Annual Meeting of the Antitrust Section of the New York State Bar Association

1. 1
ANTITRUST INJURY:BEFORE
AND AFTER BRUNSWICK
By John M. Desiderio
New York State Bar Association
Antitrust Section Annual Program
January 29, 2004

2. 2
ANTITRUST INJURY:
INTRODUCTION

3. 3
ANTITRUST INJURY – INTRODUCTION
 HISTORICAL ANTECEDENTS OF
“ANTITRUST INJURY” CONCEPT
 WHAT IT IS AND WHY IT MATTERS
 THE SIGNIFICANCE TO ANTITRUST
LITIGATION SINCE BRUNSWICK

4. 4
ANTITRUST INJURY – INTRODUCTION
• THE STATUTORY BASIS
• Sherman Act, § 1, 15 U.S.C. § 1:
Every contract, combination in the form or trust or otherwise,
or conspiracy, in restraint of trade or commerce . . . Is declared
to be illegal.
• Sherman Act, § 2, 15 U.S.C. § 2:
Every person who shall monopolize, or attempt to monopolize,
or combine or conspire with any other person or persons, to
monopolize . . . shall be deemed guilty of a felony.

5. 5
ANTITRUST INJURY – INTRODUCTION
• THE STATUTORY BASIS:
• Clayton Act, § 4(a), 15 USC § 15(a):
[A]ny person who shall be injured in his business or
property by reason of anything forbidden in the
antitrust laws may sue therefor . . . and shall recover
threefold the damages by him sustained, and the cost of
suit, including a reasonable attorney’s fee.

6. 6
ANTITRUST INJURY – INTRODUCTION
• THE STATUTORY BASIS:
• Clayton Act, § 16, 15 USC § 26:
Any person, firm, or corporation, or association shall be
entitled to sue for and have injunctive relief, . . ., against
threatened loss or damage by a violation of the
antitrust laws . . . when and under the same conditions
and principles as injunctive relief against threatened
conduct that will cause loss or damage is granted by
courts of equity, under the rules governing such
proceedings. * * *

7. 7
ANTITRUST INJURY – INTRODUCTION
WHAT IS HARM CAUSED BY (OR
THREATENED BY) AN ANTITRUST
VIOLATION?
WHAT ELSE BUT “ANTITRUST INJURY” ?
YET, NO MENTION OF “ANTITRUST INJURY”
UNTIL 87 YEARS AFTER ENACTMENT OF
THE SHERMAN ACT.

8. 8
ANTITRUST INJURY – INTRODUCTION
• THE SUPREME COURT’S DEFINITION:
[A]ntitrust injury . . . Is injury of the type the antitrust
laws were intended to prevent and that flows from
that which makes defendants’ acts unlawful. The
injury should reflect the anticompetitive effect either of
the violation or of the anticompetitive acts made possible
by the violation. It should, in short, be “the type of
loss that the claimed violations . . . would be likely to
cause.”
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.
429 U.S. 477, 489 (1977)

9. 9
ANTITRUST INJURY – INTRODUCTION
• THE SUPREME COURT’S DEFINITION:
Sections 4 and 16 are best understood as providing
complementary remedies for a single set of injuries.
Accordingly, we conclude that in order to seek injunctive
relief under § 16, a private plaintiff must allege
threatened loss or damage “of the type the antitrust
laws were designed to prevent and that flows from
that which makes defendants’ acts unlawful.”
Cargill, Inc. v. Montfort of Colorado, Inc.,
479 U.S. 104, 113 (1986)

10. 10
ANTITRUST INJURY – INTRODUCTION
27 YEARS AFTER BRUNSWICK:
• “Antitrust Injury” is a familiar concept.
• Courts routinely decide :
Whether the plaintiff’s alleged harm constitutes “antitrust
injury,” i.e., harm the antitrust laws were intended to prevent;
OR
Whether the alleged harm is of no concern to the antitrust laws.

11. 11
ANTITRUST INJURY – INTRODUCTION
What was the state of antitrust law before
Brunswick?
Was “antitrust injury” judicial legislation?
OR
Did Brunswick merely articulate principles
that were always part of antitrust law?

12. 12
ANTITRUST INJURY – INTRODUCTION
 Brunswick’s Revolutionary Effect on Proving Injury
 Expanded the role of economists in antitrust
litigation:
Pre-Brunswick (Measure of Damages)
Post-Brunswick (Anticompetitive Effects):
(Has the plaintiff suffered damage the
antitrust laws were intended to prevent?)

