Opinion ID: 2013459
Heading Depth: 2
Heading Rank: 1

Heading: The Origins of State and Federal Antitrust Laws

Text: In 1976, the Iowa legislature overhauled our state competition law using federal law as a model. Since then, the Iowa Competition Law has provided [a] person shall not attempt to establish or establish, maintain, or use a monopoly of trade or commerce in a relevant market for the purpose of excluding competition or of controlling, fixing or maintaining prices. Iowa Code § 553.5. The Iowa Competition Law also authorizes a very broad category of persons to maintain a suit in our state courts for damages resulting from anticompetitive conduct. [A] person who is injured ... by conduct prohibited under this chapter may bring suit to: ... [r]ecover actual damages resulting from conduct prohibited under this chapter. Id. § 553.12(2). A year after the Iowa legislature enacted our current state antitrust law, the United States Supreme Court was called upon to determine who has standing to sue in federal court for damages resulting from monopolistic conduct. Illinois Brick, 431 U.S. at 720, 97 S.Ct. at 2061, 52 L.Ed.2d at 707. The Court's decision in Illinois Brick was built upon the Court's prior holding in Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968). In Hanover Shoe, plaintiff shoe manufacturer alleged the defendant manufacturer and distributor of shoe-making machinery unlawfully inflated the price of the machinery. The defendant argued the plaintiff, despite being a direct purchaser, did not suffer a legally cognizable injury because the plaintiff had passed on the overcharge to indirect purchasers. The Court held the defendant could not use the pass on [1] theory as a defense. Hanover Shoe, 392 U.S. at 494, 88 S.Ct. at 2232, 20 L.Ed.2d at 1242. In so ruling the Court explained, [a]s long as the seller continues to charge the illegal price, he takes from the buyer more than the law allows. At whatever price the buyer sells, the price he pays the seller remains illegally high, and his profits would be greater were his costs lower. Id. at 489, 88 S.Ct. at 2229, 20 L.Ed.2d at 1239. In effect, the Hanover Shoe Court acknowledged that in a system allowing pass ons, the real victimsthose who paid extra money as a result of the pass on are not compensated. However, in the interests of antitrust public policies, the Court concluded the defendants should not be allowed to use the pass on theory as a defense. [2] The Court would later revisit similar antitrust issues in Illinois Brick. In Illinois Brick, the State of Illinois brought suit against concrete block manufacturers, alleging price fixing in violation of section four of the Clayton Act. See 15 U.S.C. § 15. The provision of the Clayton Act at issue there provides [a]ny person who shall be injured ... by reason of anything forbidden in the antitrust laws may bring suit to recover damages sustained by him. Id. The United States Supreme Court held the state was an indirect purchaser because it did not buy concrete blocks directly from the manufacturers. Illinois Brick, 431 U.S. at 726, 97 S.Ct. at 2065, 52 L.Ed.2d at 713. The Court drew a line at which the law will not permit remote antitrust claims to be asserted. This bright line has become known as the indirect-purchaser rule. The rule provides indirect purchasers are barred from bringing claims for overcharges under federal law. Id. at 728-29, 97 S.Ct. at 2065-66, 52 L.Ed.2d at 714. The Court explained the direct purchaser, and not others in the chain of manufacture or distribution, is the party `injured in his business or property' within the meaning of [section 4 of the Clayton Act]. Id. Accordingly, the Court concluded federal antitrust law bars claims by indirect purchasers. Id. at 745-46, 97 S.Ct. at 2074-75, 52 L.Ed.2d at 725. Over ten years after Illinois Brick, the United States Supreme Court clarified the extent of its ruling. The Court was faced with the question of whether state statutes expressly granting standing to indirect purchasers were preempted by federal law to the contrary. It held nothing in the Sherman Act [3] or in Illinois Brick prevents the states from allowing indirect purchasers to bring antitrust actions, even if this results in multiple recoveries. California v. ARC Am. Corp., 490 U.S. 93, 101-02, 109 S.Ct. 1661, 1665, 104 L.Ed.2d 86, 95 (1989). However, this decision itself did not create a cause of action for indirect purchasers to pursue. [4] It merely authorized the states to provide a cause of action for indirect purchasers based on state antitrust law. The Class asserts this case compels Iowa to find the same and allow indirect purchasers to recover under state law. We must determine whether we should interpret Iowa antitrust law in the same way the United States Supreme Court has interpreted federal antitrust law.