laws. While during the first 50 years of antitrust enforcement, only 13 suits were won by private suitors in treble damage actions, the postwar period has seen the private litigant emerge as a very significant adjunct of antitrust administration. Much of the success of the private antitrust action, however, has in turn been due in large measure to the antitrust litigation of the United States Government. It has been estimated that approximately three-fourths of all private suits have followed in the wake of victorious Government actions in fully litigated cases.78 In recent years the damages assessed in private actions for violations of the antitrust laws have been substantial. The danger that its activities may ultimately subject a company to treble damages, accordingly, has become an important consideration by corporate officials in the conduct of their affairs. Although the maximum penalty that may be imposed upon conviction of an antitrust violation is $50,000 for each count in the indictment,74 in some private actions, recovery has approached the million-dollar figure. In the Brookside Theater case, for example, the damages amounted to $1,125,000.75 It is clear that the substantial immunity from private antitrust actions is a primary consideration in defendants' willingness to negotiate consent decrees. In 1954 Assistant Attorney General Barnes advised the antitrust law section of the American Bar Association : *** from the defendants' point of view encouragement to Assistant Attorney General Hansen, on March 4, 1958, acknowledged that it would be impossible in some cases to obtain consent decrees if the defendants did not thereby secure protection from private treble damage actions. He stated: "7 Mr. HANSEN. That [consent decree] is not introduced as prima facie, and, frankly, because of that we are able to get many very effective consent decrees which we probably would not otherwise get. For example, had we introduced any evidence at all in the Safeway case, I am convinced we would not have a consent decree. Had we introduced any evidence at all in the United Fruit case, I am satisfied we would not have had a consent decree. Treble damage actions by private parties were intended by Congress not only to penalize law violators, but, also to constitute an 78 See Hearings, p. 22. A more recent approximation indicates that 90 percent of all private treble damage actions have been the aftermath of successfully prosecuted Government suits. See hearings before the Senate Select Committee on Small Business on the Role of Private Antitrust Enforcement in Protecting Small Business, 85th Cong., 2d sess., p. 127 (1958). 74 69 Stat. 282 (1955), 15 U. S. C., secs. 1 and 2 (1958), seq. Brookside Theater Corporation v. 20th Century Fox Film Corp., 193 Fed. 2d 896, 48th Circuit (1952). See also: Bigelow v. RKO Radio Pictures, 327 U. S. 251 (1946) ($360,000); Story Parchment Co. v. Paterson Co., 282 U. S. 555 (1931) ($195,000); Milwaukee Towne Corp. v. Loew's, Inc., 190 F. 2d 561 (7th Cir. 1951), cert. denied 342 U. S. 909 (1952) ($941,574); Pennsylvania Motor Truck Assoc. v. Eastern Railroad Pres. Conference (E. D. Pa. 1958) ($652,047); Kiefer-Stewart Co. v. Seagram & Sons, 182 F. 2d 228 (7th Cir. 1950), reversed 340 U. S. 411 (1951) ($975,000). 76 Stanley N. Barnes address before the American Bar Association spring meeting, 1954. 77 Hearings, The Role of Private Antitrust Enforcement in Protecting Small Business— 1958, Senate Small Business Committee, 85th Cong., 2d sess., p. 128. important auxiliary enforcement measure in antitrust administration, as well as a vital means of redress for private citizens to recoup losses that result from the activities of antitrust violators. Enforcement of the antitrust laws by means of private treble damage actions, therefore, in the public interest, should be encouraged.78 Because of the protracted nature of antitrust litigation, with the expense and complexity of proof of the legal and economic issues involved, it is difficult at best for a private citizen to prosecute to conclusion an action under the antitrust laws. When the private litigant is deprived of the use of the Government's decree as prima facie evidence, moreover, a private action becomes virtually impossible to maintain. The almost inevitable consequence of the acceptance of a consent decree by the Department of Justice in an antitrust action, therefore, is to reduce the effectiveness of section 5 of the Clayton Act and to deprive private suitors, who have been injured by unlawful conduct, of their statutory remedies under the antitrust laws. Another result of the consent settlement procedures, which also diminishes the deterrent effect of the antitrust laws on business operations, is the fact that negotiated settlements permit defendants to avoid much of the unfavorable publicity that usually attends antitrust litigation. Although the filing of a consent decree against prominent companies is noted in the press, coverage is minimal in comparison with the publicity that surrounds vigorously contested antitrust litigation during the lengthy course of a trial. At the hearings, Judge Hansen commented upon the effect on business operations of widespread unfavorable publicity in antitrust litigation. Judge Hansen stated: 79 Judge Barnes has referred to one impressive example: *** In the recent Tennessee Electrical Contractors case, Chattanooga journals each day of the 2-week trial headlined details of the defendant's