes, the government reactions or investigations, the response from competitors. Then, oftentimes, the lawyer says “no.” The music stops and people go back to their offices, sometimes frustrated and angry, perhaps thinking that the lawyer should be on the bottom of the ocean. The lawyer is the bad guy, even if he or she is just doing his or her job.

But this isn’t an article defending lawyers.

To be honest, most lawyers aren’t great, or sometimes even good. The same is true of most people in any profession. Only in Garrison Keillor’s Lake Wobegon, Minnesota is everyone above average (of course, he was talking about the children, but you get the point). And many criticisms about lawyers apply to many of members of this profession, including the fact that they just ruin the party by saying “no” all the time.

I think that the lawyer that just says “no” is a lazy lawyer that offers very little value to his or her client. Sometimes the lawyer must say “no,” but in most instances, there should be more and I don’t just mean justifications for the denial.

Of course, a client might come up to a lawyer and say the following: “As you know, we compete in a market with four main players. It seems silly that we spend so much time trying to undercut each other on price and so many resources trying to come out with new features to our product. Our adversaries may lack social grace, they may smell bad, and they certainly aren’t good looking, but they aren’t bad people. We could all make more money if we could just get together, have a meeting, set the price we are all going to charge, maybe divide up the customer base, probably by geography, and vote on features to add to our products.”

An antitrust attorney that hears this from a client, must say “NO,” in all caps, like they are yelling. Of course, after that, they better work on education through antitrust compliance counseling and training. Time to put together an antitrust compliance policy. The Department of Justice would certainly appreciate a strong antitrust compliance policy.

But in most instances—even where the client’s idea creates risk—a simple “no” is not the right approach, at least from a good antitrust attorney.

The scenario I described above—involving price fixing and market allocation (per se antitrust violations)—is a rare example of a situation where the antitrust laws are mostly clear.

In most instances, either the law or the application of law is not straightforward enough to entirely preclude the client’s objective. For example, the question of what is exclusionary conduct under Section 2 of the Sherman Act (Monopolization) is not an easy one to answer. There is still great debate among the courts, academics, and economists. Similar issues can arise if you are trying to determine if an exclusive dealing agreement violates the antitrust laws: Sometimes the answer isn’t clear.

Advising Business Clients on Antitrust Risks

I can’t speak for all antitrust attorneys, but here is how I handle counseling clients on antitrust risks:

First, I understand that the perspective of a business is different than the perspective of the typical lawyer.

The attorney, especially the litigator, has grown up (professionally) in a world where they win or lose a motion or case and where something is or isn’t illegal under the law. There are, of course, grey areas, but a young attorney that receives a research project, for example, is tasked with finding the “answer.” And courts have to give decisions on “the law” in such a way that suggests there is an answer, even when the reality is that it could have gone either way. But opinions rarely say that—when they do, it is a credit to the judge.

Businesses, however, make calculated judgments based upon risk, reward, and resources. Opening another factory has obvious risks and rewards and takes resources. The business executive tries to evaluate the risks, judge the potential upside, and compare both of those to the resources necessary to open the factory.

If you tell the business to not open the factory because there are “risks,” you aren’t helping it. The business executive will just stare at you like you are some sort of fool. Of course there are risks; the skill in running a business is to evaluate those risks and incorporate them into decisionmaking.

I understand this perspective even more clearly now, having run Bona Law for several years. Indeed, my bio now finally reflects that understanding.

Let’s apply this point to antitrust counseling: If a client comes to me with an opportunity, a project, or even a problem, it does the business little good for me to just say “no, there are risks.” That’s the lazy approach, in my view.

My value as the antitrust attorney in that situation is to help the client fully understand the risk. That is, I try to help the client appreciate the likelihood of the risk coming to fruition and the consequences of the risk, if it hits. And, in fact, the counseling is usually more complicated because there are often multiple risks, each with their own structure of probability and harm.

I do this because this is how businesses make decisions: They incorporate risk into the information that they have and make the best call they can.

Second, I work with the client to come up with options with similar rewards or upsides, but less antitrust risk—or some more preferable sliding scale of the risks and rewards.

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Author: Jarod Bona

You might hear from an antitrust attorney that it is important to have a strong antitrust compliance policy. And you may think to yourself, yes, I suppose it is. Then you go about your over-packed day, periodically seeing from other professionals that whatever their specialty is, you need to call them right away to have them help you too.

