In the 

United States Court of Appeals 

For the Seventh Circuit ____________________ 

No. 18-3735 

MARION HEALTHCARE, LLC, et al., 

Plaintiffs-Appellants, 

v.

BECTON DICKINSON & COMPANY, et al., 

Defendants-Appellees. 

____________________ 

Appeal from the United States District Court for the 

Southern District of Illinois. 

No. 3:18-cv-01059-NJR-RJD — Nancy J. Rosenstengel, Chief Judge. 

____________________ 

ARGUED SEPTEMBER 27, 2019 — DECIDED MARCH 5, 2020 

____________________ 

Before WOOD, Chief Judge, and KANNE and BARRETT, Circuit 

Judges.

WOOD, Chief Judge. Since the Supreme Court’s decision in 

Illinois Brick v. Illinois, 431 U.S. 720 (1977), only those buyers 

who purchased products directly from the antitrust violator 

have a claim against that party for treble damages. “Indirect 

purchasers” who paid too much for a product because cartel 

or monopoly overcharges were passed on to them by middlemen must take their lumps and hope that the market will 
2 No. 18-3735 

eventually sort everything out. See, e.g., Sharif Pharm., Inc. v. 

Prime Therapeutics, LLC, Nos. 18-2725 and 18-3003, 2020 WL 

881267 at *2 (7th Cir. Feb. 24, 2020). Matters are different, however, when a monopolist enters into a conspiracy with its distributors. In such cases, “the first buyer from a conspirator is 

the right party to sue.” Paper Sys. Inc. v. Nippon Paper Indus. 

Co., 281 F.3d 629, 631 (7th Cir. 2002). 

The plaintiffs in this case (“the Providers”) are healthcare 

companies that purchased medical devices manufactured by 

Becton Dickinson & Company. Healthcare providers often do 

not purchase medical devices directly from the manufacturer; 

instead, they join a group purchasing organization, known in 

the trade as a GPO. The GPO negotiates prices with the manufacturer on behalf of its members. It then presents the terms 

to the provider, which has the opportunity to accept them or 

reject them. If the provider agrees to the terms, it chooses a 

distributor to deliver the product. The distributor then enters 

into contracts with the healthcare provider and the manufacturer. These contracts obligate the distributor to procure the 

products from the manufacturer and to sell them to the provider. The distribution contracts with the providers incorporate the price and other terms of the agreements that the GPO 

negotiated, plus a markup for the chosen distributor. 

Our Providers purchased medical devices in the manner 

just described. A GPO negotiated with Becton on the Providers’ behalf, and a distributor delivered the devices. Had Becton acted alone, selling its products to an independent distributor, which then sold them to a healthcare provider, no one 

doubts that the Illinois Brick rule would bar the provider from 

suing Becton for any alleged monopoly overcharges. But 

these transactions were more complex. The Providers allege 
No. 18-3735 3

that Becton, the GPOs, and the distributors (to whom we refer 

collectively as Becton unless the context requires otherwise) 

joined forces in a conspiracy and engaged in a variety of anticompetitive measures, including exclusive-dealing and penalty provisions. Becton moved to dismiss, arguing that the Illinois Brick rule barred the case despite the Providers’ allegations of conspiracy. 

The district court agreed with Becton that the Illinois Brick

rule applied on these facts and that dismissal was therefore 

required. It found the conspiracy rule inapplicable not because of any failure to plead conspiracy adequately, but because this case did not involve simple vertical price-fixing. 

This, we conclude, was in error. At the same time, we conclude that as of now the Providers have failed adequately to 

allege the necessary conspiracy with the distributors, and perhaps with the GPOs. Because the district court’s ruling depended so heavily on an error of law relating to Illinois Brick,

we have decided to vacate the court’s decision and remand 

for further proceedings. 

I 

We present the facts in the light most favorable to the Providers without vouching for anything. Each of the Providers 

has purchased conventional syringes, safety syringes, and 

safety IV catheters from Becton. They allege that Becton 

charges supracompetitive prices for these products. It is able 

to do so, they assert, because it has monopoly power in the 

relevant nationwide market and is unlawfully maintaining 

that power through anticompetitive contract arrangements 

among itself, the GPOs, and the distributors. 
4 No. 18-3735 

In order to accomplish its goals, Becton took several steps. 

