### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE January 31, 2001 Se ssion DANIEL SHERWOOD, ET AL 

### . v. MICROSOFT CORPORATION, ET AL 

### .

Appeal from the Circuit Court for Davidson County No. 99C-3562 Walter C. Kurtz, Judge

No. M2000-01850-COA-R9-CV - Filed July 31, 2003

In this appeal, Plaintiffs, purchasers of Microsoft software, sued Mic rosoft alleging that the compa n y violated the Tenne ssee Trade Practices Act and the Te nnessee Consumer Protection Act and claiming that they paid inflated pr ices for so ftware due to Microsoft’s alleged violations of Tennessee antitrust law. Microsoft filed a motion to dismiss arguing that Tennessee antitrust law applies to activities that are predominantly intrastate in character and that Microsoft’s busine ss is predomin antly

intersta te. Micro soft also a

rgued that indir ect purcha sers have no cause of action under the Tennessee Trade Practices Act. The trial court found that federal law does not provide a
reme dy for i ndirect purchasers in antitrust cases and, conseque ntly, those purchaser s must have a Tennessee state law remedy . The trial court denied the motion to dismiss the claims of the indirect purchas ers, but beca

use dire ct purch asers ha

ve a fed eral law remedy , dismissed

the claim s of the direct purchas ers. We affir

m in part, reverse in part, and hold: (1) indirect purc hasers may br

ing an action for damages under the Tennessee Trade Practices Act; (2) the Tennessee Trade Practices Act applies to activity that has substantia l effects on comme

rce with in the state, and Plaintiffs have made sufficient allegations of such effects; and (3) the Tennessee Consumer Protection Act does not apply to antitru st cause s of actio n or antic ompetitive conduct. Tenn. R. App. P. 9 Interlocutory Appeal By Permission; Judgment of the Circuit Court

Affirmed in Part, Reversed in Part and Rem anded
P AT RICIA J. C OTT RELL , J., delivered the opinion of the court, in which B EN H. C ANT RELL , P.J., M.S., and W IL LI AM C. K OCH , J R ., J., joined.
Leo Bearman, Jr., Memphis, Tennesse e, James A. DeL anis, Rich ard H. Stout, Nashville, Tennessee, for the appellants, Microsoft Corporation and Does 1 through 100, inc lusive.
C. Dewey Brans tett er, J r., J ames G . Str anch, III, George E. Ba rrett, Edmund L. Carey , Nashville, Tennessee, for the appellees, Daniel Sherwood, Roy Cog gin s and wife

Sheila Cog gins d/b/

a Microfil m Services and William Overton, Indiv idually and on behalf of all others similarly situated.1 The cla ss h ad notbeen ce rti fi ed. Af ter appeal was g rant ed herein , but prior to oral argument t he trial court stay ed this case for reasons unrelated to this appeal by order of October 23, 2000 . The stay was li fted by order ent ered Septembe r 11, 2002.
-2- OPINION

In this interlocutory appe al Microsoft Corporation (“Microsoft”) appeals the judgme nt of the trial court that indirect purchasers of Microsoft software, purchasers who bought a compute

r with the software installed or purchased the software from a dealer, have a cau se of action a gainst M icrosoft pursuant to the Ten

nessee T rade Pra ctice Act (“TTPA” ) and the Tenness ee Co nsume r Protection Act (“TCPA”). Plaintiffs appeal the decisionof the trial court dismissing the claims of the direct purchasers, those who bought the softwa re directly

from Microsoft.
This appeal raises difficult and complex issues of state law, and its interrelationship to federal law, that have

been una ddresse d in depth b y th

e courtsof this state in a

lmost a centur y. With the aid of informat ive and w ell draf

ted briefs by

the part ies, we have given t horou gh consider ation to tho se issues. I. Backg round
Plaintiffs filed suit seeking damages, injunctive relief , and equitable remedies under the TTPA, Tenn. Code Ann. §§ 47-25-10 1 to -2704, and the T CPA, Tenn. Code Ann. §§ 47-18- 101 to -1808. The Plaint

iffs are a class 1 comprised of users of personal computers who bought Microsoft software, either separately or loade d in a computer. Plaintiffs alleged that Microsoft, the leading supplier of operating sy stems software for personal computers, engaged in conduc t thateliminated
or retard ed the de velopmen t of new so ftware

productst hat could support or become alternative platform s to Microsoft’s oper ating sy ste ms. The Plaintiffs also contended that the price that they pai d fortheir software was higher than it would have been in a competitive market. They emphasized the “massive” involvement of Microsoft in the Tennessee economy , and contended that Microsoft’s conduct was within the scope of the TTPA and the TCPA.
The trial cou

rt dismi ssed the claims of the direct purchasers and allowed the claims of the i ndirect purchasers. In its order , the court considered the history of the TTPA and T ennesse e appella te courts’ interpretation of the Act and found state law to “ start where federal law stops.” Further, the trial court held “that the TTPA is to cover ‘all commerce not c overe d by the fe deral statute’ and that the intention of the legislature was to ensure that there was no void where neither federal nor state law governs .” Noting that indirect purchasers lacked standing to enforce federa l antitrust law and th at state a

ntitrust la ws could b e applie d to indirect purch asers, t he trial c ourt held that the indirect

purchasers herein had a cause of action pursuant

to state law. The court dismissed the claim s of the di

rect pur chaser s.
The issue before us is not

whether Microsoft has engag ed in conduct violative of either st ate or federa l antitrus tlaw; rather it is whether Plaintiffs have stated a cause of action against Microsoft-3-

under Tenness ee law. The issue s presen ted involv e the sco

pe of Te nnessee statutes: ( 1) thei r applica bility to partie s who did not purcha se directly fro m Microsof

t; (2) the ir applic ability

to business activities that involve interstate commerce; and (3) their applicability to the c onduc t complained of.
The decision appealed is a partial grant a nd partial denial of a Tenn. R. Civ. P. 12 .02(6 ) motion. Such a moti on is desig ned to tes t the su fficiency of the co mplaint, a

nd dismissa

l is warranted only

when no set of facts would entitle the plaintiffs to relief. Trau-Med of Am., Inc. v. AllstateIns. Co. , 71 S.W.3d 691, 696 (Tenn. 2002). When reviewing the decision on such a motion, this court must take all the well-plead material factual allegations as true, construe the complaint liberall y in favor of the plaintiffs, and give the plaintiffs the benefit of all reasonable inferenc es. Id. ; Stein v. Davidson Hotel Co. , 945 S.W.2d 714, 716 (Tenn. 1997); Forman, Inc. v. Nat’l Council on Comp. Ins., Inc. , 13 S.W.3d 365, 366 (Tenn. Ct. App. 1999).

In their complaint, Plaintiffs alleged specific instances of anticompe titive conduct. More succinctly stated, their a

llegations are:
Microsoft possesses a dominant, persistent, and increasing share of the world-wide and Tenness ee mark

et for I ntel-co mpatible PC

o perating sys tems. Be cause Microsoft’s market sh are is so dominant, it

prevent s Inte

l-compa tible PC operating sys tems other than Windows from attracting significan t consumer dem and. Plaintiffs allege that Microsoft engaged in conduct which eliminated or reta rded the development

of new so ftware

productsthat coul d support, or thems elves become, alternative platform s to Micros oft’s ope rating sys tems. Consequently, Plaintiffs and Cl ass memb ers have

paid hig her pric es for I

ntel-co mpatible PC

operating sy stems than they would hav e paid in a

competiti ve marke

t.
Plaintiffs brought

this action pursuant to state antitrust law, embodied in the TTPA, which provides , in pertin

ent part :
All arrang ements, contracts, agreements, trusts, or combinations betwee n persons or corporations made with

a view to l esse n, or w hich tend to lessen, full and free competition in the impor

tation or s ale of articles imported into this state, or in the manufactureor sale

of articles of domestic growth or domestic raw materia l, and all
ar range ments, contracts, agreements, trusts, or combinations betwee n persons o r corporations designed, or which tend, to advance, reduce, or control the pric e or the cost to the producer or

the consumer of

any such prod

uct or ar ticle, ar e decla red to be against public policy , unlawful, and void. Tenn. Code Ann. § 47-25-101. Any arrangements, contracts, and a greements that

may be made

by any corporation
or person, o r by and betw een its a

gents a nd subag ents, tosell and market its products-4-

and articles, manufactured in this state, or imported into this state, to any producer
or consumer at prices reduced below the c ost of production or importation into this state, including

the cost o f marke

ting, and a reas onable a

nd just mar

ginal pr ofit, to cover wages or manag ement, andnecessary incidentals, as is observed in the usual
course of general

business, and the continuance of such pr

actice under suc h contra cts and arrangements for an un r easonable length of time, to the injury of full and free competition, or any other

arrangements, contracts, or a greements, by

and betw een its agentsand suba

gents, w hich tend to lessen full and free competition in thesale of a ll such articles manufactured and imported into the state, and which a mount to a subt erfuge for the purpose of obtaining the same adv antage and purposes are dec lared to be against public policy , unlawful, and void. Tenn. Code Ann. § 47-25-102.
The TTPA provides a num ber of sa nctions f or violato rs, inclu ding cr

iminal s anctio ns and revocation of the right to do business in the state . Tenn. Co de Ann. §§ 47-25-10 3 & -104. While providing for enforcement by the Attorney Ge

neral, it also provides a remedy to those injured by a violation: Any person who is injured or dam aged b y su ch arra ngemen t, contra ct, agr eement, trust, or combination described in this part may sue for and recover, in any

court of competent

jurisdiction, fromany person operating such

trust or c ombination , the full consideration or sum paid by the person fo r any g oods, wares, merchandise, or articles, the sale of which is controlled by such combination or trust. Tenn. Code Ann. § 47-25-106.
Issues of statutory construction ar e questions of

law revi ewed by

the appe llate cou rts de novo wit h no presumption of correctness accorded to the f indings of the trial court. Bryan t v. Genc o Stamping Mfg. Co. , 33 S.W.3d 761, 765 (Tenn. 2000); Perry v. Sentry Ins. Co. , 938 S.W.2d 404, 406 (Tenn. 1996). I

n our rev iew, we m

ust apply well-se ttled principles. T

he role o f th e cou rts in construing statutes i s to ascertain and give effect to the legislative purpose and intent without unduly restricting or expanding a statute’s coverage bey ond its intended scope. Limbaugh v. Coffee Med. Ctr. , 59 S.W.3d 73, 83 (Tenn . 2001); Mooney v. Sneed , 30 S. W.3d 3 04, 30 6 (Te nn. 20 00). We attempt to ascertain that purpose or intent from the natural and ord inary me aning o f the l anguage used in the stat

ute, witho ut a forc ed or subt

le interp retation that would

limit or extend the statute’s application. Id. We must presume the legislature meant what it said, and if the wordsplainly mean
one thing, they c ann ot be given a nother meaning by use of judicial interpretation. Gleaves v. Checker Cab. Transit

Corp ., 15 S.W.3d 799 , 803 (Te nn. 2000) ; BellSouth

Telecomm., Inc. v. Greer, 972 S.W.2d 663, 673 (Tenn. Ct. App. 1997).

In the abse

nce of a mbiguity in the statute itself, the purpose and intent of the legislature are found in the languag e used. Davis v . Reagan , 951 S.W.2d 766, 768 (Tenn. 1997). When the2 The com plaint d escrib es the p roce ss by wh ich M icroso ft authori zes or licenses ori ginal equipment

manufacturers (“OEM ”s) to copy its software f or instal lation i n the OEM s’ computers which ar e then s old as a combin ed product under a sing le pri ce. -5- legislative purpose has been expressed in plain, clear and unambiguous langua ge, courts look to that language and

give effect to the

statute according to the plaint meaning of its terms. Limbaugh , 59 S.W.3d at 83; Planned Parenthood of Middle Tenn. v. Sundqu ist , 38 S.W.3d 1, 24 (Tenn. 2000); Lavin v. Jordan , 16 S.W.3d 362, 365 (Tenn. 2000).

II . No Direct Purchasers
The same lawsuit has been brought in a number of other sta tes under eachstate’s laws. The
reason that state laws have be en used r ather th an fede

ral antit rust lawsis because indirect purchasers cannot bring a cause of action for overcha rge against an

antitrust violator u

nder the federa l antitrus t statutes. Illinois Brick Co. v. Illinoi s , 431 U.S. 720, 97 S. Ct. 2 061 (1 977). Based u pon t he lan guage of the Clayton Act, the Court held, “the ove rcharged direct purchaser, and

not others in the chain of manufactureor distribution, is the party ‘injured in his business or property’ within the meaning of [§ 4 of the Cla

yto n Act].” 43 1 U.S. at 72 9, 97 S. Ct. at 2067. Thus, for plaintiffs who are indirect purchasers, state law offers the only recourse, although many states follow the federal rule and do not allow a

ctions by indirec t purcha sers.
In the case

before us, the trial court made a distinction between direct and indirect purchasers basedupon its inte

rpreta tion of the

relation ship betwe

en state and fede ral antit rust law. The trial court agreed with Plain

tiffs’ a rgumen t that, “If an indir ec t p ur ch as er is ad ve rs el y af fe ct ed by a transaction which impacts interstate commerce but is not covered by federal antitrust law, then the transaction is governed by the TTPA.” Accordingly , the court held that “the cause of action alleging
a violation of the TTPA is limited to indirect purchasers.” The court gra nted the motion to dismiss “only as to the applica

tion of the TTPA to direct purchasers.”
Our review of the pleadings indicates there are no direct purchasers invo lved in this litigation. Plaintiffs brought this action “on behalf of themselves and other per sons or entitie s in the Sta te of Tennessee who purchased I ntel-co mpatible PC

operating sy stems li censed by Microsof t for purposes other than resale or distribution.” The individually named plaintiffs alleged they purchased either software, Windows 95 and Windows 98, or computers wi th W indows operating sy stem software alr eady installed. 2 Every

allega tion by a named p laintiff

is that the

purchas e was made from a retailer, not from Mi crosoft . The allegationsall r efer to operating sy stem software “licensed by Microsof t;” nowhere is there any

allegation that any

Plaintiffs actually boug

ht anything directly from Microsoft.
These allegations indicate there are no direct purchasers amongPlaintiff s. In fact, in some of their filings in the trial cour t, Plaintiff

s argue that, as indirect purchase rs, they are without a reme dy under federal law. I

n other filings Plaintiffs argue that since Microsoft ha s stated tha t virtually all its sale s are thr

ough midd

lemen, there is so me possibil ity t hat ther e may have be en some3 Plain tiffs st ate that “depen ding on what

dis coverymay dev elop further aboutthe nature of the end user license agree men ts” a bu yer-seller re lationsh ip “ma y be” fle shed out. -6- dire ct sales to some unkno wn Tenne sseans. H owever , Plaintiff s have ma

de no such claim th em selves. The named plaintiffs cannot rely on unidentified persons who may have suffered an injury to state a claim for re lief. In re Terazosin Hydrochloride Antitrust Litig. , 160 F. Supp. 2d 1365, 1371 (S.D. Fla. 2001). Each claim must be analy zed separately , and a

claim cannot beasserted
on behalf of a class unless at least one named plaintiff hassuffer ed the inj ury

that giv es rise to

that claim. Griffin v. Dugger , 823 F.2d 1476, 1483 (11th Cir. 1987), cert denied , 486 U.S. 1005, 108 S. Ct. 1729 (1988). Plaintiff s’ alleg ations tha

t there mi ght be so me direct purcha sers in this state do notgive the actual plaintiffs a claim as a direct purchaser. See Shotz v. Cates , 256 F.3d 1077, 1081 (11th Cir. 2001) (explaining that in evaluat ing standing, the

court mus t look at “ the fac ts alleged in the co mplaint ” and “may not ‘speculate concerning the existence of sta nding or ‘piece together support for the plain tiff’ ”) (quo ting Cone Corp. v. Fla. Dep’t of Transp. , 921 F.2d

1190, 1210

(11th Cir. 1991)); USA v. AVX Cor p. , 962 F.2d 108, 115 (1st Cir. 1992) (holding that in order to have stand ing, plaintiffs must demonstrate more than “purely c onclusory allega tion s” and the pl eadin gs “must be something more than an ingenious aca demic exercise in the conceivable”).
The complaint also makes allegations regar ding Microsoft’s end user licence agreements, by which end users are granted a right to use the software

for specified purposes. The end u ser lice nse agreement

is consummated when the end user installs or begins to use t he software. Other than references to the end

user lice nsing ag reemen t, none of the plaintiffs allege s he or she entere d into any transactions with M icrosof t. While the

Plaintiff s princip ally

rely on the end

user lice nse agree ments in support

of oth er argu ments, their filings can be read to rely on those agreements as establishing a relati onship between the end user and Microsoft that makes the

m direct p

urchase rs. 3

Indir ect purc hasers in similar s uits under other state statutes have attempted to use the end
user license agreement to establish an exception to the indirect purchaser

preclusion from claims for damages or

to demonstrate that the indirect purchasers are really direct purchasers. This argument has been uniformly rejected. See, e.g., Pomerantz v. Microsoft Corp. , 50 P.3d 929, 934-35 (Colo. Ct. App. 2002) (holding that the end user license ag reement has “no be aring on whether the
consumer is a direct purchaser . . . .” ); Davidso n v. Microsoft Corp. , 792 A.2d 336, 342 (Md. Ct. Spec. App. 2002 ) (affi

rming the trial c ourt’s dis missal of t h e consumers’ claim where consumers
were not direct purchasers despite arguing that end user license agree ments made them direct pu rchasers); M inuteman, LLC & Assoc. v. Microsoft Corp. , 795 A.2d 833, 840-41 (N.H. 2002); Major v. Microsoft Corp. , 60 P.3d 511 , 515 (Okl a. Ct. App. 2002); Siena v. Micro soft Corp. , 796 A.2d 461, 465 (R.I. 2002) (stating “the enormous number of potential litigants created by adopting such a warranty

or end user license exception to Illinois Br ick Co . is, in itself, instructive . . . [and] these incident al a greem ents d o not exempt plaintiffs’ claims from the purview of Illinois Br ick Co .”). We agree with the r

easoning of these courts th at the end user lic ensin g ag reement, a method used to protect copy

rights, does not tr

ansform indirec t purcha sers into d irect pu rchase rs.4 Bec ause the plainti ffs have not alleged that t hey are direct

purchaser s of Microsof t product s, we a ffi rm the t rial court’s dismissal on b ehalf of direct purch asers. -7- Alth ough the named Plaintiffs neve r actua lly plead status as direct purchasers, they nonethel ess appeal the trial court’s dismissal of claims by direct purchasers. I

f we could conclude that any direct purchasers were involved in this lawsuit, we would be inclined to agree with Plaintiffs that the TTPA provides a cause of action for direct purch asers by

its own ter

ms. 4 Such a cause of action is v

iable for either direct or indirect purchase rs, however, only

if subject matter jurisdiction exists or, st

ated dif ferent ly, if the TTPA

applies.

