“If indirect purchasers could secure antitrust standing merely by alleging that everyone above them in the supply chain is part of a grand conspiracy to ‘restrain trade,’ the direct-purchaser rule would quickly become a dead letter.”
—Cory Andrews, WLF Vice President of Litigation

Click here for WLF’s brief.

(Washington, DC)—Washington Legal Foundation (WLF) today asked the U.S. Court of Appeals for the Seventh Circuit to affirm a lower court’s sound dismissal of an antitrust lawsuit under the Supreme Court’s 42-year-old direct-purchaser rule.

The appeal arises from an action by three healthcare providers who purchase medical supplies indirectly (through brokers and distributors) from the defendant manufacturer. The plaintiffs allege that the defendants conspired to charge them inflated prices in violation of the Sherman Act. Yet under the Supreme Court’s landmark ruling in Illinois Brick Co. v. Illinois (1977), only the direct purchaser of a good or service may sue an allegedly abusive monopolist for damages. Applying that bright-line rule, the district court dismissed the suit.

Under the plaintiffs’ theory on appeal, an indirect purchaser can evade Illinois Brick simply by alleging that distributors entered into anticompetitive contracts with manufacturers—regardless whether the distributor had any part in setting the allegedly inflated price or absorbed any of the alleged overcharge. Not only would the plaintiffs’ proposed “exception” swallow the rule, but adopting it would fly in the face of the Supreme Court’s caution that it would be counterproductive to create a “series of exceptions” to Illinois Brick.

In its amicus curiae brief, WLF argues that the plaintiffs’ claim triggers a straightforward application of the direct-purchaser rule; the plaintiffs’ theory of recovery is an indirect one that would require the court to grapple with the very “evidentiary complexities and uncertainties” against which Illinois Brick warns. Such pass-through damages are prohibited in whatever form they take.

Nor, WLF contends, has the passage of time rendered Illinois Brick irrelevant. By concentrating the ability to recover in the hands of the purchaser with the most skin in the game, the rule continues to ensure robust antitrust enforcement. Despite the rise of computer-aided economic models predicting economic behavior, there remains no reliable way to trace overcharges through a distribution chain free from spurious assumptions or guesswork. And the direct-purchaser rule still eliminates the possibility that both direct and indirect purchasers will recover a treble damages windfall for the same alleged antitrust violation.

Celebrating its 42nd year as America’s premier public-interest law firm and policy center, WLF’s mission is to preserve and defend America’s free-enterprise system by litigating, educating, and advocating for free-market principles, a limited and accountable government, individual and business civil liberties, and the rule of law.