The American Antitrust Institute and Professor Joshua P. Davis of the UC Hastings College of Law and the Berger Montague firm have released a Commentary on the Huntington National Bank and UC Hastings 2021 Antitrust Annual Report: Class Action Filings in Federal Court (2021 Report). The goal of the Commentary, The Role of Private Antitrust Enforcement in a Time of Change, is to identify major implications for private enforcement in the United States. Like the 2018, 2019 and 2020 Reports, the 2021 Report relies largely on data for private U.S. antitrust class actions available through Lex Machina, as well as supplemental data analysis. The 2021 Report extends the dataset to the thirteen-year period covering 2009-2021, thus allowing for a deeper analysis of private enforcement trends and their implications. The analysis provided in the AAI-UC Hastings Commentary highlights the importance of private antitrust enforcement in the U.S. system and the particularly important role played by the antitrust class action.
The Commentary makes several observations based on the new data and discusses potential implications for private enforcement. After three years of the COVID-19 pandemic, we may be seeing the virus’s impact on the timing of antitrust enforcement actions and their resolution. With consolidated antitrust class action filings down 40% from 2020 to 2021 and settlements also down according to both quantitative and qualitative metrics, not to mention a key indicator of delay—the time from the initial filing of a complaint to the order granting final settlement approval—trending upward, there are reasons to suspect the pandemic has taken its toll on private enforcement. In particular, we might note that the pandemic caused federal courts to suspend and delay trials, especially jury trials. That could explain why the time increased to resolve litigation, why the number of settlements decreased, or other apparent patterns. The data raise a number of questions, however, and further study is required. To fully appreciate the pandemic’s effect on private enforcement, a more granular analysis of the data would be needed to address patterns in proportional sizes of settlements, the influence of settlement size and the imminence of trial on case resolution, fluctuations in mean and median settlement amounts, and other factors.
The Commentary also discusses how new data in the 2021 report informs trends we have been monitoring over time. It observes that the average annual rate of change in filings shows variability over time. For example, based on data from 2009-2019, the average annual change in total filings was about 15% per year. But based on data from 2009-2020, this rate dipped slightly to about 14% per year. And for the 2009-2021 data, the rate fell even more to about 9% per year. The possible slowdown in filings may be accompanied by a more arduous journey through the courts as well.
Trends in the data also reveal interesting developments involving judgments on the pleadings. We see a 50% increase in filings that were decided on judgments on the pleadings from the 2009-2019 to 2009-2021 data. As a percentage of all defendant wins, this category increased by 14% with the addition of the 2020 and 2021 data. Yet the average time to resolution for those cases remained steady, at about 2.4 years. Meanwhile, at the same time, a decreasing proportion of defendants won on summary judgment. We see only about a 7% increase in filings that were decided on summary judgment between the 2009-19 to 2009-21 data. As a percentage of all defendant wins, this category decreased by almost 20% between the 2009-2019 to 2009-2021 data. It is possible this may reflect the impact of the COVID-19 pandemic, as defendants and courts sought to resolve cases on the merits without trial.
Another observation is that 2021 marked a further increase in recoveries above $100 million. Past reports have shown settlements between $10-$99 million and between $100-$499 million peaking around 2018 and falling off thereafter. While the 2020 numbers in these categories were higher than the recent low point of 2019, they remained substantially below average 2014-2018 levels. The 2021 increase may indicate a trend towards a return to 2014-2018 levels, however.
Finally, the new data offers takeaways concerning trends in antitrust class actions filed on behalf of different classes of plaintiffs. The percentage of the total settlements involving direct purchasers has declined by just over 25% between the 2009-2019 and 2009-2021 data, while indirect purchases cases have increased by close to 60%. Statistics for total settlement dollars obtained in direct and indirect purchaser cases parallel these trends. For example, the percentage of total settlement dollars obtained in direct purchaser cases decreased by almost 10% from the 2009-2019 to 2009-2021 data, while those for indirect purchaser cases increased by over 45%. The possible shift admits of several potential explanations. First, it may reflect an increased preference for, or an increased rate of success under, state versus federal antitrust law. Indirect purchaser actions for damages are permitted under the former and foreclosed by the latter. Second, the increased percentage of indirect purchaser settlements and amounts may reflect increasingly sophisticated data and statistical techniques allowing indirect purchasers to better trace the impact of anticompetitive conduct through the various levels of the market, making previously impractical suits more viable.
A third possibility is more troubling. Plaintiffs may be bringing more indirect purchaser claims—and fewer direct purchaser claims—because of judicial enthusiasm for pre-dispute mandatory arbitration clauses. Such clauses often force direct purchasers—who enter contracts with alleged antitrust violators—to pursue individual arbitration rather than collective litigation. Indirect purchasers, by contrast, often are not in contractual privity with the alleged antitrust violators and so are not subject to such arbitration clauses.
If forced arbitration does explain the shift from direct to indirect actions, that could bode poorly for antitrust enforcement. The 2021 Report shows that almost as many indirect purchaser class actions as direct purchaser class actions settled from 2009-2021—559 and 604, respectively—but the indirect purchaser class actions recovered only slightly more than one quarter as much as the direct purchaser class actions— about $6 billion as compared to about $23 billion.
Based in Washington, D.C., the American Antitrust Institute is an independent, nonprofit organization devoted to promoting competition that protects consumers, businesses, and society. It serves the public through research, education, and advocacy on the benefits of competition and the use of antitrust enforcement as a vital component of national and international competition policy.
The nonpartisan Center for Litigation and Courts (CLC) at the University of California, Hastings College of the Law was established in 2021 to expand the knowledge of civil litigation, alternative dispute resolution, and the courts; to disseminate that knowledge to the bench, bar, legal academy, and public; and to supply resources and guidance to members of the UC Hastings Law community interested in civil litigation.