Thinking Outside the Illinois Brick Box : A Proposal for Reform

In Illinois Brick Co. v. Illinois, the Supreme Court adopted a per se ban on private, treble damage antitrust suits by “indirect purchasers” in federal courts. The Court did so based on its belief that, if permitted, such actions could result in duplicative liability and protracted and complex proceedings. It also concluded that concentrating all recovery rights in the hands of direct purchasers would best serve U.S. antitrust law's twin goals of deterrence and compensation. Many states disagreed with the Court's assessment. They viewed Illinois Brick's ban on recovery by indirect purchasers as an arbitrary, anti-consumer limitation on the remedies available for violation of the antitrust laws and responded by adopting “Illinois Brick repealers.” By judicial decision or legislation, these repealers authorized indirect purchasers to sue in state courts under state antitrust laws. They became an accepted feature of the U.S. antitrust remedial system when, in California v. ARC America, the Supreme Court rejected the argument that state repealers were impliedly pre-empted by federal antitrust law as interpreted in Illinois Brick. Together, Illinois Brick, ARC America and some interrelated cases have produced a needlessly expensive, cumbersome, and complex antitrust remedial system that divides related cases between federal and state courts. Although removal and multi-district litigation procedures allow for some administrative efficiencies, the likely cost of the divided system is significant both for litigating parties and for the public and promote litigation strategies that may undermine the core goals of the antitrust remedial scheme. Ironically, the current system is more likely to produce the evils feared by the Supreme Court in Illinois Brick than a system that permitted indirect and direct purchasers alike to sue in federal court. And it is almost certain that the current divided remedial system has led to the odd combination of over-deterrence and under-compensation. This article presents a proposal for reform of the Illinois Brick-ARC America system that recalibrates the balance between deterrence and compensation. The goal is to establish a system that produces improved levels of both deterrence and compensation, while significantly decreasing the current, unacceptably high costs of administering our antitrust remedial system