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Antitrust violations often have a “ripple” effect. A cartel’s prices increases can flow through distribution chains, harming everyone involved to some degree. A monopolist’s anticompetitive acts can spread from one market to another, driving prices up in both. At bottom, all antitrust violations create inefficiencies that can affect a large number of parties, from resellers, to competitors, to consumers—that is why they are illegal. But while the Clayton Act provides rights to “any person” injured or threatened with injury as a result of an antitrust violation ( see 14 U.S.C. §§ 15(a) and 16 (West 2006)), the doctrines of “antitrust injury” and “antitrust standing” limit such rights to only a subset of those actually harmed. Understanding the requirements of these doctrines is thus very important. While an antitrust violation may in fact cause harm to many, only those that meet the requirements of these doctrines can seek monetary or injunctive relief.
One way to think about antitrust injury and antitrust standing is that together, they form the antitrust law equivalent (or, perhaps, the application) of “proximate cause” in federal tort law. See, e.g., Associated Gen. Contractors of Cal., Inc. v California State Council of Carpenters, 459 U.S. 519, 536-37 (1983) (“ AGC”) (noting similarity); Jack Walters & Sons Corp. v. Morton Bldgs., Inc., 737 F.2d 698, 708-09 (7th Cir. 1984) (Posner, J.) (same), cert. denied, 1055 S. Ct. 432 (1984). The doctrine of “antitrust injury” limits liability under federal antitrust law to injuries that are sufficiently related to the anticompetitive aspect of the antitrust violations in question. See generally Herbert Hovenkamp, Federal Antitrust Policy § 16.3 (3rd ed. 2005). The doctrine of “antitrust standing” evaluates the number of plaintiffs that have suffered “antitrust injury,” and attempts to pick the “right” ones—that is, the kinds of plaintiffs which, if allowed to sue, would neither over-burden the judicial system nor frustrate the private enforcement of antitrust laws. See generally William H. Page, The Scope of Liability For Antitrust Violations, 37 Stan. L. Rev. 1445, 1446-47 (1985). This article briefly examines the elements of these doctrines and the principal Supreme Court cases which established them.
“At its most fundamental level, the antitrust injury requirement precludes any recovery for losses resulting from competition, even though such competition was actually caused by conduct violating the antitrust laws.” Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 337a (2d ed. 2000). Thus, “[a]ntitrust injury is defined not merely as injury caused by an antitrust violation, but more restrictively as ‘injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.’” Glen Holly Entertainment, Inc. v. Tektronix Inc., 352 F.3d 367, 371 (9th Cir. 2003) (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)). These two sentences capture the distinction between mere causation “in fact” and “antitrust injury.” “Antitrust injury” does not just require that an antitrust violation in fact caused the injury—it requires that the injury in question “stems from a competition-reducing aspect or effect of the defendant’s behavior.” Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 344 (1990). “To show antitrust injury, a plaintiff must prove that his loss flows from an anticompetitive aspect or effect of the defendant’s behavior, since it is inimical to the antitrust laws to award damages for losses stemming from acts that do not hurt competition.” Rebel Oil Co. v. Atlantic Ritchfield Co., 51 F.2d 1421, 1433 (9th Cir. 1995).
The Supreme Court first articulated this doctrine in Brunswick, cited above. There, the defendant, a bowling equipment manufacturer, acquired failing bowling alleys. A retail rival claimed the acquisition violated Section 7 of the Clayton Act (proscribing mergers whose effect “may be substantially to lessen competition, or to tend to create a monopoly”) because the merger would allow for predation in the retail market. The plaintiff, however, did not allege predation: instead, the plaintiff sought only profits which it claimed it would have received “but for” the bowling alleys remaining open. See Brunswick, 429 U.S. at 481. The Court held no “antitrust injury” had occurred for two reasons. First, injury resulting from increased competition was not “the type that the statute was intended to forestall.” Id.at 487. Second, the injury would still have occurred had its rival been bought lawfully—thus, it did not occur “by reason of anything forbidden in the antitrust laws . . . it did not occur by reason of that which made the acquisitions unlawful.” Id.at 488 (internal quotations omitted).