II I. Th e Scope o f the TTPA
Section 1 of the Sherman Act makes contracts, combinations, and conspiracies “in re straint of trade or commerce among the se veral states” illegal. 15 U.S.C. § 1. Similarly , Section 2 of the Act prohibits monopolies and conspiracies to monopolize “any part of the trade or commerce among the several States.” 15 U.S.C. § 2. Consequently, the re is an in terstate commerce jurisdictional requirement under the Act. Summit Health, Ltd. v. Pinhas , 500 U.S. 322, 11 S. Ct. 1842 (1991).
The scope of Congress’s authority to legislate under the Commerce C lause, and the “corre sponding ly

bro ad reach o f the Sher

man Act,”

have ev olved thr

ough jud icial hold ings. See United States v. Lopez , 514 U.S. 549, 115 S. Ct. 1624 (1995) (tracing the development of the Court’s interpretation). In Lopez , the Court enumerated three broad categ ories of activity that Congr ess may regula te under its commerce power, the one releva nt herein being “those activi ties havi ng a substantial relation

to interst ate comme

rce, i.e ., those a

ctivitiesthat substa

ntially affec t intersta

te commerce.” United Sta tes v. Mo rri son , 529 U .S. 598, 608-09, 120 S. Ct. 1740, 1749 (2000) (quoting Lopez , 514 U.S. at 558-59, 115 S. Ct. at 162 4) (ci ting NLRB v. Jones & Laughlin Steel Corp ., 301 U.S. 1, 37, 57 S. Ct. 615, 624 (1937)).
Federalcourts have often been ca lled upon t

o determ ine wheth

er activ ity i s suffici ently intersta te in nature to bring it withi n Congre ss’s power to regulate interstate commerc e. That
au th or it y, exercise d in this situatio n through antitrust statutes, extends beyond a ctivities actually “in”
or “part of” interstate commerce. Activities that ar e w holly local in n ature, but that sub stantiall y affect intersta te commer

ce, are also inclu ded in the

reach o f feder

al antitr ust statute s. McLain v. Real Estate Bd. of New Orleans , 444 U.S. 232, 241, 100 S. Ct. 502, 508 (1980).
Just as actions u

nder fe deral a

ntitrust sta

tutes ca n proceed only

if there is a jurisd

ic tiona l basis in interst

atecommerce, a plaintiff seeking re lief under state antitrust statutes must show that those statutes apply, whether

such a showing is required to establish subject matter jurisdiction or simply to state a claim. Microsoft argues that Plaintiffs herein have failed to make the required alleg ations because the commerce aff ected by the

conduct complained of is predominantly interstat e , not intrastate.-8-

It is undisputed that Microsoft is involved in interstate commerce. Microsoft is the leading supplier of operating sy stems for

persona l compute rs and tr ansactsbusiness throughout the United States and in most countries of the world. Plaintiffs accuse Microsoft of unlawful monopolization of the world wide lice nsing ma rket for all I ntel-co mpatible

operating sy stems software and alle ge this conduct affected prices of

software throughout the country and the world. Despite the clear effect Microsoft’s business a

ctivitieshave on in

te rst ate commerce and the interstate nature of the allega tions, Plaintiffs herein have brought this action under state law because they have no federal
cause of action. Plaintiffs maintain that Microsoft’s anticom peti tive conduct, although occurring primari l y out of state and affecting interstate c ommerce, is nonetheless covered by the Tennessee statute because of the substantial adverse eff ect that conduct had on commerce within the state.
The question p

resente d is not one

of fede ral pre emption or

federa l limit ation on the scope of state legislation. As a general rule , federal antitrus t law d oes not preempt state antitrust law. “Congr ess intended

the fede ral antit rust laws to supplement, not

displace , state a

ntitrust r emedies

. And on several prior occasions, the Court has recognized that the fede ral antitrust laws do not preempt state law.” Cal. v. ARC Am. Corp. , 490 U.S. 9 3, 101-10 2, 109 S. Ct. 1 661, 1666 ( 1989). Sta te antitrust laws “are consistent with the broad p urpo ses of the federal antitrust laws: deterring anticompetitive conduct and ensuring the compensation of victims of that conduct.” Id . “Antitr ust law . . . is a field in whichCongress has not sought to replace state with federal law.” In re Brand Na me Prescrip tion Drugs Antitrust Litig. , 123 F.3d 599, 611 (7th Cir. 1997). As one court has explained:
Alth ough the U.S. Supreme C ourt has n ot explicitly held that state antitrust statutes may apply to matters involving

both intra state and intersta te commer

ce, it ha s upheld application of state a

ntitrust la ws in case s in whic h thoselaws clearly affected intersta te commerce. See California v. ARC America Corp. , 490 U.S. 93 , 109 S. Ct. 1661, 104 L. Ed. 2d 86 (1989); U.S. v. Underwriters Assn. , 322 U.S. 5 33, 64 S. Ct. 1162, 88 L. E

d. 1440 (1 944); Watson v. Buck , 313 U.S. 387 , 61 S. Ct . 96 2, 8 5 L. Ed. 1416 (1941).
Moreover, several

lower federal c ourts hav e express ly d etermined that the

Comm erc e Clause of the U.S. Constitution does not necessarily preclude the appli cation of

state antitrust laws to interstate commerce. Shell Oil Co. v. Younger , 587 F.2d 34 (9th Cir. 1978), cert. denied , 440 U.S. 9 47, 99 S. Ct. 1425, 59 L . Ed. 2d 635 (1979); Woods Exploration & Pro. Co. v. Aluminum Co. of Amer. , 438 F.2d 1286 (5th Cir. 1971), cert. denied , 404 U.S. 1 047, 92 S. Ct. 701, 30 L. E d. 2d 736 ( 1972); Mathews Conveyer Co. v. Palmer-Bee Co. , 135 F.2d 73 (6th Cir. 1943). Indeed, severa

l state co urts have reasoned that neither federal antitrust leg islation nor the Commerce Clause precludes application of state ant it rust lawsto all inte

rstate commerce. Younger v. Jensen , 26 Cal.3d 397, 605 P.2d 813, 161 Cal. Rptr. 905 (1980); State v. Steriling Theatres Co. , 64 Wash. 2d 76 1, 394 P.2d 2 26 (1964) ; State
v. Southeast Tex. Chap. Of Nat. Elec. Con. Ass’n , 358 S.W.2d 711 ( Tex. Civ. App.5 The Dist ric t Cour t ci ted s tat e st atut es f rom Cal if

orni a, Con ne ct ic ut , Di strict of Columb ia, Florida, Illinois, Iowa, Kansas, Kent

ucky, Louisi ana, Maryl and, Massachus etts , Michigan , Minnesot a, New M exico , New Yo rk, N orth Car olina, O hio, U tah, W est V irginia, an d W iscon sin. -9- 1962), cert. denied , 372 U.S. 969, 83 S. Ct. 1094, 10 L. Ed . 2d 131 (1 963); Peoples Savings Bank v. S

toddard, 359 Mich. 297, 102 N.W.2d 7 77 (1 960); State v. Allied Chemical & Dy e Corp. , 9 Wis. 2d 290, 101 N.W.2d 133 (1960); Commonwealth v. McHugh , 326 Mass. 249, 93 N.E.2d 75 1 (1950); C. Bennett Bldg. Supplies v. Jenn Air , 759 S.W.2d 883 (Mo. App. 1988 ); State v. Coca Cola B ottling Co. o f Southwest

, 697 S.W.2d 677 (Tex. App. 1985), appeal dismissed , 4 78 U.S. 1029, 107 S. Ct. 9, 92 L. Ed. 2d 764 (1986).
Heath Consultants, Inc. v. Precision Instruments, Inc. , 527 N.W.2d 596, 606-07 (Neb. 1995). See also Waste

Control Spe cialists, LLC v. Envirocare of Tex. Inc. , 199 F.3d 781, 783 (5th Cir. 2000); Blake v. Abbott

Labs., Inc ., 894 F. Supp. 327, 328-29 (E.D. Te nn. 1995) ; Two Queens, Inc. v . Scoza , 296 A.D.2d 302, 304 (N.Y. App. Div. 2002) (stating that “I t is by now well settled that states can enact and enforce, through their cour ts, legislation which affects interstate commerce ‘whe n suc h commerce has significant local conseque nces’”).
States now have the power to condemn antitrust violations that occur any where in the nation, provided that there are sufficient harmful e ffects within the state itself. The
commerce clause of the United States Constitution is not a sub stantial b arrier to the application of a sta

te’s antitrust law to activities occurring outside the state. The Supreme Court h as insisted on upholding state antitrust laws under the dormant
commerce clause by holding as a general

matter that such laws do not interfere with the interstate flow of

goods a nd do not dis criminat

e aga inst interstate commerce. At the sametime , the courts refuse to find state antitrust laws preempted by federal antitrust law, unless the conflict is so sharp that compliance withthe state

law would require violation of the f e deral law. Even in that instance, the ‘state action’ exemption from the federal antitrust laws might permit enforc ement of the sta te law. Herbert Hovenkamp, State Antitrust in the Federal Scheme , 58 I ND

. L.J. 375, 431 (1983). Thus, the fact that Microsoft engage s in interstate commerce does not, under federa l law , preclud e action s brought under s tatestatutes. Specific conduct c an subject a defe ndant toliability under both fede

ral law a nd similar

state sta tutes. The District Court in United Sta tes v. Mic rosoft Corp. , 87 F. Supp. 2d 30, 54 (D.C. 2000), found that the facts “proving that Microsof t unlawfully
m aintained its monopoly power in violation of § 2 of the Sherman Act are sufficient to meet analo gous elements of causes of action arising under the la ws of each plaintiff state.” 5 The reviewing court affirmed in part and reverse d in part the trial court’s fin dings on violations of the Sherman Act. United States v. Microsoft Co rp. , 253 F.3d 34, 46 (D.C. Cir. 2001). The Court of Appealsfor the D.C. Circuit agreed that Microsoft possessed monopoly power over

the relevant market and that ithad engaged in anticompetitive conduct to pre serve that monopoly in the oper ating6 The cour t re man ded th e i ss ue of wh et he r Mi cr os of

t h ad i ll eg al ly ti ed i ts br ows er an d op er at in g s ys te m. On remand, the United State s decided not to p ursue th e tying claim

. See United Stat es v. Micros oft

Corp. , 215 F. Supp. 2d 1, 3 n.2 (D.D.C. July 2, 2002).

7 That case w as an e nforc eme nt action bro ught b y the D epa rtmen t of J usti ce and a num ber o f state attorn eys gene ral. In other

cases br ought by privat e parti es, def endants have als o been subject to liabil ity under both f ederal and state antitru st laws. See , e.g., Grif fi ths v. Bl ue Cross and Blue Shi eld of Ala. , 147 F. Supp. 2d 1203, 1214- 15 & 1221 (N. D. Ala. 2 001 ) (hold ing that the com plaint a lle ged re str aint of t rade u nder Se cti on 1 of the Sherman Act; made suffi cient all egati ons that the pri maril y int

rast ate commerci al res tra int subs tantially affecte d intersta te com merc e to sustain federal juri sdiction; and, bas ed upo n t he s ame unde rlying factua l allegatio ns, also m ade claims u nde r Alab ama ’s ant itrust statutes b ecau se it claim ed an intrastate re straint of tra de w ith effects o n bo th intrastate and in tersta t e commer ce); In re Teraz osin Hydrochl oride Anti trus t Li ti g. , 160 F. Supp. 2d 1365 (S.D. Fl a. 2001) (gra nti ng parti al summary judgment t o direct purchaser

plain tif fs on Sher

man Act claim and considering indir ect purch asers’ clai ms under various state antitru st laws); In re Car dize m CD Antitr ust Lit ig. ,105 F. Supp. 2d 618 (E.D. Mich. 2000) (inv olvin g direct purchasers bri ngi ng c lai ms u nder th e She rman Act and i ndi rec t pu rch ase rs bri ngi ng c lai ms u nder a nti tru st sta tut es of eight st ates).

8 The cour t held tha t state co urts in Lo uisiana w ere un dec ided on wh ether the ir statute’s “re str aint of t rade or commerce in t

his s tate ” requir ed that t he violati on occur in the state, that S outh C arolina ’s antitrust ac t app lies only to intrastate com merc e but its un fair trade prac tices ac t was no t so limited , t hat the U tah sta tute only applied where the violati on occurs in the st ate, and that the Tennessee statute appli ed only to violati ons occurring withi n the stat e). -10- sys tems software mar

ket. The court, however, reversed the district court’s finding that Microsoft had unlawfully attempted to extend itsmonopoly

into the int

ernet br owser ma rket. 6 The cour

t held that its “judgment extend s to the Dis trict Cour t’s findings with

respec t to the sta

te law co unterpa rts of the plain tiffs’ Sherman Act claims.” Id . 253 F.3d at 42. Thus, the appellate court affirmed the districtcourt’s finding that Microsoft had violated state antitru st l aws as well as the Sherman Act with respect to the operating sy stem software. 7
The inte r state ve

rsus intra state co mmerce i ssue is onl y r aised asa defen se wher

e it is arg uable that a parti cular s tate h as lim ited t he sco pe of i ts ant itrus t stat ute by im posi ng a greater connection withor impact upon commercewithin the state than is the general constitutionally required standard. Ap pa re nt ly, only

a few sta

tes fall in that category ; Tennessee is one. See , e.g. , Cardizem CD Antitrust Litig. , 105 F. Supp. 618 (E.D. Mich. 2000) (involving claims of violation of the an titrust laws of eight states, but

raising the interstate versus intrastate commerc e issue only as to Wiscon sin and Tenness ee); FTC v. Mylan Labs., Inc. , 62 F. Supp. 2d 25, 42 (D.C. 1999), petitions for
r econside ratio n granted in part , 99 F. Supp. 1 (1999) (involving claims under antitrust laws of thirty-twostates with defendants assertingthe claim s must be dismissed if the sta

te law ap plies only to intrastate violat ions, the court finding that only the Louisiana, South Carolina, Tennessee, and Utah statutes required

examination under this argument 8 ); In re Tera zosin Hyd rochlorid e Antitrus t Litig. , 160 F. Supp . 2d 13 65 (S. D. Fla. 2001) (invo lvin g c laims under the antitrust and consumer protection statutes o f eight een stat es, with challenges as to an intrastate conduct requirement made only to the Tennessee

and Wisconsin statutes).9 Law suits essent iall y ident

ical to th e one before u s hav e bee n bro ught by i ndir ect purch aser s i n a nu mber of states, and none has been dismissed on the basis that federal law requir es that t he suit be brought under th e Sherman Act because of it s interst ate commerce as pects. That argument has not been made by Microsoft in t hose cases , and i t does not m ake tha t argum ent her ein. B oth parti es herei n agreed tha t t o the ext ent the tri al c ourt ’s decis ion w as bas ed upon the exclusi vity of

federal and stat e antitr ust st atutes, that decisi on was in error.

