Protection of Competition Rules Via the Law of Restitution

Abstract

This Article examines the role of restitutionary remedies in competitive settings. Part II defines two modes of resource allocation: by (distributing resources by granting rights and privileges with respect to them) and by (establishing legal rules that regulate among different claimants without conferring entitlement on any of them). This Article demonstrates the ubiquity of allocation by using three scenarios: market competition, over gifts and estates, and between co-owners. Part III establishes the importance of the distinction between allocation by and allocation by entitlement and the different policy considerations relevant to each category. Part IV examines the relative merits of harm-based remedies and benefit-based remedies in competitive settings. The main conclusions of the Article are that restitution is likely to provide more effective protection to rules than harm-based tort liability and that restitution can fulfill an important role in this area because of its deterring effect and its relative flexibility. I. Introduction Competition creates outstanding opportunities for man to reveal his best qualities, but it also opens the way for his worst deficiencies. Hard work, skillfulness, honesty, and ingenuity can all be important elements in one's triumph, but so can manipulation, intimidation, deception, and deviousness. It is up to social institutions-most significantly the legal system-to ensure that, while competitive settings continue to serve as platforms to display the former, they will not be captive to those who are willing to use the latter. Most of this Article is devoted to clarifying the important role that restitutionary remedies should play in this everlasting endeavor. Two basic themes run through this Article. The first theme concerns the way in which the legal system allocates scarce resources. The basic argument is that a distinction must be made between two different methods of allocating scarce resources-allocation by entitlement and allocation by competition. The former, and much more familiar, method implies that society provides one of the claimants with a legal entitlement (a right or a privilege) to use the resource and imposes on the other claimant a correlative obligation (a duty or a no-right) to allow such use. The latter, allocation by competition, means that none of the claimants has an entitlement, but each of them can win the resource according to an established set of legal rules (henceforth called competition rules). Thus understood, allocation by entitlement and allocation by describe two possible allocation techniques, which, as argued herein, cannot be converged into one. The second theme concerns the choice between two divergent groups of legal responses: harm-based remedies (damages1) and benefit-based remedies (restitution2).3 Yet this classic question will not be dealt with in the familiar setting of allocation by entitlement, but rather in the uncharted waters of allocation by competition. The main issue that will be discussed is which type of legal response-harm-based or benefit-based-better suits competitive settings. The unusual assertion that will be supported herein is that it may well be the latter (restitution) and not the former (damages). This Article is divided into four parts. Part II clarifies and demonstrates the distinction between allocation by entitlement and allocation by at the jurisprudential level. Part III develops general arguments as to the uniqueness of competitive settings and their divergence from cases of allocation by entitlement. Part IV deals with concrete aspects of the choice between harm-based remedies (damages) and benefit-- based remedies (restitution) in competitive settings. This Article concludes with short summary notes. II. Allocation by Entitlement and Allocation by Competition A crucial task for any community is to allocate scarce resources among its members. …