Liability for Indirect Purchaser Claims


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To say that an indirect purchaser may bring suit under state law to redress an alleged upstream antitrust violation is to make a statement about a particular type of plaintiff’s standing-not about the nature of conduct that may form the basis for liability or the causes of action available to the plaintiff.1Indirect purchaser lawsuits simply represent an extension of antitrust standing to a more remote type of plaintiff. In most indirect purchaser cases, both the theory of liability and the proof necessary to establish a violation of the relevant antitrust statute (as distinct from the fact and amount of injury) are the same as if the case had been brought by a direct purchaser or an enforcement agency under federal law. That is because most states’ substantive antitrust regimes are patterned on the federal antitrust laws, and because state courts typically follow federal court interpretations of comparable federal laws.2Therefore, an indirect purchaser who brings an action for price fixing or monopolization under state law will be required to show the same conduct as would a direct purchaser, a rival of the defendant, or a government enforcement agency in an action brought under the federal antitrust laws. Of course, an indirect purchaser must also show an overcharge that was passed through the chain of distribution, but that is more properly treated as a question about whether the plaintiff can show injury, not whether the defendant can be held liable for a particular type of conduct.

The first section of this chapter briefly reviews the two bases for indirect purchaser standing under state antitrust laws: statutory grants of standing to indirect purchasers to sue under the antitrust laws (Illinois Brick repealers) and judicial interpretations of generally worded remedy statutes that are silent on the question of indirect purchaser. It next discusses the elements of liability in a typical

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indirect purchaser suit. The chapter then notes the few jurisdictions where liability rules differ from the federal scheme, and discusses whether indirect purchasers may use collateral estoppel to rely on findings made in prior direct purchaser or government enforcement litigation.

While indirect purchasers historically have brought claims alleging restraint of trade under an antitrust statute, plaintiffs in jurisdictions that bar indirect purchasers from suing under the antitrust statute have turned to state consumer protection statutes and the common law theory of unjust enrichment as alternative theories of relief. Whether indirect purchasers may pursue these theories for conduct traditionally thought to be within the scope of antitrust laws can raise difficult questions about the applicability of Illinois Brick. The second section of the chapter considers the availability of alternative theories of liability.

Regardless of whether an indirect purchaser case proceeds under an antitrust statute, a consumer protection statute, or the common law theory of unjust enrichment, general antitrust principles limiting suits by excessively "remote" plaintiffs place a limit on how "indirect" a plaintiff can be. For example, a law firm that purchased Microsoft Windows from a retail store is not too remote an indirect purchaser for purposes of bringing a claim that Microsoft monopolized the market for Windows. But would clients of every law firm that purchased Windows also have standing to sue Microsoft on the theory that the price of legal services was increased as a result of passing-on of the cost of the software?

While most would recognize that the clients’ injury is conceptually more attenuated than that of the law firms (indeed, the clients are hardly "purchasers" of the software), such a plaintiff might be able to offer some proof that the firm actually did raise fees in direct response to the increase in the cost of Windows, thus resulting in a quantifiable injury. Or, to take a fact pattern common in many modern indirect purchaser cases, are consumers who purchase finished products indirect purchasers of the raw materials used to make those products? Again, it is easy to see that such plaintiffs are more remote from the antitrust violation than if a defendant’s product made its way to the plaintiffs unchanged, but consumers may be able to demonstrate that the finished product price reflected a passed-through overcharge in the original raw material.

Articulating a limiting principle has been difficult in the context of statutes and judicial decisions that refer generically to those who "dealt directly or indirectly" with the antitrust violator. Courts have struggled to draw the appropriate line in indirect purchaser cases, much as they have long struggled with issues of proximate causation in tort. Thus, the last section of the chapter considers the limits of

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indirect purchaser standing in light of traditional antitrust standing principles.

