Preparing a Case

Evaluating Risk for Clients

Risk assessments are important both to counseling clients on proposed conduct and to advising clients in the litigation context on whether to accept a settlement or proceed to trial. Antitrust cases are expensive propositions just to litigate and get more expensive if you lose. It is critical that an antitrust lawyer be able to assess the risk that a proposed course of conduct will result in an antitrust case being filed. It is perhaps even more important to be able to assess the clients prospects for prevailing in an antitrust case once one has been filed.

In terms of counseling, you first want to have a good understanding of the conduct that is proposed, the business objective that the conduct is supposed to achieve, and the nature of competition in the industry that could be affected by the conduct. Once you are comfortable that you have the necessary understanding, then you start to discuss and evaluate with the client whether the proposed conduct is likely to be challenged if undertaken, and, if so, who would likely claim that they are harmed by the conduct if it were undertaken. You need to determine whether the claimant is likely to be a competitor or a customer or a supplier. If it is a competitor, an important principle to keep in mind is that competitors tend not to complain about anticompetitive acts. They tend to complain about acts that make them have to compete even harder than they are now. So you need to ascertain whether the competitive complainant is going to complain for a legitimate reason (i.e., that competition in some way would be adversely affected by the proposed conduct), or whether he is really complaining that he now has to compete harder because of the conduct that is proposed.

If the claimant is likely to be customers or suppliers, you need to explore with your client why he or she wants to undertake actions that hurt the companys suppliers or customers. After all, these are people that he or she does business with. I always tell my clients that I do not particularly like it when they try to practice antitrust law, and they should not like it particularly well when I try to practice business. So I just ask them to think through that process. Sometimes they have not; often they have. And then you try to get a sense of whether the business justifications are likely to outweigh the anticompetitive effects, and if it is likely that the justifications will be outweighed by the anticompetitive effects, you need to explore with your client whether there are other, more lawful ways or at least less questionable ways through which they can achieve their business objectives.

There are a few clients although I think it is fairly rare now who basically do not care about complying with the antitrust laws. They want you to bless their proposed conduct, and they will tell you anything that will lead you toward that conclusion, even if it is not supported by the facts. It is important that a lawyer and a client trust each other. If you have a client that you are somewhat concerned about and in whom you do not have a lot of trust, you need to document the underlying facts and make sure that this is not a rush to judgment that the proposed conduct is really lawful before you tell them that it is really lawful, and that is always a big challenge.

Another challenge is the fact that some of the competitive effects that you need to consider can be very expensive to explore. You need to make a judgment as to the market in which the client competes. In litigation, that is typically resolved by subpoenaing lots of companies who are arguably competitors within the market, getting their data, using your data, having an economist analyze the pricing and output data, and making a determination as to what the relevant market is. That can be an exercise that can cost thousands if not hundreds of thousands of dollars. And for a business proposal, clients sometimes resist efforts to try to make precise determinations of the competitive effects. At that point, there is a cost-benefit analysis. How well can you really assess this market without all the economic data? If you think you can make at least a reasonably educated judgment as to how the economic analysis would likely turn out if you conducted it, then you go forward; if you cannot make an educated judgment, you need to tell the client that they really ought to spend the money if they want to eliminate the risk. But even then there is a cost-benefit analysis, because sometimes the competitive concerns caused by the proposed conduct are so small that it is just not even worth doing a full-blown economic analysis; you could bless the transaction right up front without doing all that. So you have to try to balance the cost of counseling with the need for the information and the benefits of having accurate advice.

Risk assessment in the litigation context is different. It requires making judgments about a jurys ability to understand facts and the judges appreciation of the nuances of antitrust law. A lawyer should always be confident in the case he intends to try: it is impossible to get a jury to believe your version of the facts if you do not express confidence that you believe your version of the facts is correct. There is always a danger that the lawyers confidence in his or her case clouds the lawyers judgment about how the jury or the judge will likely find the facts. Some of the largest antitrust verdicts have come because the defense lawyer handling the case was not able to step outside his or her role as litigation counsel and make an objective assessment of what the jury or judge was likely to believe. When I advise a client on my objective assessment of the risks to trying a case, I always try to dial back my confidence in my ability to persuade the jury or the court so that I do not give my client an inaccurate, overly optimistic view of the chances of success.