The first addressed its relationship to the GPOs. Although the 

GPOs are supposed to negotiate at arms’ length, with their 

members’ best interests in mind, Becton ensured that their 

loyalty would run to Becton, by bribing them with millions of 

dollars annually in so-called administrative fees to include 

anticompetitive terms in the contract. These terms include 

penalty pricing for healthcare providers who fail to purchase 

a certain amount of their devices from Becton. Second, the 

Providers allege that the distributor agreements prop up the 

unfair terms of the contracts that the GPOs negotiate. Third, 

they allege that the agreements between Becton and the distributors include hidden commitments to make payments to 

the GPOs based on the volume of Becton products sold under 

the contracts. Becton pays distributors for selling more of its 

products, and in return, the distributors agree to promote Becton products above the products of competitors. The Providers allege that this network of contracts allows Becton to 

charge prices well above those of its competitors. 

Following industry practice, the Providers did not buy directly from Becton. They relied upon the GPO system described above, unaware of the distortions Becton had introduced. The distributors purchased the medical devices from 

Becton at the rates negotiated by the GPOs, and the Providers 

then purchased the devices from the distributors. Because 

they did not purchase directly from Becton, the Providers 

may pursue Becton itself only if they have properly alleged a 

conspiracy. 

II 

Section 4 of the Clayton Act states that “any person who 

shall be injured in his business or property by reason of 
No. 18-3735 5

anything forbidden in the antitrust laws may sue therefor,” 

and is entitled to treble damages for the violation. 15 U.S.C. 

§ 15. In this instance, however, the words “any person” cannot be taken literally. Instead, the Supreme Court has read 

them in the context of the statute as a whole and has inferred 

that certain limitations exist. One such limitation was announced in Illinois Brick, where the Court held that, in general, 

a downstream plaintiff cannot sue an alleged monopolist or 

cartel member on a theory that a middleman passed an anticompetitive overcharge on to her. Under Illinois Brick, only a 

purchaser who purchased goods directly from the monopolist 

(or cartel member) can claim damages. That purchaser is entitled to the full value of the damages stemming from the 

overcharge, even if it passed on some or all of the overcharge 

to downstream purchasers and consequently mitigated the 

damage it suffered. See Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968). A plaintiff who asserts that 

it indirectly bore the brunt of an overcharge passed on by the 

direct purchaser has no claim. 

The Supreme Court based its decision in Illinois Brick on 

several rationales. First, the Court concluded that “whatever 

rule is to be adopted regarding pass-on in antitrust damages 

actions, it must apply equally to plaintiffs and defendants.” 

431 U.S. at 728. It did so in part because it feared that an asymmetrical rule that prohibited a pass-on defense but permitted 

offensive use of passing-on “would create a serious risk of 

multiple liability for defendants.” Id. at 730. Moreover, the 

Court suspected that the difficulties in analyzing price and 

output decisions would be prohibitive. Id. at 731–32. The direct purchaser is not necessarily free to pass on the full 

amount of a monopoly overcharge; its range of action will be 

constrained by the elasticity of demand in the downstream 
6 No. 18-3735 

market. Furthermore, the Court believed that enforcement of 

the antitrust laws would be better served “by concentrating 

the full recovery for the overcharge in the direct purchasers 

... .” Id. at 735. 

Although Illinois Brick rejected “attempts to carve out exceptions ... for particular types of markets,” id. at 744, it did 

carry forward the limited carve-out that Hanover Shoe had recognized for “a pre-existing cost-plus contract.” Id. at 736. Even 

that exception, however, has been interpreted narrowly, as 

the Court demonstrated when it found that a public utility’s 

prices, by law passed on to final consumers, did not qualify. 

See Kansas v. UtiliCorp United, Inc., 497 U.S. 199 (1990). The 

present case, however, does not depend on that exception or 

any other deviation from the general rule, as we will see. 

