Legal Resources


Unpacking Antitrust: How Do I Estimate Damages for a B2B Antitrust Violation?

March 20, 2024

Author: Molly Donovan

Whether you have an offensive antitrust claim to assert against another business, or an antitrust claim is being asserted against your business, it can be helpful to put at least a ballpark dollar figure on the potential damages at stake.

For example, let’s say you have an antitrust claim to assert against your competitor, but you’re not sure it’s worth it. There will be costs associated with asserting the claim—time and money—that should be weighed against your potential recovery. Is the claim large enough to call a lawyer and pay her fees? Would I really file a lawsuit? Many businesses view litigations and pre-litigation negotiations as investments, asking “should I make this investment given the size of the potential reward and the likelihood of achieving it?”.

Conversely, if a competitor is asserting an antitrust claim against you, you need some understanding of your potential exposure so that you can determine what’s reasonable to pay to make the claim go away (if anything)—and when to do that. Most antitrust disputes settle or are dismissed; very few go to trial given the risks and large dollar figures usually at issue.

Can I Estimate Antitrust Damages Without the Help of an Economist?

Yes and no. The only accurate way to estimate a damages value is with an econometric model constructed by a qualified economist. The estimates we’re suggesting provide only an idea of the very approximate size of a potential damages award—which can be useful as you take the initial steps toward asserting a claim or defending against it.

How Do I Get Started?

You need to know that there are two types of antitrust damages available to claimants who are successful at a trial: lost profits and lost business value. Lost profits compensate the claimant for the income lost over a finite period. Lost business value compensates a claimant for income lost permanently.

Where the wrongful conduct causes a claimant’s partial or total foreclosure from a market, a claimant may be entitled to recover both categories of damages, although there’s no double dipping.

What’s an Example?

In a real (non-antitrust) case involving a cruise line, the cruise line sued the makers of a valve that failed to remove microbes from the water, causing an outbreak of Leguinnaire’s Disease on the ship. Three years after the outbreak, the cruise line was sold. The jury properly awarded $48 million in profits lost from the time of the outbreak to the sale and $135 million for the lost business value as of the date of the sale (the reduction in price the seller had to accept because profits would continue to be low due to the outbreak). Lost profits account for pre-sale harm; the lost business value takes into account profits anticipated as of the sale going forward—without overlap or double dipping.

Isn’t It Very Difficult to Calculate These Figures?

It is, and that’s why litigants spend lots of money on expert economists and why the damages standard in antitrust cases is “somewhat relaxed,” i.e., because it is “difficult to impossible to construct the but-for world where antitrust violations” did not occur. See, e.g., J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 565-66, 101 S. Ct. 1923, 68 L. Ed. 2d 442 (1981). 

Courts recognize that the damages in cases of partial or total market exclusion, in particular, are inherently speculative. See, e.g., Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 123, 23 L. Ed. 2d 129, 89 S. Ct. 1562 (1969). 

Despite this, damages must not be determined by “mere speculation or guess” and must be grounded on defensible assumptions.

How Do I Estimate Lost Profits?

Here are a few ground rules: 

  • An antitrust plaintiff may recover the lost net profits proximately caused by the antitrust violation. 
  • “Proximately caused” means the wrong must be a substantial factor (but not the sole factor) in bringing about the injury. Mulvey v. Samuel Goldwyn Productions, 433 F.2d 1073, 1075 n. 3 (9th Cir. 1970).
  • A business need not have been operating at a profit to recover lost profits. Graphic Prods. Distribs. v. Itek Corp., 717 F.2d 1560, 1579-83 (11th Cir. 1983).

How Does the Calculation Normally Go?

An expert would create a “violation-free” world. The violation-free world can be created with a “before and after” theory—comparing profits during the violation period with profits prior to the violation (with the “before” period acting as a proxy for the violation-free world). 

Alternatively, a “yardstick” theory compares profits by the plaintiff with profits earned by a comparable firm unaffected by the violation. 

Any approach must control for all relevant differences, besides the violation, between the two comparison periods or the two comparison firms. 

What’s An Easy Example?

Say Business had 10 suppliers for many years until sometime in 2020 when Competitor started reaching agreements that everyone must boycott Business or else! By 2023, Business had only 1 supplier.

Lost profits may be estimated by assuming all 10 suppliers would have continued dealing with Business in years 2020, 2021, 2022 and 2023, at the same or greater profits as in years prior, but-for the illegal agreements. Internal projections that Business developed prior to the violation may serve to defend assumptions about expected profits had the violation not occurred.

The expected profits minus expected costs would function as the lost profits figure.

Is That It?

No, you should multiple the lost profits figure by a figure that represents litigation risk. No matter the strength of any claim, there are uncertainties in every litigation. 

So, for example, if the lost net profits are $1 million, you might multiple that number by 50% if you believe you have a 50/50 chance of recovering $1 million. The result is a claim value of $500,000.

This is rudimentary, but it illustrates the concept.

How Do I Estimate Lost Business Value?

This is typically harder.

Lost business damages are available if the plaintiff shows that defendant’s wrongdoing is a substantial factor in bringing about its exclusion from the market.  Mulvey v. Samuel Goldwyn Productions, 433 F.2d 1073, 1075 n. 3 (9th Cir. 1970). Lost business value is the value that a willing buyer would have paid a willing seller for a business as of the “valuation date” but for the wrongful conduct. The chosen valuation date is usually the date the plaintiff goes out of business.

The most straightforward method of calculating a lost business value estimates the expected values of the income in the future years and uses a discount rate appropriate to the risk involved to discount those future values to a single present value. 

As with lost profits, the expected value of income can be established using a “before and after” method or a “yardstick method.” 

What’s an Example?

Pretend Business received an acquisition offer of $10 million in 2020. In 2023, with only 1 supplier, the Business sold for only $2 million. $8 million is the lost business value, assuming the wrongdoing can be shown to be a substantial factor in the diminished price.

You’d want to multiply the $8 million figure to reflect some litigation risk. If we again choose 50%, the lost business value for purposes of this exercise would be $4 million.

In Our Hypothetical , If I’m the Potential Defendant, Should I Settle for $4.5 million (Lost Profits + Lost Business Value)?

Maybe not. There are many factors that should be considered in settling a claim, for how much and when—including the merits of the claim, relationships, the human toll a litigation takes, lawyer fees and other costs as well as reputation and customer goodwill, if applicable. But the calculated figure does provide some sense of the magnitude of the exposure, so that you can weigh all the relevant factors more appropriately.