Document Type
Article
Publication Title
Albany Law Review
Publication Date
1984
Volume
48
First Page
273
Abstract
(Excerpt)
In Illinois Brick Co. v. Illinois, the United States Supreme Court held that in price-fixing actions brought under section 1 of the Sherman Act, only first purchasers in the chain of vertical distribution are "injured," within the meaning of section 4 of the Clayton Act, by the full amount of any overcharge. The Court's ruling bars plaintiffs who are "indirect purchasers" from offering proof that they have been injured by defendants' illegal overcharges which have been "passed on" to them by middlemen. The Court's holding reaffirmed the principles previously enunciated in Hanover Shoe, Inc. v. United Shoe Machinery Corp., which prevented defendants from escaping liability by proving that direct purchaser plaintiffs, who pass on to their customers the alleged illegal overcharge initially imposed by defendants, are not injured within the meaning of section 4. Thus, both the Hanover Shoe and Illinois Brick decisions lodge the potential for full treble damage recovery in the hands of the first purchasers.
Illinois Brick was a pragmatic resolution of the very complicated passing-on issue; the Court attempted to harmonize the twin, but often competing, aims of treble damage actions—deterrence and compensation—in a manner that would maximize antitrust enforcement. Although the Court recognized that its decision might deny compensation to certain indirect purchasers who have borne the brunt of an overcharge and in some cases permit antitrust violations to go unpunished, it nevertheless ruled that the goals of the antitrust laws are better served by holding that only direct purchasers are injured to the full extent of the overcharge paid by them. Attempts at apportioning the overcharge among all buyers down the distribution line who may have absorbed a part of the overcharge were rejected. The ruling was grounded primarily on the Court's perception that tracing overcharges beyond first purchasers down the distribution line would enormously complicate antitrust litigation and thereby impair the effectiveness of the treble damages remedy. Additionally, the Court feared that sanctioning the indirect purchasers' offensive use of passing-on (while at the same time denying defendants' use of passing-on as a defense) would expose defendants to multiple liability, enhance the likelihood of duplicative recoveries, and give rise to inconsistent judgments.
Illinois Brick has been an unpopular decision in many quarters. It seems likely that the Court was aware of the controversy which its holding and rationale would generate because it specifically invited Congress to provide a legislative solution to the practical problems inherent in large antitrust litigation which deals with plaintiffs at different points in the distribution chain. Congress responded almost immediately with a flurry of bills designed to override Illinois Brick, and extensive hearings were held on such bills in both the House and Senate during the 95th and 96th Congresses. None of the bills was ever debated on the floor of either chamber of Congress, however, and the measures failed. Following these initial legislative attempts to override the direct purchaser rule, the Illinois Brick controversy laid dormant until July, 1982 when it was infused with new life upon the introduction of yet another repealer bill in the Senate. That bill, however, was not scheduled for hearings, and no action was taken on it. Now, more than six years after the Illinois Brick decision, the debate has once again been rekindled in the 98th Congress. Both the House and Senate are considering measures to overrule, this time in a very limited fashion, the Supreme Court holdings in Illinois Brick and Hanover Shoe.
The purposes of this Article are to (1) examine the legislative efforts to overturn Illinois Brick and Hanover Shoe; (2) determine whether the proposed congressional action effectively deals with the problems identified by the Supreme Court when the passing-on issue is introduced into treble damage litigation; and (3) examine whether the problems posed by indirect purchaser suits can be surmounted by resort to state law.