And that isn’t a surprise because each professional, each specialist in something, and, really, each person with any experience of any sort sees life through their own unique lens. We wrote about this in the context of trade associations.

The truth is we are all bombarded with marketing and emails and social media posts and problems in our lives and our world that are “urgent” or “important.”

So when I tell you that your company should have a strong antitrust compliance policy, no matter what its size, you may appreciate that advice, but recognize that (1) I see life through the lens of antitrust and competition law (among other lenses); and (2) Bona Law prepares antitrust compliance policies, so I am biased. And both of those are true. Whenever you evaluate what anyone says, you should do so understanding their perspective, as bias isn’t necessarily conscious or even negative—it often just is part of perspective and experience.

This is a long introduction to tell you that when it comes to antitrust compliance policies, you don’t just have to listen to me or the many other attorneys that advocate for them:

The Antitrust Division of the Department of Justice has now reversed its position and will give companies with robust compliance programs credit when considering charges.

The purpose of the policy change, of course, is to encourage companies to adopt and (just as importantly) follow strong antitrust compliance programs. If that occurs, the amount of criminal antitrust conduct should decrease. Of course, there may be an inverse relationship between the companies that would enact and follow an antitrust compliance program and those that would criminally violate the antitrust laws. But, still, it will probably help overall. And it should help to keep otherwise law-abiding companies from getting pulled into, for example, an industry-wide price-fixing cartel. If that happens, they will likely experience what we like to call an antitrust blizzard.

In a speech at New York University School of Law, Makan Delrahim said that in evaluating a policy for charging decisions, DOJ prosecutors would consider whether the program is well-designed, if the company applies it in good faith, and if the program actually works. So, as you can see, this is one of those policies that will evolve as they try it on a case-by-case basis.

The Department of Justice also released details on how it would evaluate antitrust compliance policies: US Department of Justice Antitrust Division: Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations.

We will write more about the specifics of a strong corporate compliance program in future articles.

In the meantime, you can read an article by Luis Blanquez about antitrust compliance policies in the US and Europe.

As you might know, the DOJ already has a leniency program, which you can learn more about here. DOJ will sometimes grant leniency to companies and people that report antitrust cartel activity and then cooperate with the DOJ investigation. DOJ antitrust attorneys, experts in competition themselves, incorporated some competition into their leniency program.

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Baseball Antitrust Exemption

Author: Jarod Bona

Baseball is special. How do we know that? Is it the fact that it has been declared America’s Pastime? Or is it the feelings we have when we smell the freshly cut grass on a sunny spring day? Or is it the acoustics of a wood bat striking a leather-wrapped baseball? The answer is that  we know that baseball is special because the US Supreme Court has told us so.

Over the course of ninety-two years, the Supreme Court has consistently affirmed and re-affirmed a special exemption from the antitrust laws for the “business of providing public baseball games for profit between clubs of professional baseball.” There is a state action exemption, an insurance exemption, a labor exemption, and a  . . . baseball exemption? That’s right. A baseball exemption from the federal antitrust laws.

The Ninth Circuit—in an opinion courtesy of Judge Alex Kozinski—just applied this exemption in City of San Jose v. Office of the Commissioner of Baseball, which rejected San Jose’s antitrust lawsuit challenging Major League Baseball’s “attempt to stymie” the relocation of the Oakland Athletics to San Jose, California.

Update: On October 6, 2015, the US Supreme Court, without comment, declined to hear this case. Because the Supreme Court rejects the vast majority of petitions for cert., I wouldn’t read too much into this. Of course, if at least four Justices had wanted to revisit the historical exemption, they could have done so.

You might also enjoy Luke Hasskamp’s series on baseball and antitrust:

Part 1: Baseball and the Reserve Clause.

Part 2: The Owners Strike Back (And Strike Out).

Part 3: Baseball Reaches the Supreme Court.

Part 4: Baseball’s Antitrust Exemption.

Part 5: Touch ’em all, Curt Flood.

Why is There a Baseball Exemption from the Antitrust Laws?

