BYU Law Review Volume 2011|Issue 2 Article 2 5-1-2011 Comparative Deterrence from Private Enforcement and Criminal Enforcement of the U.S. Antitrust Laws Robert H. Land Joshua P. Davis Follow this and additional works at:https://digitalcommons.law.byu.edu/lawreview Part of theAntitrust and Trade Regulation Commons Recommended Citation Robert H. Land and Joshua P. Davis,Comparative Deterrence from Private Enforcement and Criminal Enforcement of the U.S. Antitrust Laws, 2011 BYU L. Rev.315 (2011). Available at: https://digitalcommons.law.byu.edu/lawreview/vol2011/iss2/2 This Article is brought to you for free and open access by the Brigham Young University Law Review at BYU Law Digital Commons. It has been accepted for inclusion in BYU Law Review by an authorized editor of BYU Law Digital Commons. For more information, please contact [email protected]. DO NOT DELETE 1/31/2013 3:27 PM Comparative Deterrence from Private Enforcement and Criminal Enforcement of the U.S. Antitrust Laws Robert H. Lande and Joshua P. Davis I. INTRODUCTION The purpose of this article is to determine which type of antitrust enforcement deters more anticompetitive behavior: the U.S. Department of Justice (“DOJ”) Antitrust Division’s criminal anti-cartel enforcement program or private enforcement of U.S. antitrust laws. The answer to this question—and answers to related questions concerning deterrence and compensation issues—could have important implications for the United States, pertaining both to appropriate antitrust remedies and to the course of litigation of private antitrust cases. Those answers also could influence other nations considering either adopting or changing criminal penalties for competition law violations, or allowing private rights of action by the victims of competition law violations. Anti-cartel enforcement by the DOJ long has been the gold standard of antitrust enforcement worldwide. If a country were to have only one type of antitrust violation, surely it would be against horizontal cartels, and surely this law would be enforced by that country’s government officials. Even critics who believe that monopolization and vertical restraints never or rarely should be challenged almost always believe in  The authors are, respectively, Venable Professor of Law, University of Baltimore School of Law, and a Director of the American Antitrust Institute; Associate Dean for Faculty Scholarship, Professor of Law, and Director, Center for Law and Ethics, University of San Francisco School of Law, and member of the Advisory Board of the American Antitrust Institute. This Article in part relies upon and significantly extends analysis contained in the authors’ earlier joint work, Benefits From Private Antitrust Enforcement: An Analysis of Forty Cases, 42 U.S.F. L. REV. 879 (2008) [hereinafter Lande & Davis, Benefits], available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1090661 (last revised April 27, 2010). For summaries of the individual case studies analyzed in this article, see Robert H. Lande & Joshua P. Davis, Benefits from Antitrust Private Antitrust Enforcement: Forty Individual Case Studies, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1105523 (last revised Oct. 15, 2008). The authors are grateful to the American Antitrust Institute for funding the empirical portions of this study, to participants in conferences sponsored by the American Antitrust Institute, George Washington University, and the Lear Conference, and to Albert A. Foer, John M. Connor, and John R. Woodbury for comments and suggestions, and to Thomas Appel, Kathi Black, Christine Carey, Joanna Diamond, Ken Fung, Gary Stapleton, Thomas Weaver, and Michael Cannon for valuable research assistance. 315 DO NOT DELETE 1/31/2013 3:27 PM BRIGHAM YOUNG UNIVERSITY LAW REVIEW 2011 strong anti-cartel enforcement.1 People in the antitrust world disagree about many things, but it is extremely difficult to find responsible critics who do not applaud the U.S. government’s anti-cartel program.2 We strongly agree with this almost-unanimous consensus and are second to no one in our appreciation of the DOJ’s anti-cartel activity. In terms of taxpayer dollars well spent, the program surely is one of the most outstanding in all of government. By contrast, private antitrust enforcement under U.S. antitrust laws gets little respect and much criticism. Indeed, it is difficult to find many people other than members of the plaintiffs’ bar willing to say much good about private enforcement. For example, even moderates like FTC Commissioner J. Thomas Rosch believe that