10 The Co urt has consi dered anti trus t is sues, such as the re quirement of an act

ual ant itr ust i njury , in cas e s construing other s tatutes. See GHE M, Inc. , 850 S.W .2d 447 (T enn. 1993) (construing the Petroleum Trade Practices Act); Walker v. Bruno’s, Inc. , 650 S.W.2d 357 (Tenn . 1983) (hol ding tha t the Tennes see Unf air Milk Sa les Act di d not confli ct with t

he Sherman Act). See al so State e x rel . At torne y Gen. v. Burley Tobacco Growers’ Co -Operative Ass’n , 2 Tenn. App. 674 (Tenn. Ct. App. 1927) ( holdi ng, in asui t t o prohi bit ass ociat ion fr om transac ting bus iness in this sta te for violati on of antitr

ust st atutes, that a st atute all owing co-operative marke ting legaliz ed practices that mi ght have previously been il legal).

11 The language of the act defining t

he prohibited conduct has not changed since the Co urt i nterp reted it in Stan dar d O il

.

12 In pertinent part , the st atute made unlawful ar ra nge me nts lessen ing co mpe tition “in the im por tation o r sale of arti cles imported in to this st ate. ” Tenn. Code Ann. § 47-25- 101.
-11- Thus, it is not federal law that determines whether Tennessee has jurisdiction under the TTPA. 9 Rather, i t is state law that determines what degree of connection with or impact upon
commerc e within the state mu st exist.

A. What Tennessee Courts Have Said About the Tennessee Standard
Alth ough federa

l courts a nd courtsin other states have attempted to determine the reac h of Tennessee’s antitrust statute, our state courts have spoken ra rely on the topic. We begin with the seminal case, Standard O il Co. v. Sta te , 117 Tenn. 618, 100 S.W. 705 (1907), t he Tenne ssee Supreme Court’s last statement on the issue. 10
Standard O il

involved a constitu

tional ch alleng e to the TTPA. 11 In that case, the Standard Oil Company and its employ ee, Mr. Holt, were indicted for violating state antitrust laws by

making
an unlawful agreement

for the purpose of

lessenin g compe

tition in the sale of coal oil. The company and its age

nts induced c

ustomers in Gallatin to cancel orders they had placed with a competitor by offering the customers qua ntities of fr ee oil. On

ce it ag ain beca

me the sole

supplier of coal o il in the area, the company

raised its prices. After being fo un d g ui lt y by a ju ry, Standard Oil and Mr . Holt appealed and therein assailed the constitutionality of the statue, arguing that

it was inva

lidbecause it was an attempt at regulation of interstate commerc e. The Tennessee Supreme Court disagreed.
It is importan t to re cogn ize the basis for the constitutional challenge so that the Court’s hold ings can be placed in proper context. Standard Oil argued that to the extent the statute applied to transactions rela

ting to the importa

tion of ar ticles of commerc e from oth

er state s, 12 i t impinged upon Congress’s exclusive power to regulate interstate commerce . Based upon its determination of the legislative intent behind the statute, theCourt held that the statut

e did not a

pply to interst ate13 The app ellants ha d arg ued that the statu te imp inged on inter state commerce becaus e it was a ppli ed, in their case, to an a rrang eme nt relating to property to be th ereafter import ed int o the st ate. The Court made clear , however , th at there was no averment

that the agr eement was made to les sen competi tion i n the s ale of coal oil int ended to be import ed by St andard Oil’ s compet it or. 117 Tenn. a t 642- 43, 100 S. W. at 711.

14 Th is conclus ion was bas ed upon t he narrow i nterpre tati on of Congress ’s Commerce Clau se power t hat prevail ed at the ti me. -12- commerce “when properly construed,” and stated, “the sole object and purpose of theenactment of it was to correct and prohibit abuses of trade within the state.” 117 Tenn. at 635, 100 S.W. at 709. Apply ing fundamental rules of statutory construction, including an examination of the history of the time when the statute was passed, the Court concluded:
The Legislature wa s cognizant, we must presume, that it had no power to enact laws regulating interstate commerce, and did not inte

nd to enact unconstitutional la w, in whole or in part. There was already then in force an act of Congress, the She rm an Antitrust Act, enacted

in 1890, fully covering

that subject, the provisions of which
were much broader

and more effective than those of this act, and c ould be enforced to their ful lest exten t by the stronge r and more vigorous government. The re was neither the powe r nor the necessity for enacting any

legislation relativeto interst ate commerce. The wrongs to trade which were intended to be c orrect ed and punished were those being perpetrated against commer ce within the state , whic h Co ng re ss co ul d n ot re ac h, an d f or wh ic h t he re wa s t he n n o e ff ic ie nt re me dy.
Id . 117 Tenn. at 639-40, 100 S.W. at 710 (emphasis added).
The Court found that the convictions were based upon charg es and proof of agree ments to lessen competition in the sale of coal oil that had already been imported into the state prior to the agree ment. 13 117 Tenn. at 646-47, 100 S.W. at 712. This finding was consistent with the Court’s interpretation of the word “importation” as used in the statute, to include articles “which had been imported from other sta

tes and c ountries , comming led with th e common mass of pr

operty in this state, and no longer articles of interstate commerce.” Id . at 117 Tenn. at 642-43, 100 S.W. at 711. Relying on precedent holding that commerce in “such” imported a rticles may

be regulated by state legislation, the Cou rt determine d that the legisla ture’s in tent was t o protec t commerc e in articles already

imported into the state because that commerce would not otherwis e be prot

ected if notexpressly mentioned in the statute; 14 it needed the same prot ection as com merce in domestic products due to the investment of Tennessee citizens in imported property ; and because: [t]he Legis la ture cle arly

intended to prohibit trusts, c ombination s, and ag reemen ts affecting a ll commerce not covered by the federal statute, and upon which it had a right to legislate. It did not intend to stop short of its power or to exceed it.-13-

Standard O il , 117 Tenn. at 643, 100 S.W. at 711 (emphasis added).
The Court’s ho ldings w ere sha ped in the context of

two expres sed princ iples. One , that it is the cour

ts’ duty to construe a statute so as to avoid conflict with the United States Constitution, if such construction can be accomplished without disregard of the evident intent of the legislature

. 117 Tenn. at

642, 100 S.W. at 710. Se cond, tha t even though the

legisla ture ma y include ove

rly broadterms in a

statu te, it is the dut

y of the cour ts to limit ap

plication of the sta

tute to thos e situations that were within the intent of the legislature. Id . 117 Tenn. at 643, 100 S.W. at 711.
We interpre

t Standard O il

as holdi ng, wheth er because of Constitutional limitations or because of imputed legislative intent consiste nt with thos e limitatio ns, that the state a ntitrust sta

tute didnot infringe on Congress’s exclusive power to regula te inters tate comm

erce. A ll of the Court’s findi ngs in that ca se were made in the context of the constitutionally allowed scope of authority of state legisla tures in th

e area s of antitr

ust law and in

te rstate c ommerce

and the c ourt’s du

ty to in te rp re t t he st at ut e s o a s t o a vo id co ns ti tu ti on al in va li di ty. Shortly after the Standard O il

criminal case, th e Attorne y General sought to enjointhe outof-state corporation from doing business in the state based upon the same conduct t hat resulted in the criminal convictions. On appeal, Standard Oil raised the same interstate c ommerce infringement chall enge to the statute, and the Tennessee Supreme Court merely recited and readopted its h oldi ngs in Standard O il

. State ex

rel. Cates v. Standard Oil Co. of Ky. , 120 Tenn. 86, 110 S.W. 565 (1908), aff’d by Standard Oil of Ky. v. State of Tenn., ex rel. Cates , 217 U.S. 413, 30 S. Ct. 543 (1910). The
case eventually we

nt to the United States Supreme Court, which upheld the ouster of the fo reig n corporation and stated:
The present statute . . . doe s not regulate business at all. It is not even directed agains tin te rf

er en ce wi th th at bu si ne ss sp ec if ic al ly, butagainst acts of a certain kind that the state disappro ves in

whatever connection. The mere fact that it may happen to remove a

n interfe rence with commer

ce among the state s as well a s with the r est does not invalidate it. 217 U.S. at 422, 30 S. Ct. at 544.
This statement provides another explanation for the Tennessee Supreme Court’s determination that the Act did not unconstitutionally attempt to regula te interstate commerce that is consistent

with that c ourt’s e arlier s tatement in State ex rel. Astor , 104 Tenn. 715, 7 40-4 1, 59 S .W. 1033, 1039 (1900), that the act’s inclusion of imported goods was not an interference with inter state commerce or a reg

ulation of such comm

erce. I t also demo nstratesthat eve n at that time there was no clear demarcation

betwee n intersta te and int rastate commerce and no complete exclusivity . The Tenness e e Supr eme Court had said the same thing in Standard O il , when it recognized that the TTPAcould re ach con duct “where inte rstate c ommerce

is inciden

tally affected.” 117 Tenn. at 647, 100 S.W. 712.15 HRI was a whollyowned subsi diary of Nationa l Souveni r Center , Inc. , a Dist rict of Columbia c orporati on that was also a par ty to this suit.

16 In sup por t of this statem ent, the court cit ed S.C. Hwy. Dep’t

v. Bar nwell Bros ., 303 U.S. 177, 58 S. Ct . 510 (1938) an d Union Brokerage Co. v. Jensen , 322 U.S. 202 , 64 S. Ct. 967 (1944 ).
-14- The Tennessee Court of Appeals has discussed the interpreta tion of the TTPA in only a few
cases. The firs t is Lynch Dis play Corp. v. Nat’l So uvenir Ctr

. , 640 S.W.2d 837 (T enn. Ct. App. 1982). In that case, L

ynch, a Mar

yland co rporation manufacturing and leasing wa x figures for museums, a greed

to ma nufacture and lease to Historical Reviews, I nc. (“HRI”), 15 a Tennessee Corporation that operated a wax museu m in Gatlinburg, 90 wax figu

res to be display ed in its
museum. The leas e agreement inc luded a pr ovision tha

t required HRI

to enter in to a franchising agreement with National Historical Museum, I nc. (“NHM”), a District of Columbia corporation.
When HRI

stopped ma

king pa yme nts under the fra nchise a greem ent, L ync h brought su it

. HRI counterclaimed and defended on the basis that the orig inal lease and franchising a greement were forced on HRI because of the

monopoly position

of Ly nch and, consequently, the a greements were void under the Tenness ee antitr ust statute. T his court determin ed that the Tenne ssee ant

itrust sta tute could not be use d as the ba sis for ei ther the counter claim or t h e defense becaus e that statute was simply not applic able. I

t agre ed with the

trial cou rt’s conclusion th at t

he ac tivities of the parties “wereacts exclu sively

in interst atecommerce and

therefore not within the purview of the Tennessee Antitrust A

ct.” 640 S .W.2d at 838 . The cou rt held:
The Tennessee antitrust law applies to transactions which are predomin antly intrasta te in character. The transaction does not have to be exclusi vely intrasta te to be affected. The old constitutional doctrine of mutual exclusivity

betwee n state and federal laws affecting commerce has long been rejected. 16 The Tenn essee Sup reme Courthas rec ognized t

his fact in the important opinion Standard Oil Co. v. State

. .

. . 640 S.W.2d at 84 0. Apply ing the s tandard

of “pre dominantly

intrasta te,” the court r eachedthe conclusion that the subject of the dispute, the lease and franchise ag reement between instate andoutof-stat e corporations, was “predominantly interstate in character [and] only incidentally aff

e ct s intrastate commerce.” Id. [T]he predomin ant char

acter o f these a

greem ents is inte

rstate c ommerce . The go ods, service s, and pay

ment for t

hem is flowing betw een par ties in dif

fere nt states. Appellan ts argue i n their br iefs that the wax muse

um has bee

n establis hed in Gatlinburg for 17 y ears and regularly sells tickets to customers in exchange for admission and that this fact es tabli shes s ignifi cant i ntras tate c ommer ce. Al thou gh thi s is unquestionably intrastate commerc e, it is of a nature incidental to th e predominant

agreements in this dispute. Hence, theTennessee antitrust statute does not apply.17 Some of those courts have relied upon a n additional o pinion this court is preclud ed from a ddressing b ecause

the Tennessee Supreme Court concu rred in r esul ts only when i t den ied pe rmis sion to appe al. Pursu ant to Tenn. R. Sup. Ct. 4(F), an interme diate court op inion so designated m ay not be cited b y any judge o r by any litigant. Because cour ts outs ide our st ate court

syst em have ci ted the op inion, ho weve r, it is prud ent for u s to pro vide th e nam e and citation: Dzik & Dzik, P.C. v . Vi sion Serv. Plan , No. 836, 1989 WL 3082 (Tenn. Ct. App. Jan . 20, 1989) (pe rmis sion to appe al de nied,
con curring in results o nly, Aug . 7, 19 89)

. -15- Lynch Display Corp. , 640 S.W.2d at 840-41.
This court again addressed the appli cation of

the TTPA in

Blake v. Abbott Labs., Inc. , No. 03A01-9509-CV-00307, 1996 WL 134947 (Tenn. Ct. App. Mar. 27, 1996) (no Tenn. R. App. P. 11 application filed). The plaintiffs in Blake alleged that the defendants, Abbott L abor atories,an out-ofstate company distributing na tionwide, grossly ove

rcharged Tennessee

consumers who purchased infant formula in the state. This co urt found that the only sufficie ntly plead facts were that the defendants, along with others, conspired to fix prices and did fix prices of formula.

In the portion of the opinion relevant to this issue, the court in Blake reiterated the “predom inantly intrasta te” stan dard est

ablished in Lynch, but proceeded to apply the test to the effect of the allegedly

illegal conduct on commerce. The cour t determined tha t there were not sufficient facts alleged to make a finding “that the transactions comp lained of predomin antly

affec t intersta

te commerce as opposed to intrastate commerce” an d, co ns eq ue nt ly, dismissal u nder Te nn. R. Civ. P. 12 was inap

propria te. 1996 WL

134947, a

t *5. Howe

ver, “if it is later determined by

some manner cogniza ble under Tennessee law that the actions complained of by the plain tiff pre dominantly

affect interstate commerce, then the defendants must preva il on this issue.” Id.
Fi na ll y, this c ourt was called upon to interpret Tennessee’s antitrust statutes in Forman v. Nat’lCouncil on Comp. Ins., Inc. , 13 S.W.3d 36 5 (Tenn. Ct. App. 19 99), but on ly on the question of whether workers’ compensation insurance, an intangible contract right or service, was an a rticle
or product subject to those statutes. This court found that the antitru st statutes d id not appl

y to insurance and declined to adopt the argume nt that Standard O il

indicate d that the

state sta tute shoul d be interpreted expansively to enc ompass claims not precl uded by the fed eral an titrust sta tutes, at l east with regard to the definition of articles or g oods.

B. What Other Courts Have Said About the Tennessee Standard
A number of courts not part of the Tennessee cour t system have

examined the scope of Tennessee’s antitrust statute using the scant state authority discussed above. 17 While those decisions18 This co urt has describe d the effect of the interpretation of state law by fed eral courts as follows:

Federal courts look to t he law of

the s tate as declared by it s hig hest c ourt when they deci de questions of stat e law. In th e absence of an auth orit ativ e pronouncement by the s tate ’s hi ghest court, the f

ederal
cou rts may eit

her certify the state law question to the state’s highest court for an interpretation, Tenn. S. Ct. 2 3; Ariz onans f

or Off ici al Engl ish v. Ar izona , 520 U.S. 43, 76-78, 117 S. Ct . 1055, 1073-74, 137 L. Ed . 2d 1 70 ( 197 7), or ascer tain and app ly the state law as they un dersta nd it from availab le
sources. Un ited S ta tes v. A nde rson Co unty , 761 F.2d 1169, 1173 (6th Cir . 1953). When a feder al court underta kes to decide a stat e law ques tion i n the abs ence of autho ritative state prec ede nt, the state
cou rts are no t bou nd to follow th e fede ral co urt’s dec ision.
Townes v. Sunbeam Oster Co., Inc. , 50 S.W .3d 446, 452 (Tenn. Ct. App. 2001 ).

19 In Duke v. Br

owning-Fer ris Indus. of Tenn. , Inc ., No. 96-2859- TUA, 1996 W L 334 151 34 ( W.D. Te nn. O ct. 22, 199 6), the c ourt co nside red a n antitr ust clai m under t he Tennessee statute that was essenti ally t

he same as one brought by the p laintiff in ano ther ca se und er fed eral law . The cour t viewed its task as determining wh ether a cause of acti on had been all eged under the Sherman Act or und er state law , stating, “T he ma in dist inct ion betwe en clai ms under the Tennessee and the f ederal s tatu tes i s that

the Sher man Act p rohib its mon opo lization in interstate c omm erce, w hile the Te nnesse e statute o nly app lies if the actio n is predominant ly i ntras tate .” 1996 U .S. Dist. LEX IS at *7-*8. In a third case, Blake v . Abbot t Labs ., Inc ., 894 F. Supp. 327 (E .D. Tenn. 1995 ), the court did not addre ss the merits of plaintiffs’ claim under st ate l aw, but commented that

the Tenness ee Supreme Court h ad narrowl y const rued Tennessee a ntitr ust law in Stan dar d O il . 894 F. Supp. a t 330. -16- are not binding on the courts of this state, 18 they are informative and demonstrate thediffering and even inconsistent conclusions that have been reached.

