The debate over antitrust reform is reaching a crescendo. Several proposals have been introduced in Congress and state legislatures to expand the scope of substantive antitrust rules governing marketplace behavior. Missing from the current discussion, however, is careful consideration of whether these new rules should incorporate a process for calculating antitrust damages that has remained essentially unchanged for over a century. As legislators grapple with antitrust reform, it is important to examine the implications of importing the existing mandatory treble damages framework to new causes of action. Failure to appreciate these effects creates a serious risk of undermining reformers’ core objectives.
Mandatory treble damages incentivize private antitrust enforcement and deter anticompetitive conduct, but they also produce social and economic costs. We apply simple behavioral models to analyze two effects of mandatory treble damages on firms and judges. First, mandatory trebling can drive overinvestment in filing antitrust cases. Second, it may create a judicial bias against plaintiffs because judges, behaving as rational actors seeking to minimize error costs, have an incentive to avoid triple magnitude Type I errors (erroneous rulings for plaintiffs) by leaning toward single-magnitude Type II errors (erroneous rulings for defendants).