Appendix B. Background of the Illinois Brick Decision

• Pages: 343-370

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APPENDIX B

BACKGROUND OF THE ILLINOIS BRICK DECISION

The United States Supreme Court’s decision in Illinois Brick barred

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

the federal antitrust laws. This Handbook has desribed how the states

have responded to that decision and the jurisprudence that has emerged

as a result. For those who seek a deeper understanding of how the U.S.

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 of the critiques of the Court’s analysis.

A. Indirect Purchaser Jurisprudence Before Illinois Brick

Section 4 of the Clayton Act1407 addresses the standing of private

parties to sue under the antitrust laws, as follows:

[A]ny person who shall be injured 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

controversy, and shall recover threefold the damages by him sustained,

and the cost of suit, including a reasonable attorney’s fee.

Prior to Illinois Brick Co. v. Illinois,1408 the Supreme Court’s general

comments regarding standing suggested that this provision would be

afforded a broad reading. In 1957, the Court wrote:

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

prohibition on unreasonable restraints of trade’ . . . and meet the

requirement that petitioner has thereby suffered injury. Congress has,

by legislative fiat, determined that such prohibited activities are

injurious to the public …. and has provided sanctions allowing private

enforcement of the antitrust laws by an aggrieved party. These laws

1407. 15 U.S.C. § 15(a). Prior to 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.

1408. 431 U.S. 720, 726 (1977).

344 Indirect Purchaser Litigation Handbook

protect the victims of the forbidden practices as well as the public . . .

Furthermore, Congress itself has placed the private antitrust litigant in a

most favorable position through the enactment of § 5 of the Clayton

Act. . . . In the face of such a policy this Court should not add

requirements to burden the private litigant beyond what is specifically

set forth by Congress in those laws.1409

In 1968, the Court decided Flast v. Cohen,1410 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 “whether 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.1411 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.”1412

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, prior to Illinois Brick, lower courts could not agree on a

consistent prudential standing rule regarding indirect purchasers.1413

Prior to Hanover Shoe, Inc. v. United Shoe Machinery Corp.,1414 the

cases dealing with standing under the Clayton Act did not exhibit a

consistent pattern.1415 The two most common tests courts applied to

1409. Radovich v. Nat’l Football League, 352 U.S. 445, 454 (1957) (footnotes

omitted) (citing Times-Picayune Publ’g 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, 340 U.S. 558 (1951)).

1410. 392 U.S. 83 (1968).

1411. Id. at 101 (citations omitted).

1412. Ass’n of Data Processing Serv. Orgs. v. Camp, 397 U.S. 150, 153 (1970).

1413. See Comment, Standing to Sue in Antitrust Cases: The Offensive Use of

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

1414. 392 U.S. 481 (1968).

1415. 123 U. PA. L. REV. at 977.