Unintended Consequences: Abolishing the Direct Purchaser Rule as a Threat to Private Antitrust Enforcement

Abstract

Proposals to abandon the direct purchaser rule under federal antitrust law—and to allow indirect purchasers to bring claims for damages—sound as if they would enhance private antitrust enforcement. That presumably is why they have been attractive to some progressives. After all, expanding who may sue could only increase recoveries, promoting the goals of compensation and deterrence, right? Wrong. Enter the rule of unintended consequences. What is easily missed is that federal class certification doctrine has become entwined with the direct purchaser rule. Overturning Illinois Brick—allowing indirect purchasers to sue for damages under federal law—could well overturn Hanover Shoe—permitting a pass-on defense. Courts have imposed standards to certify a class that are strict and often might not be met without Hanover Shoe. As a result, repealing the direct purchaser rule could make certifying direct purchaser classes much harder, on the whole undermining private enforcement of antitrust laws. This Article argues for either keeping the direct purchaser rule or taking a subtler approach--repealing Illinois Brick while retaining Hanover Shoe.

Keywords: antitrust, private enforcement, direct purchaser rule, Illinois Brick, Hanover Shoe

JEL Classification: L4