In a reported decision by

a federal court in Tennessee, Valley Prods. Co., Inc. v. Landma rk , 877 F. Supp. 1087 (W.D. Tenn. 1994), the court, relying on Lynch , held that the Tenness ee antitr ust statute applies to transactions that are predomin antly

intrasta te incharacter. “Al

though th e dispute
ne ed not b e exclusively intrastate to fall within the statute, it must more than incidentally affect intrasta te commerce.” Id

. 877 F. Supp. at 1095. Th e court h eld th at the standard was not met because “[t]he matter before the court clearly involves s ignific ant inter state co mmerce a nd activity and only minimally affects intrastate commerce. HFS franchiseesare located in every state in the country and the sa

le of guest amenities necessarily implicates many g eographic regions.” Id. 19

Federalcourts ou

tside this state have also been called upon to apply the TT PA. In FTC v. Mylan Labs., Inc ., 62 F. Supp. 2d 25 (D.C. 1999) the United States District Court for the District of Columbia considered claims broug ht by thi rty-two states under the Sherman Act as well as under eachindividua

l state’santitrust

laws. The initial lawsuit brought by the F TC alleged thedefenda

nts were engag

ing in unf

air metho ds of comp etition in o r affe cting c ommerce . The st ates joined in adopting these allegations, added another defenda nt, and alleged a

n illega l price- fixing ag

reemen t.
The defenda

nts moved t

o dismiss the

state law claims on vari ous grounds, one being that the state law challenges to the interstate conduct alleged must be dismissed if the sta te law ap plies only to intrastate violations of the law. With regard to Tennessee, the court dismissed all claims brought under the TTPA a

nd the TCPA

“becau se both sta

tutes app ly o nly

to violatio ns occur

ring in intrastat

e-17-

commerce,” relying

on Standard O il

. Mylan Labs., Inc. , 62 F. Supp. 2d a t 51

. See also FTC v. Mylan Labs., Inc. , 99 F. Supp. 2d 1, 4 (D.C. Cir. 1999) (reaffirming on motion to recon sider its decision to dismiss the Tennessee claims because the condu ct co mplained of was pr

edominan tly interstate).
The same cou

rt in a lat er case saw fit to

“expound u

pon its ra tionale”for ruling in My lan Labs that the n ational c onspiracy a ffecting thirty -two states was outside the ambit of Tennessee’s antitrust laws. In re Vitamins Antitrust Litig. , 2001 WL 849928 (D. D.C. Apr. 11, 2001). The court emphasized that the Tennessee Supreme Court had narrowed the importation lang uage of the statut e and found significant the Standard O il court’s specific holdin g that the oil that was the subject of the anticompetitive arrangement was not an article of interstate commerce whe n the agreement was made; it had already

come to rest in Tennessee. Stating, “[a]nd therein lies the critical distinction upon which Mylan and the instant action lie,” the court reiterated its holding in Mylan that when the challenged

conduct occurs before the products ar rive in Tennessee, t

he con duct is considered intersta te and not subject to the TTPA or the TCPA. In re Vita mins Antitr

ust Litig. , 2001 WL 849928, at *4. The court also relied upon Lynch and Blake for the predominantly intra state test, and its application to the facts therein. Distinguishi ng t he case before it from Blake , the court had no trouble finding that “alt

hough the alleg ed condu ct may have a d emonstra ble effec t in Tenne ssee, thi s effect is clearly

incidental in comparison to the interstate character of the alleged conspiracy .” Id

. at *5.
A similar conclusion was reached in In re Terazosin Hydrochloride Antitrust Litig. , 160 F. Supp. 2d 136 5 (S.D . Fla. 2001) , where in cla sses o f indi rect an d dire ct pur chaser s of cer tain d rugs filed complain

ts alleg ing viola

tions of federal and va rious state antitrust and consumer protection laws. The indirect purchasers’ claims under federal law were dismissed. The court also dismissed those state law claims where no named plaintiff had purcha sed a particular drug in that state. The court then proc eeded to

examine the

remain ing c laims on a state by state basis and he ld that the TTPAdid not re ach “so f ar as to p rohibit the

nationwid

e consp iracy a

l leged in the end p ay ors’ complai nt.” 160 F. Supp. 2d at 1376-77. The court reached this conclusion based in p art on it s reading of Standard O il , which it interpreted as holding

that the st

atute ap plied to c ommerce

within Ten nessee, not contracts “in relation to the importation of articles.” 160 F. Supp. 2d at 137 7 (quot ing Standard O il , 117 Tenn. at 643, 100 S.W. at 711).
The court al so held tha

t S tan dard Oil

had been refined by

the courts to hold that the Act applies to transactions which are predominantly intrastate in character and found that the complaint didnot meet that standa rd. Noti ng that, “conspicuously absent from the complaint are any allegations that the defendants forged alliance s in Tennessee, stored te razosin hydrochl oride drugs therein, or sold them within the state at the time,” 160 F. Supp. 2d at 1377, the court concluded, “No
reasona ble obser ver conf ronted w ith these allegations would infer that the defendants’ conspiracy was ‘predominantly intra state’ in character.” 160 F. Supp. 2d at 1378.
A different result, emanating from a diff erent interpretation, was reached in In re Cardizem CD Antitrust Litig. , 105 F. Supp.2d 618 (E.D. Mich. 2000). That multidistrict litigation involved-18-

class actions under federal la w and unde

r variou s state la

ws and alleged t

hat the de

fendant s committed anticompetitive practices with regard to the sale of heart medication. Relying on previo usly discusse d holding s, the defendants argued that the claims for violation of the TTPA and the TCPA must be dismissed because these statutes apply only to transactions that
are wholly

or predo minantly

in tr astate in character and plaintiffs alleg ed anticompetitive activity and restraints of trade occurring in several jurisdictions. The court, howe ver, found that this argument interpre ted the sta

tutes too n arrowly

and ag reed wit h the plaintiffs’ p osition tha t the statu tes
allow Tenness ee to regulate anticompetitive conduct occurr ing outside the state but having more than incidental effect on Ten nessee’s intrastate commerce; i.e., situations like that alleged here where anticompetitive c on duct may have occurred outside the state but results in a prescriptiondrug product intentiona lly c oming to r

est within Tennessee and causing injury to Tennessee citizens who have purchased the product in T ennesse e at arti ficially inflated prices a s a resul

t of Defe

ndants’ anticomp etitive c onduct. In re Cardizem CD Antitrust Litig. ,105 F. Supp. 2d at 667.
The court based its conclu si on on its interpretation of Standard O il and the more recent opinion in Forman , supra , which the court described as “observing that ‘it is clear

that Tennessee Code Annotate d section

47-25-10 1, in expre ss terms, a pplies to a

rti cles of fo reign a

nd domesti c origin.’” 105 F. Supp. 2d at 667.
The Cardizem court

then found that courts have subsequently held that to state a claim under Tennessee’s antitrust statute, “the dispute need not be excl

usively intrasta te” but “ it must more than incident ally affect intrastate commerce,” citing Valley Pr oducts . 105 F. Supp. 2d at 667. The court held that the antitrust statutes were not limited to anticompetitive conspiracies that are “hatched and implemented solely or predominantly ” in Tennessee and

to the exten

t the dec isions in Lynch , Blake , Dzik , and Mylan held otherwise, those decisions were “wrongly decided.” 105 F. Supp. at 667. The court went on to predict that the Tennessee Supreme C ourt, if p resente d with the i ssue woul d establish a test of whether the alleged fa cts show that an illegal combination or agree ment more than incidentally aff

ects Tennessee’s intrastate commerce

. Id . at 667-68.
IV. The Tennessee

Intrastate Commerce Require ment
As the above discussion demonstrates, various courts have interpreted the scarce Tennessee authority to espouse different tests for whether Tennessee’s antitrust statute applies. Some have focused on the defendant’s conduct, some have focuse d on the transactions involved, and some have looked to the nature of the dispute. Many have focused on, or at least included in the analy sis, the effects on commerce.20 Some cour ts have fo und a legislature ’s grant o f reme dy to indirect purchasers signif icant in determining t

he scope of a state’s a ntitrust statute. See, e .g. ., Emergency One v. Waterous Co., Inc. , 23 F. Supp. 2d 959, 964 (E.D. W is. 1998) (holding that

the best indi cation of an intent to hold int erstate act ors accoun tabl e may be the inc lus ion of a reme dy for indirect purchasers , and stati ng “the prototypicalindirect purchasers action would vindicate f ar-fl ung consu mers f

or the indirect

costs of price- fixi ng conducted on a national scale”).

21 The federal court’ s statement i n In re Teraz osin Hydrochl oride Anti trus t Li ti g. that the p hrase “transac tions,”
as used in the plaintiff

s’ pleadings and, presumably, as used in Lynch , must refer to the actions of the de fendants bec ause Tenn. Co de A nn. § 47-2 5-10 2 pr ohib ited “ar range men ts to restra in com petition ,” 160 F. Supp. at 1377 n.9, impl ies t hat the test is r elat ed to the all eged il legalconduct. We disagree wit h that conclus ion, h owever, becau se the Lynch cour t’s analysis of

the transact

ions between the parti es, i .e. t heir c ontract

ual re lati onship, demonstrates tha t th e Lynch standard
w as base d up on the transac tions b etwee n the p arties givin g rise to th e disp ute, no t to the loc ation o f the allege dly anticomp etitive acts. -19-

A. Test Based on Transaction or I llegal Conduct
Our review of Lynch co nf ir ms Pl ai nt if

fs ’ a ss er ti on s t ha t n o b ac kg ro un d, so ur ce , a ut ho ri ty, or explanatio n is give

n for the court’sstatemen

t that, “T ennesse e antitru st law applies to transactions which are predominantly

intrastate in character.” As the quoted stateme nt makes clear, the standard announced in Lynch focused on the transaction giving rise to the dispute, or the “character” of the agree ments betwee

n the par ties. How ever, th

e court a lso stated that t he in trastate commerce activitie s of plain

tiff wer e only incident al to the part

ies’ transactions and t

hat the a greem ents only incidentally aff

ected intrastate commerce.
The Lynch court’s focus on the character of the tra nsaction is understandable in light of the issue in that case: the enforceability of contracts between

the parties to the lawsuit. Thus, the nature
or character of the transaction could be analyzed. See also Valley Pr oducts , 877 F. Supp. at 1094-95 (involving a sp ec ific relationship between the parties). Attempting to apply a transaction-based standardto the case before us illustrates the difficulty of

such a standard. Herein, there wer e no direct transactions between Plaintiffs, indirect purchasers, and the

defendant. The complaint alleges intrasta te and inters tate pur

chases b y Pla

intiffs f rom third p arties a

nd also alleges interstat e transactions between Microsoft, an out-of- state co

rporatio n, and thir

d partie s, at lea st some

of which are also out-of-state corporations. Lynch providesno guida nce as to which of these tra nsaction s is subject to the “predominantly

intrasta te” test. 20

We find no la

nguag e in the TT

PA itself to

evidenc e an inte

nt that it c over only

in trasta te transactions. Similarly, we find no expression of i nte nt that only illega l conduct occurr ing in thi s state subjects the defendant to civil causes of action. 21 While the Tennessee legislature could have placed such limitations on the scope of the TTPA, see, e.g ., Archer Daniels Midland Co. v. Seven Up Bottling Co. of Jasper, Inc. , 746 So. 2d 966, 989-90 (A la. 1999) (holding that Alabama’s antitrust statute r egulat

es o nly “monopolistic activities that occur ‘within this state’ – within the geographical

boundaries of this state”); and Mylan Labs

. , 62 F. Supp. 2d at 47 , 51, and 52 (discussing the requirement in several states that the illeg al conduct occur in the state), we simply find no indication of such intent in the statute itself.-20-

The TTPA appl ies, by its terms, to arrang ements lessening competition “in the sale of articles imported

into this state” or affecting the “price or the cost to the producer or the consumer of any such product or article.” Consequently , the legislatureclearly intended that the Act apply

to anticompetitive conduct t hat decr eases c ompetition

in or incr

eases the price of goods paid by
consumers in Tennessee even though those goods may have arrived in Tennessee through intersta te commerce. Other than the reference to a rticles imported“into this state,” the statute includes no “in this state” language. Thus, the s tatute itself does not place a geogr aphic limitation on where the illegal conduct must occur or on the nature of the transactions involved. Because the purchase by
consumers in this state of articles imported from out of state will generally invo lve at lea st one transaction between instate and out-o f-state

parties, we must presume the legislature intended that such transactions be included in the statute’s reach, contra ry to the Lynch court’sanaly sis.
We also find no judicial interpretation prior to Lynch establishing suc h limitati on To the contrary , in Bailey v . Ass’n of M aster Plumbers , 103 Tenn . 99, 52 S.W. 8 53 (1899) , the Supre me Courtof Tennessee found, under common law and under the statute a t i ssue herein, void and
un enforc eable

certain provisions of the bylaws of the Association of Master Plumbers of the City of Memphis. In particular, the cour t examined a provi sion that req uired me mbers to purchase materia ls and supplies from only spe cified dealers who had agreed to sell only to members of the association. The court noted that the dealers, by agreeing to and observing this provision, had become parties to the scheme. Several out-of-state dea lers hadratified the by-laws as to themselve s and refused to sell to non-members. “This action of important dealers was the consummation of a vital part of the complex scheme,” resulting in a restraint of trade in a Tennessee community. Id

. 103 Tenn. at 121, 52 S.W. at 858.
State ex rel. Astor v. Schlitz Brewing Co. , 104 Tenn. 715, 59 S.W. 1033 (1900), involved an action by t

his st ate’s At

torney Genera l to enjoin a

foreign corpor

ation fro m doing bu siness in Tennessee because

of alleg ed violat

ions of thisstate’s a

ntitrust statutes. The complaint alleged that Schlitz Brewing Company , the foreign corporation, and its ag ent in Tennessee had entered into an arrangement

with a Tennessee corporation and other brewers with the intent

and effect of lessening competition in the importation and sale of beer. Th e defend ants attacked the statute as
uncon stitutional under various provisions of the Tennessee Constitution and the United Stat e s Constitution, but the Tennessee Supreme Court found the

act cons titutional

in all particulars. 104 Tenn. at 750-51, 59 S.W. at 1041. The court upheld the provision penalizing a foreign corporation by p rohibiting it from doing business in the state. I n addition , the cour

t found:
The subject of this act, as already stated, isthe prohi

bition and

punishmen

t of those transactions which are ca lculated to lessen competiti on in trad

e, or toinfluence the price of either im ported or domestic g oods.
State ex rel. Astor , 104 Tenn. at 741-42, 59 S.W. at 1039. Standard O il

itself involved an out-ofstate corporation that

sold coal oil in this sta

te and wa s convict

ed for itsrolein an arr

angeme nt to reduce competition in this state. See also S tate ex r el Cates v . Standard

Oil Co. of Ky. , 120 Tenn. 86, 110 S.W. 565 (1908), aff’d by Standard Oil of Ky. v. State o f Tenn., e x rel. Cates , 217 U.S. 413,-21-

30 S. Ct. 543 (1910) (prohibiting the same for e ign cor poration from doin g busine ss in this sta te because it violated the Act).
Courts in ot her st ates h ave rel ied up on st atuto ry language in considering the rea ch of the ir states’ antitrust

statutes. For examp le, in Heath Consultants, Inc. , 527 N.W.2d at 606, the Nebraska Supreme Court held that the Nebraska antitrust statute, which prohibited combinations “in restraint of trade or commerce, within this state” appl ied to extra territorial conduct when that conduct affected
consu mers w ithi n the s tate, stati ng:
While there is no showing that any of the conduct about which Precision complains occurred within the territor

ial limits of

this state, the

record nonethel ess infe

rentiall y establishes that the tying a rrangement affected end user s of Heath equipmen

t in Nebraska by d eny ing them the adva ntage o f parts sold in a f

reely competiti ve marke

t.
527 N.W.2d at 606. The cour t conclud ed this evidenced anticompetitive conduct restraining tra de within the state and the statute applied. Id

. See also In re: Microsoft Antitrust Litig. , No. CV-99-752 & - 709, 2001 WL

1711517 (

Me. Super . Ct. Mar. 2 6, 2001) ( holding t hat the Ma

ine antitr ust statute applied to illegal conduct

occurring outside the state that restrains trade or monopolizes any part of the trade or commerce within the state, because the statute used the phrases “in this State” and “of this State” to modify trade or c ommerce, not the illegal conduct).
The Wisconsin Supreme Court determine d in State v. A llied Chem ical & Dye Corp ., 101 N.W.2d 133 (

Wis. 1960), that because the people of that state were entitled to the advantages that flow from free competition, any illegal arrangement re straining trade or affecting price s to those citizens was within the state’s police power to prohibit or punish, r egardless of the fact that the defendants did not operate a manufacturing , sales, or other facility within the state.
We conclude that Tennessee’s antitrust statute is not limited to anticompetitive condu ct occurring withi n the

bound arie s of th

e sta te. We also conclude that it is not limited to transactions betweenthe parties t

hat are predomin antly

intrasta te in character. We also conclude that neither a transaction-b asednor a loc ality -of-ille gal-c onduct ba sed test isappropr iate for determin ing th e scop e of the TTPA. Inste ad, the pr oper tes t must rela

te to th e potential effe ct or impact on commerce within this state of the illegal acts condemned by the statute because s uch a standar d is directly related to the pur

pose of th e Act.
As set out earlier, the courtin Astor indicate d it was the

effec t on trade

or comme

rce in Tennessee that was the determina tiv e facto r in wheth

er the sta tute appl ied. Tha t conclus ion is reinforced

by the court’s a

dditional statements that, “The thing condemned and punished by the Act is injury to trade. The thing protected is trade . . . .” State ex rel. Astor , 104 Tenn. at 741-42, 59 S.W. at 1039. The se comme

nts are c onsistent with the Supr emeCourt’s statement in Standard O il that the “wron gs to trade which were intended to be c orrected and punished were those being perpetrated

against commerce within the state, . . . .” 117 Te nn. at 6 42, 100 S. W. at 7 10. In22 The Co urt spe cifically held that the p laintiffs are not required to make the “ more parti culari zed showing ” that

the anticomp etitive conduct cau sed an effect on interstate co mmerc e. 444 U .S. at 242-4 3, 100 S. Ct. at 509 . The test
enun ciated is:

To establ ish f

ederal j uris dicti on in t

his ca se, t

here remai ns only the re q uirement tha t respond ents’ acti vit ies whi ch al lege dly have be en in fect ed by a pric e-f

ixi ng cons pira cy be s hown “ as a ma tt er of practical economi cs” t o have a

not i nsubs tant

ial eff ect on th e in ter sta te c ommerce i nvol ved.