treble damage class action cases “are almost as scandalous as the price-fixing cartels that are generally at issue . . . . The plaintiffs’ lawyers . . . stand to win almost regardless of the merits of the case.”3 Due to these widespread beliefs, former FTC Chairman William E. Kovacic recently summarized the 1. See ROBERT BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 66–67 (2d ed. 1993); see also id. at 263 (“The law’s oldest and, properly qualified, most valuable rule states that it is illegal per se for competitors to agree to limit rivalry among themselves. . . . Its contributions to consumer welfare over the decades have been enormous.”); id. at 163–97 (Bork’s analysis of monopolization and attempted monopolization); id. at 225–45 (Bork’s analysis regarding conglomerate mergers); id. at 280–98 (Bork’s analysis regarding price maintenance); Frank H. Easterbrook, Treble What?, 55 Antitrust L.J. 95 (1986). 2. Both Democratic and Republican administrations have made anti-cartel activity their highest priority. Both have succeeded wonderfully at this crucial task and for this they have been applauded widely. It is difficult to find many who have even questioned the DOJ’s anti-cartel enforcement, except for small criticisms at the margins. If we may use the terms of professors, it is possible to find critics who give the DOJ anti-cartel programs an “A” instead of an “A+,” but almost impossible to find responsible critics grading them lower than this. See AMERICAN ANTITRUST INSTITUTE, THE NEXT ANTITRUST AGENDA: THE AMERICAN ANTITRUST INSTITUTE’S TRANSITION REPORT ON COMPETITION POLICY TO THE 44TH PRESIDENT OF THE UNITED STATES 2–3 (2008), available at http:// www.antitrustinstitute.org/node/11001 (describing “the resilience of antitrust”). By contrast, it is easy to find critics on both sides of the political aisle giving much lower grades, even failing grades, to other DOJ antitrust programs. For example, the AAI’s report sharply criticized the DOJ’s record in the Section 2 area. See id. at 55, 58–59. 3. J. Thomas Rosch, Fed. Trade Comm’n Comm’r, Remarks to the Antitrust Modernization Commission 9–10 (June 8, 2006), available at http://www.ftc.gov/speeches/ rosch/Rosch- AMC%20Remarks.June8.final.pdf. Similarly, Steve Newborn, co-head of Weil, Gotshal & Manges’ Antitrust/Competition practice, was asked which areas of antitrust need reform, and replied: “[c]lass actions: they are increasingly beneficial only to plaintiffs’ law firms and not to consumers.” Q&A with Weil Gotshal’s Steven A. Newborn, LAW360 (June 1, 2009), http://law360.com/competition/articles/103359. 316 DO NOT DELETE 1/31/2013 3:27 PM 315 Comparative Deterrence from Private Enforcement conventional wisdom about private enforcement succinctly: “private rights of actions U.S. style are poison.”4 Given these criticisms, it may come as a surprise—even a shock— that a quantitative analysis of the facts demonstrates that private antitrust enforcement probably deters more anticompetitive conduct than the DOJ’s anti-cartel program.5 This deterrence effect is, of course, in addition to its virtually unique compensation function.6 If this article’s conclusion about the importance of private enforcement for deterrence is true, private antitrust enforcement also should receive much of the praise given to DOJ anti-cartel efforts. Further, private enforcement should be encouraged in the United States rather than hampered through new legislation7 or through restrictive judicial interpretation of existing law.8 And the United States’ version of private antitrust enforcement should be something for other countries to consider.9 4. FTC: WATCH No. 708, Nov. 19, 2007, at 4 (quoting William E. Kovacic speaking at an ABA panel on Exemptions and Immunities where he summarized the conventional wisdom in the field but was not necessarily agreeing with it). For additional criticisms of private antitrust enforcement, see Lande & Davis, Benefits, supra note *, at 883–89. 5. We will not, however, attempt to compare private enforcement to FTC enforcement because, except for a few disgorgement cases, the FTC obtains only injunctive relief. 6. See Lande & Davis, Benefits, supra note *, at 881–83; Harry First, Lost in Conversation: The Compensatory Function of Antitrust Law (2009) (unpublished draft) (on file with author). Another goal of private enforcement is to restore competition to markets. See Lande & Davis, Benefits, supra note *, at 881. 