Antitrust and Unfair Competition Law

Competition: Fall 2018, Vol 28, No. 1

THE DIFFICULTIES OF SHOWING PASS THROUGH IN INDIRECT PURCHASER COMPONENT CASES

By James Bo Pearl and Allison Smith1

Over the last decade, California federal courts have heard a number of antitrust suits alleging price fixing and other anticompetitive conduct by cartels of electronic component manufacturers. These alleged conspiracies have touched various components of everyday electronics that allow the devices to perform basic tasks.

The component cases almost invariably include claims by indirect purchasers seeking damages from the alleged cartelists, even though they did not purchase products directly from defendants. In most of these cases, the indirect purchaser class purchased finished products incorporating the electronic component at issue, such as a laptop computer.2 The electronic component generally will have passed through multiple intermediaries in the distribution chain between the defendant manufacturer and the indirect purchaser plaintiff ("IPP"). Given the volume of commerce associated with these commonplace consumer products, the damages claims in these cases are often substantial.

Establishing damages incurred by indirect purchasers is complicated by their attenuated commercial relationship with the conspirators.3 To recover, indirect purchasers must show that the original increase in price charged by the component manufacturer to a direct purchaser because of the conspiracy (the overcharge) made its way through all stages of the distribution chain. That is, "plaintiffs must demonstrate that defendants overcharged their direct purchasers . . . and that those direct purchasers passed on the overcharges to plaintiffs."4

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