Appendix B. Background of the Illinois Brick Decision

• Pages: 443-472

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APPENDIX B

BACKGROUND OF THE ILLINOIS BRICK

DECISION

The Supreme Court’s decision in Illinois Brick barred most

indirect purchasers from bringing “pass-on” antitrust claims under

the federal antitrust laws. This Ha ndbook has described how states

have responded to that decision and the resulting jurisprudence. For

those who seek a deeper understanding of how the Supreme Court

arrived at its decision, this Appendix explores the case law pre-dating

Illinois Brick, the factual background, and policy considerations that

the Court considered in reaching its decision, and the decision itself,

as well as some critiques of the Court’s analysis.

A. Indirect Purchaser Jurisprudence before Illinois Brick

Section 4 of the Clayton Act addresses the standing of private

parties to sue under the antitrust laws, as follows:

[A]ny per son who shall be inj ured in his business or property by

reason of anything forbidden in the antitrust laws may sue therefor

in any district court of the United States in the district in which the

defendant resides or is found or has an agent, without respect to the

amount in controvers y, a nd shall recover threefold the damages by

him sustained, and the cost o f suit, including a reasonable

attorney’s fee.1

Before Illinois Brick Co. v. Illinois,2 the Supreme Court’s general

comments regarding standing suggested that this provision would be

interpreted broadly. In 1957, the Court wrote:

Petitioner’s claim need only be “tested under the Sherman Act’s

general prohibit ion on unreasonable restraints of trade,” and meet

the req uirement that petitioner has thereby suffered injury.

Congress has, by legislative fiat, determined that suc h prohibited

activities are injurious to the public and has provided sanctions

allowing private enforcement of the antitrust laws by an aggrieved

party. These laws protect the victims of the forbidden practices as

1. 15 U.S.C. § 15(a). Before the 1982 amendment, this language

appeared in 15 U.S.C. § 15, October 14, 1914, c. 323, § 4, 38 Stat.

731. The 1982 amendments, Pub. L. 96-349 § 4(a)(1), 96 Stat. 1964

(Dec. 29, 1982), redesignated the existing provisions as subsection

(a) and added as subsection (b) an exception for foreign states and

instrumentalities of foreign states.

2. 431 U.S. 720, 726 (1977).

444 Indirect P urchaser Litigation Ha ndbook

well as the public. Furthermore, Congress itself has placed the

private antitrust litigant in a most favorable position through the

enactment o f § 5 of the Clayton Act. In the face o f such a policy

this Court should not add req uirements to burden the private

litigant beyond what is specifically set forth by Congress in those

laws.3

In 1968, the Court decided Fla st v. Cohen,4 establishing a two-

prong standing analysis under the Clayton Act applicable to all

antitrust plaintiffs, direct and indirect purchasers alike. The first

prong is the “case or controversy” requirement; it asks “whet her the

party invoking federal court jurisdiction has a ‘personal stake in the

outcome of the controversy,’ and whether the dispute touches upon

‘the legal relations of parties having adverse legal interests’”—

whether the plaintiff suffered injury-in-fact.5 The second prong is

jurisprudential; it provides standing to an individual—assuming an

injury-in-fact is alleged—when “the interest sought to be protected

by the complainant is arguably within the zone of interests to be

protected or regulated by the statute or constitutional guarantee in

question.”6

Because indirect purchasers who plead actual injury will

generally be able to satisfy the constitutional injury-in-fact

requirement, the central issue for indirect purchaser standing under

the Clayton Act is the prudential “zone of interest” question. Despite

the language of the Clayton Act and the Supreme Court’s general

guidance on antitrust standing before Illinois Brick, lower courts

could not agree on a consistent prudential standing rule regarding

indirect purchasers.7 Before Hanover Shoe, Inc. v. United Shoe

Machinery Corp.,8 the cases dealing with standing under the Clayton

Act did not exhibit a consistent pattern.9 To discern the interest at

stake, courts commonly applied either the “direct injury” test or the

“target area” test.10 These two tests are described below.

3. Radovich v. NFL, 352 U.S. 445, 453 -54 (1957) (citations and

footnotes omitted) (quoting Times-Picayune Publ’g Co. v. United

States, 345 U.S. 594, 614 (1953); Mandeville Island Farms v. Am.

Crystal Sugar Co., 334 U.S. 219, 236 (1948); Emich Motors v. Gen.

Motors Corp., 340 U.S. 558 (1951)).

4. 392 U.S. 83 (1968).

5. Id. at 101 (quoting citations omitted).

6. Association o f Data Processing Serv. Orgs. v. Camp, 397 U.S. 150,

153 (1970).

7. See Comment, Standing to Sue in Antitrust Ca ses: The Offensive Use

of Passing-On, 123 U. PA. L. REV. 976, 977 (1975).

8. 392 U.S. 481 (1968).

9. Comment, supra note 7, at 977.

10. Id.