Section 64 Indirect Purchaser Rule

• Library: Commercial Law 2007

In Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), the State of Illinois and 701 local governmental entities brought an action to recover treble damages under § 4, 15 U.S.C. § 15, of the Clayton Act, alleging that manufacturers of concrete blocks had conspired to fix prices in violation of the Sherman Act, 15 U.S.C. §§ 1 et seq. Of the 701 plaintiffs, only 4 had purchased concrete blocks directly from the defendant manufacturers. The other 697 plaintiffs were indirect purchasers who had purchased buildings in which the concrete blocks had been used as part of the masonry structure.

The Supreme Court found that the plaintiffs were barred from recovering treble damages because they had not purchased directly from the defendant manufacturers. The ruling of Illinois Brick is that only illegally overcharged, direct purchasers in the chain of distribution are entitled to treble recovery of the overcharge amount, even though the overcharge may have been passed on to subsequent purchasers. Indirect purchasers, as a matter of law, are barred from bringing antitrust actions for damages.

The Supreme Court felt compelled to reach this result because of its earlier ruling in Hanover Shoe, Inc....