More than 40 years ago, the Supreme Court determined that efficient enforcement of the Sherman Act required a bright-line rule, with very limited exceptions, barring antitrust claims by "indirect purchasers"—end customers who purchase products through an intermediate source—for payment of alleged overcharges that were "passed on" through a distribution chain. See Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). The Illinois Brick rule has been criticized as preventing, as opposed to promoting, effective antitrust enforcement. In addition, the growth of indirect purchaser lawsuits in state courts has resulted in parallel litigation, creating the complexity that the Illinois Brick decision sought to avoid.

While earlier this year Trump officials indicated that it was "worthwhile" to consider whether the Illinois Brick decision should be overturned, less than a week ago the Antitrust Division of the Department of Justice filed an amicus curiae brief with the United States Supreme Court in support of the Illinois Brick rule. The uncertainty surrounding the antitrust enforcement policies of the Trump administration makes it difficult, if not impossible, to predict how it might view forthcoming enforcement decisions.

A. Direct Purchasers and the Illinois Brick Rule

Section 4 of the Clayton Act states that "any person who shall be injured" by a violation of the antitrust laws may seek treble damages from the offending party. 15 U.S.C. § 15(a). The Supreme Court has interpreted Section 4 narrowly, limiting the parties that have statutory standing to recover damages through antitrust suits.

The first major case to consider the scope of Section 4 was Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968). In that case, Hanover alleged that United Shoe had monopolized the shoe manufacturing industry in violation of the Sherman Act. Hanover sought treble damages for overcharges paid in leasing machinery from United. United defended using a "pass on" theory, arguing that Hanover had passed on the overcharge to its customers and therefore had suffered no injury. The Court rejected the defense because (i) proving the amount of the overcharge shifted to indirect purchasers "would normally prove insurmountable," and (ii) this defense would reduce the overall effectiveness of antitrust actions by diminishing the recovery available to any potential plaintiff.

In Illinois Brick, the Supreme Court extended the Hanover principle to prohibit the offensive use of a "pass on" theory. In that case, the State of Illinois sued concrete block manufacturers for conspiring to raise prices. The Court ultimately held that the use of the "pass on theory" outlined in Hanover Shoe should "apply equally to plaintiffs and defendants." The Court stated that "allowing offensive but not defensive use of pass-on would create a serious risk of multiple liability for defendants" which ultimately resulted in the bright-line rule that only direct purchasers have standing under Section 4 of the Clayton Act to seek damages for antitrust violations.

B. The Trump Administration, Illinois Brick, and Apple v. Pepper

At the outset of the Trump administration in 2017, there was a level of uncertainty as to how the administration would approach antitrust enforcement. Indeed, then-candidate Trump made very few official statements on what his administration's enforcement policies would look like, but he did suggest an interest in targeting particular companies and industries for aggressive enforcement.

Adding to the uncertainty, earlier this year the current head of the Antitrust Division of the Department of Justice (DOJ), Assistant Attorney General Makan Delrahim, spoke at a conference organized by the Antitrust Research Foundation, and stated the that DOJ was looking into the possibility of pursuing civil damages on behalf of taxpayers in antitrust price fixing suits—in other words, indirect purchasers who would otherwise be barred from pursuing such claims under Illinois Brick. In fact, in 2007, Delrahim publicly supported overturning Illinois Brick in connection with his participation in the "Antitrust Modernization Commission."

However, just this past week, the DOJ filed an amicus curiae brief in the United States Supreme Court in Apple, Inc. v. Pepper supporting Illinois Brick. In the case, a class of plaintiffs maintain that Apple engaged in anticompetitive behavior by taking a "cut" of the proceeds from developers sales in its App Store. The district court rejected the claims finding that because the developers pay the commission, the plaintiffs are indirect purchasers barred from bringing suit under the Illinois Brick. But the Ninth Circuit Court reversed, finding that Apple acts as a "distributor" from which the buyers directly purchase services and was therefore not a mere collector of payments which go to the real producers—the app developers.

In a reversal from previous positions by Delrahim, the DOJ argued this week that the Ninth Circuit got it wrong and cannot get around the Illinois Brick rule by labeling Apple as a "distributor," arguing that antitrust claims under Section 4 aren't dependent "on the defendant's functional role."

The case highlights the unpredictability of the approach the Trump administration takes towards antitrust enforcement. This conclusion is buttressed by the surprisingly active enforcement since President Trump took office, a departure from the generally less-interventionist posture of his Republican predecessors. This uncertainty makes it impossible to predict where the DOJ or FTC will come out on forthcoming enforcement decisions.