444 U.S. at 246, 100 S. Ct. at 511. The pleading requir ement has been ref ined, a t least

in some circuits , to require ident if icat ion of th e relev ant as pect of intersta te com merc e. Va lley D ispos al v. C ent. V t. Solid Wa ste M gm t. Dist. , 31 F.3d 89, 94 (2d Cir. 1994).
-22- addition, we note that the criminal sanctions portion of thestatute declares that a violation of either section 101 or 102 is “a conspiracy against trade.” Tenn. Code Ann. § 47-25-101 & -102.
B. Test B ased on E

ffect o n Commerc e Within the State
Those courts examining Tenness ee’s statute under an effects on commer ce test have es pouse d the two st andard s argu ed by the p arties herein: the “predominant effects” standard and the “significant effects” standar d.
Fede ral courts use an ef fects on commerc e test in de

termining whether federa l law is applica ble to an antitrust action. For purposes of establishing jurisdiction under the Sherman A

ct, plaintiffs must on ly d emonstr ate a substantial, or not insubstantial, effect on interstate commerce generated by the defe

ndant’s normal business activity that is infected by

the illegal conduct. McLain , 444 U.S. at 242-43, 100 S. Ct. at 509. 22 In Blake , this court indicat ed the co rrect a naly sis would involve examining whether the alleged illega l actions by defe

ndant s predo minantly affected interstate or intrastate commerce. 1996 WL 134947, at *5. Applying a similar analysis, the inquiry beco mes whether that portion of Mi crosoft ’s busine ss infected by the alleg ed illegal conduct, or whether that illeg al conduct itself: (1) p redomina ntl y affec ts intrasta

te commer

ce as opp osed tointerstate commerce, under the “predominant e

ffects” test, or (2) ha s a substa

ntial eff ect on co mmerce within Tennessee, u nder the “substan tial eff ects” te st.
The predominant effects standard requires the court

to make a determination of whether the
commerce involved o

r potentia lly a ffecte d by the wron gful co nduct is pr edominan tly intrastat

e or interstate. Courts are not unfamiliar with legal standards requiring them to deter mine predominance. See , e.g. , Trau-Med of Am., Inc. , 71 S.W.3d at 702 n.5 (hol ding that to sus tain an action for intentional in fe re nc e w it h b us in es s r el at io ns hi ps , i mp ro pe r m ot iv e m us t b e s ho wn by plainti ff demonstrating that the d efenda nt’s pre dominant purpose w as to in jur e the pla

intiff); City of Chattanooga v. Davis , 54 S.W.3d 248, 270 n.22 (Tenn. 2001) (requiring a determination of whether the predominant “remedial” purpose of a monetar y san ction is ensuring

deterr ence ag ainst wrongdoing); Williams v. Estate of Williams , 865 S.W.2d 3, 5 (Tenn. 1993) (holding that the expressed predominant purpose of a testator prevails, and subsidiary clauses must be c onstrued so as to bring

them into su

bordinat ion to the p

redomina nt purpose ); Hudson v. Town and Country True23 Although Plaintiffs ar gued that the p redo minan t effects test wa s extinct, ina pplic able, a nd intro duc ed into

Tennessee law wit

houtexpl anat ion or

autho rity, they also m aintaine d that the ir claims m et the p redo minan t effects test. We disagr ee. Based upon al legations i n the compla int , it is cl ear th at Microsof

t’s all egedly an t icompeti tiv e conduct
wou ld have had ef

fect s on int

erst ate commerce, as wel l as on that of other stat es. Conf ronted with these all egati ons, we cannot infer that the effects are pred omin antly intrasta te. P laintif fs ha ve off ered no fact

ual al legat ions t

hat t hey are. Plaintiffs’ conclusory allegat ions that Microsoft’ s conduct had sign ificant, substa ntial, and “pred ominan t” e ff ects on tr ade and commerce inside the state of Tennessee cannot suffice f or the absence of even one factual al legation t hat the effects in Tenness ee are predomina nt over t he eff ects n ationwi de.

24 For a dis cuss ion of

the “du al sove reignty” theory that predominate d in earl y st ate ant itr ust ca ses, which s et forth dis ti nct and mut

uall y exc lus ive juri sdic ti onal areas forstate and fe dera l regulatio n, see A bbo tt Lab s. v. Du rrett , 746 So. 2d 316 ( Ala. 1999) and Archer Daniel s Midl and Co. , 746 So. 2d at 987- 88.

-23- Value Hardware, Inc. , 66 6 S.W. 2d 51 (Tenn. 1984) (adopting and apply ing the test for the ap plication of the Un

iform Comme

rcial Cod e as depe nding on whether the pred ominant a ss ets t o be transferred are g oods or services).
“Predominant” is a relative term; whether something is predominant ca n only be determined in relation

to other th

ings; it isgreat

er or sup erior in

influence compared to other factors. Dillard
v. City of Gre ensboro , 946 F. Supp. 946, 955-56 (M.D. Ala. 1996 ); Matthews v. Bliss , 39 Mass. 48, 53 ( 1839). Consequently, we a gree that “[a]n action cannot be both predominantly inter state i n nature a nd predo minantly

intrasta te in natu re; it must

be one or the other.” Emergency One , 23 F. Supp. 2d at 967. 23

The Lynch dec ision has been interpreted by some courts as introducing the predominant effec ts test into Tennessee law. Howeve r, the co urt in Lynch actually mentioned the e ffect on intrastate commerce as only incidental to the in ter st ate nat ure of t he t ran sac ti on. It is a significant leap to transla

te “not incidental” to “predominant.” Thus, to the extent Lynch set a standard based
on the effect on c ommerc e within the state, that standard can only be interpreted as requiring something more than an incidental effect. It was in the unreported decision in Blake that this court indicatedthat plaintiffs could only proce ed under the TTPA if they could show that the alleged anticompetitive conduct affected predominantly intrastate, as opposed to interstate, commerce. According to Plaintiffs, Lynch and subsequent ca ses have mechanically applied the “predominant

vs. incide

ntal e ffect s” test, with no discussion of the impact of current Commerce Clause analysis on the eff

icacy of this test for state court

jurisdict ion. I ndeed, a t the time Standard Oil was decided

and into the middle of the twentieth century , a dichotomy or dual sover eignty the ory prevailed pres umin g mutually exclusive jurisdiction for state a nd federal regulation. 24 However, state antitrust laws are now considered supplementary and complementary

to federal laws and enforcement

of state l aws cons istent with the purpo ses o f fede ral legislation. ARC America , 490 U. S. at 101-02, 109 S. Ct. at 1661. Plaintiffs’ position is supported by judicial analy sis of the issue: Framing the issue as one of predominance t hus becomes a way

of reintroducing f ederal preemption of state antitrust law - a result consistently rejected by t h e Supreme Court. Congress intended the federal antitrust laws to supplement and not25 The Alab ama Sup reme Co urt reje cted th e con clusion of the S even th Circ uit in In re Brand Name Prescr ipt ion Drugs rega rdin g th e scope of the Ala bama anti trus t st atut e and held t hat t he scope was exactl y the same today as it was when the statute w as pa ssed. Archer Daniel s Midl and Co. , 746 So. 2d at 987- 88.

26 See also Da vid W . Lam b, N ote, Avoidi ng Impo tence: R ethinking the Stan dard s for App lying State A ntitrust Laws to Inter

stat e Comm erce , 54 V AND

. L. R EV . 170 5 (2 001 ).
-24- displace state regulation. . . . Further, a standar d which re sults in t he mutually exclusive application of state and federal antitrust law is contrary to Congressional intent an d Supreme

Court pre cedent. Emergency One , 23 F. Supp. 2d at 967-68 (citations omitted).
The cases on which the defendant s rely . . . date f

rom a per iod in which, inters tate commerce being narrowly de fined, a nd federal power to regula te such commerce being deemed e

xclusive, . . . a state

statute limited to intrastate commerce would have some, albeit a strictly limited, scope and c o uld not have a greater scope no matter how much the s tate wan

ted it to. T

he case s thus wer

e not inte rpreting the statu te ; they were interpreting the Constitution as placing upp er and low er bounds on the reach of the statute, and the Constitution has since been reinterpr eted.

In re Brand Name Prescription Drugs Antitrust Litig. , 123 F.3d at 612-13 (citations omitted). 25 Authors o f learned artic les have also acc epted the

premise a

rgued by Pl aintiffs : At various times, many state cour ts concluded that their jurisdiction was limited to activities that

either were not involved in interstate commerce or w hich had no effect
on interstate commerce. Many of those decisions -- at least those based on perceive d li mi ts im po se d u po n t he st at es by fed er al la w - - a re of du bi ou s v it al it y to da y.
For a half century

after the Sherman Act’s passage , courts and many c ommentators adopteda rather

facile distinction between the proper jurisdictional limits of federal and state antitrust law. Federal law applied t o rest raint s that were ‘i n or aff ectin g’ intersta te commerce. State law, on the other hand, applied t o purely ‘local’ restraints.
* * * *

In other wo

rds, the c lassific ation of r estraint s [of trade ] as purely intrasta te and thus within the exclusive jurisdiction of state antitru st, or interstate and thus within the exclusive domain of federal law has long since passe d. . . . Hovenkamp, supra , 58 I ND

. L. J. at 376. 26

These statements accurately

describe and explain the T enness ee Supreme Court’s holding in Stan dard Oil . The Court strove therein to interpret the statute in a way that would m ake i t27 The preambl e to t he 1903 Act , whi ch was iden ti cal to that of the 1897 Act , prov ided:

An act to d eclare unlawfu l and v oid all arrangemen ts and contrac ts, agreements, trusts or combinations made with a view to les sen, or which tend to le ssen f ree competi tion i n the i mportati on or sal e o f arti cles impo rted into this state; or in the manuf actu re or sal e of

arti cles of

domestic growth or

of raw mate rial; to declare unlawful and void all arrangements, contracts, agreements , trust s or combinations b etween persons or corporati ons desi gned, or wh ich t end to advance, reduce or cont rol the price o f such product or articles t o produce r or c onsume r of any such product

or ar ti cles ; t o provi de for forfeit ure of the ch arter an d franc his e of a ny corporat ion, or ganized un der the l aws of t his s tate , violati ng any of the p rovisio ns of this act; to prohibit every foreign corporati on, violati ng any of the provisi ons of t

his ac t, f rom doing busi ness i n thi s st ate; to r equir e th e Att orney General of this state to institute legal p roce eding s agains t any such corp oratio ns viola ting the p rovisio ns of this Act, and to enforce the penal ties prescri bed; to pres cribe penal ties for any viol ation of the act; to aut horize any person or co rpo ration d ama ged by any su ch trust, agreement or combination, to sue for t he recovery of such dam ages, and for o ther purpo ses.
1903 Te nn. P ub. A cts, ch. 1 40 § 1; see al so State e x rel . Ast

or , 104 Tenn. at 722, 59 S. W . at 1034 (quoting the prea mble to the 1897 Act). -25- constitutional under the

n prevai ling law . It c onsidered the boun ds of the s tatute to b e limited o nly by restraints originating in the United States Constitution. It attributed intent to the legislature based upon th e p re su mp ti on th at th at bo dy d id not intend to e nact a st atute tha t was viola

tive of tho se re straints. The Court was interpreting the Constitution. Most significantly , it held tha t th e legislature“did not intend to stop s hort o f its p ower or to e xcee d it.”117 Te

nn. a t 643, 100 S. W. at 711.
The Court in Standa rd Oil did not base any limitations in the statute’s application on the la nguage of the Act itself. There is good reason for that, as the language containsno suc h limitations

. The language of the stat ute is broad and does not e vidence an intent to limit its application. Nowhere in the statute do the word s “predominant” or “intrastate” appear . The legislatureclearly intended to prohibit arrangements tendi ng to lessen free competition in “the importation or sale of articles imported into this state” and tending to affect the price to “produc er or consumer” of “s uch prod uct or articles.” From the languag e of the statute itself, including the original preambl e 27 , we simply cannot conc lude that the legislature intended to limit the application of the statute geograph

ically other than the effect on competition and prices in Tenne ssee. Limita tion in its sc ope would

not further the e

xpressed purpose of

the Act. Thus, the only limitation placed on the scope of the statute has been a judicial one, impelled initially by feder al interpretations of U.S. Constitutional provisions, the Supremacy Clause a nd the Commerce Clause. I

t is well se

ttled that courts ha

ve a duty to constr

ue a stat ute t o avoid a constitutional conflict. State v. B urkhart , 58 S.W.3d 694 , 697-98 (Tenn. 200 1). Courtsshould adopt the plaus ible c onst ructi on th at avo ids u nderm inin g t he statute’s constitutionality. Davis-Kidd Booksell ers, Inc. v. McWhe rter , 866 S.W.2d 520, 529-30 (Tenn. 1993). We must presume that an act of the legislature is constitutional. State v. Robinson , 29 S.W.3d 476, 479 (Tenn. 2000).28 A stat e’s power to regul ate i nters tate commerce is s til l li mited in some situations; for example, by the

limit ations on th e ext

rat erri tori al powe rs of

state gove rnme nt. See K-S Pharmacie s, Inc. v. Am. Home Prods . Corp. , 962 F.2d 728, 730 (7t h Cir . 1992) (hol ding tha t a s tat e cann ot regula te sales tha t take p lace w holly ou tside it). See also H eath Co nsu lt ants , 527 N.W .2d a t 606 (giving e xam ples o f pree mptio n or ina pplic ability of state antitrust law s, gene rally describing them as sit

uations involvi ng national organizat ions alr eady subject to federal l egislation or national governing bodies). Some courts h ave appli ed the t est promul gated by t he U. S. S upre me Court in Pike v. Bruce Church, Inc. , 397 U.S. 137 , 90 S . Ct. 84 4 (1 970 ), that is, “W here th e statute re gulates e venh and edly to effectua te a legitim ate loc al pub lic interest, and its e ffects on interstate c omm erce a re on ly inciden tal, it will be up held unless t he burden imposed on s uch commerce is c learl y exces sive i n rela tion to the put ativ e local benefi ts.

