The Overcharge as a Measure for Antitrust Damages

Posted by D. Daniel Sokol

Martijn A. Han, University of Amsterdam - Amsterdam Center for Law & Economics, Maarten Pieter Schinkel, University of Amsterdam - Amsterdam Center for Law & Economics, and Jan Tuinstra, University of Amsterdam - Department of Quantitative Economics discuss The Overcharge as a Measure for Antitrust Damages.

ABSTRACT: Victims of antitrust violations can recover damages in court. Yet, the quantification of antitrust damages and to whom they accrue is often complex. An illegal price increase somewhere in the chain of production percolates through to the other layers in a sequence of partial pass-ons. The resulting reductions in sales and input demands lead to additional harm to downstream (in)direct purchasers and upstream suppliers to the cartel, respectively. Nevertheless, U.S. civil antitrust litigation is almost exclusively concerned with direct purchaser claims for (treble) damages calculated on the basis of the overcharge. Similar best practice rules are emerging in Europe. In this paper, we show that the direct purchaser overcharge bears no structural relation to the true harm inflicted by a cartel on all of its direct and indirect purchasers and sellers in the chain of production.