Third Circuit Establishes New Framework for Determining Direct Purchaser Standing in Price-Fixing Litigation

February 9, 2018

In a decision with broad implications for future antitrust litigation, the Third Circuit recently established a framework for determining antitrust standing in circumstances where a direct purchaser plaintiff has alleged the existence of an antitrust conspiracy in regards to a product which contains price-fixed inputs supplied by both the seller-conspirators as well as third party non-conspirators. 

In determining standing to sue for possible antitrust violations, courts have historically expressed concern regarding two potential issues involved in proving antitrust injury: (1) the possibility of duplicative recovery, and (2) the complex economics of apportioning damages among various levels of purchasers. Accordingly, the federal courts have barred indirect purchasers (i.e., those consumers who have purchased a price-fixed product from a non-conspirator intermediary) from pursuing federal antitrust claims, based on a concern that permitting indirect purchaser recovery would result in unreasonably complex proceedings and excessive liability for defendants. The courts have likewise rejected the “umbrella theory” of antitrust injury, which based standing on non-conspirators’ ability to charge supra-competitive prices due to its competitors’ conspiracy , finding that, absent a direct purchase from the defendant conspirators, a plaintiff cannot demonstrate sufficient causation to establish standing.

Drawing on the Supreme Court’s seminal opinion on antitrust standing in California, Inc. v. California State Council of Carpenters, 459 U.S. 519 (1983) (“AGC”), the Third Circuit has articulated the following five-factor framework to assess antitrust standing:

  • The causal connection between the antitrust violation, the harm to the plaintiff, and the defendant’s intent to cause that harm;
  • Whether the plaintiff’s alleged injury is of the type the antitrust laws are designed to redress;
  • The directness of the injury;
  • The existence of more direct victims of the alleged antitrust violations; and
  • The potential for duplicative recovery or a complex apportionment of damages

Under this rubric, the existence of a direct relationship between a plaintiff purchaser and a defendant conspirator may be sufficient to confer standing, despite the presence of third parties in the supply chain.

The case is In re Processed Egg Products, No. 16-3795, in the Third Circuit Court of Appeals.