7. See, e.g., Class Action Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4 (codified throughout 28 U.S.C.). The Class Action Fairness Act (“CAFA”) allows defendants to remove most class actions to federal court and, as a result, arguably makes class certification for state law claims more difficult. Stephen Burbank, The Class Action Fairness Act of 2005 in Historical Context: A Preliminary View, 156 U. PA. L. REV. 1439, 1530–31 (noting one goal of CAFA was to make class certification more difficult for plaintiffs). 8. See, e.g., Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (overruling Conley v. Gibson, 355 U.S. 41 (1957), and applying heightened pleading standard to private antitrust cases). 9. In a thoughtful critique of this Article, John R. Woodbury suggests the possibility that private enforcement, even if more effective as a deterrent than DOJ criminal enforcement—indeed, particularly under those circumstances—may lead to over-deterrence. See John R. Woodbury, Paper Trail: Working Papers and Recent Scholarship, THE ANTITRUST SOURCE 3–4 (August 2010), http://www.abanet.org/antitrust/at-source/10/08/Aug10-pTrail8-2f.pdf. He rests this possibility in part on the reputational effects of litigation, offering as an “admittedly extreme example” BP’s willingness to provide $20 billion in compensation for the Deepwater Horizon oil spill. Id. The choice of this example may be telling. There is little indication that antitrust defendants in private litigation suffer any significant cost in terms of their reputation, and so it is perhaps no accident that Woodbury did not offer a more directly relevant example to make his point. More generally, however, in this Article we do not attempt to determine whether antitrust violations on the whole are insufficiently or excessively deterred. Our aim is to establish a proposition that is more limited, although one that still defies conventional wisdom: that private enforcement probably serves as a greater deterrent to antitrust violations than criminal enforcement by the DOJ. A demonstration that 317 DO NOT DELETE 1/31/2013 3:27 PM BRIGHAM YOUNG UNIVERSITY LAW REVIEW 2011 Part II of this Article analyzes the deterrence effects of DOJ anti- cartel efforts by studying DOJ cases filed from 1990 to 2007. Part III compares these results to the cumulative deterrence effects of a sample of forty large private cases that ended during this same period. (We do not compare the DOJ with the deterrence effects of every private case filed during this period, however, because we were unable to obtain this information). Before coming to any policy conclusions based on this comparison, we address some criticisms of private enforcement. Few commentators dispute that most DOJ anti-cartel prosecutions involved anticompetitive conduct or that most DOJ cartel cases should have been brought. But are most private enforcement cases legitimate? Do most involve anticompetitive behavior? Considering the widespread criticism within the profession of private enforcement, and that most successful private cases result only in settlements, do these cases mostly involve underlying anticompetitive conduct? We address this topic in Part IV, concluding that the evidence suggests the legal actions on which we rely did indeed entail claims with merit. Part V then acknowledges some qualifications and caveats to the quantitative conclusions of this Article. Finally, Part VI concludes by offering policy suggestions that follow from our analysis. Our results demonstrate that private enforcement most certainly has crucial deterrence effects. These effects are so important that U.S. courts should not continue their steps to curtail private enforcement, and foreign jurisdictions should consider permitting private enforcement of competition laws as a complement to government efforts. II. DETERRENCE FROM DOJ ANTI-CARTEL CASES The DOJ Antitrust Division can attempt to deter illegal cartel activity in several ways. First, it can request that courts fine the corporations involved. Second, it can request that the most culpable individuals be fined. Third, it can and occasionally does ask for restitution. Fourth, it can request that some of the individuals involved be imprisoned or placed under house arrest.10 The Division also can secure injunctions to restore competition to the affected markets. Since we know of no way to private enforcement helps the law to more closely approximate optimal deterrence is a project for another day. 10. U.S. DEP’T OF JUSTICE, ANTITRUST DIVISION WORKLOAD STATISTICS FY 1999–2008, 13 n.14, http://www.justice.gov/atr/public/242359.pdf (last visited Jan. 25, 2010) (The term other confinement “[i]ncludes house arrest or confinement to a halfway house or community treatment center.”). 