Antitrust and Consumer Protection
Competition: Spring 2016, Vol 25, No. 1
Content
- 2015: a Year of Big Plaintiff Wins In Antitrust and Privacy Cases
- Big Stakes Antitrust Trials: O'Bannonvnational Collegiate Athletic Association
- California Antitrust and Unfair Competition Law Update: Procedural Law
- California Antitrust and Unfair Competition Law Update: Substantive Law
- Chair's Column
- Considerations, Not Limitations: An Argument Against Defining the Anticompetitive Harm Under F. T.C. Vactavis As the "Elimination of the Risk of Potential Competition"
- Editor's Note
- Ftc Data Security Enforcement: Analyzing the Past, Present, and Future
- Golden State Institute 25Th Anniversary Retrospective and Prospective Views On California Antitrust and Unfair Competition Law
- Keynote Address: a Conversation With the Honorable Tani Cantil-sakauye, Chief Justice of California
- Managing Antitrust and Complex Business Trials-a View From the Bench
- Masthead
- Settlement Negotiation Tactics, Considerations and Settlement Agreement Provisions In Antitrust and Ucl Cases: a Roundtable
- The Decision of the Supreme People's Court In Qihoo Vtencent and the Rule of Law In China: Seeking Truth From Facts
- The Nexium Trial Pioneers Actavis' Activation: a Roundtable of Nexiums Counsel Reflect On Their Six-week Trial
- The Ucl-now a Money Back Guarantee?
- Royal Printing and the Ftaia
ROYAL PRINTING AND THE FTAIA
By Robert E. Freitas1
In Royal Printing Company v. Kimberly-Clark Corporation,2 the Ninth Circuit created an exception to the Illinois Brick3 direct purchaser rule that grants an indirect purchaser standing to sue participants in a price fixing conspiracy "when the direct purchaser is a subsidiary or division of a co-conspirator."4 The Ninth Circuit now applies the Royal Printing exception "when a conspiring seller owns or controls the direct purchaser."5 The Supreme Court has not approved or adopted the Royal Printing "owned or controlled" exception.
In addition to creating a new Illinois Brick exception, the Royal Printing court established a "full overcharge" rule that allows an indirect purchaser plaintiff to recover the full amount of the price fixing overcharge paid by its direct purchaser supplier. There is no requirement that the plaintiff prove that the overcharge was fully or partially passed on to the indirect purchaser. Further, the defendant is not allowed to defend with evidence that the overcharge was absorbed by the direct purchaser, or to reduce the amount of the plaintiff’s recovery by proving that pass on of the overcharge was not complete. The Royal Printing court concluded that "[d]etermining what portion of the illegal overcharge was ‘passed on’ . . . and what part was absorbed by the middlemen would involve all the evidentiary and economic complexities that Illinois Brick clearly forbade."6
The Royal Printing full overcharge rule is not compelled by Illinois Brick, or by Hanover Shoe,7 the case from which the limitation on the use of evidence of pass on in antitrust cases is derived. Hanover Shoe and Illinois Brick are based on an interpretation of Section 4 of the Clayton Act8 making the direct purchaser the only party that is "injured in [its] business or property" within the meaning of Section 4 by the payment of an illegal overcharge. In both Hanover Shoe and Illinois Brick, the Supreme Court expressed concern about "evidentiary and economic complexities" associated with proof of pass on, but the basis for the Court’s decisions was the determination that the direct purchaser is the injured party under Section 4. Illinois Brick did not simply "forbid" evidence of pass on based on "evidentiary and economic complexities." The Royal Printing full overcharge rule—which allows indirect purchaser recovery without proof of injury—is a questionable application of Illinois Brick, and is arguably inconsistent with the Hanover Shoe interpretation of Section 4.