Even the strictest application of the Illinois Brick rule requires the court to identify which entity is the seller and 

which the direct purchaser. The case of Reiter v. Sonotone 

Corp., 442 U.S. 330 (1979), illustrates this point. In that case, 

Sonotone was vertically integrated, and so it sold its hearing 

aids directly to final consumers. One such consumer brought 

a class action against five companies, alleging illegal price-fixing and other antitrust violations. The defendants argued that 

the Clayton Act’s requirement of injury in one’s “business or 

property” did not encompass consumer harm, but the Court 

rejected that narrow reading, finding instead that the term 

“property” “comprehends anything of material value owned 

or possessed,” id. at 338, and thus easily covered the consumer’s loss of money. But the critical point here is that the 

consumer was the first direct purchaser from the cartel member, and so her suit was not barred by the recently announced 

Illinois Brick rule. 
No. 18-3735 7

Vertical integration can occur either by internalizing functions within one firm, as one sees in Reiter, or by contract. But 

contractual vertical integration presupposes independent 

firms. In that instance, as we explained in Toys “R” Us v. Fed. 

Trade Comm’n, 221 F.3d 928 (7th Cir. 2000), the manufacturer 

has an incentive to get the best deal it can from its distributors, 

both in terms of price and in terms of necessary services. Id. at 

937. That will cause the manufacturer to sell its goods to 

whichever distributor will accomplish the distribution function as efficiently as possible. The manufacturer’s interests 

thus align with those of the consumer who buys from the distributor, not with those of the distributor. 

This dynamic breaks down if there is a conspiracy between the manufacturer and the distributor and the point of 

that conspiracy is to support supracompetitive prices for the 

ultimate consumer. Rather than keeping both its prices (inclusive of distribution costs) as attractive as possible (i.e. as low 

as possible) for consumers, as one would expect in a competitive market, the manufacturer/distributor conspiracy has a 

way to extract supracompetitive profits from consumers. Or 

at least it can do so if it has enough market power. But market 

power is a separate element of a plaintiff’s claim. The only 

point here is that Illinois Brick is not a barrier to suit on behalf 

of a purchaser who dealt with a member of the conspiracy. 

This is what we mean when we speak of a conspiracy “exception” to the Illinois Brick rule. It is not so much a real exception as it is a way of determining which firm, or group of 

firms collectively, should be considered to be the relevant 

seller (and from that, identifying which one is the direct purchaser) for purposes of the rule. We recognized this point in 

Paper Systems, 281 F.3d at 629. In that case, paper distributors 
8 No. 18-3735 

sued paper manufacturers that had allegedly conspired to fix 

prices. The distributors had purchased some of the products 

through trading houses that allegedly had participated in the 

conspiracy. We found that the distributors had a claim under 

the antitrust laws, because they were “the first purchasers 

from outside the conspiracy.” Id. at 631. They faced no Illinois 

Brick bar, because they dealt directly with the conspiracy and 

were thus entitled to the full amount of its overcharge. Id. at 

633. See also Fontana Aviation, Inc. v. Cessna Aircraft Co., 617 

F.2d 478, 481 (7th Cir. 1980) (“We are not satisfied that the Illinois Brick rule directly applies in circumstances where the 

manufacturer and the intermediary are both alleged to be coconspirators in a common illegal enterprise resulting in intended injury to the buyer.”); In re Brand Name Prescription 

Drugs Antitrust Litig., 123 F.3d 599, 604–05 (7th Cir. 1997). 

The fact that antitrust liability is joint and several reinforces the appropriateness of looking to the first sale outside 

the conspiracy. See Paper Systems, 281 F.3d at 632 (“Nothing 

in Illinois Brick displaces the rule of joint and several liability, 

under which each member of a conspiracy is liable for all 

damages caused by the conspiracy’s entire output.”). That is 

why we said in Paper Systems that it is better to think of the 

right to sue co-conspirators not as an exception to Illinois 

Brick, but instead as a rule inhering in Illinois Brick that allocates the right to collect 100% of the damages to the first nonconspirator in the supply chain. Id. at 631–32. A contrary rule 

that looked behind the conspiracy to the role each member 

played would render upstream antitrust violators effectively 

immune from suit through the simple expedient of conspiring 

with a middleman or distributor to pass on the inflated prices. 

