Chapter II. Responses to Illinois Brick Decision

• Pages: 5-28

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CHAPTER II

RESPONSES TO ILLINOIS BRICK DECISION

Illinois Brick Co. v. Illinois6 stood for the proposition that indirect

purchasers, even if they were injured, had no remedy (at least not under

federal law).7 Although the Supreme Court articulated a reasonable case

for its decision, the stark proposition—that people who, by extension,

have suffered an actual injury are left without remedy—unquestionably

did not sit well with state legislatures and the judiciary. State legislatures

and Congress tried various different responses to overturn or limit the

scope of Illinois Brick, and even without state legislative action, a

number of state courts interpreted their laws to permit indirect actions.

This Chapter first describes the initial and subsequent, intermittent

efforts in Congress to respond to Illinois Brick; next, it briefly describes

the Antitrust Modernization Commission; then it describes post-Illinois

Brick federal judicial interpretations that limited at least some of the

harshness of that decision; finally, it turns to the state legislative and

judicial responses, providing a brief survey of the approaches taken by

different states. (A state-by-state assessment of the law appears as

Appendix A.)

A. Congressional Responses

There have been at least seven instances of federal legislation

attempting to modify or repeal the Illinois Brick decision. In 1983,

members of both the House and the Senate introduced bills that would

have granted the United States, a state (suing either for an injury to the

state itself or as parens patriae on behalf of natural persons residing in

such state), or a political subdivision of the State the right to maintain

indirect purchaser actions.8 Both bills also included provisions

authorizing the pass-through defense, although they differed in scope.

The House bill would have prohibited any plaintiff proceeding under

section 4, 4A, or 4C of the Clayton Act from recovering for any

overcharge paid or underpayment received that duplicated the recovery

of another plaintiff in the action or any other action based upon the same

6. 432 U.S. 720 (1977).

7. Id. at 730-31.

8. See H.R. 2244, 98th Cong. (1st Sess. 1983); S. 915, 98th Cong. (1st Sess.

1983).

6 Indirect Purchaser Litigation Handbook

conduct of the defendant.9 Thus, the House bill would have allowed the

pass-through defense only if another plaintiff had already recovered the

same damages claimed by the plaintiff in the instant action.10 On the

other hand, the Senate bill would have allowed defendants to prove as a

partial or complete defense to an action that “some or all of what

otherwise would constitute [the] plaintiff’s damages has been passed on

to others, who are themselves entitled to maintain an action or on whose

behalf the Attorney General of the United States or of any State is

entitled to maintain an action.”11

In 1985, Senate members proposed amendment no. 1069 to the

Agriculture, Food, Trade, and Conservation Act, which would have

effected a much more limited repeal of Illinois Brick.12 That amendment

provided that an action under section 4, 4A, or 4C for damages “resulting

from any underpayment received on the sale of agricultural products

shall not be barred because the person seeking such damages is not a

direct seller to the defendant.”13 It additionally allowed a defendant in

such an action to claim, as a defense, that the underpayment “has been

passed on [to] other persons, who themselves are entitled to recover

damages for such underpayment.”14

Between 1986 and 1987, the Senate attempted three more times to

repeal Illinois Brick. The first bill would have amended Section 4C to

allow the U.S. Attorney General, the Federal Trade Commission (FTC),

or the attorney general of any state to maintain an indirect purchaser

action, parens patriae, on behalf of injured residents of the United States

or the state, as appropriate.15 Upon the initiation of such an action, the

U.S. Attorney General, FTC, or attorney general would have been

required to provide “reasonable public notice” of the allegations in the

suit and “a general description of any direct purchasers who may be

entitled to maintain an action under section 4.”16 Direct purchasers

would then be entitled to intervene in the indirect purchaser action.17

The proposed amendment also provided potential defendants with a

pass-through defense: if an indirect purchaser claim was asserted, and the

9. H.R. 2244.

10. Id.

11. S. 915.

12. 131 Cong. Rec. S15, 931 (daily ed. Nov. 20, 1985).

13. Id.

14. Id.

15. S. 2022, 99th Cong. (2d Sess. 1986).

16. Id.

17. Id.