NCPA - National Center for Policy Analysis

FTC Proceeding Without Authority on "Restitution Funds"

May 10, 1999

Moves are afoot at the Federal Trade Commission to allow trial lawyers to set up "restitution funds" paid for by companies that lose antitrust cases brought against them. The lawyers could then dip into the funds on behalf of their class-action clients.

  • Companies that are the target of government antitrust lawyers would be forced to put aside the money after a finding of liability -- but before any verdict is reached in private class-action suits.
  • The scheme is to reduce the risks to plaintiffs' attorneys that the weight of private litigation might force a firm into bankruptcy before funds are paid out.
  • Critics point out that just the knowledge that a pot of risk-free money is available could guarantee that enough lawsuits are filed to drive even more firms into insolvency.
  • If approved by the courts, the funds would impose yet another layer of penalties on firms already subject to treble damages, plus attorneys' fees.

Neither the courts nor Congress has ever given the FTC the authority in a civil antitrust case to force a company to hand over allegedly ill-gotten profits to the federal government.

The FTC is trying to use the case U.S. vs. Mylan Laboratories Inc. -- in which the company is charged with monopolization and restraint of trade in two of its widely used anxiety drugs -- to establish the precedent that it can collect money from companies found liable in civil antitrust suits.

The U.S. Chamber of Commerce has filed an amicus brief in the case, warning that the power would "transform (the FTC's) antitrust role from that of an expert agency to that of a prosecutor" and urged the court to block that "power grab."

Source: Dick Thornburgh (former U.S. Attorney General), "FTC Seeks Precedent Only a Trial Lawyer Could Love," Wall Street Journal, May 10, 1999.


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