Law School Case Brief
Ill. Brick Co. v. Illinois - 431 U.S. 720, 97 S. Ct. 2061 (1977)
The United States Supreme Court has rejected the defense that indirect rather than direct purchasers were the parties injured by an antitrust violation, and held that, except in certain limited circumstances, a direct purchaser suing for treble damages under § 4 of the Clayton Act, 15 U.S.C.S. § 15, is injured within the meaning of § 4 by the full amount of the overcharge paid by it and the antitrust defendant is not permitted to introduce evidence that indirect purchasers were in fact injured by the illegal overcharge.
In the United States District Court for the Northern District of Illinois, an antitrust treble damages action under 4 of the Clayton Act 15 U.S.C.S. § 15, was brought by the State of Illinois and a large number of local governmental entities in the Chicago area against Illinois Brick Company. Illinois Brick Company sold blocks to masonry contractors, who submitted bids to general contractors for the masonry portions of construction projects, and the general contractors, in turn, submitted bids for these projects to customers such as Illinois and the local governmental entities. The State of Illinois and a large number of local governmental entities were indirect purchasers of the concrete blocks, and they claimed that the manufacturers' price fixing injured them because the overcharges were "passed on" to them by masonry and general contractors. Illinois Brick Company’s motion for partial summary judgment, based on the contention that only direct purchasers could sue for the alleged overcharge, was granted by the District Courtbut the United States Court of Appeals for the Seventh Circuit reversed, holding that indirect purchasers could recover if they could prove that the overcharge was passed on to them. Illinois Brick Company petitioned for further review by the United States Supreme Court.
Could owners of buildings constructed with block purchased from Illinois Brick Company by subcontractors recover under a pass-on theory for Illinois Brick Company’s alleged price-fixing?
The United States Supreme Court held that under the rule of Hanover Shoe, the State of Illinois and a large number of local governmental entities, as indirect purchasers, could not use a pass-on theory to recover for Illinois Brick Company’a alleged antitrust violations. The Court said that allowing offensive use of pass-on would create a serious risk of multiple liability for defendants, and that the use of pass-on theories would transform treble-damages actions into massive and overly complicated efforts to apportion recovery among all potential plaintiffs that might have been overcharged.
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