Other circuits to consider the issue have come to the same 

conclusion. See Insulate SB, Inc. v. Advanced Finishing Sys., Inc., 
No. 18-3735 9

797 F.3d 538 (8th Cir. 2015); Lowell v. Am. Cyanamid Co., 177 

F.3d 1228 (11th Cir. 1999); Arizona v. Shamrock Foods Co., 729 

F.2d 1208 (9th Cir. 1984). 

The district court here recognized that Illinois Brick does 

not bar suits brought by direct purchasers from a conspiracy, 

but it thought nonetheless that the Providers’ suit could not 

go forward. It found that the existence of a conspiracy mattered only for cases of price fixing, as opposed to other forms 

of anticompetitive activity; as we noted, it thus saw no need 

to delve into the adequacy of the conspiracy allegations. In its 

view, cases outside of the arena of price fixing implicated the 

same considerations that led the Supreme Court to adopt the 

Illinois Brick rule in the first place. In particular, it thought that 

it would be too difficult to calculate which portion of the overcharge the distributor had absorbed or to ascertain how much 

of the distributor’s profits came from fair pricing rather than 

anticompetitive overcharges. 

We see nothing in either the Illinois Brick line of cases or 

the conspiracy line that supports this distinction. The central 

point of Illinois Brick is to allocate the right to recover to one 

and only one entity in the market. It is just as easy to do that 

in the present case, where that entity is the Provider group 

and the mechanisms that the conspiracy uses to push up 

prices include exclusive dealing arrangements and bribes or 

kickbacks, as it is if the entity is the same Provider group but 

the anticompetitive activity is a more direct agreement to raise 

prices. Whatever difficulties there may be in calculating damages in a case such as this one, they are not enhanced by the 

complex downstream tracing that the Court rejected in both 

Illinois Brick and UtiliCorp. Indeed, UtiliCorp reinforced the 

need for one simple rule, when the Court stated that it would 
10 No. 18-3735 

be “an unwarranted and counterproductive exercise to litigate a series of exceptions” to the Illinois Brick rule in cases 

where “economic assumptions underlying” the rule “might 

be disproved.” 497 U.S. at 217. 

The relevant inquiry in determining the applicability of Illinois Brick focuses on the relationship between the seller and 

the purchaser, not the difficulty of assessing the overcharge. 

The Supreme Court confirmed this in Apple Inc. v. Pepper, 139 

S. Ct. 1514 (2019). There, consumers who had purchased 

“apps” from Apple’s “App Store” sued, arguing that Apple 

had monopolized the retail market for the sale of iPhone apps 

and had used its power to overcharge consumers. Apple argued that the critical question was “who sets the price,” id. at 

1522, not who was the direct seller. It reasoned that because it 

did not set the retail price, it could not be sued under Illinois 

Brick, even though the consumers had purchased the apps directly from it. The Court rejected this argument, holding that 

Illinois Brick “established a bright-line rule where direct purchasers ... may sue antitrust violators from whom they purchased a good or service.” Id. While the details of Apple are 

different from the facts before us, the same rule applies. Apple 

confirms that Illinois Brick is a bright-line rule allocating the 

right to sue to direct purchasers alone, not a rule that requires 

analysis of competing policy justifications in each case. The 

relationship between the buyer and the seller, rather than the 

nature of the alleged anticompetitive conduct, governs 

whether the buyer may sue under the antitrust laws. 

Becton has other arguments, however. It contends that 

when a manufacturer and a distributor have agreed to resell 

a product at a specific, anticompetitive price, there is no Illinois Brick “pass on,” because the indirect purchaser is the first 
No. 18-3735 11

party to have paid the overcharge. This eliminates the Illinois 

Brick concerns about tracing passed-on overcharges. But that 

says nothing about allocating the right to sue. If anything, it 

reinforces the conclusion that the Providers hold that right on 

these facts. 

Becton also claims that treating the conspiracy as the relevant entity in cases involving anticompetitive conduct other 

than price fixing would swallow the Illinois Brick rule entirely. 

