Antitrust Arbitration and Merger Approval

INTRODUCTIONIn a string of recent opinions, the Supreme Court has made it harder for consumers to avoid arbitration clauses, even when businesses strategically insert provisions in them that effectively prevent consumers from being able to bring any claim in any forum. For example, when firms engage in illegal conduct that extracts small amounts of ill-gotten gains from millions of consumers, individual litigation (or arbitration) may cost more than the maximum possible recovery. In these scenarios, class action litigation or class-wide arbitration may be the only viable mechanisms for consumers to seek recovery. Yet, in AT&T Mobility LLC v. Concepcion,1 the Supreme Court held that the Federal Arbitration Act preempted state laws that rendered class arbitration waivers in arbitration clauses unconscionable and, thus, unenforceable. In American Express Co. v. Italian Colors Restaurant,2 an antitrust case, the Court held that class action waivers embedded in mandatory arbitration clauses were enforceable even when they had the effect of making it economically irrational for the victims of antitrust violations to pursue their claims.3Part I of this Article examines how courts initially treated antitrust claims as nonarbitrable. For decades, courts considered antitrust claims to be too complex and too important to trust to private arbitrators. By the 1980s, the Supreme Court permitted federal statutory rights, including antitrust claims, to be arbitrated so long as the plaintiffs could effectively vindicate their rights in the alternative forum (the so-called Effective Vindication Doctrine). In 2013, the Supreme Court in Italian Colors fundamentally weakened the Effective Vindication Doctrine when it held that arbitration clauses that precluded class actions and class-wide arbitration were enforceable even when they effectively prevented any victim from actually bringing an individual case.Part II details the problems of mandatory arbitration of antitrust claims. Arbitration differs from litigation in ways that harm the interests of consumer-plaintiffs. For example, arbitration limits discovery and has no meaningful appeals process. Furthermore, defendants draft arbitration clauses to prevent class actions and to undercut the pro-plaintiff features of antitrust law, including mandatory treble damages, meaningful injunctive relief, recovery of attorneys' fees, and a lengthy statute of limitations. With the Court's undermining of the Effective Vindication Doctrine in Italian Colors, defendants' efforts to dismantle these pro-plaintiff components of antitrust law may prove more successful in the future.Part III shows how the problems associated with antitrust arbitration are magnified in concentrated markets. Supporters of enforcing arbitration clauses assume that these contractual provisions are the result of an informed, voluntary bargain. But when a market is dominated by a single supplier or a small group of firms, consumers often find it impossible to purchase a necessary product while retaining the right to sue, especially since arbitration clauses are generally embedded in contracts of adhesion. This means that in the markets most likely to be affected by antitrust violations, consumers are least likely to be able to avoid mandatory arbitration clauses. Furthermore, when mergers result in concentrated markets, they can increase the problems explored in Part II.Finally, Part IV explains how antitrust authorities can address the problem of proliferating arbitration clauses. When evaluating mergers, officials at the Federal Trade Commission and the Antitrust Division of the Department of Justice can threaten to challenge the merger unless the merging parties agree to specified conditions, such as the divestiture of certain assets. Because those mergers that pose the greatest risk of anticompetitive effects also magnify the problems associated with mandatory arbitration clauses, antitrust officials would be wise to condition merger approval on the merging parties' agreement to not require arbitration of antitrust claims. …