Chipping Away at the Illinois Brick Wall: Expanding Exceptions to the Indirect Purchaser Rule

INTRODUCTION For over thirty years, the Supreme Court's decisions in Illinois Brick Co. v. Illinois (1) to deny compensation to indirect purchasers (2) harmed by antitrust violations has drawn consistent criticism. (3) Illinois Brick limits private treble damage actions to the antitrust violator's direct customers, leaving subsequent purchasers who often suffer substantial harm without a remedy. The well-publicized Microsoft antitrust litigation provided a glaring example of the problems with this rule. Large scale purchasers who suffered considerable harm could not recover, while the only parties who could sue refused to do so for fear of economic retribution. (4) In 2007, the Antitrust Modernization Commission issued its report recommending legislative repeal of Illinois Brick, and most commentators agree that reform is needed, even if they disagree on how to correct the rule. (5) Such sweeping calls for change have gone unanswered for over three decades, with the Supreme Court reaffirming Illinois Brick (6) and Congress failing to provide a legislative fix. Making a bad situation worse, many lower courts deny indirect purchaser actions even where none of the policies animating Illinois Brick support this result. Rather than add to the chorus calling for the Illinois Brick wall to come down, (7) this Note identifies circumstances, like those in the Microsoft litigation, in which none of Illinois Brick's rationales apply. Where this happens, exceptions should be carved out of the rule to remedy the most egregious harm caused by denying indirect purchaser recovery. Exceptions currently receive inconsistent treatment, often accompanied by inadequate or inaccurate policy considerations. This Note creates a coherent, flexible approach to identifying and applying exceptions using policy as a guide, rather than clinging to rigid categories and rules. Part I begins by identifying deterrence and compensation as the twin aims of antitrust law before discussing Illinois Brick, which deemphasized compensation and elevated other policy concerns. Part II describes how changes in the antitrust landscape have undermined most of the policy rationales once supporting Illinois Brick. The weaknesses of the rule discussed in Part II bolster the call for exceptions in Part III. Part III describes a variety of situations in which allowing an exception promotes antitrust goals more effectively than the rule itself, and it culminates in an argument for exceptions when the direct purchaser is unlikely to sue, (8) rather than limiting indirect purchaser suits to cases where the direct purchaser is legally unable (9) to do so. The latter approach undermines not only the goals of Illinois Brick, but the goals of antitrust law generally in a number of cases. While greater exceptions may not make Illinois Brick ideal, exceptions will do more to strengthen enforcement, promote deterrence, and compensate victims than will fruitless attempts to create an ideal rule. (10) Further, exceptions do not require the Court or Congress to reach consensus on new normative goals. Exceptions do nothing more than bring Illinois Brick back in line with the normative goals Congress and the Court already established--goals which they appear unwilling or unable to relinquish in pursuit of an ideal rule. I. THE POLICY OBJECTIVES OF ANTITRUST LAWS AND ILLINOIS BRICK A. The Policies of the Sherman Antitrust Act: Deterrence and Compensation With the passage of the Sherman Antitrust Act, Congress created a vigorous dual enforcement regime designed to deter anticompetitive behavior by subjecting violators to both government prosecution (11) and private treble-damage actions. (12) Vigorous enforcement was needed to combat the substantial harm trusts caused. (13) Responding to public sentiment, eliminating this harm was Congress's central goal in passing the Sherman Act. Indeed, when the Sherman Act was passed, "[t]he general disposition of the public was not in doubt. …