. . .” Id

. -26- It was these already

established principles that framed the Tennessee Supreme Court’s decision and language in Standard O il , and the only restriction placed o n the statute’s broad langua ge was Congress’s exclusivepower to regulate interstate commerc e. We agree with Plaintiffs and with the trial court that the Standard Oil court’s primary conc ern was ensuring that Tennessee law was construed to reach as far as possible within the confines of the Constitution. Recodifications and amendments subsequent to Standard O il have not altered the sections of the TTPA defining the offenses and, conseque ntly, the scope of the statute. Rather, it is judicial interpretation of the authority of states to ena ct and enforce antitrust statutes even where intersta te commerce is involv ed that has changed or evolved since our Supreme Court last considered the scope of the TTPA. Under now well-established principles set out earlier, neither federal law nor federal interpretation of the United States Constitution precludes state antitrust laws from reaching anticompetitive conduct t

hat aff ects inte rstate c ommerce

but also ha s su bstantial e ffects o n intrasta te commer ce
. 28 Limitations on such authority are much less restrictive; state antitrust laws reach acti vities in or aff

ecting intersta te commer

ce, and there is a

n overla p betwee n feder al and sta t e antitrust au th or it y. Hovenkamp, supra , 58 I ND

. L. J.at 376. Con sequentl y, “ [s]tate cou

rts freq uently
use state an

titrust law s to conde

mn acti vities occurr

ing outsi de the sta

te if the v

iolation ha s a sufficient effect within the state so that the state may justifiably

assert its own law. ” Hovenkamp, supra , 58 I ND

. L. J.at 382.
We can find no basis for a requireme nt that the illega l conduct predomin antly

affec t intrasta

te commerce. As the court in In re Brand Names Prescrip tion Drugs A ntitrust Litig . found, limiting
a statute today to outdated

concepts of Commerce Clause jurisprudence would make state an titrust laws ineffective because there are “virtually

no sales . . . in the United States, that are intrasta te in that sense.” 123 F.3d at 613. Such aninterpretation would be inconsistent with the purpose of the statute.
Becau se the legislature put no words in the statute limiting its application to conduct predomin antly

affecting intrastate commerce , bec aus e our highest court has determined that the legislatureintended the scope of the statute to extend as far as allowe d b y the United States Constitution, and bec ause the allowable scope has greatly expanded, we conclude that Tennessee’s Trade Practices Act applies to illegal conduct that substantially a ffects commerce within this state.29 Th is is the same test used by feder al cou rts to de termin e if the Sh erma n Ac t can b e app lied to a primari ly l ocal restraint of trad e. Mc Lain , 444 U.S. at 510, 100 S. Ct. a t 244. It is al so the approac h taken with regard t o the Sherman Act’s applicat

ion to an ticompet iti ve conduct occu rrin g outsi de thi s countr y. “ [I]t is wel l est ab lished by no w that the Sherman Act applies to forei gn conduct t hat was meant t o produce and did in fact produce some substantial effect in the United Sta tes. ” Ha rtford F ire Ins. C o. v. C al. , 509 U. S. 764 , 795, 113 S. Ct. 2891 , 2909 (199 3). -27- That is the generally

accepted test for application of s t ate antit rust laws

. 29 Emergency One , 23 F. Supp. at 969 (holding that a standard extend ing the scope of the Wisc onsin antitrust stat ute to unlawful activity which ha s significantly a nd adversely

affected trade and competition in the stat

e is consistent with judicial interpretations of the scopeof fede ral antit rust law as we

ll as the pu

rpose of the state statute) ; Hoven kam

p , supra , 58 I ND

. L. J. at 387 ( “ . . . one must look at the state’s interest sought to be protected. That interes t is measured i n part by examining the e ffect that the transaction had within the state or upon the people whom the state protects”)

. Plaintiffs have alleged that Mi crosoft monopolized the Intel-compatible PC operating sy stem software market and that, as a result, Plaintiffs andother purchasers of Windows have paid higher prices than they would have in a competitive mar ket fre e of Micr osoft’s a lleged illega l conduct

. They also alleged that

Microsoft sells or

license s its opera

ting sy stems soft

ware thr oughout the State of Tenness ee, that

Microso f

t has profited substantially by the sale and licensure of its operating sys tems to Tenne sseans, a nd that Mic

rosoft’sconduct h as had the following

substantia

l advers e effec ts on commerce inside the State of Tennessee: (1) Com p etition between actual and potential competitors in the Tennessee market for I ntel-compatible PC operating systems has been re strained, eliminated and foreclosed; (2) Actual and potential competitors in the Tennessee market

have been i njuredin their business and their property ; (3) Purchasers, including indirect purchase rs, i n th e Tennessee mar

ket have been deprived of the benefits of a fre e, competitive, innovative, and unrestr ainedmarket; (4) Purchasers, including indirect purc hasers, in the Tennessee market have h a d to pay a rti fic ial ly hi gh a nd n on- com pet it iv e pr ice s; and (5) In place of a free, open and c ompetitive market, a monopoly in the Te nnessee market has been maintained.
Similarallegations have been found sufficient to sustain actions under other state’s a ntitrust laws. In re Terazosin Hydrochloride Antitrust Litig. , 160 F. Supp. 1365 (holding that def endants’ anticompetitive acts had

a signif ic ant and adverse impact on consumers in the state, forcing them to pay artific ially high price s in a nationwide conspira cy to fores tall compe

tition); In re Cardizem CD Antitrust Litig. , 105 F. Supp. 2d 618 (holding that an alleged antico mpet itive agreement had significant

effec t on price

competiti on in the st

ate); Unite d Stat es v. Mic rosoft Corp. , 87 F. Supp. 2d at 55 (“assuming that each of those [19] states has, indeed, expressly limited the application of its antitrust laws to activity that has a significant adve rse effect on competition within the state or is other contrary to state interests, that element is manifestly pr oven by the facts presented here. . . .”) ; Allied Ch emical &

Dye Corp , 101 N.W.2d at135 (holding that the public interest and welfare of the peopl e of that state are substantially affected if prices of a product are fixed or supplies thereof are restricted as a result of an illeg al arrangement). See also In re S. D. M icrosoft A ntitrust

Litig. , 657 N.W.2d 668 ( S.D. 2003) (upholding cert ificatio n of clas s of in direc t purchasers who alleged Microsoft’s monopolistic conduct eliminated competition in the oper ating sy stem softw are mar ket,-28-

deprivedpurchasers of

the benefit of a f

ree mar ket, and forc ed them to

pay artific ially

high pri ces, and finding the consumers met their threshold of showing ha rm).
We conclude that Plaintiffs have sufficiently alleg ed substantial effects on commerc e within this state to state a claim under the TTPA.

V. Indirect Pu

rchase r Standing

Under the TTPA
The trial cou

rt here in determined that indirect purchas ers coul d sue unde r the TTPA

because they could not sue under federal law. While we agree that indirect purchase rs are persons within the Act’s provision

on privat e remed ies, we do soon the basis of our reading of that statute, not on the basis of Standard O il

. We have a lready determin ed that Standard O il

limited the scope

of the TT PA only to the extent of federal Constitutional restraints, but we conclude that holding is related to the scope of the statute defining the offense, not to the provision es tab li shi ng t he r igh t t o re med y. In other wo rds, we a ffirm the trial cou rt’s holding, but f

or diffe rent re asons.
In 1977, the

United Sta

tes Supre me Court he

ld, in Illinois Br

ick Co. v . Illinois , 431 U.S. 720, 97 S. Ct. 2061 (1977), that indi rect purchasers have no cause of a ction pursuant to federal law because they suffer

no legally

cognizable injury. Section 4 of the Clayton Act allows suit by

a party “injuredin his business or property,” a nd the Court rea

ffirmed its holding in Hanover Shoe, Inc. v. United Shoe Mach. Corp. , 392 U.S. 481, 88 S. Ct. 224 (1968) that“the overcharged direct purchaser, and not others in the chain of manufacture or distribution,” is theparty suffe ring that injury. Illinois Brick , 431 U.S. at 728, 97 S. Ct. at 2066. Thus, the Court determined that direct purchasers suffer the entire in

jury that is a c onseque

nce of vi olation of

federa l antitr us t laws and could collect the entire overcharge.

In Hanover

Shoe , the Court

had rejected a defense to an a ntitrust claim based on the theory that the direct purchaser had suffer ed no real injury

because any

illegal overcharge

had been passed
on to the ult

imate customers or consumers. The Court held that direct purchase rs could pursue antitrust claims re gardle ss of whether they had absorbed or passed on the overcharg e resulting from
a nti-competitive conduct. The Court in Hanover Shoe reasoned that to hold otherwise woul d complica te treble-damages actions with attempts to trace the effects of the ov erchar ge on the pu rchaser’s prices, sales, c osts, and p rofits. T he court also was c oncerne

d that unle ss direc t purchasers were a

llo wed to sue for the portion of the overcharg e arguably passed on to indirect purchas ers, antitrust

violators “would retain the fruits of their illegality ” because direct purchaser s “would have only a

tiny stake in the lawsuit” and he nce little incentive to sue.

In Illinois Brick , the Court reaffirmed Hanover Shoe and determined that the pass-on theory could not be usedoffen sively

by indirect

purchas ers cla

iming the illega l overch arge w as actua

lly passed on to them. Illinois Brick , 431 U.S. at 728-29, 97 S. Ct. at 2066. The Court stated:
We decline

to abandon the construction given § 4 [of the Clay ton Act] in Hanover Shoe that the overcharged direct purchaser, and not others in the chain of manufactureor distribution, is the party “injured in his business o

r proper ty”within-29-

the meaning of the section in the ab se nce of a convincing demonstration that the Courtwas wrong in Hanover Shoe to think that the effectiveness of the ant itru st treble-damages action would be substantially reduc ed by adopting a rule that neither party in the chain may sue to r ecover the f

raction of the ove

rcharg e alleg edly absorbe d by

it.
Id. 431 U.S. at 728, 97 S. Ct. at 2066.
The Court expressed concern that allowing offensive use of the pass-on theory w ould create: (1) the risk o f mu ltipl e liability for the defe ndant, i.e., recovery

by both the direct and indirect pur chasers of the en

tire ove rcharg e; (2) dif

ficulty in apport

ioning th e respon sibility

for th e overch arge among those in the chain of dist rib ution; and (3) lack of incentive for the direct purchasers to sue. In add ition, the C o urt was concerned that allowing suit by indirect purchasers would lead to highly c omplex litigation because of the necessity of determ ining the proportion of the overcharge that was passed on to indirect purchasers. Id . 431 U.S. at 732, 97 S. Ct. at 2067-68. [T]he principal basis for the decision in Hanover Shoe was the Court’s perception of the uncertainties and difficulties in analyzing price and output decisions “in the real economic world rather than an economist’s hy pothetical model,” and

of the co sts to the judicial system and the eff icient enforcement

of the antitrust laws of attempting to recon struct tho se decis ions in a c ourtroom

. Id

. 431 U.S. at 731-32, 97 S. Ct. at 2067 (citations omitted). The Court reaffirmed the direct purchaser rule in Kan. v. Utilicorp United, Inc ., 497 U.S. 199, 110 S. Ct. 2807 (1990). Clearly Illinois Brick

addressed only f

ederal law. In Cal. v. ARC Am. Corp. , 490 U.S. 93, 109 S. Ct. 1661 ( 1989), a

case involving claims of

a nationwide consp iracy

to fix ceme

nt price s in violation of the Sherman Act and a number of state antitrust laws, the plaintiff direct purchasers objectedto pay

ment to indi

rect pur chaser s any

porti on of the se

ttlement f und, arg uing tha t claims by indirect purchasers under state antitrust law wer e preempted by

fed eral law a nd that allowing indi rect purchasers a cause of action under state antitrust laws would frustrate federal law . Th e Supreme Court held otherwise and madeclear that states are free to determine the issu e themselves.
It is one thing to consider the congressional policies identified in Illinois Brick and Hanover Shoe in defining what

sort of re covery federa l antitrus t law authorizes; it is something altogether different, a nd in our view inappropriate, to consider them as defining what federal law allows States to d o under th eir own antitrust law. As construedin Illinois Brick , § 4 of the Clayton Act authorizes only direct purchasers to recover monopoly

overcharges under federal law. We construed § 4 as not authorizing indirect purchasers to recover under federal law because that

would be contrary to the purposes of Congress. But nothing in Illinois Brick su gge sts that it would be contr ary to congressional purposes for States to allow indirect purchasers to recover under their own antitrust laws.30 In Com es v. M ic rosof t Corp. , 646 N.W.2d 440, 448 (Iowa 2002), the Supreme Court of Iowa s tate d that ninet een states, the Distri ct of Columbia, and Puerto Rico hav e adopted st atut es expres sly authori zing s uit s by i ndirect purchase rs, cit

ing st atut es f rom Cal if

orni a, Hawa ii , Il li nois , Kans as, Maryla nd, Michigan, Minnesota, New Mexico, New Yo rk, So uth D ako ta, W iscon sin, and the D istrict of Co lumb ia. -30- 490 U.S. at 103 , 109 S . Ct. at 166 6. The Court re-emp hasiz ed thi s hol ding, stati ng, “When viewed pr op er ly, Illinois Brick

was a decision construing the federa l antitrust laws, not a decision defining the interrelationship between the federal and state antitrust laws.” Id . 490 U.S. at 105, 109 S. Ct. at 1666. The Supreme Court decl ined to impo se on states the policy, desig ned to further federal antitrust legislative purposes, of deterring violations by simplifying litigation. Thus, states ca n, but are not required to, provide a remedy to indirect purcha sers unde r state la w. Whethe

r to do sois a policy decision left to the legislature. See Mack v. Bristol-M yers Squi bb Co ., 673 So. 2d 100, 108 (Fla. Dist. Ct. App. 199 6) (st ating “issues such as whether deterr ence, compensation, or efficient judicial a dministra tion should

be promoted by antitrust laws a nd whether and to what extent these goals can or should be ha rmonized a

re funda mental po licy

decis ion s for the legislature of each state”).
After Illinois Brick , a number of states am

e nded their antitrust laws to specifically cover indirect purchas ers. 30 In those state s adop ting “ Illinois Brick repealer statutes,” the legislature has clearly expressed its intent, and courts have interpreted those statutes as allowing indirec t purchasers to sue under state law. See, e.g. , Union Carbide Corp. v. Su perio r Court , 679 P.2d 14 , 17 (Cal. 1984) (observing that “California’s 1978 amendment . . . in eff ect incorporates into the Cartwright Act the view of the dis senting opinion in Illinois Brick

that indirect purchasers are persons ‘injured’ by illegal overcharge s passed on to them in th e chain o f distribu

tion”); A&

M Supply C

o. v. Mic rosoft Corp. , 654 N.W.2d 572, 595 (Mich. Ct. App. 2002) (holding that Michigan’s adoption of an Illinois Brick repealer lawin co rp or at in g “ di re ct ly o r i nd ir ec tl y” langua ge to de scribe th

e injury allowed s uit by d irect or

indirec t purcha sers); In re Microsoft Antitrust Litig. , 2001 WL 1711517, at *2 (Me

. Super. Ct. Mar. 26, 2001) (hol ding that the passage in Maine of an Illinois Brick repealer in 1989 reflected an intent to fill the gap that prohibited indirect purchaser suits and referring to legislative hist ory menti onin g ARC America ).
Some state legislatures have all owed an a ction on be

half of indirect purchasers but limited that right. See, e.g. , Gaebler v. N.M. Potash Corp. , 676 N.E.2d 228, 230 (Ill. Ct. App. 1996) (holding that the Illinois Antitrust Act’s provision that “no person other than the Attorney Ge

neral of this State shall be authorized to maintain a class action in any c ourt of t his Stat e for indirect purchasers asserting claims” precluded private pla int iffs ’ class action on behalf of indirect purchasers); Davidson v. Microsoft Corp. , 792 A.2d 336, 341 (Md. Ct. App. 2002) (noting that the legislaturehad rejected a bi ll that would have repealed the Illinois Brick

principle as to all plaintiffs bu thad, inste ad, late

r passed a limited a

mendment

allowing gover nments to su e rega

rdless o f whether they dealt “d irectly or indirectly ” with the

violator) ; Siena v. Microsoft , 79 6 A. 2d 6 41 ( R. I. 2002) (noting

Rhode I sland ant

itrust sta tute limite d right t

o brin g damages act

ion on behalf of indirec t purcha sers to At

torney Genera l as parens patriae ).-31-

Tennessee has not adopted an Illinois Br i ck repealer amendment. Some courts have considered

their sta te legislature’s failure to enact spec ific legislation addressing indirect purchasers after Illinois Brick in determining legislative intent. See , e.g. , Vacco v. Microsoft Corp. , 793 A.2d 1048, 1059-60 (Conn. 2002) (stating thecourt was mindful of Illinois Brick repealer bills that

had been introduc ed in the s tate legislature but never e nacte d, setting out statements from legislative history of those attempts, and acknowledg i ng “the inferential value of fa iled attempts to amend existing laws with respect to the intent of the legislature to a c quiesce in prevailing judicial interpretations of

such law s”); Davidson , 792 A.2d at 341 (stating that a 2001 unsuccessful attempt to amend the statute to permit suits by private pa rty indirect pur

chaser s was consistent with the court’s conclusion that only gove rnmental indirect purchasers could sue, but pointing out that mere introduction of a bill does not establish legislative intent).
This court addressed the same situation in Blake v. Abbott Labs., Inc. , and held:
To support their position that a similar restriction [the Illinois Br i ck preclusion of indirect purcha ser cla

im s] is applicable to actions under the Tennessee Trade Practices Act, [defenda

nts] assert that The General Assembly of Tennessee on three occasions has sought to pass legislation to expressly confer standing on indire c t purchas ers. We simply note that proposed legislation, not enacted, has no consequencewhatever upon the interpre tation of an existing statute. While such proposedlegislation may indica te to some extent some of the individ

ual leg islators’ interpretation of an existing statue, it is in no way controlling or, for that

matte r, releva nt, to the c ourt’s du

ty to properl y c onstrue s tatutes.
Blake , 1996 WL 134947, at *3.
This conclusion regarding the ef fect of failed efforts to amend legislation appears contradictory

to that expressed by this court in Forman , which involved the question of whether worker’s compensation insurance was a product or article under the TTPA. This court relied on the Tennessee Supreme Court’s decision in McAdoo Contractors, Inc. v. Harris , 222 Ten n. 623, 439 S.W.2d 594 (1969), that claims of restraint of trade i n the bidding and award of construction contracts could not b e broug ht under t he TTPA because that

statute a pplied to a

rticles, not servi ces, to find that insurance was not an article.
We also noted that

after the McAdoo decision, many attempts had been made in the General Assembly to expand th

e scope o f the TTPA , includin g one in 1978 to add “ser

vices” to § 47-25-101. None was succ essful. T

his court relied o n the principle th at failure of the le gislatu

re to expr ess disapproval of

a judicia l constru ction of a

statute ispersuasive evidence of legislative a doption of the judicial construction, as expressed in Hamby v. McDaniel , 559 S.W.2d 774, 776 (Tenn. 1977). Alth ough this court acknowledged that unsucce ssful attempts at legislation are not the best guides to legislative intent, it also notedthat cou rts have held that nonaction by a legislative body

may become significant

where proposals for legislative change have been repeatedly rejected. Forman , 13 S.W.3d at 373. The court noted that if the statute were intended to be as br

oadly applica ble as argue d, there

would simpl

y ha ve been no need f or the at tempts to a

mend it.-32-

Any appar

ent conflict between Blake and Forman on the significance of legislative failure to amen d is exp lained in the con text of the case before us. While the Hamby principle remains good law, see Storey v . Nichols , 27 S.W.3d 88 6 (Tenn. 2000), it i s appli cable wher e there has been a judicial interpretation of the statute at issue. In Forman , the highest court in this state had interpreted specific language of the TTPA; when a nother request to interpret that same languag e presented itself, the court was entit led to pre sume that t

he legi slature’ s inaction

indicate d agreement wit

h the prior interpretation.

