Standing in the Way of the FTAIA: Exceptional Applications of Illinois Brick

In 1982, Congress enacted the Foreign Antitrust Trade Improvements Act (FTAIA) to resolve uncertainties about the international reach and effect of U.S. antitrust laws. Unfortunately, the FTAIA has provided more questions than answers. It has been ten years since the Supreme Court most recently interpreted the FTAIA, and crucial questions and circuit splits abound. One of these questions is how to understand the convergence of the direct purchaser rule (frequently referred to as the Illinois Brick doctrine) and the FTAIA. Under the direct purchaser rule, only those who purchase directly from antitrust violators are typically permitted to sue under section 4 of the Clayton Act for treble damages. There are several court-created exceptions to this rule that allow indirect purchasers to sue under section 4. This Note addresses the open question of whether courts should apply these exceptions in the FTAIA context. The Seventh Circuit recently discussed this question in Motorola Mobility LLC v. AU Optronics Corp., implying that courts should not recognize Illinois Brick's exceptions in the FTAIA context. This Note argues for a different interpretation of the case-one that supports the effective deterrence of antitrust violations while vindicating the need to compensate American consumers who are foreseeably, substantially, and directly damaged by foreign anticompetitive conduct. Based on an analysis of the purpose of the Illinois Brick doctrine and the text of the FTAIA, this Note concludes that when an exception to Illinois Brick would permit indirect purchasers to sue in the domestic context, U.S. courts should also allow indirect purchasers to sue under the FTAIA.INTRODUCTIONThe following hypothetical implicates many of the concerns this Note confronts:At the annual Computer Speaker Manufacturers' Conference, the producers of computer speakers in Europe and Asia conspire to price fix, forming an international cartel artificially inflating the price of computer speakers.1 After the formation of the conspiracy, one of the conspirators, Mono Polly Speakers, Inc. (the supplier), sells its artificially expensive product to Computer Direct, a computer manufacturer in a small Asian country. Once it purchases the overcharged goods, Computer Direct is a direct purchaser from Mono Polly. This means that, if all of the parties were in the United States, Computer Direct would have standing2 to sue Mono Polly for antitrust damages under the Illinois Brick doctrine.3 Computer Direct could accrue damages in one of three ways. First, Computer Direct might keep its computer prices the same, sell the same number of computers, and lose profits equivalent to Mono Polly's overcharge on the speakers. Second, it could increase sales prices by the exact amount of the overcharge. In this scenario, Computer Direct would pass on the overcharge to its customers.4 Although this would bring in the same perunit profits, the increased price may diminish demand for the computers, thereby reducing sales numbers. Finally, Computer Direct might take a middle path: increase the sales price by some amount less than the total overcharge, losing some profits and losing some sales.Mono Polly's anticompetitive conduct also reaches American commerce because Computer Direct and other similar foreign manufacturers sell computers to consumers and department stores in the United States. Assuming that Computer Direct and others pass on a portion of the overcharge by increasing their sales prices, American purchasers are damaged because they pay more for the product than they would have absent the price fixing. Since the U.S. consumers and department stores did not buy directly from Mono Polly, they are indirect purchasers in antitrust terms.5 In the typical case in which all parties are located in the United States, indirect purchasers (and, accordingly, the U.S. consumers in this case) would generally be unable to sue Mono Polly under the Illinois Brick doctrine. …