New Study Shows Class Actions are Good for Small Businesses Too

By John W. Barrett and Ryan M. Donovan, Bailey & Glasser LLP

A recent study from the Center for Justice & Democracy highlights the little-recognized fact that small businesses are major beneficiaries of class action litigation. Though some corporate interests use scare tactics to convince business owners that class actions are dangerous, the truth is that class actions provide virtually the only way to compensate small businesses that are victims of antitrust violations.

CJD’s study examined more than 150 class actions that have been litigated and settled since 2005, including nine antitrust class action settlements that distributed over $1 billion to small and medium-sized businesses. Consider the following examples:

  • Two dozen major airfreight carriers in the world reached at least 21 settlements for over $320 million with class members for unlawfully fixing prices of airfreight shipping services.
  • Manufacturers of graphite electrodes, which are used to conduct electricity in steel mill furnaces, settled with a class of steel manufacturers who alleged anti-competitive activity.  The settlement totaled over $111 million, which was distributed to 166 claimants.
  • Several U.S. manufacturers of linerboard settled with a class of businesses that purchased corrugated boxes and sheets over price-fixing allegations.  The settlement distributed over $140,000,000 to more than 7,000 claimants.

These cases illustrate that class actions perform an important market function in combating anti-competitive behavior. As the authors of the study note, “Class action lawsuits are among the most important tools that cheated and violated individuals and small businesses have to recover stolen money, hold large corporations and institutions accountable and deter future misconduct. This report shows clearly that class actions are one of the most powerful mechanisms used to secure justice in America.”

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