Umbrella Liablity: Has Its Time Come? (Hausfeld)

https://www.hausfeld.com/news-press/umbrella-liability-has-its-time-come

Introduction

This Article addresses the case law dealing with the question of whether antitrust claims brought by so-called “umbrella plaintiffs” should be permissible. Such claimants purchase products or services from firms that are competing with but not members of, a cartel, or are competitors of a defendant accused of exclusionary conduct. As a matter of antitrust policy and sound economics, umbrella purchasers suffer actionable harm. This is because their suppliers are incentivized to raise their prices under cover of the cartel’s or monopolist’s umbrella, and thereby the umbrella purchasers are forced to pay an overcharge for the same products or services as claimants who buy directly from the wrongdoers.

Those supporting antitrust standing for umbrella plaintiffs argue that allowing such claims furthers the policy goals of antitrust: promoting competition; deterring anticompetitive behavior; compensating injured parties; and restoring market integrity. Those opposed to the concept contend that umbrella damages are unduly expansive of monetary accountability and highly speculative of a demonstrable cognitive nexus.

To date, the U.S. Supreme Court has not addressed the antitrust standing issue, but three circuits have upheld umbrella liability—the Third, Fifth, and Seventh. The Ninth Circuit has rejected umbrella liability in a multi-step distribution scheme but specified that it was not ruling whether such a claim is acceptable in a single-step distribution scheme. A Second Circuit panel appeared not to favor it, but did not rule on the issue. The concept is authorized in Canada and the EU.