In the 1920’s, the Supreme Court decided a case called Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs, which held that the Sherman Act didn’t apply to the business of baseball because such “exhibitions” are purely state affairs. As Judge Kozinski explained, the reasoning behind the Supreme Court’s decision reflected the “era’s soon-to-be-outmoded interpretation of the Commerce Clause.” In other words, back in the day, courts didn’t assume that almost every economic activity was within federal jurisdiction.

Thirty-years later in Toolson v. New York Yankees, Inc., the Supreme Court affirmed Federal Baseball on different grounds. The Court recognized that the Commerce Clause reasoning no longer applied, but observed that despite the Federal Baseball governing law that the federal antitrust laws don’t apply to baseball, Congress hasn’t legislated to the contrary. So it left the baseball exemption.

Finally, in 1972, the Supreme Court decided the Classic Antitrust Case of Curt Flood v. Kuhn, which is the famous baseball exemption case. The Court specifically addressed baseball’s reserve clause, which essentially prohibited free agency. When a player’s contract ended, the team still retained the player’s rights. Once again, the Supreme Court upheld the baseball exemption based upon Congress’ inaction.

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Author: Jarod Bona

If, like me, you have ever spoken to someone that faces criminal indictment by a federal grand jury following a Justice Department antitrust investigation, you know why antitrust compliance counseling and training is a big deal—you don’t need reasons; hearing the crackle of the voice is enough to understand.

You might think that an antitrust investigation or lawsuit may not happen to you or your company. Perhaps you think that your company is too small or that since you don’t sit in smoke-filled rooms with many of your competitors laughing about your customers—or whatever image from books or movies is in your head, antitrust isn’t something you need to worry about.

You might be wrong. Are the chances great that you will be prosecuted or sued under the antitrust laws? Since you are reading a blog about antitrust, they are greater than average, but even still, the odds are relatively low.

But even if the likelihood of an adverse antitrust event is low, the consequences may be so extreme that it is something you should think about. You don’t anticipate that your house is going to burn down, but you—hopefully—take some precautions and probably have some sort of fire protection as part of your homeowner’s insurance.

With antitrust, a little knowledge can go a long way.

If you have an antitrust issue, it is not likely to be a small issue. Indeed, it may start with a government investigation, but could progress into dozens of antitrust class actions against your company.

As you might know, there is a cottage industry of plaintiff attorneys that read SEC filings and watch for government antitrust investigations. When they see something that raises the possibility of an antitrust violation, they pounce. Attorneys all over the country file lawsuits in their home jurisdictions against the target company—which could be your company if you aren’t careful. I go into more detail about this “antitrust blizzard” here.

Antitrust issues can arise for big and small companies and even individuals—like real-estate investors. If you don’t think your company is susceptible to antitrust liability or indictment, I’d like you to read one of my early blog posts that explains how easily a per se antitrust violation can happen.

The Federal Trade Commission even went after an association of music teachers for potentially violating the antitrust laws.

What is tough about antitrust is that the laws are not always intuitive; it isn’t like a law that says “don’t steal.” In fact, in one instance, the antitrust laws encourage you to try to steal.

Sometimes the law isn’t even altogether clear. Of course, you are unlikely to face criminal indictment over complicated questions of whether a bundle of products sold by a company with market power violates the antitrust laws. Or whether your vertical pricing arrangements went beyond Colgate policy protections. But you could face criminal antitrust penalties for allocating markets and customers and that isn’t obvious to all sales people.

The bottom line is that if you run or help to manage a company—and especially if your company has a sales team—you need some knowledge of the antitrust laws. At the very least, you should understand what to train your team members to avoid. Antitrust training can be invaluable.

You might also enjoy our article on Antitrust Compliance Programs in the US and European Union.

Antitrust compliance training and programs are even more important now that the US Department of Justice has announced that they will take these programs into account in their charging decisions.

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Author: Luis Blanquez

Luis Blanquez is a European Competition Attorney that works with Bona Law.

WHAT IS AN ANTITRUST COMPLIANCE PROGRAM?

An antitrust compliance program is an internal business policy designed by a company to educate directors and employees to avoid risks of anticompetitive conduct.

Companies that conspire with their competitors to fix prices, share markets, allocate customers, production or output limitation; have historically faced severe fines from antitrust enforcement all over the world.

Companies articulating such programs are in the best position to detect and report the existence of unlawful anticompetitive activities, and if necessary, be the first ones to secure corporate leniency from antitrust authorities.  This allows them to avoid substantial fines, and in some jurisdictions, such as the US and the UK, even criminal charges.

