The Supreme Court initially viewed Illinois Brick as a logical outgrowth of Hanover Shoe, but the controversy over how those decisions are linked is at the heart of the question of what to do about the “Illinois Brick doctrine.” Indeed, today the Illinois Brick doctrine lies at the intersection of at least four Supreme Court decisions that have defined the modern private right of action and is interlinked with developments in state antitrust law, the law of class actions, and the practice of multi-district litigation. In ways that the Illinois Brick Court could not have foreseen, the decision set in motion the opposite of what it intended: a private rights system that is complex and costly, perhaps at the expense of effective antitrust enforcement.
The Supreme Court’s original goals of simplifying litigation and emphasizing deterrence have been thwarted by flaws in its reasoning in Illinois Brick, as well as subsequent developments. First, by elevating the goal of deterrence and downgrading the goal of compensation, the Court failed to give effect to what it, itself, viewed only two years later as a core purpose of the private right of action: consumer redress. It also failed to anticipate the related reaction of states that embraced “Illinois Brick repealers” to restore an effective role for compensation, which the Court later blessed in California v. ARC America Corp.
Second, in the decades that followed Illinois Brick, the Court and Congress became increasingly hostile to class actions generally. The consequence has been ever more demanding standards for class certification, and more readily available mechanisms for state to federal court removal, which have further complicated both direct and indirect purchaser antitrust litigation. What plaintiffs gained in expanded coverage of indirect purchasers under state law has been thwarted to some extent by expanded removal rights and the higher hurdles for class certification in federal courts, often to the exclusion of consumers from indirect purchaser classes.
The simple direct purchaser model envisioned by the Court in Illinois Brick is the rare occurrence. Far more common is the phenomenon of multidistrict litigation with multiple classes of direct and indirect purchasers, opt outs, and sometimes state attorneys general all asserting related claims. And while the plaintiffs in such sprawling litigation often cooperate, that is not always the case. Moreover, enormous resources are poured into litigating class certification over arcane issues that are divorced from the substance of the antitrust claims. Advances in theories of economic harm and in the economic tools available for evaluating it have also rendered some of the Court’s assumptions in Illinois Brick invalid, but may also illustrate their durability when combined with current class certification standards of proof: battles over the reliability and admissibility of expert testimony on injury and damages have become sport in all antitrust litigation, and can be especially challenging (and inordinately expensive) in the context of antitrust class action litigation involving direct and indirect purchasers.
Third, it is questionable that the system that has emerged adequately serves the goal of either deterrence or compensation. The combination of split federal-state private rights, procedural maneuvering, elevated class action standards, and reliance on multi-district litigation to assess and allocate negotiated damages, has rendered Illinois Brick’s core assumptions inoperative. Instead, litigation leads to, at best, an inconsistent admixture of compensation and deterrence. As was evident in Apple v. Pepper, no single case is likely to present facts that will test the assumptions of both Hanover Shoe and Illinois Brick, as well as the frequently overlaid class certification issues. It is a puzzle that has expanded beyond the Supreme Court’s ability to solve.
That means that if there is to be reform, Congress will need to act. Past proposals have offered solutions, but any attempt to reach a compromise today will be complicated by the same challenge that faced the Court in 1977 and that reappeared in Apple: how best to achieve the goals of deterrence and compensation. That task will be even more challenging today than in the past because the current system has produced an ecosystem of stakeholders who have learned to work with and benefit from the system. A legislative compromise might be found, however, through some combination of substantive and procedural reforms, including class certification relief, expanded indirect purchaser rights, and protections against multiple liability.
Our three articles examine these themes more deeply. Economist Greg Leonard opens the Symposium by examining the operation of Illinois Brick in light of contemporary economic notions of economic loss, specifically in the context of price fixing. He examines and questions two key characteristics of Illinois Brick. First, he asks whether a narrow focus on the recovery of overcharges by direct purchasers will in practice account for the economic losses that can flow from price fixing. He illustrates how those losses can diverge substantially and be both greater than or less than “overcharges,” making overcharges a poor metric for economic loss. He also explains how Hanover Shoe’s and Illinois Brick’s concept of “pass-on” of losses in a supply chain are not a “summary statistic” for the economic losses sustained by downstream victims of price-fixing. He concludes that today’s judicial approach to calculating damages in price-fixing cases is “the product of a rather haphazard and patchwork history” that serves neither the goal of compensation nor deterrence. Revising the legal framework to align more closely to economic loss, he argues, would be more economically sound and an improvement over the current system in theory, although he recognizes that class certification issues could prove to be even more challenging under his suggested approach.
