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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).
3 Freeman v. San Diego Ass'n of Realtors,
322 F.3d 1133, 1145 (9th Cir. 2003).
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