But not every program ensures compliance.  A successful compliance program must alert and educate sales force; issue-spot risks; encourage reporting of anticompetitive issues, and deter risky conduct.

Over the years, antitrust authorities all over the world have published some general guidance creating and managing compliance programs.  Even though there are differences between jurisdictions, all of them seem to have the following anchor points in common:

  1. No “one size fits all” model: You must tailor your compliance program.

Effective compliance programs require companies to tailor their internal policies according to their particular situation.

A generic out-of-the-box compliance program is not likely to be effective.  It is more important that the company conducts an assessment of the particular risk areas involved in its day-to-day business activities, with a specific focus on the structure and previous history of the industry.

Interaction of sales people with other competitors, with close attention to trade association meetings, is also an important point to consider.  To illustrate, employees with access to pricing information and business plans are more likely to meet their counterparts from other companies in trade association reunions or industry events.

  1. Development of training programs to educate directors and employees.

A company should ensure antitrust compliance training for all executives, managers and employees, especially those with sales and pricing responsibilities.

Genuinely effective compliance requires that companies apply the antitrust policy and training program to their entire organizational structure, preferably in writing.  It may take the form of a manual and must be plainly worded in all the working languages of the company, so everyone understands it.  The antitrust policy must contain a general description of antitrust law and its purpose, explaining the way the company enforces it, along with highlights of the potential costs of non-compliance.

An effective way to implement an antitrust policy is through a list of “Don’ts”, including illegal conduct such as price-fixing agreements, the exchange of future pricing information, or allocation of production quotas, among other conduct.

You might complement the forbidden conduct with a list of “Red Flags” to identify situations in which antitrust risks may arise (i.e. sales people attending trade associations or industry events).

You might also add a list of “Do’s” because employees are often more receptive to what they can do, rather than what they cannot do.

Finally, companies and their employees should document their antitrust compliance training in writing. This assures that employees take compliance efforts seriously and that antitrust enforcers understand that the company does so too.

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Author: Jarod Bona

Business can be brutal.

Let’s say you have this business. Maybe you started it recently, or maybe you’ve been around for some time. But, in any event, you offer a good product or service. Customers like you and you are making money.

This is—for many—the American dream. You have freedom, which plays itself out by your decision to exercise that freedom by working 80 hours per week. But you are working those 80 hours for your baby—your business.

And at least you have control over your circumstances: If you keep providing your customers with great value at a great price, you will succeed.

That’s true, except sometimes it isn’t.

Competing for customers in a market isn’t just about providing the best services, products, or prices. That is, of course, the biggest part of it, most of the time. If you do well for your customers, they will usually do well for you. But sometimes it is more complicated than that.

Companies compete within markets, but they also compete for markets.

What does that mean?

Let’s say you own a restaurant and there are five restaurants on your street. You compete within the market because whoever offers the best combination of atmosphere, price, and quality and can best match the needs (i.e. demand) of the prospective restaurant customers in that geographic area will make the most money. That is competing within the market.

But the more competition there is, the harder it is to make money. Every market is different, of course, but the greater the differentiation among competitors within the market and the less competition within that market, the more profit margins increase. This, of course, is just a rough approximation. Markets are complicated beasts.

The truth is, if you want to make more money as a business, it is best to avoid or minimize competition. That is why Peter Thiel tells you in Zero to One to create new markets or to build businesses that will face minimal competition. In that sense, a restaurant is a terrible business—too much competition. We wrote about avoiding competition and Peter Thiel’s excellent book here.

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Author: Jarod Bona

Even if you aren’t an antitrust lawyer, you have certainly seen notices of class actions, perhaps with a solicitation from an attorney stating in legalese that you may be entitled to money or something to that effect. You probably ignored them—and for good reason—perhaps the amount you could receive was small, or the subject didn’t really have anything to do with you or your business or you just didn’t want to suffer through the poor lawyer-drafted prose.

Did it surprise you to learn that while you were just minding your own business you were apparently a part of what looks like pretty major litigation?

In this article, I’ll offer some background about how antitrust class action settlements work and do it by describing a big one: In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation. This is the antitrust litigation against Visa, MasterCard, and their member banks.

