Opinion ID: 791984
Heading Depth: 3
Heading Rank: 1

Heading: Why we adopt a limited general co-conspirator exception.

Text: 71 If there is a general co-conspirator exception, why do we limit it? To begin, we examine whether Illinois Brick's policy justifications suggest we should adopt (1) a general co-conspirator exception that would permit indirect purchaser standing when the middlemen conspired with the manufacturers even if the middlemen were not barred by the complete involvement defense from suing their former co-conspirator—the manufacturer (the unlimited exception), or (2) an exception that would permit indirect purchaser standing only if the middlemen were barred by the complete involvement defense from suing the manufacturer (the limited exception). 13 72 Illinois Brick's first policy concern—the risk of duplicative liability—cuts against the unlimited exception, but in favor of the limited exception. For example, imagine the dealers had already sued and recovered overcharges from Dentsply for the exclusive-dealing conspiracy. If there was an unlimited exception, presumably nothing would stop the labs from then suing Dentsply to recover the duplicative portion of the overcharge that the dealers had passed on to them. Even under the conditions of this case (with the labs suing first and the dealers joined), duplicative recovery is a possibility. If the labs prove Dentsply engaged in an exclusive-dealing conspiracy with the dealers, the dealers could potentially sue Dentsply for duplicative damages the conspiracy caused them. See Link, 788 F.2d at 932 n. 12 (analyzing an alleged conspiracy analogous to our case and noting that, even if the dealers were joined and were co-conspirators, they could still potentially sue the manufacturer for overcharges caused by the exclusive-dealing conspiracy). However, under the limited exception, the risk of duplicative liability is alleviated because that exception is only applicable if the middlemen are barred from recovery. 73 Illinois Brick's second policy concern—avoiding the need to ascertain the portion of an overcharge that was passed on—cuts against both exceptions. Unlike vertical conspiracies involving RPM, other vertical conspiracies are designed to distort the wholesale market for a particular good. For example, assume that Dentsply and its dealers only engaged in an exclusive-dealing conspiracy. The effect of that conspiracy would be to deny Dentsply's competitors access to its authorized dealers. The absence of competition for these dealers' business would allow Dentsply to charge its dealers a supra-competitive price at wholesale. This overcharge would then be passed on (at least in part) to the dealers' customers, the dental laboratories. The damages that the laboratories could recover from Dentsply would thus be the treble portion of the overcharge that the dealers passed on to them. 14 Thus both exceptions, which apply to conspiracies that attack the wholesale market, potentially create the problems of apportionment that underlie Illinois Brick. 15 74 Illinois Brick's third policy concern—risk of inefficient enforcement of the antitrust laws because the ultimate recovery for the dealers would be diluted, thereby decreasing the dealers' incentive to sue—cuts against the unlimited exception, but in favor of the limited exception. Under the unlimited exception, when middlemen were not completely involved, their recovery would be diluted and their incentive to sue would decrease (assuming that, rather than the middlemen being permitted to recover the entire overcharge, it was apportioned among the middlemen and the indirect purchasers). However, under the limited exception, when middlemen were not completely involved, their recovery would not be diluted and their incentive to sue would not decrease. As the indirect purchasers would not have standing in this instance, no recovery by them could dilute the middlemen's recovery. 75 Thus, all three of the Illinois Brick policy justifications argue against adopting the unlimited exception, while the first and the third favor adopting the limited exception and only the second (the desire to avoid ascertaining the portion of an overcharge that was passed on) cuts against it. Further, while it is true that adopting the limited exception creates the need to ascertain the portion of an overcharge that was passed on, we think the alternative, adopting no general co-conspirator exception, is less desirable. Cf. In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1169 (3d Cir.1993) ([W]hile complex apportionment problems are implicated here, we do not hold that litigation must be avoided solely because it might be difficult to ascertain damages. Injured parties cannot be penalized and left without recourse because measurement of their damages is difficult.). The Illinois Brick Court was concerned with promoting the longstanding policy of encouraging vigorous private enforcement of the antitrust laws. 431 U.S. at 745, 97 S.Ct. 2061. We are unwilling to hold that if initial sellers and completely involved direct purchasers conspire, then no plaintiff outside the conspiracy may sue the initial seller for damages. 76