It argues that allowing the conspiracy exception in cases such 

as this one would permit plaintiffs to circumvent Illinois Brick

by asserting in every case that the defendant and the middleman had formed a conspiracy together. But plaintiffs would 

do so at their peril: Federal Rule of Civil Procedure 11, 28 

U.S.C. § 1927 (counsel’s liability for costs incurred from vexatious and unreasonable conduct), and the court’s inherent authority all protect against such abuses. Furthermore, a complaint that does not lay out a plausible case for relief will be 

dismissed. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544 

(2007). A plaintiff is not entitled to resort to frivolous accusations of conspiracy to evade the Illinois Brick rule; the allegation must still reach the level of baseline plausibility. 

We recognized in Paper Systems that a different problem 

might arise in some cases: “[p]erhaps if a conspirator defects 

and sues its former comrade, that snitch would come to own 

the right to damages.” 281 F.3d at 632. Until that happens, 

however, we held that the plaintiffs “are entitled to collect 

damages from both the manufacturers and their intermediaries if conspiracy and overcharges can be established.” Id. 

Nothing in this case even hints at a distributor who defected 

and then sued, and so we have no need to explore this possibility further. 
12 No. 18-3735 

The district court thus erred in holding that the Illinois 

Brick rule bars the first purchasers outside of a conspiracy 

from suing under the antitrust laws except in cases where vertical price fixing is alleged. Provided that our plaintiffs have 

properly alleged a conspiracy, they may sue for whatever 

form of anticompetitive conduct they are able plausibly to allege. 

III 

The mere fact that the Providers are proper antitrust plaintiffs from the Illinois Brick standpoint does not resolve the 

question whether they have adequately alleged a conspiracy. 

We turn therefore to that question, beginning with their accusation that Becton conspired with its distributors. 

The role of the distributors is critical to the Providers’ case. 

That is because the distributors are the entities from which the 

Providers purchased the products at issue. If the distributors 

were not part of the alleged conspiracy, then Providers’ case 

falls apart: no conspiracy, no direct purchaser status, no right 

to recover. The distributors would be the proper plaintiffs in 

such a situation and could sue Becton, as other distributors 

have done in other cases against Becton. See, e.g., In re Hypodermic Prods. Antitrust Litig., 484 F. App’x 669 (3d Cir. 2012). 

In order to show an antitrust conspiracy, the Providers 

must prove that “the manufacturer and others had a conscious commitment to a common scheme designed to achieve 

an unlawful objective.” Monsanto Co. v. Spray-Rite Service 

Corp., 465 U.S. 752, 768 (1984). In a case such as this one, where 

the plaintiffs allege that participants in a market at different 

levels of the distribution chain entered into a conspiracy, the 

plaintiffs must show that similarly situated members of the 
No. 18-3735 13

conspiracy coordinated not only with the manufacturer, but 

also with each other. If the plaintiffs do not adequately allege 

this type of coordination, they have made, at best, an allegation of a number of different conspiracies, not of a single conspiracy. 

The Providers allege that Becton and the distributors were 

members of a “hub-and-spokes conspiracy.” This type of conspiracy requires a plaintiff to allege both that there was a central coordinating party (the “hub”), and that each participant 

(along the “rim”) recognized that it was part of the greater 

arrangement, and it coordinated or otherwise carried out its 

duties as part of the broader group. In other words, a “huband-spokes conspiracy” requires a “rim” connecting the various horizontal agreements. See, e.g., In re Musical Instruments 

& Equip. Antitrust Litig., 798 F.3d 1186, 1192 (9th Cir. 2015). As 

applied to our case, the Providers must allege that the distributors, in addition to coordinating with Becton, would not 

have attempted to inflate prices without assurance that each 

distributor was abiding by the agreement and behaving in the 

same way. 

The complaint before us does not accomplish this. The 

Providers allege only that the distributors “enforce” the terms 

of the contracts that the GPOs negotiated and then assess the 

Providers an additional fee for the distributors’ services. The 

complaint has nothing to say about any involvement that the 

distributors may have in inflating the prices, or whether they 

coordinate among each other or with Becton or the GPOs as 

part of the conspiracy. The Providers ask us instead to find 

that the distributors are members of the conspiracy because 

they buy and sell the devices according to the terms of contracts that the GPOs allegedly negotiated in a crooked 
14 No. 18-3735 

fashion. But this allegation is insufficient to find a conspiracy 

between the distributors and Becton. 