As one commentator explains, “most courts have recognized that Brunswick announced a general principle that requires every treble damage plaintiff to show that his harm is related to the anticompetitive aspect of the defendant’s conduct.” Page, supra, at 1459-60 (collecting cases). This “requires a determination of the law’s purposes and an examination of the effects of a challenged practice.” John E. Lopatka and William H. Page, Brunswick at 25: Antitrust Injury And The Evolution Of Antitrust Law, 17 Antitrust L.J. 20, 21 (2002). The Supreme Court re-visited the doctrine in four cases:
Based on the above, courts today generally hold that “[a]ntitrust injury is made up of four elements: ‘(1) unlawful conduct, (2) causing an injury to the plaintiff, (3) that flows from that which makes the conduct unlawful, and (4) that is of the type the antitrust laws were intended to prevent.’” Glen Holly, 351 F.3d at 372 (quoting American Ad Mgmt, Inc. v. Gen. Tel. Co. of Cal., 190 F.3d 1051, 1054 (9th Cir. 1999). Courts also often impose a fifth requirement: that “the ‘injured party be a participant in the same market as the alleged malefactors.’ ” Id. (quoting American Ad, 190 F.3d at 1057 (quoting Bhan v. NME Hospitals, Inc.,772 F.2d 1467, 1470 (9th Cir. 1985)). Usually, this means that the party must be either “a consumer of the alleged violator’s goods or services or a competitor of the alleged violator in the restrained market.” Eagle v. Star Kist Foods, Inc., 812 F.2d 538, 540 (9th Cir. 1987). While “there are situations in which other market participants can suffer antitrust injury” ( American Ad Mgmt., 190 F.3d at 1058) such situations are rather rare. See, e.g., Ostrofe v. H.S. Crocker Co., Inc., 740 F.2d 739, 744-45 (9th Cir. 1984) (supervisor fired by conspirator for refusal to participate in conspiracy alleged “antitrust injury” under McReady because firing “intertwined” with conspiracy).
The doctrine of antitrust injury has arisen in a wide variety of contexts too varied to summarize here. While Brunswick, Cargill, and Atlantic Richfield each involved plaintiffs whose injuries failed these requirements because they resulted from acts by the defendants that increased, rather than decreased, competition, “heightened competition is not the only circumstance in which courts have found antitrust injury to be missing.” ABA Section of Antitrust Law, Antitrust Law Developments, at 768 (4th ed. 1997). “Courts have rejected claims where the plaintiff’s injury is deemed unrelated to the alleged antitrust violation or where the defendant’s conduct injures the plaintiff without having an adverse effect on competition.” Id. (collecting cases). A useful resource discussing the doctrine of “antitrust injury” is Areeda and Hovenkamp’s Antitrust Law. See Areeda and Hovenkamp, supra, ¶ 337. There are also a number of useful law review articles that discuss the history and this doctrine and collect recent cases in which courts have applied it. See, e.g., Ronald W. Davis, Standing On Shaky Ground: The Strangely Elusive Doctrine of Antitrust Injury, 70 Antitrust L.J. 697 (2003) (discussing application of “antitrust injury” doctrine and collecting cases); C. Douglas Floyd, Antitrust Victims Without Antitrust Remedies: The Narrowing Of Standing In Private Antitrust Actions, 82 Minn. L. Rev. 1 (1997) (same); John E. Lopatka and William H. Page, Who Suffered Antitrust Injury In The Microsoft Case?, 69 Geo. Wash. L. Rev. 829 (2001) (discussing the issue of whether harm to innovation constitutes harm to competition and collecting cases).
