Antitrust Law Daily Wrap Up, ANTITRUST NEWS: High court asked to consider Illinois Brick indirect purchaser doctrine, (Jul 15, 2013)

By Jeffrey May, J.D.

Bank customers claiming that their banks engaged in a conspiracy to fix fees charged in connection with transactions using automatic teller machines (ATMs) have asked the U.S. Supreme Court to review a decision of the U.S. Court of Appeals in San Francisco, rejecting their claims for lack of standing. The customers' petition for a writ of certiorariwas filed with the Court on July 11 (In Re: ATM Fee Antitrust Litigation: Brennan v. Concord EFS, Inc., Dkt. 13-63).

The customers have asked the Court whether a plaintiff who purchases directly from a member of a price fixing conspiracy is necessarily a “direct purchaser” entitled to standing under the Supreme Court's holding in Illinois Brick Co. v. Illinois (431 U.S. 720, 1977-1 Trade Cases ¶61,460), or whether a plaintiff must show that the conspirators agreed to set the specific price the plaintiff paid and not merely that the conspiracy inflated that price by anticompetitive means.

In their petition, the customers explained that, under the Illinois Brick doctrine, indirect purchasers ordinarily do not have standing to bring civil antitrust claims and that only “direct purchasers” have standing. The petitioners noted, however, that the appellate courts are divided on the issue of whether a plaintiff who directly purchases from a defendant who has participated in a price fixing conspiracy is necessarily a “direct purchaser” under Illinois Brick. According to the petitioners, the Ninth Circuit decision at issue “over-reads Illinois Brick to create an inappropriate immunity for price fixing conspiracies.”

The complaint alleged that the company behind the Star network—the largest ATM network—conspired with banks to fix interchange fees they passed on for ATM transactions at “foreign” ATMs (ATMs that are owned by a different bank, but are part of the same “ATM network” joint venture). In seeking dismissal, the defendants claimed that the customers were indirect purchasers because they alleged that the conspiracy fixed the interchange fee and not the foreign ATM fee that the customers paid.

Summary judgment was granted in favor of the defendants, and the Ninth Circuit affirmed (686 F. 3d 741, 2012-1 Trade Cases ¶77,969). The appellate court reasoned that because the customers did not themselves pay the interchange fee that the defendants allegedly conspired to set, they were “indirect purchasers” under the Illinois Brick doctrine. The appellate court also ruled that the limited exceptions under which indirect purchasers might obtain antitrust standing were inapplicable. The price paid by the plaintiffs had to be paid by the conspiracy.

According to the petitioners, the Ninth Circuit ruled that the customers were not direct purchasers, even though they purchased services directly from members of the alleged conspiracy and not from an innocent intermediary. The court reasoned that the alleged conspiracy set the price of an input to the product that the customers purchased and not the price of the product itself.

The Ninth Circuit recognized that its ruling conflicted with decisions of the Third and Seventh Circuits, which had held that a plaintiff has standing when the direct purchaser conspires with the seller, even though the price illegally set is an upstream cost that is passed-on to the plaintiffs. The Ninth Circuit's decision followed a Fourth Circuit decision that also restricted standing.

The petitioners contend that they, as the first non-conspirators in the chain of distribution, are the appropriate plaintiffs under Illinois Brick. They suggest that the result cannot be reconciled with the goal of robust enforcement of the antitrust laws.

Attorneys: Jeffrey A. Lamken (MoloLamken LLP) for Pamela Brennan.

Companies: Concord EFS, Inc.

News: Antitrust