Illinois Brick doctrine

The Illinois Brick doctrine (or Doctrine of the Illinois Brick case) is a rule of United States antitrust law that prohibits indirect purchasers of goods or services from recovering antitrust damages from antitrust violators. Thus, if manufacturer A sells bricks to contractor B who builds a house and sells it to customer C, and A engages in a price fixing conspiracy with other brick manufacturers, C cannot sue A and recover damages for the overcharges resulting from the antitrust violation. (This fact pattern is that described in the decision of the United States Supreme Court in Illinois Brick Co. v. Illinois.^[1]

Supreme Court treatment of the doctrine

As indicated, the doctrine stems from the Supreme Court’s Illinois Brick decision. The Supreme Court’s rationale for the doctrine was that “multiple recovery” of the overcharge might be collected if more than one entity in the chain of distribution of the product could recover for the same violation. Many state antitrust laws reject the Illinois Brick doctrine. Thus, in California v. ARC America Corp.,^[2] the Supreme Court rejected arguments that Illinois Brick preempted broader state antitrust laws such as that of California, which rejected the doctrine.

Subsequent developments

A 2007 Antitrust Modernization Commission Report proposed that Congress should abandon the Illinois Brick doctrine.^[3] The proposal, if adopted, would weaken the federal right of action for direct purchasers by reviving as a defense the fact that the direct purchaser had passed on the overcharge instead of absorbing it, while creating a federal right of action for indirect purchasers. Federal rights of action under the proposal would not be exclusive, but state law claims would be subject to expanded federal jurisdiction to allow consolidation of all claims from a price fix in a single court for both discovery and trial. All recoveries in the consolidated actions would be limited to the initial overcharge, trebled.

References

1. ^ Justia, 431 U.S. 720 (1977).
2. ^ Justia, 490 U.S. 93 (1989).
3. ^ The Antitrust Modernization Commission was created pursuant to the Antitrust Modernization Commission Act of 2002, Pub. L. No. 107-273, §§ 11051-60, 116 Stat. 1856. The Commission submitted its Report and Recommendations to Congress and the President on April 2, 2007. The Report and other documents relating to its work are found at its website—http://govinfo.library.unt.edu/amc/index.html.

See also

• American Bar Association, Indirect Purchaser Litigation Handbook, ISBN 1590318684—Bar association book on legal issues raised by doctrine and how practitioners may address them

• Class interpleader: the Antitrust Modernization Commission's recommendation to overrule Illinois Brick — September 2008 Article from Antitrust Bulletin Symposium: The Antitrust Modernization Commission. Article asserts that proposal is flawed.

• Entrepreneur.com, Illinois Walls: how barring indirect purchaser suits facilitates collusion--Article asserts that Illinois Brick rule facilitates collusion by allowing an upstream cartel to shield itself from private damage claims by sharing cartel profits with its direct purchasers.