Document Type
Article
Publication Title
Valparaiso University Law Review
Publication Date
1983
Volume
17
First Page
63
Abstract
(Excerpt)
In June 1977, the United States Supreme Court handed down the landmark decision in Illinois Brick Co. v. Illinois. Reaffirming its decision in Hanover Shoe, Inc. v. United Shoe Machinery Corp., the Court held that in a treble damages action where defendants are charged with price-fixing in violation of Section 1 of the Sherman Act, first purchasers, and not others down the distribution line ("indirect purchasers"), are injured by the full amount of any overcharge; and indirect purchasers are prohibited from offering proof that illegal overcharges had been "passed on" to them by their sellers.
The holding in Illinois Brick was narrow in scope, a pragmatic resolution of the very complicated passing on issue. The principle basis for the Court's ruling was its perception that enormous complexities which would inevitably arise in tracing overcharges past first purchasers in the distribution chain would unduly complicate treble damages proceedings and thereby reduce their effectiveness. Additionally, the Court feared that sanctioning plaintiffs' use of "passing on" would expose defendants to multiple liability and enhance the likelihood of duplicative recoveries. While recognizing that its decision may in some cases permit antitrust violations to go unpunished and close the door on certain meritorious treble damages claims by indirect purchasers, the Court held that, on balance, the goals of the antitrust laws are better served by holding direct purchasers to be injured to the full extent of the overcharge paid by them than by attempting to apportion the overcharge among all buyers down the distribution line who may have absorbed a part of it.
Thus, Congress has left to the courts the task of harmonizing the theoretical goals of antitrust enforcement and the practical limitations on achieving these goals through the judicial process. Despite the Supreme Court's unequivocal ruling elevating direct purchasers to a preferred position as antitrust plaintiffs, the lower federal courts have been somewhat reluctant to throw out indirect purchaser claims; and in attempting to salvage such claims, have placed glosses on the Illinois Brick holding, which have in turn generated a series of confusing rulings on the intended scope of the direct purchaser rule and the exceptions thereto. Since these issues will ultimately have to be resolved by the Supreme Court, the need to revisit Illinois Brick at this time is especially intense.
The purposes of this article are to: (1) provide a comprehensive review of Illinois Brick and its progeny to clarify and, to the extent possible, harmonize the bewildering result-oriented judicial precedents on the offensive use of passing on which have emerged in the wake of Illinois Brick, contrary to the express holding in that case; (2) discuss the application of the Illinois Brick rationale to the related area of standing in treble damages actions and particularly to the umbrella theory of damages; and (3) reflect on whether the courts by applying the Illinois Brick rule have demonstrated the capacity to deal with the practical problems of complex litigation or whether legislation will be necessary to solve such problems.
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Available at: https://scholar.valpo.edu/vulr/vol17/iss2/1/