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Hastings Law Journal

Abstract

In Illinois Brick Co. v. Illinois, the Supreme Court held that, except in special circumstances, only direct purchasers may recover treble damages under section 4 of the Clayton Act for the effect of a price-fixing conspiracy throughout a vertical supply chain. The wisdom of the Court's decision was questioned at the time by the three dissenting Justices, has been hotly debated in the scholarly literature, and currently is being considered by Congress. This Article focuses on one of the most important issues raised in the debate-whether, as the Court appears to have concluded, assigning the exclusive right to recover damages to direct purchasers enhances the deterrent effect of private antitrust enforcement. Although the Illinois Brick rule applies to all damages actions under section 4 of the Clayton Act, only price fixing is considered in the Article. The Article first reviews the Court's rationale in Illinois Brick and summarizes the basic issues in the controversy caused by the decision. An economic model of private antitrust enforcement is then developed and the model's implications are compared with the rule of Illinois Brick. The Article concludes that the rule limiting recovery to direct purchasers is probably appropriate. Finally, some observations derived from this analysis on possible exceptions to the rule and on the optimal legal system are offered.

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