“Antitrust standing” requires courts to engage in a multi-factor test to determine “what is the most efficient plaintiff or plaintiffs from among those who have suffered economic injury.” Page, supra, at 1445. Courts undertake a case-by-case analysis of “the plaintiff’s harm, the alleged wrongdoing by the defendants and the relationship between them.” AGC, 459 U.S. at 535. In AGC, the Court emphasized that it would be “virtually impossible to announce a black-letter rule that will dictate the result in every case,” and that instead it would “identify factors that circumscribe and guide the exercise of judgment in deciding whether the law affords a remedy in specific circumstances.” Id. In doing so, the Court rejected earlier approaches to “antitrust standing” formulated in the lower courts, and instead provided the following factors to be considered on a case-by-case basis:
R.C. Dick Geothermal Corp. v. Thermogenics, Inc., 890 F.2d 139, 146 (9th Cir. 1989) (en banc) (citing AGC, 459 U.S. at 536, n. 33).
These factors include, or, to be more accurate, assume, the presence of “antitrust injury,” which “is necessary, but not always sufficient, to establish standing under § 4.” Cargill, 479 U.S. at 110 n. 5. Courts tend to examine “antitrust injury” within the broader question of whether a plaintiff has “antitrust standing” to sue. See, e.g., R.C. Dick, 890 F.2d at 149-52 (examining requirements of “antitrust injury” as a factor in determining “antitrust standing”); American Ad., 190 F.3d at 1054-1058 (same); Glen Holly, 352 F.3d at 371-72 (same). In practice, however, the presence (or absence) of antitrust injury remains the primary factor that determines antitrust standing. See, e.g., ABA Section of Antitrust Law, Antitrust Law Developments, at 780 (4th ed. 1997) (“Many decisions following [ ACG]have focused mainly on the question of antitrust injury, and while the five standing criteria are frequently listed and evaluated separately, in most cases a finding that the plaintiff suffered antitrust injury appears to have been dispositive of the standing issue.”) (collecting cases).
Nonetheless, the factors listed above set forth in AGC remain relevant. They focus on the remoteness of the injury, the existence of a potential plaintiff with a greater motivation to bring an action, and the complexity of the ensuing litigation should a particular plaintiff be permitted to bring an action. See AGC, 459 U.S. 540-43. In AGC, all three factors weighed against the plaintiffs. The unions were not competitors within the market in which the anticompetitive conduct allegedly took place; thus, “the chain of causation between the Union’s injury and the alleged restraint in the market for construction subcontracts contains several somewhat vaguely defined links.” Id.at 540. Coerced contractors and union subcontractors were injured more immediately. The Court held that “[t]he existence of an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement diminishes the justification for allowing a more remote party such as the Union to perform the office of a private attorney general.” Id. at 542. The “indirect” nature of the injuries, combined with the fact that “the alleged effects on the Union could have been produced by independent factors,” also led the Court to conclude the damages were “highly speculative.” Id.at 542. Finally, allowing recovery by “more remote” parties such as the Union created the danger of “duplicative recoveries on one hand, or the danger of complex apportionment on the other.” See id. at 543-45.
Since AGC, lower courts have applied the doctrine of “antitrust standing” in a multitude contexts too varied and complex to summarize here. Areeda and Hovenkamp’s Antitrust Law, supra, provides several useful sections examining how courts have applied the doctrine in specific contexts, including sections divided by type of plaintiff (including everything from suits by consumers (¶ 345) to nascent firms (¶ 349)) and by type of antitrust violation (including unlawful mergers (¶ 356) to intrabrand distribution restraints (¶ 357)). Because of the highly fact-specific nature of the “antitrust standing” test, these sections can be very helpful.
The doctrines of antitrust injury and standing are important doctrines to understand. As discussed in the five Supreme Court cases discussed above, they apply in any antitrust case and combined, they limit the scope of a defendant’s liability for anticompetitive acts to (i) those harmed by the anticompetitive aspect(s) of the acts in question and (ii) whose injuries are not too “remote” from the anticompetitive acts such that recovery would be too speculative, potentially duplicative, or complex. Because of the fact-specific nature of these doctrines (especially standing), understanding how courts have applied them in similar or analogous cases is important to evaluate the merit of potential claims.
About the Author
Matthew R. Schultz, Associate, Zelle, Hofmann, Voelbel, Mason & Gette LLP. B.A., University of Maryland, College Park, 1997; J.D., Order of the Coif, University of California at Berkeley School of Law (Boalt Hall), 2000.