alleged antitrust abuses. In that same city in the liquor cases, there was, in fact, so much comment in the public press that the court continued the imposition of sentence for 2 months, and on March 23, 1956, fined defendants $34,000 and placed 8 on 1-year probationary sentences. This had double headlines on the first page. In some instances, this publicity, largely avoidable in a consent settlement, may prove as damaging as the remedy decreed." The purpose of the antitrust laws is to deter future violators as well as to remedy abuses that have occurred in the past. As a deterrent, however, the antitrust laws are weakened when the chances that a suspected violator will be brought to trial are but 1 out of 4. Widespread employment of the consent decree as a method for dealing with antitrust violations, accordingly, tends to convert antitrust violation into a calculated business risk. The risks involved in violating the law are more readily taken. 78 Chief Justice Warren in Lawlor v. National Screen Services, 349 U. S. 322, 329 (1955), stated: "* particularly is this so in view of the public interest in vigilant enforcement of the antitrust laws through the instrumentality of private treble damage actions." 79 Hearings, p. 432. Corporate officers realize that violations of the antitrust laws, if discovered, will occasion no greater penalty than a written promise in the form of a consent decree not to err again. On the other hand, when the corporate officer is aware that, if the proposed course of action is challenged, his company will be subjected to the unfavorable publicity that attends an antitrust trial, and in the event that the Government prevails, his company will be liable for substantial damages to all of his competitors who may have been injured in the course of the violation, an entirely different business judgment is involved. These potential dangers undoubtedly would make corporate officials hesitant to undertake economic programs after counsel had advised that they ultimately may be found in violation of the requirements of the antitrust laws. When the corporate official, however, knows that the probabilities are that, if detected, the entire matter can be concluded amicably, with no notoriety, and with little danger of resultant private antitrust actions, there is virtually nothing to lose and everything to gain from undertaking the questionable program. Large-scale use of the consent decree to conclude antitrust suits instituted by the United States, therefore, amounts to an invitation to corporate officers to undertake programs that may violate the law. Another result of the consent settlement procedures is found in the secrecy which, under present procedures, surrounds the entire program. Although competitors of the defendant who are not parties to the Government action may be affected by the terms of the consent decree, as the consent decree program is now administered, these competitors are unable to ascertain whether or not the Government adequately has protected their interests. Since he is excluded from the negotiations, and is given no notice when a consent decree that affects his industry is to be submitted to the court, the nonparty to the Government's action cannot discover the effects of the consent decree's provisions until after it has become operative. The element of secrecy that surrounds the entire consent-decree program is contrary to the general policy, established by Congress, that antitrust enforcement proceedings shall be public. Congress, in 1913, considered the public or judicial purpose to be served by secrecy in antitrust proceedings. As a result of its consideration, Congress required that in the taking of depositions of witnesses for use in any civil trial under the Sherman Act, "*** the proceedings shall be open to the public as free as our trials are in open court; and no order excluding the public from attendance in any such proceeding shall be valid or enforcible." 80 The House Committee on the Judiciary, in its report, stated: 81 Everything pertaining to our courts should have the greatest publicity. Secret hearings would surround our courts with a mystery of doubt and eventually bring them into disrepute. If our courts are to retain the confidence and respect of the country generally, their conduct must be entirely free from any suspicion of star-chamber proceedings. During the consideration of this legislation, the Attorney General opposed secrecy in antitrust proceedings because, when publicity sur 80 37 Stat. 731, March 3, 1913; 15 U. S. C. 30. H. Rept. 1356, 62d Cong., 3d sess., p. 2. rounded the Government's action, it invariably developed useful information.82 In the debates on the bill, Representative Clayton, then chairman of the House Committee on the Judiciary, emphasized that an antitrust suit "*** is not between private parties peculiarly a public matter." 