A. Standing and Liability

  1. Basis for Standing

Indirect purchaser standing derives either from an explicit statutory text or from a judicial precedent that interprets the generally worded remedy provisions of a state antitrust statute to include persons who are indirectly injured by the defendant. Explicit state statutes-so-called Illinois Brick repealers-usually provide that anyone injured directly or indirectly by an antitrust violation may bring suit.3The avowed purpose of these statutes was to adopt the dissenting view in Illinois Brick and ensure that indirect purchasers have a remedy.4

In states without Illinois Brick repealers, plaintiffs must rely on the remedy provisions of the states’ antitrust statutes. These

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provisions, like Section 4 of the Clayton Act, typically permit "a person" or "any person" who has been injured by reason of an antitrust violation to sue for damages or an injunction.5In these jurisdictions, courts face the same questions about statutory interpretation and sound antitrust policy that confronted the U.S. Supreme Court in Illinois Brick. Some courts have followed Illinois Brick and denied indirect purchaser standing.6Others have held that the broad and unqualified language of the statute confers standing on all persons injured by an antitrust violation, including those who dealt indirectly with the defendant.7When standing is based on a judicial interpretation of a general antitrust remedy statute, indirect purchasers possess the same right to bring a cause of action as do purchasers in states with explicit Illinois Brick repealers.

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2. Liability in Indirect Purchaser Suits

When an indirect purchaser can sue-whether by virtue of an Illinois Brick repealer statute or a judicial decision rejecting Illinois Brick-the basic elements of an antitrust claim are the same as in any other case under the applicable state antitrust law. The plaintiff must establish (1) that the defendant violated a substantive prohibition of the state’s antitrust law, (2) an injury caused by the antitrust violation, and (3) quantifiable damages.8Courts also frequently require that the plaintiffs’ injury to an "antitrust injury," or "injury of the type that antitrust laws were designed to protect against."9

With respect to the first element, the substantive provisions of state antitrust statutes often parallel the federal antitrust statutes.10In

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many states, statutes or court decisions explicitly reinforce this state-federal parallelism by directing state courts to interpret their antitrust statutes in harmony with comparable federal statutes and to rely on federal court interpretations of comparable statutes for guidance.11

Therefore, when indirect purchaser standing is authorized, indirect purchasers usually can sue for the same violations of substantive antitrust law as can direct purchasers who sue under federal law.12

As a practical matter, because the injury suffered by an indirect purchaser is payment of a price that exceeds the price that would have prevailed in the absence of the antitrust violation,13indirect purchasers can bring a cause of action only for those types of antitrust violations that result in the defendant selling its output at supracompetitive prices. This means that indirect purchaser cases typically allege violations such as price fixing, monopolization, and tying. In contrast, antitrust theories that principally result in injury to the defendant’s business rivals (such as exclusive dealing) rarely

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serve as the liability theory in an indirect purchaser lawsuit. For example, if a supplier enters into an exclusive contract with a distributor that has the effect of foreclosing an unacceptably large share of the market to competing suppliers, the injury is likely to be experienced by the supplier’s excluded competitors, not the customers of the distributor.14

The paradigmatic antitrust violation that results in an injury to an indirect purchaser is a per se illegal horizontal conspiracy among competitors to fix prices, restrict output, allocate quantities or customers, or divide markets. If successful, these types of agreements are likely to result in an overcharge to the defendants’ customers.15If these direct purchasers are not the final users of the product, but either sell the product in its original form or incorporate it into a different finished product, there is a potential for liability to indirect purchasers.

Not surprisingly, the most common substantive allegations in indirect purchaser cases since Illinois Brick have been price fixing and other horizontal conspiracies among competitors. Price-fixing cases brought by indirect purchasers have spanned a wide range of products and industries, including infant formula,16cigarettes,17compact discs,18food and animal feed additives,19vitamins,20

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prescription drugs,21computer memory,22liquid crystal displays,23air cargo services,24and many others. Recently, cases have been brought in which indirect purchasers...

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