As of early May 2019, this case is between second settlement (more about that below) and final approval. The settlement amount will range from $5.54 billion to $6.24 billion. The class members are merchants that have accepted Visa and/or MasterCard between January 1, 2004 and January 25, 2019.

Is that you or your company?

But before we begin, a disclaimer: Bona Law doesn’t typically represent classes in antitrust class action cases. We do represent defendants. But there is one exception: We will represent members of an existing class or opt-out plaintiff members, typically businesses. This, of course, follows our practice—which is common among large international firms as well, to represent both plaintiff and defendant companies in antitrust litigation (but not plaintiff-side classes).

If you are a defendant facing a class action, you might want to read our articles on an antitrust blizzard and defending an antitrust MDL.

Here is the disclaimer: In the Interchange Fee litigation, Bona Law (along with Cahen Law P.A.) represents multiple merchant members of the class that are seeking relief from either the existing settlement (if approved) or as an opt-out.

And here is a good life lesson: Whenever someone has an interest (including attorneys representing clients with an interest), consider their bias, which may be unintentional but present. So assume that we are biased here in favor of the merchants that are seeking relief from the evil antitrust violations.

With that out of the way, let’s jump into the substance.

How Do Class Action Settlements Work?

I won’t go too deeply into the basics of class actions or how class certification works. We’ve written about it elsewhere. You can read our blog post about defending against class certification here. You can read about the requirements of class certification here. And if you want to appeal a class certification decision, read this article.

Here is the gist of class actions: There are some cases in which many people are damaged only a little bit—maybe even just a few dollars. It doesn’t make sense for those people to hire an attorney and file a lawsuit to recover a few dollars. So—absent another method of relief—there won’t be lawsuits if a legal violation results in widespread but minimal harm to each. Some people may say “good” to that. But our legal system has adopted a private-attorney general model in antitrust and elsewhere that places some of the enforcement of law in the hands of private individuals and companies that have been harmed, and their attorneys.

If you want to learn more about the private attorney general model, you can read a law review article that I wrote many years ago with Carl Hittinger.

Even if each individual has sufficient incentive to file a lawsuit (i.e. enough money is at stake), the law has determined that there may be overall efficiencies for the individuals to handle their claims as part of a class if, for example, the common issues in the case predominate over any individual issues.

The class action approach, codified under federal law into Federal Rules of Civil Procedure, Rule 23, allows courts to hear and decide actions on behalf of an entire class of people that have been injured. Class actions, not surprisingly, happen a lot in antitrust, especially when plaintiffs allege that price-fixing, bid rigging, or market allocation, for example, led to an overcharge of some minimal amount, resulting in widespread, but often minimal individual damages.

There is a certification requirement, but other than that much of the litigation is just like any other case, except settlement.

If you want to settle with a class, it is a big to-do. That is because the class action can, in fact, eliminate the right to seek relief by people that may have no idea about the litigation. In addition, the attorneys that brought the action on behalf of the class typically receive their fees (which are usually contingency) out of the settlement proceeds (or judgment proceeds if the case gets that far).

So, to deal with all of these issues, a class-action settlement requires a preliminary approval by the court, a notice to the class, an opportunity for class members to opt-out or challenge the settlement, and, eventually, a final approval. And the court’s final approval is subject to appeal by class members that may disagree with the settlement. Then, if the settlement survives all of that, there is a process for paying the class members from the settlement funds through a claims administrator.

The paragraph above listed a lot of steps, each with its own nuances and details. So please just take that as the “gist” of it.

It will be easier to understand with a concrete example.

In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation

If we are going to talk about a particular class-action settlement, I can’t think of a better current one to discuss than the In re Payment Card Interchange and Merchant Discount Antitrust Litigation, which some people just call the “Visa-MasterCard case.” The settlement is valued at between $5.54 billion and $6.24 billion. That’s a lot of money, even for a big antitrust case.

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Dallas, TX 75201
Phone: 469-296-7716
Detroit
28175 Haggerty Rd
Novi, MI 48377
Phone: 248-994-2221
Minneapolis
331 2nd Avenue S. #420
Minneapolis, MN 55401
Phone: 612-284-5001
New York
16 Madison Ave 9th Floor
New York, NY 10010
Phone: 212-634-6861
San Diego
4275 Executive Square
UNIT 200
La Jolla, CA 92037
Phone: 858-964-4589

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