Dollars for antitrust
Class action slush funds are becoming more prevalent. By “slush fund,� I mean settlement funds that are extracted from defendants and given, not to plaintiffs, but to charitable and tax-exempt organizations to carry out objectives that are unrelated to the litigation itself.
The other day, I blogged about a slush fund that gave the University of California, Davis $6.5 million to “probe the roles of California fruits, vegetables and nuts in providing vitamins and other phytochemicals that lower the risk of chronic disease.� The $6.5 million was extracted from vitamin manufacturers who settled a class action for “price fixing�.
In another recent case, a New Mexico state court gave preliminary approval to a class action settlement that would give the defendants’ entire payment—nearly $40 million—to educational and charitable groups selected by the plaintiffs’ counsel. The actual plaintiffs will receive nothing. The plaintiffs’ lawyers, however, will receive their traditional one-third contingency fees.
The defendants in the New Mexico case are manufacturers of MSG and other food flavoring agents. The defendants already pled to various criminal price fixing charged brought by the Clinton and Bush administrations. When the DOJ settles antitrust cases, they expressly do not provide restitution to supposedly injured consumers on the grounds that they can file separate civil lawsuits. Of course, when those civil suits result in large attorney’s fees and free cash for university researchers, and no “restitution� for the plaintiffs, it appears that the DOJ is perpetuating a fraud.
Slush funds allow antitrust lawyers to build support for their profession. Indeed, the vitamin industry slush fund that provided the UC Davis “grant� also financed the distribution of a pro-antitrust group’s propaganda films in California schools. Academics throughout the country now know that they can get “free� money by singing the praises of antitrust and “directing� their research accordingly. After all, it’s doubtful that any slush funds will finance criticisms of antitrust policy or promoted free-market economics.
