Judgment Sharing Agreements

U.S. District Judge J. Hamilton last week rejected a challenge to a sentencing agreement. Manufacturers of dynamic random access memory chips entered into the agreement in ongoing pricing disputes against them. California`s attorney general challenged the deal as a hindrance to settlement. Not like that, his honor. Lookie here (subscription required). California v. Infineon Technologies AG, 06-cv-04333-pjh (N.D. Cal.

November 29, 2007). Antitrust legislation condemns price agreements and aims to encourage private action against conspirators by automatically tripling the harms of cartels and abuse of dominance and by providing for joint and several liability. Since the Supreme Court has held that there is no right to a contribution among the offenders, a single defendant is at risk of being charged with prejudice well in excess of three times the harm caused by his own market share. Companies that are accused of price-fixing often attempt to reduce this risk by entering into judgment allocation agreements that essentially create a right to a contribution premium in accordance with the contract. Despite their pervasiveness, agreements on the sharing of judgments have received almost no scientific attention. Courts and commentators consistently praise them as a reasonable way for companies to manage risk and eliminate the perceived unfairness of joint and several liability without contribution rights. This article shows how judgment allocation agreements can undermine deterrence of cartels and abuse of dominance and prevent price agreements. Based on economic theory and empirical evidence, the article explains how judgment allocation agreements can reduce billing values, reduce compromising evidence, reduce the likelihood of success of meritorious price-fixing actions, and promote price-fixing. The article goes on to argue that the fairness arguments in favour of judgment allocation agreements (and contributions in general) are erroneous and easily refuted and, in any event, offset by the potential anti-competitive effects of such agreements. Finally, the article advocates a more well-founded treatment of cartels and abuses of dominance between judgment allocation agreements, taking into account their possible use for anti-competitive purposes.

Blawgletter agrees. The DRAM agreement on the sharing of judgments complicates the settlement in that it encourages the accused to tighten their elbows and not to separate them. But it does so rationally and, above all, a little illegal. Second, it emphasizes, for the defendants in the cartels and abuse of dominance, the potential benefits of the inclusion of a judgment allocation agreement after the filing of a dispute.

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