13. 13
ANTITRUST INJURY:
ANTECEDENTS – ORIGINS
What Was Antitrust Law Intended to Prevent?

14. 14
ANTITRUST INJURY:
ANTECEDENTS -- ORIGINS
Standard Oil (1911):
“The dread of enhancement of prices and of
other wrongs which it was thought would flow
from the undue limitation on competitive
conditions . . . led, as a matter of public policy,
to the prohibition or treating as illegal all
contracts or acts which were unreasonably
restrictive of competitive conditions.”

15. 15
ANTITRUST INJURY:
ANTECEDENTS -- ORIGINS
Evils Perceived to “Flow From” Monopoly:
-- Power to fix prices
-- Power to limit production
-- Deterioration in quality of
monopolized goods

16. 16
ANTITRUST INJURY:
ANTECEDENTS -- ORIGINS
Senator Sherman:
“Society is now disturbed by forces never felt before
. . . . [whose] sole object . . . is to make competition
Impossible . . . control the market, raise or lower prices,
as will best promote its selfish interests. . . . It is the
kind of combination we have to deal with now.”
*******
“In providing a remedy the intention of the combination
Is immaterial. . . . If the natural effects of its acts are
injurious, it they tend to produce evil results, . . . It may
be restrained, be punished with a penalty or with damages.”

17. 17
ANTITRUST INJURY:
ANTECEDENTS -- ORIGINS
• EARLY SUPREME COURT CASES DID NOT CHARACTERIZE THE INJURY
• MONTAGUE V. LOWRY (1904):
Fact-specific, but identified those elements of the plaintiffs’ harm
--- that were the “natural effects” of the defendants’ acts, and
--- that “flowed from the undue limitation on competition.”
• A century after Lowry, cases show same “antitrust injury”
Carpet Group International v. Oriental Rug Importers Assn., 227 F3d 62 (3d Cir. 2000)
Rossi v. Standard Roofing, 156 F3d 452 (3d Cir. 1998)

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ANTITRUST INJURY:
ANTECEDENTS – TRANSITION
EARLY TO MID-20TH CENTURY

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ANTITRUST INJURY:
ANTECEDENTS -- TRANSITION
EARLY TO MID-20TH CENTURY
STORY PARCHMENT (1931)
“The natural and probable effect of the combination and price
cutting would be to destroy normal prices.”
The kind of injury that Brunswick would later say
reflected the “anticompetitive effect of either the
violation or of the anticompetitive acts made
possible by the violation.”

20. 20
ANTITRUST INJURY:
ANTECEDENTS -- TRANSITION
EARLY TO MID-20TH CENTURY
ZENITH v. HAZELTINE (1969)
“The injury alleged by Zenith was precisely the type of loss that
the claimed violations of the antitrust laws would be likely to
cause.”
Words that the Supreme Court would later cite in
Brunswick as one definition of antitrust injury.

21. 21
ANTITRUST INJURY:
ANTECEDENTS -- TRANSITION
EARLY TO MID-20TH CENTURY
GAF v. CIRCLE FLOOR (2d Cir. 1973)
“Whether viewed in terms of ‘lack of
standing’ or the absence of antitrust
damages, the courts, in denying recovery to
various kinds of plaintiffs, have sought to
confine recovery to those who have been
injured by restraints on competitive forces in
the economy.”

22. 22
GAF v. CIRCLE FLOOR (Cont.)
 GAF was not injured by reason of violations alleged.
 Only a person whose competitive business position
is harmed by anticompetitive effects of the alleged
restraint can maintain a treble damage action.
 GAF’s damages were not the economic result of the
anticompetitive effects of the alleged violations.
 The anticompetitive effects of a takeover would be
felt not by GAF but by competitors of GAF and
CIRCLE FLOOR.
 No antitrust damages because no diminution of
GAF’s competitive position.

23. 23
BRUNSWICK’s TEACHINGS
WHAT THE SUPREME COURT
DISCOVERED IN PLAIN HINDSIGHT

24. 24
BRUNSWICK’S TEACHINGS
Causation Is Not Enough:
Injury that is arguably traceable to an antitrust
violation does not automatically qualify as
“antitrust injury.”
Courts Must Distinguish Between:
• loss that occurs by reason of a violation, and
• loss that occurs by reason of that which makes
defendant’s actions unlawful.

