§4.2 A. Indirect Purchasers Can Sue For Damages

• Jurisdiction: New York

A. Indirect Purchasers Can Sue for Damages

Under the U.S. Supreme Court’s 1977 decision in Illinois Brick Co. v. Illinois,³⁷⁹ an indirect purchaser (e.g., a retailer) cannot sue for damages caused by a price-fixing conspiracy by manufacturers, even if the manufacturers have overcharged their direct customers (e.g., wholesalers) who have in turn passed on some or all of the overcharge to their own customers (including the indirect-purchaser retailer). That rule itself is an extension of the statement by Justice Holmes that: “[T]he general tendency of the law, in regard to damages at least, is not to go beyond the first step.”³⁸⁰

Subsequently, however, in California v. ARC America Corp.,³⁸¹ the U.S. Supreme Court upheld the right of individual states to permit indirect purchaser recovery under their own state antitrust laws. Under that decision, individual states are free to enact so-called “Illinois Brick repealer” statutes, which make it clear that indirect purchasers may recover damages under that state’s antitrust laws. The antitrust laws of many states, however (including New York prior to 1998) do not directly address the issue of indirect purchaser recovery, leaving the issue open to judicial resolution.

After the ARC case, at least two New York trial courts held that the Donnelly Act did not authorize indirect purchaser suits. In both of those cases, the court found that the rationales given by the U.S. Supreme Court in 1977 in Illinois Brick for barring federal indirect purchaser suits also applied to such suits under the Donnelly Act. In the first case, Russo & Dubin v. Allied Maintenance Corp., the court cited with approval the Supreme Court’s concern that permitting indirect purchaser suits would result in multiple actions by downstream purchasers claiming that antitrust overcharges were passed on to them.³⁸² The Russo court also suggested that permitting indirect...