In Blake , however, the court consi dered t he Tenn essee l egisla ture’ s inac tion in ame ndin g a state statute in reaction to a federal court interpre tation of a federal statute. The effect of the Illinois Brick ruling on state statutes was not c larifie d, in ge neral, u ntil ARC America , and, in specific , until rulin gs on each

state’s s tatutes. Thus, we cannot presume that the Tennessee leg islature considered Illinois Brick to affect the state’s antitrust act or that any amendment

was necessary . We assign no specific legislative intent to the failure to enact an Illinois Brick repealer.

In states wh

ere th e legislature has not adopted a statute in response to Illinois Brick , state courts have searched the langua ge of the s t ate antitrust statutes for other indications of the legislature’s intent regarding indirect purch asers. Many have f ound t hat in tent i n langu age directing how the state statute is to be interpreted, particularly language directing

harmony with fede

ral court interpretations of federal law.

In Major v. Microsoft Corp. , 60 P.3d 511 (Okla. Ct. App. 2002), the court found dispositive langua ge in the Oklahoma Antitrust R

eform Act (1) des cribing

those persons entitled to relief under the state statute in almost identical terms as federal law, the Clayton Act, “any person who is injured in his or her

business o

r proper ty b y a violatio n of the ac t,” and (2) the controlling section of the Oklahoma

Act stating that the provisions of that act “shall be interpreted in a manner consiste nt with FederalAnti trust Law 15 U.S.C. § 1 et seq. and the case law applicable thereto.”60 P.3d at 513. Th e c ou rt in te rp re te d t he se tw o s ec ti on s a s r eq ui ri ng it to ap pl y Illinois Brick

. Id.

In Vacco v. Microsoft Corp. , 793 A.2d 1048 (Conn. 2002), the court found determinative a 1992 amendment to that state’s antitrust act directing that the courts be “guided

by interpreta

tions givenby the fede

ral courts to federal antitrust statutes.” Id

. 793 A.2d a t 1056. Af

ter car eful ana lys is of Illinois Brick

and other federal cases re levant to the issues raisedin the case before it, the court determinedthat allowing only those consumers who purchase directly from the antitrust defendant to bring suit ensured harmony between the state act and federa l statutes. The cour t distinguished
cases from other states, including Tennessee, on the basis that those state statutes did not require that their state courts interpret those statutes consistently with federal interpretation. Id . 793 A.2 d at 1059; see also Siena , 796 A.2d at 461 (explaining that Rhode Island statute required construc tio n in harmony with judicial interpreta tions of comparable federal antitrust statutes).

In some states, the courts have had more than one indication of legislative intent or used more than one factor in their analy sis. For example, in Sti ffle ar v. Bristol-Myers Squibb , 931 P.2d 471 (Col. Ct. App. 1996), the court construed its antitrust statute to preclude direct actions by indirect purchasers because: (1) the Colorado statute was modeled on the fe deral statute; (2) the Colorado31 It appears the Ari zona Supreme Court h as grant ed review of thi s case. -33- Supreme Courthad previously held that the state act should be interpreted consistently with federal antitrust law; (3) a 1992 re-enactment directed Colorado courts to use as a guide federa l court interpretations of federal law; and (4) the same re -enactment only pa rtially repea

led the indirect purchaser preclusion by giving standing to gov ernm ental entities injured “either directly or in di re ct ly. ” The court also shared the same concer ns expressed by the Supreme Court in Illinois Brick regard ing disincentive to private enforcement and diff iculties in apportioning alleged overcha rges. Id . at 476; see also Davidson v. Microsoft Corp. , 7 92 A.2d 336, 341 (Md. Ct. App. 2002) (ho lding tha

t Illinois Brick

applied in that stat

e becau se of lan guag e inthe Mary land statu te that directed the courts to “be guide d by feder al court interpretations of federal antitrust statutes,” because of prior cases using federa l authority in interpreting

the Maryland a

ntitrust statute, and based
on the legislative history of the act, including adoption of a right fo r only gove

rnmental indirect purc hasers to sue); Elkins v. Microsoft , 817 A.2d 9, 18 (Ver. 2002) (discussing the holdings o f various states under their antitrust statutes and their consumer protection statutes).
The Tennessee act includes no se ct io n d ir ec ti ng th e c ou rt s’ in te rp re ta ti on . M or e s pe ci fi ca ll y, the Tennessee legislature has not included any ref er ence to federal antitrust law and fede ral interpretations of

th at la w. Co ns eq ue nt ly, the cases listedabove a re usef ul primar ily t o distinguish their analy sis from the one ap

propria te in this case. M ore rel evant to ou r inqu iry, alth ough still only persuasive authority , are those decisions by other courts that do not depend upon either an Illinois Brick repealer or mandatory

direction on interpretation. Among those is the consideration of the issue in Bunker’ s Glass Co. v. Pilkingt on PLC , 47 P.3d 1119 (Ariz. Ct. App. 2002). 31 Arizona’s antitrust statute was en acted in 1974 by adoption of the Uniform State Antitrust Act. The legislature adopted the portion of the uniform statute requiring construction effectuating the ge neral purpose of makingthe law uniform among the states enacting the unifo rm law . Howe ver, t he legi slat ure added a provision that the courts “may ” use as a guide interpretations given by

the federal courts to comparable fe deral antitrust statutes. The court found that the leg islature ’s use of

the word “may” did

not require it to follow federal interpretations and, consequently, it was not bound to follow Illinois Brick . 47 P.3d at 1126-27. Acknowledgingthat the provision encouraged Arizona courts to rea ch int erpretations consistent with those

of federal courts, the court found it significa nt that the state statute was adopted before the Illinois Brick

decision and, at that

time, indirect purchasers could bring actions under the Sherman Act according to law prevailing in that circuit. Cons equent ly, the court found that the legislature’s fa ilure to s pecifically a uthorize indirect purchaser claims could not be interpreted as indicating its agreement with Illinois Brick

. The court concluded that the statute’s gra ntof a cause of action to “any person . . . injured in his business or property” a pplied to individu al consum ers and c ould

not be interpreted to exclude those individual consumers who were in direct purchase rs. Given

the public

policy of the sta

te-34-

agains tanticompetitive conduct, the court determined the statute mu st

be liberally construed to carry out its purposes. Thus, the court found that “a person” includes indirect purcha sers.
Si mi la rl y, in Comes v. M icrosoft , 646 N.W.2d 44 0 (Iowa 2002), the cour t determined that Iowa’s harmonization provision did not require Iowa courts to interpret

its state antitrust statute the
sameway as f

ederal courts interpreted feder al antit rust statutes, particularly since that provision stated such har

monizatio n “shall not be made in su ch a way as to cons titute a de

legati on of stat

e authority to the federal government.” The court found th e p ur po se of

th e p ro vi si on wa s t o a pp ly a uniformstandard of conduct, not to require the state to define who may sue in sta te court s the same way federal courts decided who could bring an action in federal courts. The court found that the langua ge of its antitrust stat ute providing a remedy

to a person who is injured by conduct prohibited by the act did not restrict the class of persons e ligible t o sue to direct purchasers. “Given the clea r, broadlanguage of the

state antitrust law, we conclude [it] creates a cause of action for all consu mers, regardless of one’s technica l status as a direct or indirect purchaser.” 646 N.W.2d at 445.

I n Hyde v. Abbott Labs., Inc. , 473 S.E.2 d 680 (N.C . Ct. App. 1 996), the court held that a 1969 (pre - Illinois Brick ) amendm ent to the North Carolina statutes adding “if any pe rson shall be injured” to the previous language g ranting a cause of action “ if the bus iness of any per son be . . . injured” indicatedan intent to establish a private cause of action for any person injuredby a violation of the act, including primarily consumers, and that there was no basis to conclude that the legislature intended to exclude consumers who were indirect purchaser s. Id . at 683-84. The court found the legislaturehad intended to expand the class of person w ith standing to sue to include any person suffering an injury , regardless of whether that pe rson purchased directly

from the wrongdoer. Although interpreting a consumer protec tion statute rather than anantitrust state, the court in Elkins , 817 A.2d at 12-13, found that th e statute

contained no privit

y r equirem ent and th at it expressly stated that any consume

r, defined as ‘a

ny person’ w ho suffers an injury , may bring an action. T he court concluded that any

consumer

or any person included indirect p urchase rs.
While decisions from other states provide insight into the issues involved, our decision must be based on

Tenness ee’s sta

tute. Tha t statute makes unla

wful all a rrang ements te

nding to l e sse n competition in the importation or sale of imported and domestic articles or tending to aff ect the price “to the producer or consumer ” of su ch goods. Tenn. Code Ann. § 47-25-101 (emphasis added)

. Si mi la rl y, price f

ixing ag reemen ts to sell and market products manufactured in this state or imported into it to any produce

r or consumer

at below cost, to the injury of f ree competition, are

also ag ainst public policy, unlawful, and void. Te nn. Code Ann. § 47-25-102 (emphasis added).

In a ddition to criminal sanctions, the law provides a civil remedy to “Any person who i s injured or da maged by

such arrangement.” Tenn. Code A nn. § 47-25-106. Unlike the federal statut e and many state statutes modeled ther eon, Tennessee’s statute has never included the “any pers on injured in his business or property”language. Combined with the use of the wor d “consumer” in Tenn. Co de Ann. §§ 47-25-10 1 and -10 2, the sta tute clea rly reflects an inten

t to protect and provide a remedy to individuals who are the ultimate consumers.32 The two decis ions by federalcourts in Tenness ee interpr eting the r eme dies se ction o f the statute pro vide little

guidance on the issue be fore us

. See V olpp T ractor P arts, Inc. v. Caterp illar, Inc ., 917 F. Supp. 1208 , 1236 (W .D. Tenn. 1995) (holding that T enn. Co de An n. § 47-2 5-106 provide s a reme dy on ly to customers or consumers, not to competitors and stating that, “A s a co mpe titor, V olpp never paid any consi deration or sum for any product sold in vi olation of t he statute”) ; Tacker

v. Wi lson , 830 F. Supp. 422, 430 ( W.D. Tenn. 1993) (f indi ng t hat plai nti ff

had not st ated a cla im f

or reli ef under T enn. Co de An n. § 47-2 5-106 because he had not alleg ed an y facts to indic ate he tra nsacte d bu siness with any of the defendants)

. -35- That conclusion is strengthened by other language in Tenn. Code Ann. § 47- 25-106 that allows recove

ry of “the f ull consid eration or sum paid by the pe rson for any goods , . . . the sa

le of which is controlled by such combinat ion or tru st” (emph asis added). In addition, that rec overy is to be had “from

any person ope

rating such trust or

combination.” There is no requirement that the consideration be paid directly from the injured consumer to the person operating the trust. While the purpose of

the federal antitrust statutes is to protect competition and commerce, the st ate act ’s p urp ose s ar e to pro tec t b ot h co mm erc e an d t he c ons um in g pu bl ic. It is clear that the legislatureintended that

consumers, or

ultimate purchasers, of goods be provided a r emedy for any in ju ry, including

higher prices, sustaine d due tothe prohi bited ant icompetit ive condu ct. There is no basis to presume t

hat the le gislatu

re inten ded to protect only those con sumers who purcha sed dire ctly from the violator. There is clear intent to the contrary

. We hold t hat indirect purchasers are “persons” who may

bring an action for an injury caused by violation of the TTPA.
Our holding is consistent

with that reached in Blake v. Abbott Labs. Inc. , wherein this court also h eld th at the TTPA p rovid ed ind irect purch asers a remedy, s tati ng:
It seems abundantly c lear from the unambiguous provision of T.C.A. § 47-25-106, that there is a n individua

l right, under the

laws of th

is state, t o ma in tain an action agains tany person or

entity guilty

of violating the provision of Title 47, Chapter 25, whether the individual is a direct purchaser or indirect purchaser.
* * * *
We find that the plaintiff

in this cas e has sta

nding to pursue an action for a violation of T.C.A. § § 47-25-1 01 et seq. , without r efere nce to cl assifica

tion as a d

irect o r indirect purchaser. There is no such limitation written into the statute.
Blake , 1996 W

L 134947, at *3-*4. 32 It is also consistent with the statement in State ex rel. Cates v. Standard Oil Co. of Ky ., 120 Tenn. at 138, 110 S.W. at 578 that the section provided a civil remedy “in favor o f any

one who ma

y be injured o r damag ed by

the thing s legisla

ted aga inst in the f

ir s t section.” Of

course, plaintiffs will be required to prove they were actually

damaged by

the alleged monopolisti c conduct, i.e. , that they paid more f or the softwarethan they

would have been required to pay absent th e antico mpetitive

conduct.33 Some commentators have express ed the vi ew that stat e courts dealin g with the ques tion of indir ect purchasers and the concerns raised in Hanover Shoe and Ill inois Bri ck general ly approach the policy questions in o ne of two ways. The fir st emphas izes t

he purpose of

anti trus t remedi es as deterring viol ations; t he other views compensation as more important and emphasizes compe nsation of t he consumer who usually b ears the cost o f all or a portion of the overcharge caused by antic omp etitive co nduc t. See A& M Sup ply Co. , 654 N.W.2d at 580-81 (discussing and q uoting extensiv ely from W illiam H . Pag e, The Limits of Stat e Indirect Purchaser Suit

s: Cl ass Cer

ti fi cati on in t

he Shadow of Ill inois Bri ck , 67 A NTITRUST L.J. 1, 2 (1999)). -36- T he Hyde , Bunker’ s Glass , and Comes courts weighed the policy concerns raised by

th e Courtin Illinois Brick . They found that a llowing indirect purchasers to sue would notpose a ri sk of deterring lawsuits because of appor tionment of recovery , observi ng “a defend ant guilty of a n antitrust violation would face pay

ing damages to indirect purchas ers under st ate antit rust lawsas well
as paying any damag es awarded

to direct purchasers under feder al antitrust laws” and, co ns eq ue nt ly, bothwould have incentive to sue, Bunker ’s Glass , 47 P.3d at 112 9 (quo ting Hyde , 473 S.E.2d at 687), and also that often indirect purchas ers are

the only ones who will sue, Comes , 646 N.W.2d at 450. These courts found the concer ns over complexity and apportionment less worr isome or inapplic able

in the cases before them

and were sy

mpathetic to the arguments that indirect purchaser s usually suffer the rea l loss.
The obvious difficulty with deny ing damages for consumers buy ing from an intermediary

is thatthey are

injured, often more thanthe inter mediary , who may

also be injured but for who m the entir e overcharge

is a windfall

. The indirect purchaser ruleawardsgreat

ly o vercomp ensate intermed iaries a nd g reatly

underco mpensate consumer s in the na

me of ef ficienc y in

the admin

istration of the an titrust law s.
Bunker’s Glass Co ., 47 P .3d at 1129 ( quot ing P HILL IP E. A R E EDA , ET AL ., A NTITRUS T LAW 378 (2000)). None found complexity of the litig ation a r

eason to p

rohibit indirect purchaser suits, one noting that “co mplexity

is not a foreign concept in the world of antitrust.” Comes , 646 N.W.2d at 451. 33 Any

policy questionsabout all owing r ecover y to indirec t purcha sers hav e been a nswere d in Tennessee by our legislature. The legislature has determined that the pur p oses of th e TTPA are furthered by g ra nt in g a pr iv at e r em ed y to an y person injur ed by anticompetitive conduct and by setting those

damages at the consideration paid by those pur chaser s for the

product. Our role

is to give effect

to clear legislative

purpose and language. We c onclude that indirect purchasers such as Plaintiffs herein may sue f or injury caused them by violation of the TTPA.
VI. Pl aintiffs ’ Claims Under the T CPA
The trial court denied Microsoft’s motionto dismiss the indirect purchasers’ claims pursuant to the TCPA, Tenn. Code Ann. §§ 47-18-101 to -18 08. Plaintiffs alleged that the unlawful arrangement

in restraint of trade that

was the basis for their antitrust claims was also a violation of the TCPA. Thus, the first question presented is whether anticompetitive conduct actionable under the TTPA also creates a cause of ac tion under the TCPA.34 15 U .S.C.A. § 4 5 (a)(1) p rovides:

Un fair methods of competit ion in or aff ecti ng commerce, and un fai r or dece ptive a cts or p ractice s in or affec ting co mm erce, a re her eby d eclare d unla wful.