318 DO NOT DELETE 1/31/2013 3:27 PM 315 Comparative Deterrence from Private Enforcement value these injunctions, however, or to compare them to injunctions secured by private parties, we have omitted them from our analysis.11 A. Optimal Deterrence of Cartels The most generally accepted approach to optimally deterring antitrust violations was developed by Professor William Landes,12 who convincingly showed that to achieve optimal13 deterrence,14 the total amount of the sanctions imposed against an antitrust violator should be equal to the violation’s expected “net harm to others,” divided by the probability of detection and proof of the violation.15 Moreover, because 11. Additionally, DOJ cases often set important legal precedents that can deter anticompetitive conduct significantly. We do not know how to value these precedents, however, or to compare their value to the value of precedents established through private enforcement. For an excellent analysis of this topic, see Stephen Calkins, Coming to Praise Criminal Antitrust Enforcement, EUROPEAN UNIVERSITY INSTITUTE (June 2006), http://www.eui.eu/RSCAS/Research/Competition/2006(pdf)/200610-COMPedCalkins. pdf. Calkins found that of leading antitrust cases decided before 1977, twelve were private and twenty-seven were government. Of the leading cases decided in 1977 or later, however, he found thirty private cases and only fifteen government cases. Id. at 12, 14 (sample taken from the leading cases printed in the leading antitrust casebook). Calkins concluded: Today what is known as U.S. antitrust law no longer is exclusively or even principally the consequence of Justice Department [or FTC or State] enforcement. The leading modern cases on monopolization, attempted monopolization, joint ventures, proof of agreement; boycott; other horizontal restraints of trade, resale price maintenance, territorial restraints, vertical boycott claims, tying, price discrimination, jurisdiction, and exemptions are almost all the result of litigation brought by someone other than the Justice Department [or the FTC or the States]. Id. at 13 (citations omitted). 12. William M. Landes, Optimal Sanctions for Antitrust Violations, 50 U. CHI. L. REV. 652 (1983). Landes built upon concepts developed in Gary S. Becker, Crime and Punishment: An Economic Approach, 76 J. POL. ECON. 169 (1968), by applying them to the antitrust field. 13. The goal is optimal deterrence, not complete deterrence, because enforcement aggressive enough to deter all cartels is likely to unduly penalize honest business conduct. Therefore a proper balance must be struck to achieve optimal deterrence. 14. Professor Landes was not concerned with compensating victims. For an analysis that takes victim compensation into account, see Robert H. Lande, Are Antitrust “Treble” Damages Really Single Damages?, 54 OHIO ST. L.J. 115, 161–68 (1993), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1134822. 15. See Landes, supra note 12, at 657. If the harm was ten and the probability of detection and proof .333, since (10/.333 = 30), the optimal penalty for this violation would be 30. This ignores risk aversion and other factors. See id. Analysts of both the Chicago and post-Chicago schools of antitrust have almost universally accepted these principles. See Lande, supra note 14, at 125–26. Despite the general acknowledgement of the superiority of the Landes approach, however, many respected scholars and enforcers instead focus upon the gain to the lawbreaker, perhaps because it is simpler to calculate. For an insightful analysis, see Wouter P.J. Wils, Optimal Antitrust Fines: Theory and Practice, 29 WORLD COMPETITION 183, 190–93 (2006). 319 DO NOT DELETE 1/31/2013 3:27 PM BRIGHAM YOUNG UNIVERSITY LAW REVIEW 2011 not every cartel is detected or successfully sanctioned, the “net harm to others” from cartels should be multiplied by a number that is larger than one (the multiplier should be the inverse of the probability of detection and proof).16 In other words, the optimal penalty = (harms) ÷ (probability of detection x probability of proof). In applying Landes’s model, we will undertake several important steps that warrant noting. First, we will attempt to compare financial penalties imposed on corporations with similar penalties imposed on the individual corporate actors who are personally responsible for an antitrust violation. Second, we will attempt to compare financial penalties with time in prison (or time spent under house arrest). Of