Sen. Edward M. Kennedy (D-Mass.), backed by a public show of support from the White House, introduced legislation yesterday to allow class-action consumer suits against corporations that engage in price-fixing and antitrust activities.
The action almost guarantees a major showdown between the Carter administration and the business community over the proposal. The powerful Business Roundtable, which vigorously opposed similar legislation last year, yesterday called the Kennedy move "unwise."
Unlike last year's legislative battle, however, Kennedy is now chairman of the Senate Judiciary Committee, which must consider the bill. This year, he said, the measure would be his "highest priority in the 96th Congress."
At yesterday's news conference announcing the bill, Kennedy was flanked by presidential advisers Alfred Kahn and Esther Peterson and Justice Department antitrust chief John Shenefield.
Shenefield said the Justice Department supported the proposal because it would "restore an essential element of effective antitrust enforcement" by permitting indirect purchasers to collect damages.
In addition to the administration officials at yesterday's news conference, Kennedy was joined in support of the legislation by Rep. Peter Rodino (D-N.J.), chairman of the House Judiciary Committee, and representatives of several consumer groups.
The major purpose of the bill is to overrule the Supreme Court, which last year held in a case involving the state of Illinois and the Illinois Brick Co. that only those who had direct dealings with an antitrust violator could sue for damages. The effect of the ruling was virtually to eliminate class action suits in such cases.
"By conservative estimates," Kennedy said in the press conference, "antitrust violations cost us at least $150 billion every year. They strain our savings and earnings. They fuel inflation. And they line the pockets of those businesses that place their own profits above the demands of law and the dictates of fairness.
"Without this legislation," he added, "too many of these violations will go unchallenged, and too many of their victims uncompensated."
Kennedy acknowledged, however, that opposition from the powerful business lobby prevented the bill from coming to a vote last year, "particularly from the Business Roundtable. I'm hoping they'll have a change of mind, but to date they have not."
Rodino, too, said he expected the business lobby to "rear its head again" in opposition to the bill."We're not going to have an easy time getting it passed," he added.
Richard L. Lesher, president of the U.S. Chamber of Commerce, denounced the proposed legislation yesterday."Consumers, the supposed beneficiaries, would get very little. Instead, the benefits would go largely to consumer class-action lawyers who take it on themselves to represent people who have never asked for their services," he said.
Specifically, the proposed bill would allow consumers and other indirect purchasers in the chain of distribution of a price-fixed product to recover damages measured by the extent to which they were overcharged because of the price-fixing or antitrust violations.
Although the legislation does subject a defendant to possible multiple claimants, it does not permit multiple liability, and restricts collectable damages to actual losses suffered by plaintiffs.
The Illinois Brick decision, Kennedy said, is inherently unfair because it allows only the middleman in the distribution chain -- who deals directly with the manufacturer -- to recover damages, but in most cases that middleman has already passed the extra charges along to the consumer.
"Most of the time," Kennedy said, "those direct dealers are not the ones who are injured by illegal price-fixing schemes. Most of the time they pass on the overcharge to their purchasers, and they pass it on to theirs, and it's the American consumer, or governmental agencies which purchase goods, who end up paying the real cost."
Kennedy said Illinois Brick "permits the middleman to collect twice -- to reap the profits of overcharges from the consumer, and then to charge the manufacturer for the illegality. And it leaves the one party injured in fact -- the consumer -- wholly uncompensated."
In addition., administration inflation fighter Kahn said, "all too often, direct purchasers have little incentive to sue their suppliers," because they fear possible reprisals from companies they must continue to deal with.
The measure is the first legislative volley in an all-out administration attack on antitrust violators, involving cooperative efforts by the Justice Department, Congress and the Federal Trade Commission. Hearings on the legislation begin today.
Justice's Shenefield said yesterday that Justice supported the bill, because it would "restore an essential element of effective antitrust enforcement." by permitting indirect purchasers to recover for injuries.
Mark Green, head of Ralph Nader's Congresswatch, said in support of the legislation that "this bill tries to take the profit out of price-fixing."
Consumer Federation of America's Executive Director Kathleen O'Reilly said, "The ability to sue for damages is important both as a matter of equity to compensate individual consumers who are victims of price-fixing overcharges and as an effective deterrent to antitrust violation."