35 The FTC and feder al court s rev iewing FTC actions have interpreted the “ unfair methods of competiti on” language as applying to vi olations of t he Sherman Act and other a ntitrust statutes and to acti ons rai sing anti trus t is sues or co ncern s. FTC v. Brown Shoe Co ., 384 U.S. 316, 321 -22, 86 S. Ct. 1501, 150 4-05 (1966 ); FTC v. Mo tion Picture Adver. Se rv. Co ., 344 U.S. 392, 394 -95, 73 S. Ct. 361, 363 (19 53); FTC v. Cem ent Inst ., 333 U.S. 683, 692-95, 68 S. Ct. 793, 799- 801 (19 48)

. See also John F. G raybe al, Un fair Tra de P ractice s, An titrust an d C ons um er W elfare in No rth Caroli na , 80 N.C. L. R EV . 192 7, 19 39-5 1 (2 002 ).

36 For an ex pl an at i on of

t he hi st or y of

t he FTC Act see Joh n F. G raybe al, supra ; Marshall A. Leaff er & Michael H. Lipso n, Cons umer Actions Against Unfair or Decepti ve Acts or Practices : The Pri vate Uses of Federal Trade (con tinued ...) -37- The TCPA prohibits “unfair or deceptive acts or practice s affecting the conduct of any trade
or commerce.” Tenn. Code Ann. § 47-18-1 04(a). T he Act is t

o be liber ally construed consiste

ntly withexpressed specific purposes, all of which relate to fair c onsumer practices, and include pro tection of “consumers and legitimate business enterprises f rom those who engage in unfa ir o r deceptive acts or practices in the conduct of any trade or commerce in part or whol ly within this state.” Tenn. Code Ann. § 47-18-102(2). In addi tion, the legislature has provided guidance for interpreting the TCPA:
This part, be

ing dee med reme dial legislation ne cessary for the protection of the
consumers of the state of Tennesse e and els ewhere , shall be construed to effec tuate the pur pos es a nd i nt ent . It is the inte nt of the g eneral

assembly that this pa

rt shall be interpr etedand construed consistently with the interpretations given by the feder a l trade commission and the federal courts pursuant to § 5(A)(1) of the Federal Tr ade Commission Act (15 U.S.C. § 45 (a)(1)). Tenn. Code Ann. § 47-18-115. 34

The federal provision referred to, unlike the TCPA, declares two ty pes of offenses unlawful: (1) unfair me

thods of c ompetition

in or aff ecting commerce; and (2) unfair or deceptive acts or practices in or affecting commerce. 35 While the Tennessee General Assembly has chosen to include in the TCPA’s prohibitions “unfair or deceptive acts or practice s affecting the conduct of any

trade
or commerce,” Tenn. Code Ann. § 47-18-104(a) , it did not include unfair competition or anticomp etitive a

cts. That choice i s signif

icant.
When origina

lly a dopted, th

e feder al statute creating the F

TC proscr

ibed only “unfair methods of compe

titi on.” Fed. Trade Comm’n Act, Pub. L. No. 63- 203, § 5, 38 Stat. 717, 719 (1914). Apparently in re action to judicial interpretation r equiring a showing of injury to c ompetition, notjust to consumers, and creation of the “rule of rea son,” the Act was amended in 1938 to ad

d to the FTC’s en

forcem ent jurisd iction “unfair

or deceptive acts or practices.” Fed. Tr ade Comm’ n Act, Pub. L. No. 75-447, § 3, 52 Stat. 111 (1938). 3636 (.. .cont inu ed) Commissi on Juris

prudence , 48 G EO

. W ASH

. L. R EV . 521 (1980 ); W illiam A. Lov ett, State Decepti ve Trade Practi ce Legis lat ion , 46 T UL

. L. R EV . 724 (1972 ).

37 Other uniform acts have also been proposed, i ncludi ng the U N I F O RM D ECEPTI VE T RADE P RACTICES A CT , 7A U.L. A. 35 (1978), and th e U NI FORM C ONSUMER S ALES P RACTICES A CT , 7A U .L.A. 1 (19 78)

. See Marshall A. Leaff er and Mic ha el H. Lipson, supra , at 522 n.3. H owe ver, the g enesis o f the ma jority of st ate cons umer protect ion act s can be traced t o the Unif

orm Trade Practices and Consumer Protect ion Law. D EE P RIDGEN , C ONSUMER P ROTE CTI ON AND THE L AW , § 3.5 (20 02). O bviously, Te nnessee’s enactm ent preced ed these othe r uniform acts.

38 The Pridg en book l ist s t went y st ates as adopt ing the “Li tt le FTC Act ” ver sion : Alas ka, C alifornia , Con necticu t, Florida, Ha wa i i , I l l i no i s , Lo ui s i an a, Ma i ne , Ma s s ac hu s et t s , Mo n tana, Nebraska, New Hampshire , North Carol ina, Pennsyl vania, Rhode Is land, South Carolina, Vermont, W ashington, W est V irginia an d W iscon sin. P RIDGEN , supra , § 3:5 n .13. -38- In the 1960’s the FTC participated with others, includingthe Counc il of State Governm ents, i n the development of a uniform act, the Uniform Trade Pra ctices Act and Consumer Prot ectio n Law. 37 The uniform act included three alternative for ms. All thre e include d deceptive acts or practices in their definition of unlawful conduct. Howeve r, only the first alterna tive form also included unfair me

thods of c ompetition . It w as descr ibed as f ollows:
This formulat

ion has the

broades timpact because it , like the present section 5 of the FTC Act, achieves antitrust as well as deceptive pra ctice objectives. A s t he explanatory

comments to the model legislation indicate, this language “ena bles the enforcement

official to reach

not only decepti ve prac tices tha

t prey upon cons umers, but also unfair methods that injure competition.”
William A. Lovett, State Deceptive Trade Practice Litigation , 46 T ULANE L. R EV . 724, 732 (1972) (quoting Council of State Governments, 1970 Suggested State Legislation 142)); see also National Association of Attorneys Ge neral Committee on the Office of the Attorney General, Report on the Office of Attorney

General, 395, 399 (1971).
From the mid 1960s, states began adopting consumer protection laws, most based more or less on one of the formats proposed in the Uniform Act. A large number adopted the version that mirroredthe FTC Act, prohi biting both unfair methods of competition and unfair or decepti ve acts of practices. D EE P RIDGEN , C ONSUMER P ROT ECT IO N AND THE LAW § 3:5 (2002); Marshall A. Leafler & Michael H. Lipson, Consumer Actions Against Unfair or Deceptive Acts or Pra ctices: the Private uses of Federal Trade Commission Jurisprudence , 48 G EO

. W ASH

. L. R EV . 521, 531 and Appendix (1980). 38
Other states chose to ado

pt anothe r versio n of the pr

oposed mod

el ac t, there

by e lecting to prohibit only unfair and deceptive acts and pr actice s without including the unfair methods of39 Along wit h a nu mber of

othe r st ates , Tenne ssee als o adopte d the appr oach of li sti ng cert ain prohi bited practi ces and in cludin g a gen eral “an y other p ractice that is unfair or deceptive” provision. The TC PA lists some thirtythree spec ific acts that c onstitute u nfair or dece ptive a cts or p ractice s, Te nn. Code Ann. § 47-18-104(b), a ll of which involve some form of misrepresentation about goods or services. In additi on, there is a gene ral catc hall, “eng aging in any other ac t or pract

ice whi ch is deceptive to th e consumer or to any othe r person. ” Tenn. Code Ann. § 47-18

- 104(b)(27 ).

40 In Blake , th e unreport ed opin ion d iscussed earlier, the cour t held tha t “a viab le cau se of act io n u nde r TTPA also st ates a caus e of

act ion u nder TCPA,” 1996 WL 1 34947, at *5- *6. For t he clear legi slat ive hi story reasons stat ed herein, we disagree and decline to follow that holding in Blake

. -39- competition language. Marshall A. L eafler & Michael H. L

ipson, supra , at

531 and Appe ndix. When Tennessee adopted the TCPA in 1977, it chose this approach. 39
This history makes clea

r that by the time Tenne ssee adopted its Consumer Protectio n Act, its drafters and the legislators considering it had the benefit of the federal act and e xperience under it, the proposedUnifo rm Trad e Pract ices A ct and Cons umer P rotect ion Law, the st atuto ry language adoptedin many other states, and the evalua t ions of a number of authors of learned articles a nd treatise s. We cannot presume other than that the Tennessee Ge neral Assembly

knowing ly

chose not to include antitrust or anticompetitive conduct as actionable under the TCPA. Heirs of Ellis v. Esta te of Ellis , 71 S.W.3d 70 5, 713-14 (Tenn. 2 002) (expl aining t he inter pretatio n accorded the legislat ure’s adoption of uniform laws or parts thereof).
That concl usion is fu

rther bu ttressed by t he legi slature’ s choice

of lang uage in the priva te remedy provision of the Act, which allows an action by any

person injured “as a result of the use or employment

by another pe

rson of an unfair or deceptive act or practice declared

to be unlawful by this part.” Tenn. Code Ann. § 47-18-109(a)(1). A d eceptive act or practice involves a mate rial representationor practice likely to mislead a reasonable consumer or the conce alment or omission of a material fact. Ganzevo rt v. Russe ll , 949 S.W.2d 293, 299 (Tenn. 1997). The TCPA generally applies to transa

cti on s between buye

rs and sellers, and its purpose is to protect buyers in such transactions, Id. 949 S.W.2d at 297-98, from unfair and d ec eptive practices in the conduct of commerce, Pursell v . Whit e , 937 S.W.2d 838, 841-42 (Tenn. 1996).
Ac co rd in gl y, we must pr esume tha

t the legislature

intended that antitrust a ctions, th ose involving harm to competition, continue to be brought under the existing antitrust statute, the TTPA. Co ns eq ue nt ly, we conclude th at claims based upon anticompetitive conduct are not cognizable unde r the TCPA. Plaintiffs’ TCPA claims based on allegations of anticom peti tive conduct must be dismissed. 40
Other courts have r eached the same conclusion. For example, in Laughlin v. Evanston Hosp. , 550 N.E.2d 986 (1990), the Supreme Court of Illinois concluded that that state’s consumer fraud act
was not intended to be an additional antitrust mechanism. “The languag e of the Act shows that it s reach was to be limited to conduct that defrauds or deceives consumers or others.” 550 N.E.2d at 986.41 In Blake thi s court stat ed that be cause “one c anno t do ind irectly wha t canno t be d one direc tly,” if plaintiffs had no cause of

acti on under th e anti trus t st atut e, th ey similarly ha d no claim unde r the T CP A. Blake , 1996 WL 134947, at *19. The court conclud ed, howe ver, that plaintiffs had a cause of action un der bo th statutes. W e disagree, be cause the two statutes co ver d ifferent type s of illegal c ond uct. See foot note 40. -40- This is not a question of whether the TCPA can ap ply to conduct that is also covered by another statute. Our Supreme Court has stated that, “Even when a diffe rent code section

applies and is invoked to obtain relief, the TCPA may a lso apply, assuming the act or practic e in question falls within the scope of its application .” Myint v. Allstate Ins. Co. , 970 S.W.2d 920, 926 (Tenn. 1998) (emphas is added). The TCPA’s provision making powers and remedies under the act cumulative and supplementary to all other pow ers and remedies provided by law, Tenn. Code Ann. § 47-18-112, likewise has no ap plication to a claim

based on conduct that is simply not a violation of the TCPA.
Our conclusion is based solely on the purpos e of the Tennessee legislature in enacting the TCPA, as reflected in the langu age of the statut

e and the circumst ances e xist ing at the time. Irrelevant to our holding arecases relied upon by Microsoft anddistingu

ished by Plaintiff s where in courts in other states have ruled that because indirect purchasers have no cause of action under that state’s antitrust

laws, they

similarly are precluded from bringing a case under that state’s consumer protection statutes where both claims rest on the same conduct. See, e.g., Ab bott Lab s., Inc. v. Segura , 907 S.W.2d 503, 507 (Tex . 1995 ) (dismissing plaintiffs’ claims under the deceptive practices statute because they were “in essence antitrust claims,” and those cla ims ha d be en dismissed under Texas antitrust law because the court would not permit “an end run aro und the policies allowing only direct purchasers to recover under the Antitrust Act”). 41
Ob vi ou sl y, our holding may dif fer from that reached

by courts in states that have adopted the “unfair methods of competition” language. See Mac k v. Brist ol-Mye rs Squibb Co ., 673 So. 2d 100 (Fla. Dist. Ct. App. 1996) (holding that although plaintiff indirect purchaser c ould not bring an a ction under Florida’s antitrust statute, she had standing under that state’s Deceptive a nd Unfair Trade Practices Act because she alleged she was damaged by

an unfair method of competition, rely ing on federal interpretations of “unfair methods of competition” i n the F TC Act as including antitrust violations); Elkins v. Microsoft , 817 A.2d 9 (Ver. 2002) (holding that the Vermont Consumer Fr aud Act prohibiting unfair methods of competition was an additional state antitrust statute). Having determined that Plaintiffs’ allegations of an ti competiti ve condu ct do not st ate a cl aim for a violatio n of the TC PA, we must consider whether other co nduct is a

ll eged. In their brief, Plaintiffs assert that they a lleged conduct tha

t violates t

he TCPA se

parate and apa rt from, o r in addition to, the alleged anticompetitive conduct that is the basis for their claim under the antitr ust s tatute. We ha ve reviewed those portions of the amended complaint ref erred to by

Plaintiffs as examples of “vary

ing way s in which consumers were victims of misleading, unfair and/or de ceptive conduct by Microsof

t.” Many of those p aragr

aphs simply

allege facts reg arding Microsoft’s sale to OEMs in Tenne ssee and elsewhe re and th e distribu ti on of computers with Microsoft software already loaded. There are two a

llegat ions that so ftware

was flaw ed and Mic

rosoft wo uld not re pair it at its cost. Several describe the licensing procedu re for e nd user li censes a

nd for OE Ms, including
an allegation that purchasers of a pre -loadedcomputer may c ontact the computer manufacturer for-41-

a refu nd if they choose not to ac cept the terms of the licensing agr eement. None of the spe cifi c factua l alleg ations co nstitutes a separa te alleg ation of u

nfair or decepti ve acts o

r pract ices.
The allega

tions in the

complain

t regardi ng t he TCPA cause of action, other than the anticompetitive conduct allegation set out earlier, are, first, “advertising upgrades with the intent

not to sell them as advertised, i.e. , the price was set by competitive market

forces when in fact that was notthe case,” in violation of Tenn. Code Ann. § 47-18-104(b)(9). This allegation is directly related to, and an a

lleged consequ ence of

, the antitrust

violation allegations. The second is by “repre senting that a transaction involves rights which are prohibited by law,” in violation of Tenn. Code Ann. § 47-18-104(b)(12). We can find no further explanation for this conclusory alleg ation, and no facts supporting it. The thi

rd is “enga

ging in other acts or practices that are deceptive to the consumer,” in violation of Tenn. Code Ann. § 47-18-104(b)(27). Of course, this is the generalcatchall provision of the TCPA. No specific conduct was tied to this genera l allegation in the complaint.
We are unable to find any sufficient factual allegations to support the conclusory allegations that Micro soft e nga ge d in d ecepti ve acts or prac tices in vi olati on of t he TCP A othe r than throu gh anticompetitive conduct a nd its cons equenc es. Essentially, Plaintiffs’ claims are “classic antitrust allegations dressed in” TCPA clothing, Gae bler , 676 N.E. 2d at 709, or “the same claim with a different label,” Blewett v. Abbott Labs , 938 P.2d 84 2, 84 6 ( Wa sh . C t. Ap p. 19 97 ). Co ns eq ue nt ly, Plaintiffs’ cause of action based upon the TCPA must be dismissed.
VII . Conclusion
Plaintiffs a s indire ct purchasers have standing to bring an action for damages under Te nn. Code Ann. § 47-25-106 for injuries caused by violation of Te nn. Code Ann. §§ 47-25-101 or -102. Plaintiffs have no cause of action under the TCPA for antitrust violations prohibited by the TTPA. Plaintiffs have sufficiently alleged substantial adverse effec ts on commerce within Tennessee of the alleged misconduct to bring this action for violation of the TTPA.
We reverse the trial court’s denial of Mic roso ft’s motio n to di smiss the T CPA cl aims. We affirm the denial of the motion to dismiss the TTPA.
Costs of this appe al are taxed equally betwe en the appellants Microsoft, et al., and the appelle es, Dani el Sherw ood, et al

.

___________________________________ PATRICIA J. COTTREL L, JUDGE