course, making these comparisons in an objective, accurate, and non-controversial manner is not possible. The conventional wisdom seems to be that fines are superior to prison as a way to secure optimal deterrence.17 However, one might argue, to put the points in their strongest form, that corporate actors care only about their own financial well-being and that prison sentences are so abhorrent18 that no corporate 16. Unfortunately, this is often difficult to determine: Of course, no one knows the percentage of cartels that are detected and proven. In 1986, the Assistant Attorney General for Antitrust, Douglas Ginsburg (AAG Ginsburg), estimated that the enforcers detected no more than 10% of all cartels. There are reasons to believe that the Antitrust Division’s amnesty program has resulted in a larger percentage of cartels detected and proven today, but there is anecdotal evidence that, despite the enforcers’ superb efforts, many cartels still operate. From an optimal deterrence perspective it would be necessary to know the percentage of cartels that are detected and proven to know what number to multiply the “net harms to others” by. At a minimum, however, we know that if the combined antitrust sanctions only total the actual damages, firms would be significantly undeterred from committing antitrust violations. Ideally, optimal deterrence should be based upon the expectations of potential price fixers, not the results of their price-fixing or the actual fines imposed. To ascertain this, however, we would have to interview a random sample of potential price fixers and discern their expectations. In reality, however, it would be impossible to assemble a proper random sample or to get them to respond candidly. John M. Connor & Robert H. Lande, How High Do Cartels Raise Prices? Implications for Optimal Cartel Fines, 80 TUL. L. REV. 513, 519–20 (2005) (citations omitted). 17. The conventional wisdom in the field was well summarized by V.S. Khanna, Corporate Criminal Liability: What Purpose Does it Serve, 109 HARV. L. REV. 1477, 1534 (1996) (“Thus, some justification for corporate criminal liability may have existed in the past, when civil enforcement techniques were not well developed, but from a deterrence perspective, very little now supports the continued imposition of criminal rather than civil liability on corporations.”). 18. See Gregory J. Werden, Sanctioning Cartel Activity: Let the Punishment Fit the Crime, 5 EUR. COMPETITION J. 19, 31 (2009); Donald I. Baker & Barbara A. Reeves, The Paper Label Sentences: Critiques, 86 YALE L.J. 619, 621 (1977) (“Experience supports the conclusion that businessmen view prison as uniquely unpleasant and that therefore incarceration is a uniquely effective deterrent.”); Arthur L. Liman, The Paper Label Sentences: Critiques, 86 YALE L.J. 630, 320 DO NOT DELETE 1/31/2013 3:27 PM 315 Comparative Deterrence from Private Enforcement actor would be willing to risk prison, no matter how large the financial gain (or, to put the point somewhat differently, that a corporate actor would be willing to pay virtually any amount of money to avoid the risk of prison).19 The extreme form of these arguments is unpersuasive. Corporate actors do in fact risk their own prison time for the financial benefit of their employers when they violate the antitrust laws—by, for example, participating in price fixing. Moreover, the literature on antitrust law generally assumes that corporations maximize profits, which means that it also assumes the interests of corporate representatives and corporations generally align.20 Any other approach would greatly complicate antitrust 630–31 (1977) (“To the businessman . . . prison is the inferno, and conventional risk-reward analysis breaks down when the risk is jail.”). 19. Baker & Reeves, supra note 18, at 621–22. Note the important difference in these two baselines: a corporate actor might demand a different sum to risk prison than they would be willing to pay to avoid the risk of prison. For example, suppose someone would rather pay a $2 million fine than be imprisoned for one year. How would that person react to the question of whether they would accept $2 million in return to going to prison for one year? They might not agree to this deal. Part of the difference is the relative wealth of the actor in the two situations. A corporate actor can demand an unlimited amount to accept the risk of prison. And any such payment increases his or her wealth. But the same person cannot pay an unlimited amount to avoid the risk of prison. She can only spend as much money