Brick By Illinois Brick: Ninth Circuit Builds High Wall For Indirect Purchaser Suits

by Dylan Ballard and Nadezhda Nikonova

The Ninth Circuit unanimously affirmed a grant of summary judgment for defendants in an antitrust suit involving alleged price-fixing of ATM fees, holding that the plaintiffs were indirect purchasers within the meaning of Illinois Brick Co. v. Illinois, but they did not satisfy an exception to the "Illinois Brick wall."

Excerpt:

The Ninth Circuit unanimously affirmed a grant of summary judgment for defendants in an antitrust suit involving alleged price-fixing of ATM fees, holding that the plaintiffs were indirect purchasers within the meaning of Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) [an enhanced version of this opinion is available to lexis.com subscribers] and could not satisfy an exception to the "Illinois Brick wall," which deprives indirect purchasers of standing to bring federal antitrust claims. In re ATM Fee Antitrust Litigation, No. 10-17354 (9th Cir. July 12, 2012).

When an ATM cardholder withdraws money from another bank's ATM (a "foreign" ATM), several fees are generated. One is a "foreign ATM fee," which the cardholder must pay to the bank that issued her ATM card. Another is known as an "interchange fee," which is paid by the card-issuing bank to the owner of the foreign ATM. The card-issuing bank sets the amount of the foreign ATM fee, while interchange fees are set by entities known as ATM networks, which are responsible for administering agreements between card-issuing banks and foreign ATM owners. Plaintiffs, a class of ATM cardholders, alleged that several banks colluded with the STAR ATM network to fix the interchange fees paid by the banks, which the banks then passed on to plaintiffs as part of the foreign ATM fee.

"Indirect Purchasers"

The Court adopted a strict definition of direct purchaser in price-fixing cases, finding that anyone who does not pay the allegedly fixed price is an indirect purchaser. Thus, because the allegedly fixed interchange fees were paid by the bank defendants, not plaintiffs, the plaintiffs were indirect purchasers for purposes of Illinois Brick. The Court rejected plaintiffs' argument that they were in fact direct purchasers under this standard because the fee they paid-the foreign ATM fee-was "fixed" within the meaning of the Clayton Act as a result of defendants' alleged collusion with respect to interchange fees. The Court explained that the rationales underpinning Illinois Brick's bar on indirect purchaser suits-avoiding multiple recoveries, simplifying the process for determining injury and damages, and promoting antitrust enforcement-apply whenever a plaintiff relies on the concept of pass-on in attempting to demonstrate injury. The plaintiffs relied on a pass-on theory; therefore they were indirect purchasers.

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Dylan Ballard is an associate in the Antitrust and Trade Regulation Practice Group in the firm's San Francisco office. Mr. Ballard specializes in complex business litigation and white collar criminal matters, with an emphasis on antitrust and unfair competition issues. He has significant experience defending U.S. and multinational businesses in all phases of class action litigation, as well as in civil and criminal proceedings involving federal, state, and foreign enforcement agencies.