U.S. Supreme Court
Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977)
Illinois Brick Co. v. Illinois
Argued March 23, 1977
Decided June 9, 1977
431 U.S. 720
Respondents, the State of Illinois and 700 local governmental entities, brought this antitrust treble damages action under § 4 of the Clayton Act alleging that petitioners, concrete block manufacturers (which sell to masonry contractors, which in turn sell to general contractors, from which respondents purchase the block in the form of masonry structures) had engaged in a price-fixing conspiracy in violation of § 1 of the Sherman Act. Petitioners, relying on Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U. S. 481, moved for partial summary judgment against all plaintiffs that were indirect purchasers of block from petitioners, contending that only direct purchasers could sue for the alleged overcharge. The District Court granted the motion, but the Court of Appeals reversed, holding that indirect purchasers such as respondents could recover treble damages for an illegal overcharge if they could prove that the overcharge was passed on to them through the intermediate distribution channels. Hanover Shoe held that generally the illegally overcharged direct purchaser suing for treble damages, and not others in the chain of manufacture or distribution, is the party "injured in his business or property" within the meaning of § 4.
1. If a pass-on theory may not be used defensively by an antitrust violator (defendant) against a direct purchaser (plaintiff), that theory may not be used offensively by an indirect purchaser (plaintiff) against an alleged violator (defendant). Therefore, unless Hanover Shoe is to be overruled or limited, it bars respondents' pass-on theory. Pp. 431 U. S. 729-736.
(a) Allowing offensive but not defensive use of pass-on would create a serious risk of multiple liability for defendants, since even though an indirect purchaser had already recovered for all or part of an overcharge passed on to him, the direct purchaser would still automatically recover the full amount of the overcharge that the indirect purchaser had shown to be passed on, and, similarly, following an automatic recovery of the full overcharge by the direct purchaser, the indirect purchaser could sue to recover the same amount. Overlapping recoveries would certainly result from the two lawsuits unless the indirect purchaser is unable to establish any pass-on whatsoever. Pp. 431 U. S. 730-731. chanroblesvirtualawlibrary
(b) The Court's perception in Hanover Shoe of the uncertainties and difficulties in analyzing price and output decisions "in the real economic world, rather than an economist's hypothetical model," applies with equal force to the assertion of pass-on theories by plaintiffs as it does to such assertion by defendants. Pp. 431 U. S. 731-733.
(c) Because Hanover Shoe would bar petitioners from using respondents' pass-on theory as a defense to a treble damages suit by the direct purchasers (the masonry contractors), Hanover Shoe must be overruled (or narrowly limited), or it must be applied to bar respondents' attempt to use this pass-on theory offensively. Pp. 431 U. S. 735-736.
2. Hanover Shoe was correctly decided, and its construction of § 4 is adhered to. Pp. 431 U. S. 736-747.
(a) Considerations of stare decisis weigh heavily in the area of statutory construction, where Congress is free to change this Court's interpretation of its legislation. Pp. 431 U. S. 736-737.
(b) Whole new dimensions of complexity would be added to treble damages suits, undermining their effectiveness, if the use of pass-on theories under § 4 were allowed. Even under the optimistic assumption that joinder of potential plaintiffs would deal satisfactorily with problems of multiple litigation and liability, § 4 actions would be transformed into massive multiparty litigations involving many distribution levels and including large classes of ultimate consumers remote from the defendant. The Court's concern in Hanover Shoe with the problems of "massive evidence and complicated theories" involved in attempting to establish a pass-on defense against a direct purchaser applies a fortiori to the attempt to trace the effect of the overcharge through each step in the distribution chain from the direct purchasers to the ultimate consumer. Pp. 431 U. S. 737-744.
(c) Attempts to carve out exceptions to Hanover Shoe for particular types of markets would entail the very problems that Hanover Shoe sought to avoid. Pp. 431 U. S. 744-745.
(d) The legislative purpose in creating a group of "private attorneys general" to enforce the antitrust laws under § 4, Hawaii v. Standard Oil Co. of California, 405 U. S. 251, 405 U. S. 262, is 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 that may have absorbed a part of it. Pp. 431 U. S. 745-747.
536 F.2d 1163, reversed and remanded.
WHITE, J., delivered the opinion of the Court, in which BURGER, C.J.,and STEWART, POWELL, REHNQUIST, and STEVENS, JJ., joined. BRENNAN, J., filed a dissenting opinion, in which MARSHALL and BLACKMUN, JJ., chanroblesvirtualawlibrary
joined, post, p. 431 U. S. 748. BLACKMUN, J., filed a dissenting opinion, post, p. J., filed a dissenting opinion, post, p. 431 U. S. 765. chanroblesvirtualawlibrary