Just as powerful firms may use their clout to overcharge customers, they can also manipulate markets to pay lower wages. In competitive labour markets an individual employer can do little to squeeze pay, because workers can easily find better-paying jobs. Firms can offer wages below the competitive-market rate knowing that many workers will not be able to afford to turn them down.
As with monopolies, this exercise of monopsony power boosts profits but saddles society with a deadweight loss—the underemployment of workers—as well as other costs, such as higher spending on state benefits. Antitrust regulators overwhelmingly focus on the harm to consumers when judging market power. But there is mounting evidence that damage is also done within labour markets.
The growth of wages has lagged behind that of productivity. Even so, regulators rarely fret about the labour-market effects of corporate tie-ups. Second, regulators have not caught up with the emerging conclusion that labour markets may not always be competitive. Third, any harms to workers were thought to be best dealt with by labour-market regulation and trade-union bargaining, rather than by antitrust rulings.
A growing number of economists therefore argue that antitrust policy must take monopsony more seriously. Antitrust statutes are written broadly enough that other standards might be applied just as easily. Plaintiffs allege further that this imagined pricing umbrella somehow injures all buyers in the market, even those who buy from non-conspirators.
In Garabet , the court identified a number of reasons why the "umbrella theory" does not give rise to antitrust standing, including the speculative nature of damages:.
Private antitrust litigation in the United States: overview
Normally, the impact of a single change in the relevant conditions cannot be measured after the fact; indeed a businessman may be unable to state whether, had one fact been different The court concluded that "the weight of recent authority, using the nuanced antitrust analysis outlined in Associated General Contractors , has found against allowing 'umbrella' standing to plaintiffs. See e. Mere allegations of conspiracy do not establish antitrust injury or standing. Rather, plaintiffs must show direct 3 v2 injury.
It is not sufficient that "plaintiffs' claimed injury flows from the unlawful conduct. An antitrust injury must flow from that which makes defendants' acts unlawful. The plaintiffs' supposed damages are the cover price it actually paid less the lower contract prices which they say suppliers wrongfully changed.
This may be a breach of contract measure of damages, but this does not confer antitrust standing on plaintiffs because the evaluation of why the non-conspirators may have set the particular covering sales prices that plaintiffs had to pay is far too speculative to justify further pursuit of the antitrust claims. If you would like to learn how Lexology can drive your content marketing strategy forward, please email enquiries lexology. The quality of the material is very good and the newsfeeds provide concise overviews of recent developments. Back Forward. Share Facebook Twitter Linked In.
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Register now for your free, tailored, daily legal newsfeed service. USA June 14 Introduction The consequences of a court finding that an actor engaged in behavior that would violate the antitrust laws are quite dire, and include treble civil damages and potential criminal liability.
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Antitrust Standing Suppose plaintiffs have been long-term buyers of processed fruit from two suppliers in Central America on requirement contracts at set prices. Under federal law, the district court must look at and evaluate the plausibility of five factors: What is the nature of plaintiffs' alleged injury, i. In the modern world of multi-layer supply chains, Illinois Brick radically shrunk the pool of potential purchaser plaintiffs.
For many antitrust violations, final consumers are out of luck. By virtue of having bought a good or service from an intermediary such as a retailer and not directly from the antitrust violator, many purchasers cannot obtain damages under federal antitrust law. Illinois Brick frustrates the compensatory purpose of the Clayton Act. Many injured parties cannot seek recompense and be made whole. Deterrence is also impaired.
To be sure, direct purchasers can and do bring suits for treble damages and have recovered billions , but they are not a proxy for general consumer interests. Is a direct purchaser always going to file an antitrust suit and jeopardize a commercial relationship with a powerful supplier?
Killing Antitrust Softly (Through Procedure) « Law and Political Economy
If the direct purchaser passes the full overcharge down the chain by raising prices for its customers, the likelihood of a suit only goes down further. In the same year it announced Illinois Brick , the Supreme Court added another restriction on who can enforce the antitrust laws. The Court, in a unanimous decision in Brunswick Corp.
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- Legal basis for bringing private antitrust litigation actions.
Pueblo Bowl-O-Mat, Inc. Whereas Illinois Brick establishes a straightforward, though overly narrow, rule, antitrust injury is a confusing—and indeed confused—doctrine. By muddling the separate questions of liability and damages, the Supreme Court itself is the source of this confusion. In its principal decisions on antitrust injury, the Court skipped past the question of whether alleged conduct was or should be an antitrust violation. It should have decided the liability question before inventing a new doctrine. A plaintiff that could not show it was worse off due to the antitrust violation would not be entitled to damages.
By virtue of its slipperiness, the antitrust injury is a serious threat to private antitrust enforcement. The doctrine gives judges broad discretion to throw out—on nominally procedural grounds—substantive claims that they dislike.