Our second piece, co-authored by Joshua P. Davis and Anupama Reddy, directly addresses Justice Gorsuch’s puzzlement about the “plaintiffs’ bar,” which once seemed unequivocally aligned with efforts to overrule Illinois Brick. Doing so today, they argue, would have “unintended consequences” if it also involved overruling Hanover Shoe. Focusing in particular on the role of class actions, which they view as essential to the success of direct and indirect purchaser litigation, Davis and Reddy argue for decoupling Hanover Shoe and Illinois Brick, which together have provided what they label the “Direct Purchaser Rule.” Their research suggests that under the current state of the law, it has become far more difficult for putative classes of indirect purchasers to secure certification and recovery as compared to direct purchaser classes, and that elimination of both Illinois Brick and Hanover Shoe would make it even more difficult, perhaps insuperably so, for direct purchasers to secure certification. The result would be diminished, not enhanced deterrence and compensation. To recalibrate the balance between compensation and deterrence, they advocate abandoning Illinois Brick but retaining Hanover Shoe.
The final piece in the Symposium, contributed by Barry Rodger, provides a valuable comparative perspective that considers the European Union’s longstanding rejection of an Illinois Brick-styled bar to indirect purchaser recoveries, as well as a perspective on the still evolving private competition law regime of the United Kingdom. The EU experience, in particular, provides a window into a world that has rejected the rationale of both Hanover Shoe and Illinois Brick, albeit in the context of a far different civil litigation system that does not share the defining features of the U.S. antitrust system of treble damages, no loser-pays rule, broad discovery, and a well-developed system for class actions. The European Union, and now the United Kingdom, have sought to provide guidance on damage calculations that allow for both indirect purchaser recoveries and a pass-on defense. Professor Rodger observes, however, that just as context matters in understanding the U.S. approach, so too does it matter in assessing the development of “pass-on” rules in the UK. He identifies the various and interconnected characteristics and legal dictates of that system and, echoing the U.S.-focused Symposium authors, emphasizes that a “workable collective redress mechanism is vital in ensuring that rules facilitating indirect purchaser rights benefit consumers in practice.”
In the more than 40 years since Illinois Brick, antitrust litigation itself has evolved substantially. The Supreme Court has imposed increasingly demanding burdens of pleading, production, and proof on plaintiffs, and has openly expressed its concern for the costs of discovery and the potential misuse of the class action device both directly and by implication.
Apple v. Pepper, however, hinted at a willingness to reassess the barricade that has been erected around the Clayton Act’s private right of action. In doing so, it also may have breathed life into its compensatory goal. The procompensation, pro-consumer themes that characterized the Court’s 1979 decision in Reiter v. Sonotone could be detected when the majority reasoned that the consumer class plaintiffs were properly viewed as direct, not indirect purchasers, and that the economic losses they allegedly suffered were distinct from, not duplicative of, those experienced by app developers. But the Court divided 5-4 in its judgment, and Justice Ruth Bader Ginsburg, who joined the majority opinion authored by Justice Kavanaugh, has now been replaced by Justice Amy Coney Barrett. The durability of the reasoning in Apple, therefore, may be questioned, and any reappraisal of Illinois Brick may lie in the hands of Justice Barrett.
The capacity of the Court to “solve” the Illinois Brick problem, however, has likely passed. As is evident in all three articles in this Symposium, the task of designing a remedial system fit to the needs of any particular litigation system is not one the Court is well-suited to undertake, and no single case will present it with an opportunity to do so. Reformation of the “Illinois Brick doctrine,” if it is to come, will require a broader perspective that encompasses all aspects of today’s substantive and procedural law and seeks to reconcile the competing goals of the private right of action as well as the competing interests of the stakeholders who have now adapted to the complex system set in motion by the Court back in 1968 and 1977.
Read this article in PDF format.
