Efficient Assignment of Rights to Sue for Antitrust Damages

Abstract

DIRECT purchasers of price-fixed goods now have the right to sue for treble damages based the full overcharge. The Supreme Court established this legal rule in two decisions, Hanover Shoe, Inc. v. United Shoe Machinery Corp. and Illinois Brick Co. v. Illinois.2 Both cases deal with the fact that illegal overcharges may be on from direct purchasers to indirect purchasers further down the distribution chain. The defendant in Hanover Shoe claimed that the plaintiff, a direct purchaser, was not injured because it passed overcharges to indirect purchasers. Indirect purchaser plaintiffs in Illinois Brick claimed damages from overcharges passed to them by direct purchasers. The Supreme Court rejected both uses of passing on-the defensive use in Hanover Shoe and offensive use in Illinois Brick.3 This legal rule has been debated vigorously. Harris and Sullivan,4 the severest critics, argue that the rule does not deter horizontal conspiracies due to the weakness of direct purchaser incentives, that it is unfair, and that alternative rules splitting damages based the extent of passing