25. 25
BRUNSWICK’s TEACHINGS EXPLAINED
• ATLANTIC RICHFIELD (1990)
 Antitrust injury arises only from anticompetitive aspects of a
defendant’s conduct.
 Requiring antitrust injury ensures that plaintiff’s claimed harm
corresponds to the rationale for finding a violation of the antitrust law
in that particular case.
 Requiring antitrust injury prevents plaintiffs from recovering
damages or equitable relief for losses caused by lawful competitive
conduct.
 Requiring antitrust injury ensures that plaintiffs can recover only for
losses caused by competition-reducing aspects or effects of a
defendant’s behavior.
 Pro-competitive or efficiency enhancing aspects of nominal antitrust
violations have no role in the definition of antitrust damages.

26. 26
BRUNSWICK’s LEGACY
A FOCUS ON ANTITRUST ESSENTIALS
FOR ANTITRUST STANDING AND LIABILITY

27. 27
BRUNSWICK’s LEGACY
Antitrust Injury takes many forms and applies to
all antitrust violations.
Blue Shield of Virginia v. McReady (1982)
“[W]hile an increase in price resulting from a
dampening of competitive market forces is
assuredly one type of injury for which § 4 potentially
offers redress . . . That is not the only form of injury
remediable under § 4.”

28. 28
BRUNSWICK’s LEGACY
• ANTITRUST INJURY AS ANTITRUST STANDING
 Increased reliance by federal courts on “antitrust injury”
requirement in deciding whether a plaintiff has been
“injured in his business or property by reason of anything
forbidden in the antitrust laws.”
 “Antitrust Injury” test provides more relevant, consistent,
and theoretically-sound basis for determining “antitrust
standing” than tests courts relied upon prior to
Brunswick, such as “direct injury,” “target area,” “zone of
interests,” or various “balancing” tests.

29. 29
BRUNSWICK’s LEGACY
• Associated General Contractors (1983)
In deciding standing, courts “should analyze in each situation”:
 The causal connection between the antitrust violation and the plaintiff’s harm.
 The intent of the defendant to cause the harm.
 Whether the alleged injury is of the type for which the antitrust laws were
intended to provide redress.
 The directness of the injury (to address possible speculative claims).
 The existence of more direct victims.
 The potential for duplicative recoveries and/or the danger of complex
apportionment of damages.

30. 30
BRUNSWICK’s LEGACY
 Courts Have Generally Ignored AGC’s Directive
 “Antitrust Injury” has been treated as the sine qua non of “antitrust
standing”
 Balaklaw v. Powell (2d Cir. 1994)
-- Courts have developed a two-pronged analysis.
-- “As a necessary first step, courts must determine whether the
the plaintiff has suffered an antitrust injury.”
-- If courts find “antitrust injury,” then they must determine whether
any of the other factors prevent plaintiff from being an efficient
enforcer of the antitrust laws.

31. 31
BRUNSWICK’s LEGACY
• COMPETITOR CASES:
Is Plaintiff’s Injury Caused By Vigorous Competition Or
By Competition-Reducing Conduct?
 HARM IS “ANTITRUST INJURY” OR IT IS NOT.
 NO FURTHER “STANDING” INQUIRY REQUIRED.
 AGC FACTORS THAT ARE NOT DETERMINATIVE:
CAUSATION, INTENT, DIRECTNESS OF INJURY,
DUPLICATIVE RECOVERY, COMPLEX APPORTIONMENT OF
DAMAGES.

32. 32
BRUNSWICK’s LEGACY
• CONSUMER CASES:
Conduct That Enhances Price, Reduces Output,
Or Affects Consumer Choice Is “Antitrust Injury.”
BUT ILLINOIS BRICK AND OTHER AGC
FACTORS WILL APPLY.

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BRUNSWICK’s LEGACY
• DISTRIBUTOR CASES:
Harm Caused By Anticompetitive Agreements
Between Supplier(s) And Plaintiff’s Competitors
Is “Antitrust Injury.”
ILLINOIS BRICK And Other AGC Factors
Generally Do Not Apply (Especially Where Per
Se Violations Are Alleged).

34. 34
CONCLUSION
 Although “antitrust injury” was not formally defined until
1977, the elements of the concept have been part of
antitrust law from its very inception.
 “Antitrust injury” has required more economic analysis.
 “Antitrust Injury” has become the threshold focus of the
“antitrust standing” inquiry.
 Situation not likely to change in foreseeable future.
 In Verizon v. Trinko (decided 1/13/04), the Supreme
Court avoided deciding the antitrust standing issues
raised in that case.
 While Justice Stevens would have dismissed on standing
grounds, he also, apparently, would have done so
without using the full AGC six-factor analysis.