The Providers argue that we should not demand such direct evidence, and that there is enough here to infer an agreement among the distributors. They rely heavily upon Toys “R” 

Us, 221 F.3d 928, but that case does not support their position. 

We held in Toys “R” Us that in certain circumstances, an 

agreement between horizontally situated market participants 

can be inferred for the purpose of an antitrust conspiracy, 

even in the absence of an express agreement. In that case, Toys 

“R” Us had sent letters to major toy manufacturers, indicating 

that it would not carry the manufacturers’ toys unless the 

manufacturers agreed to withhold certain highly desirable 

toys from warehouse clubs. The FTC found that it would not 

have made economic sense for any individual manufacturer 

to capitulate to these demands, unless it knew that its competitors would also play along. Id. at 935. That finding, we 

concluded, was supported by substantial evidence. It was 

thus permissible to infer that even if the manufacturers did 

not expressly agree to join a conspiracy with one another, they 

had functionally joined the conspiracy because they were assured that their competitors would all follow the same anticompetitive strategy. 

Here, by contrast, the Providers have not alleged that the 

distributors engaged in parallel conduct, much less that they 

coordinated their actions to engage in illegal activity. In their 

complaint, the Providers list three activities they say the distributors have undertaken “in furtherance of the conspiracy.” 

First, the distributors agree to distribute Becton’s products 

pursuant to anticompetitive contractual terms. Second, the 

distributors enforce Becton’s penalty pricing system, which 
No. 18-3735 15

penalizes the healthcare providers if they switch to a different 

manufacturer. Third, the distributors make payments to the 

GPOs based on the volume of sales under the contracts. 

These allegations, whether taken alone or together, do not 

suffice to describe a hub-and-spokes conspiracy. All the Providers have alleged is that the distributors buy and sell the 

devices in accordance with the terms of the contracts that the 

GPOs have negotiated. They have made no argument that the 

distributors played any role in setting the anticompetitive 

pricing or that there was any quid pro quo according to which 

Becton compensated them for participating in the alleged antitrust conspiracy. The fact that the distributors pay a fee to 

the GPOs for the latter’s role in negotiating the contracts is not 

anticompetitive conduct on its own; indeed, it is to be expected. Without an allegation that the distributors have participated in the conspiracy or knowingly engaged in parallel 

anticompetitive conduct, the Providers cannot sue the distributors under the antitrust laws. 

As the complaint now stands, the Providers have not 

shown that the distributors made a conscious commitment to 

participate in an illegal scheme. Without any allegation that 

the distributors coordinated with Becton to profit from the anticompetitive scheme, their case is barred under Illinois Brick. 

In a last-gasp effort, the Providers argue that they should 

be given a chance to amend their complaint, given the legally 

flawed and relatively unexplored reason that underlay the 

district court’s ruling. The United States, appearing as amicus 

curiae, agrees that the district court’s Illinois Brick analysis was 

incorrect and supports vacating the district court’s judgment 

and remanding for further proceedings. The distributors contend in response that the Providers have waived the 
16 No. 18-3735 

opportunity to amend their complaint, because they did not 

focus on Illinois Brick’s application to conspiracies in their 

opening brief. But the opening brief did cite Paper Systems, it 

did discuss the rule that direct purchasers from antitrust conspiracies are entitled to sue under Illinois Brick, and it stressed 

the conspirators’ joint and several liability. This is more than 

enough to avoid waiver in this court. The district court, too, 

extensively discussed what it called a conspiracy exception, 

and so there was no waiver at that level either. 

What the Providers could not have foreseen was the district court’s categorical rejection of Illinois Brick for the type of 

anticompetitive activity they were alleging—a rejection that 

did not depend on any additional detail about the structure 

of the conspiracy. Now that we have straightened out the Illinois Brick side of things, we conclude that the Providers 

should have an opportunity to file an amended complaint, 

provided that they believe they can adequately plead that the 

distributors were part of the putative conspiracy. Any such 

amended complaint should also plausibly indicate (if possible) how, if at all, the GPOs might be liable. 

IV 

We VACATE the judgment of the district court and REMAND

for further proceedings in accordance with this opinion.