as she has or can borrow. See David Cohen & Jack L. Knetsch, Judicial Choice and Disparities Between Measures of Economic Values, in CHOICES, VALUES AND FRAMES 424, 428 (Daniel Kahneman & Amos Tversky eds., 2000). But there is another element at play here as well. Empirical evidence shows that people’s attitudes toward costs and benefits depend on their perception of the status quo. Id. at 428–29. A person who accepts prison as the status quo may be willing to pay less to avoid it than a person who sees prison as a deviation from the status quo. A corollary is that, depending on the odds and stakes, people value avoiding losses—and are willing to take risks to do so—far more than they value gains—which they generally will not take risks to obtain (although, oddly, this principle may vary depending on the odds of the risk and the size of the gain or loss). See Daniel Kahneman & Amos Tversky, Prospect Theory: An Analysis of Decision under Risk, in CHOICES, VALUES AND FRAMES 35–36 (Daniel Kahneman & Amos Tversky eds., 2000). This psychological phenomenon—and others—greatly complicates an economic analysis of behavior. So, for example, a corporate actor who perceives herself as taking steps that violate the antitrust law to return to the status quo (perhaps because she thinks her corporation is suffering from unfair competition) may be far more tolerant of risk than the same corporate actor who contemplates the same measure as a means of obtaining a perceived economic advantage. Even for a single corporate actor, then, there may be no single correct amount that represents her willingness to trade off between gain for her corporation and the risk of prison for herself. 20. See, e.g., RICHARD A. POSNER, ANTITRUST LAW ix (2d ed. 2001) [hereinafter, POSNER, ANTITRUST LAW] (arguing that his brand of economic analysis of antitrust law has come to predominate judicial doctrine, with a consensus that “business firms should be assumed to be rational profit maximizers, so that the issue in evaluating the antitrust significance of a particular business practice should be whether it is a means by which a rational profit maximizer can increase its profits at the expense of efficiency”). See also Richard A. Posner, Optimal Sentences for White- Collar Crime, 17 AM. CRIM. L. REV. 409, 417–18 & n.27 (1980) [hereinafter Posner, Optimal Sentences] (acknowledging that he has made “an argument . . . in the antitrust context for confining 321 DO NOT DELETE 1/31/2013 3:27 PM BRIGHAM YOUNG UNIVERSITY LAW REVIEW 2011 analysis, requiring an inquiry not only into the market and its participants but also into the internal workings of particular corporations. Indeed, there is an odd—and usually unexplained—inconsistency when proponents of the free market claim that corporations should not be subject to civil liability for the wrongdoing of their representatives: if the free market works in the sense that corporations respond in an efficient manner to market incentives, including by encouraging corporate representatives to act for the benefit of the corporation, why shouldn’t the same be true of legal sanctions?21 The work of Richard Posner provides a useful illustration. He addresses—and rejects—the twin concerns about correlating financial penalties to corporations with prison terms for corporate representatives: (1) that corporate representatives have different interests than corporations and (2) that prison time cannot be equated with a monetary sum. The first issue involves a potential divergence of interests between principal and agent, which economists tend to call agency costs. Posner’s response: A corporation has effective methods of preventing its employees from committing acts that impose huge [antitrust] liabilities on it. A sales manager whose unauthorized participation in a paltry price-fixing scheme resulted in the imposition of a $1 million fine on his employer would thereafter, I predict, have great difficulty finding responsible employment, and this prospect should be sufficient to deter.22 In other words, corporations can and will impose incentives that align their interests and the interests of their representatives. criminal (or civil-penalty) liability to the corporation, on the theory that if it is liable it will find adequate ways of imposing on its employees the costs to it of violating the law”) (citing RICHARD A. POSNER, ANTITRUST LAW: AN ECONOMIC PERSPECTIVE 225–26 (1976)). The same is true for scholars of a similar ilk in the field of securities. See, e.g., EASTERBROOK & FISCHEL, THE ECONOMIC STRUCTURE OF CORPORATE LAW 4 (1996) (“Managers may do their best to take advantage of their investors, but they find that the dynamics of the market drive them to act as if they had investors’ interests at heart. It is almost as if there were an invisible hand.”). 