82 it is These strong denunciations of secret judicial proceedings concerned only the taking of testimony under oath. This is merely one of the initial steps that contributes to the ultimate judgment. It is taken far in advance of the final judgment, and is less powerful in its effect than the judgment itself, which directly affects private rights. In the consent-decree program, however, the entire procedure, after the filing of the Government's complaint, is secret except for the relatively brief period when the decree physically is presented to the court for adoption. It would seem that complete secrecy contravenes the spirit of the 1913 Act to a much greater extent than the mere hearing of evidence behind closed doors at the taking of a deposition. The committee does not suggest that it would be necessary, or even appropriate, that competitors of defendants, who are not parties to the Government's suit, should participate in the negotiations between the Department of Justice and the defendant. The committee believes, however, that the Department of Justice should devise procedures which would assure such competitors a greater participation in the preparation of the terms of a consent decree than are now provided by the sporadic discussions which the Department of Justice on occasion initiates. At the hearings, Assistant Attorney General Hansen advised that the Division has followed the practice in the formulation of the provisions of a consent decree of obtaining, where appropriate, the views of competitors, suppliers, and customers of the defendant. Such consultation, however, only occurs in those cases where the Department of Justice discovers it needs additional information. No procedure is provided by which affected nonparties are apprised of the terms of the proposed decree so that they may come forward with information and take appropriate action to protect themselves. One method by which this situation could be remedied would be for the Antitrust Division, after conclusion of the negotiations with the defendants, to give general notice to the trade. After lapse of a waiting period of sufficient duration for all affected parties to make their views known to the Department, the decree could then be submitted to the court. Examination and analysis of the terms of the proposed consent decree would enable all affected parties to advise the court of its probable effects on their operations. Although its investigation has disclosed serious deficiencies in the administration of the consent-decree program of the Department of Justice, and a weakening in antitrust enforcement as a result of excessive use of negotiated settlements, the committee does not believe 83 House Debates, February 3, 1913, 62d Cong., 3d sess.; 49 Congressional Record pt. 3, p. 2513. 83 House debates, February 3, 1913, 62d Cong., 3d sess.; 49 Congressional Record pt. 3, p. 2512. 84 Hearings, p. 432. Notice to an industry, however, had been given in only one case. Hearings, p. 50. that consent decrees should be eliminated entirely from the Antitrust Division's program. Most of the deficiencies can be cured by less drastic corrective steps. While it is difficult to establish numerical restrictions on the proportion of consent decrees which the Department of Justice should accept in its antitrust enforcement program, the committee considers that currently there are too many consent decrees in relation to litigated judgments. For many years the Department of Justice has terminated approximately 75 percent of all its equity actions by negotiated settlements. In the last 2 years the proportion has gone even higher. In order that the deterrent effect of the antitrust laws may be realized and growth in judicial precedent assured, a greater proportion of litigated judgments is required. In its effort to reduce the relative proportion of consent decrees to litigated judgments, consideration should be given by the Department to the type of issues involved and the economic significance of the proceeding. When novel questions of law are presented, or, when the Government's complaint attacks the structure and operations of dominant corporations that determine the standard of conduct for an entire industry, only in the most extreme situation should a negotiated settlement be undertaken by the Government. Compromise of the Government's position in such a case is not warranted, and a consent decree should only be assented to by the Government when the defendants agree to all of the relief which the Department of Justice believes is essential to reestablish competition, eliminate the conditions which caused the Government to institute its action, and to dissipate the fruits of monopoly. Revision of the current antitrust consent decree procedures utilized by the Department of Justice is essential. It is appropriate that the Attorney General be given an opportunity, first, to accomplish this revision through changes in the rules that govern the administration of his Department. If the Attorney General fails to act, however, or, if the changes he institutes are inadequate, Congress should, by legislation, establish mandatory procedures and standards of conduct for this area. Revision of consent decree procedures should provide public notice of the terms of the consent decree and a waiting period after there has been agreement between the Government and the defendant. During the waiting period private parties, who may be affected by the terms of the decree, should be given an opportunity to intervene in the Government's case in order to present their objections to the court for its consideration. When the Department of Justice presents a consent decree to the court for its approval, it should be accompanied by an opinion that would set forth the facts involved, the defendant's position, the meaning of the terms of the decree, and the reasons that form the basis for the Department's acceptance of the particular compromise. These procedures would go far to insure against arbitrary action in the consent disposition of antitrust litigation. |