In a recent opinion, the Ninth Circuit provided important clarifications regarding the scope of two exceptions to the general rule set forth in Illinois Brick1that only direct purchasers have standing to pursue damages for antitrust violations. The court's decision in In re ATM Fee Antitrust Litigation2narrowly interpreted the exceptions to the Illinois Brick rule, and held that plaintiffs, who did not directly purchase the allegedly price-fixed product from the defendants, lacked standing to pursue the antitrust claims.
Plaintiffs alleged that the defendants – a group of ATM card-issuing banks and an ATM network – violated Section 1 of the Sherman Act by conspiring to fix the interchange fee that banks must pay to the ATM network when a cardholder engages in an ATM transaction abroad. As holders of ATM cards, plaintiffs allege they were injured by the purported conspiracy because banks passed on the inflated interchange fees to cardholders by increasing the foreign ATM fee that cardholders must pay to the banks after using an ATM abroad.
Defendants filed for summary judgment, arguing that as payers of the foreign ATM fee – not the interchange fee that was the subject of the alleged conspiracy – plaintiffs should be considered indirect, not direct, purchasers. As such, according to defendants, plaintiffs lack standing to pursue the claims under the Illinois Brick rule.
The Ninth Circuit agreed with defendants that plaintiffs are indirect purchasers and rejected plaintiffs' arguments that they fall within one of the limited exceptions to the Illinois Brick rule. In doing so, the court clarified language in previous Ninth Circuit decisions regarding the scope and applicability of two exceptions to Illinois Brick: the co-conspirator exception, which confers standing on indirect purchasers when the seller and intermediary purchaser are co-conspirators, and the control exception, which confers standing on indirect purchasers when the seller owns or controls the intermediary purchaser.
The Ninth Circuit first limited application of the co-conspirator exception to cases in which indirect purchasers buy the allegedly price-fixed product itself, not a final product containing the allegedly price-fixed product, from a member of the conspiracy. In doing so, the Ninth Circuit rejected plaintiffs' arguments that the exception should apply when an indirect purchaser buys a product that contains, as a component, the allegedly price-fixed product directly from a co-conspirator. If correct in their interpretation of the exception, plaintiffs would have had standing because the defendant banks to which plaintiffs paid the inflated ATM fee were also allegedly complicit in conspiring to fix the interchange fee. The Ninth Circuit cited to the Supreme Court's edict in prior case law that exceptions to Illinois Brick should be limited and narrowly construed.
The Ninth Circuit also clarified that the "control" exception to Illinois Brick only applies when the intermediary purchaser of the allegedly price-fixed product is owned or controlled by the conspiring seller. Plaintiffs cited a prior case in which the Ninth Circuit stated that the purpose of the control exception is to provide indirect purchasers with an avenue to sue for antitrust violations where "there is no realistic possibility that the direct purchaser will sue its supplier," because one is an affiliate of the other.3 By extension, plaintiffs argued that the control exception should also apply when the intermediary purchaser is a co-conspirator with the seller because the intermediary purchaser would be equally hesitant to bring a claim against its co-conspirator. The court rejected plaintiffs' arguments, and held that, because plaintiffs failed to show the ATM network that charges the interchange fee is owned or controlled by the defendant banks, plaintiffs lacked standing under the control exception to Illinois Brick.
Footnotes
1 See Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977).
2 No. 10-17354, 2012 WL 2855813 (9th Cir. July 12, 2012).
3 Freeman v. San Diego Ass'n of Realtors, 322 F.3d 1133, 1145 (9th Cir. 2003).
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