21. See, e.g., Christopher D. Stone, Sentencing the Corporation, 71 B.U. L. REV. 383, 385 (1991) (“While it is true that managers have a hard time getting the rank and file to adapt to market threats, no one suggests that corporations are so hidebound or so buffered from their capital environments that market penalties must be ruinously high before the company will respond. Why should it be otherwise with legal penalties?”). 22. POSNER, ANTITRUST LAW, supra note 20, at 271. But see John Collins Coffee, Jr., Corporate Crime and Punishment: A Non-Chicago View of the Economics of Criminal Sanctions, 17 AM. CRIM. L. REV. 419, 458–59 (1980) (noting examples of limited internal sanctions imposed against individuals responsible for antitrust violations). 322 DO NOT DELETE 1/31/2013 3:27 PM 315 Comparative Deterrence from Private Enforcement Posner has also addressed the second issue—the concern that prison time cannot be correlated to financial penalties. He has argued for “the substitution, whenever possible, of the fine (or civil penalty) for the prison sentence as the punishment for crime.”23 His contention is, particularly in cases of “white collar” crime,24 that “fining the affluent offender is preferable to imprisoning him from society’s standpoint because it is less costly and no less efficacious.”25 As he notes, “The fine [or civil liability] for a white-collar crime can be set at whatever level imposes the same disutility on the defendant, and thus yield the same deterrence, as the prison sentence that would have been imposed instead.”26 Thus skeptics of private enforcement with a Chicago school orientation—including Posner himself27—should not rely on agency costs or the inherent superiority of prison as a deterrent to reject an effort to compare the deterrence effects of private enforcement and criminal prosecutions.28 23. Posner, Optimal Sentences, supra note 20, at 409. 24. Id. at 409–10 (defining “white collar” crime). 25. Id. at 410. 26. Id. Posner is familiar with resistance to this claim—indeed, his article responds in part to a sophisticated criticism by John Coffee that contends that “the threat of imprisonment is inherently greater than that of a fine,” id. at 413 (citing Coffee, supra note 22), or, presumably, civil liability. Posner usefully distills Coffee’s argument to three points: (1) financial penalties work only if the culpable party has the means to pay them; (2) fines themselves work only if backed by a sufficient penalty for non-payment (otherwise they will not be paid); and (3) culpable parties are likely to experience an increasing marginal loss of utility as fines get larger (at least up until the point that they have no money left), but a decreasing marginal loss of utility as prison sentences grow in length. Id. at 413–14. The first two points have only limited significance for our Article: corporations generally can pay the damages they owe and courts have methods of making them do so, including mulcting them with sanctions for contempt. But Coffee’s point about the potentially complicated relationship between financial penalties and prison time does suggest that any ratio between prison time and money will be an imperfect approximation. 27. See, e.g., POSNER, ANTITRUST LAW, supra note 20, at 274–75. Posner’s concern about antitrust class actions is particularly curious. He levels two criticisms: first, that class action lawyers have incentive to settle cases for relatively small amounts compared to their actual worth and, second, that risk-averse corporations may settle claims for too much because of an unlikely possibility of an extraordinarily large loss. Id. at 275. Posner does not address the fact that these tendencies—if real—are off-setting. 28. Indeed, Posner even suggests what he believes to be a feasible method for estimating the trade-off between years in prison and monetary sanctions: [A] promising method would be to infer statistically the relative deterrent effect of fine and prison. Suppose that in one federal district the average fine for a federal white-collar offense is $1,000 and the average prison term 30 days, and in another district it is $800 and 40 days, and so forth. Then, by comparing the incidence of the offenses across districts, we should be able to infer the rate of exchange at which days in jail translate 323