Responses to the Illinois Brick Decision

• Pages: 3-25

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CHAPTER II

RESPONSES TO THE ILLINOIS BRICK

DECISION

Illinois Brick Co. v. Illinois1 stood for the proposition that

indirect purchasers, even if they were injured, had no remedy (at least

not under federal law).2 Although the Supreme Court articulated the

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

extension, have suffered an actual injury are left without remedy—

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

legislatures and Congress tried various approaches 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 views of 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, this chapter 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 proposed 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.3 Both bills also

included provisions authorizing the pass-through defense,4 although

they differed in scope. The House bill would have prohibited any

plaintiff proceeding under section 4, 4A, or 4C of the Clayton Act

1. 431 U.S. 720 (1977).

2. Id. at 730-31.

3. See H.R. 2244, 98th Cong. (1983); S. 915, 98th Cong. (1983).

4. A “pass-through” defense, discussed in greater detail in Chapter VI,

Section D, is a defense asserted by an indirect purchaser defendant

based on the premise that the indirect purchaser (to whom some

portion of an overcharge was passed on) in turn passed on some of

the overcharge to its own customer.

4 Indirect P urchaser Litigation Ha ndbook

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 conduct of the defendant.5 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.6 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.”7

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

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

been a much more limited repeal of Illinois Brick.8 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.”9 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.”10

Between 1986 and 1987, the Senate attempted three more times

to repeal Illinois Brick. The first bill (S. 2022) 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.11 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.”12 Direct purchasers would then be entitled to

intervene in the indirect purchaser action.13

5. H.R. 2244.

6. Id.

7. S. 915.

8. 131 CONG. REC. S15,931 (daily ed. Nov. 20, 1985).

9. Id.

10. Id.

11. S. 2022 , 99th Cong. (1986).

12. Id.

13. Id.