Illinois Brick Co. v. Illinois

431 U.S. 720, 97 S. Ct. 2061, 52 L. Ed. 2d 707, 1977 U.S. LEXIS 105

Opinions

Mr. Justice White

delivered the opinion, of the Court.

Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U. S. 481 (1968), involved an antitrust treble-damages action brought under § 4 of the Clayton Act¹ against a manufacturer of shoe machinery by one of its customers, a manufacturer of shoes. In defense, the shoe machinery manufacturer sought to show that the plaintiff had not been injured in its business as required by § 4 because it had passed on the claimed illegal overcharge to those who bought shoes from it. Under the defendant’s theory, the illegal overcharge was absorbed by the plaintiff’s customers — indirect purchasers of the defendant’s shoe machinery — who were the persons actually injured by the antitrust violation.

In Hanover Shoe this Court rejected as a matter of law this defense that indirect rather than direct purchasers were the parties injured by the antitrust violation. The Court held that, except in certain limited circumstances,² a direct purchaser suing for treble damages under § 4 of the Clayton Act is injured within the meaning of § 4 by the full amount of the overcharge paid by it and that the antitrust defendant is not permitted to introduce evidence that indirect purchasers were in fact injured by the illegal overcharge. 392 U. S., at 494. The first reason for the Court’s rejection of this offer of proof was an unwillingness to complicate treble-damages actions with attempts to trace the effects of the overcharge on the purchaser’s prices, sales, costs, and profits, and of showing that these variables would have behaved differently without the overcharge. Id., at 492-493.³ A second reason for barring the pass-on defense was the Court’s concern that unless direct purchasers were allowed to sue for the portion of the overcharge arguably passed on to indirect purchasers, antitrust violators “would retain the fruits of their illegality” because indirect purchasers “would have only a tiny stake in the lawsuit” and hence little incentive to sue. Id., at 494.

In this case we once again confront the question whether the overcharged direct purchaser should be deemed for purposes of § 4 to have suffered the full injury from the overcharge; but the issue is presented in the context of a suit in which the plaintiff, an indirect purchaser, seeks to show its injury by establishing pass-on by the direct purchaser and in which the antitrust defendants rely on Hanover Shoe’s rejection of the pass-on theory. Having decided that in general a pass-on theory may not be used defensively by an antitrust violator against a direct purchaser plaintiff, we must now decide whether that theory may be used offensively by an indirect purchaser plaintiff against an alleged violator.

I

Petitioners manufacture and distribute concrete block in the Greater Chicago area. They sell the block primarily to masonry contractors, who submit bids to general contractors for the masonry portions of construction projects. The general contractors in turn submit bids for these projects to customers such as the respondents in this case, the State of Illinois and 700 local governmental entities in the Greater Chicago area, including counties, municipalities, housing authorities, and school districts. See 67 F. R. D. 461, 463 (ND Ill. 1975); App. 16-48. Respondents are thus indirect purchasers of concrete block, which passes through two separate levels in the chain of distribution before reaching respondents. The block is purchased directly from petitioners by masonry contractors and used by them to build masonry structures; those structures are incorporated into entire buildings by general contractors and sold to respondents.

Respondent State of Illinois, on behalf of itself and respondent local governmental entities, brought this antitrust treble-damages action under § 4 of the Clayton Act, alleging that petitioners had engaged in a combination and conspiracy to fix the prices of concrete block in violation of § 1 of the Sherman Act.⁴ The complaint alleged that the amounts paid by respondents for concrete block were more than $3 million higher by reason of this price-fixing conspiracy. The only way in which the antitrust violation alleged could have injured respondents is if all or part of the overcharge was passed on by the masonry and general contractors to respondents, rather than being absorbed at the first two levels of distribution. See Illinois v. Ampress Brick Co., 536 F. 2d 1163, 1164 (CA7 1976).⁵

Petitioner manufacturers moved for partiál summary judgment against all plaintiffs that were indirect purchasers of concrete block from petitioners, contending that as a matter of law only direct purchasers could sue for the alleged overcharge.⁶ The District Court granted petitioners’ motion, but the Court of Appeals reversed, holding that indirect purchasers such as respondents in this case can recover treble damages for an illegal overcharge if they can prove that the overcharge was passed on to them through intervening links in the distribution chain.⁷

We granted certiorari, 429 U. S. 938 (1976), to resolve a conflict among the Courts of Appeals⁸ on the question whether the offensive use of pass-on authorized by the decision below is consistent with Hanover Shoe’s restrictions on the defensive use of pass-on. We hold that it is not, and we reverse. We reach this result in two steps. First, we conclude that whatever rule is to be adopted regarding pass-on in antitrust damages actions, it must apply equally to plaintiffs and defendants. Because Hanover Shoe would bar petitioners from using respondents’ pass-on theory as a defense to a treble-damages suit by the direct purchasers (the masonry contractors),⁹ we are faced with the choice of overruling (or narrowly limiting) Handover Shoe or of applying it to bar respondents’ attempt to use this pass-on theory offensively. Second, we decline to abandon the construction given § 4 in Hanover Shoe — that the overcharged direct purchaser, and not others in the chain of manufacture or distribution, is the party “injured in his busir ness or property” within the meaning of the section — in the absence of a convincing demonstration that the Court was wrong in Hanover Shoe to think that the effectiveness of the antitrust treble-damages action would be substantially reduced by adopting a rule that any party in the chain may sue to recover the fraction of the overcharge allegedly absorbed by it.

II

The parties in this case agree that however § 4 is construed with respect to the pass-on issue, the rule should apply equally to plaintiffs and defendants — that an indirect purchaser should not be allowed to use a pass-on theory to recover damages from a defendant unless the defendant would be allowed to use a pass-on defense in a suit by a direct purchaser. Respondents, in arguing that they should be allowed to recover by showing pass-on in this case, have conceded that petitioners should be allowed to assert a pass-on defense against direct purchasers of concrete block, Tr. of Oral Arg. 33, 48; they ask this Court to limit Hanover Shoe’s bar on pass-on defenses to its “particular factual context” of overcharges for capital goods used to manufacture new products. Id., at 41; see id., at 36, 47-48.

Before turning to this request to limit Hanover Shoe, we consider the substantially contrary position, adopted by our dissenting Brethren, by the United States as amicus curiae, and by lower courts that have allowed offensive use of pass-on, that the unavailability of a pass-on theory to a defendant should not necessarily preclude its use by plaintiffs seeking treble damages against that defendant.¹⁰ Under this view, Hanover Shoe’s rejection of pass-on would continue to apply to defendants unless direct and indirect purchasers were both suing the defendant in the same action; but it would not bar indirect purchasers from attempting to show that the overcharge had been passed on to them. We reject this position for two reasons.

First, allowing offensive but not defensive use of pass-on would create a serious risk of multiple liability for defendants. Even though an indirect purchaser had already recovered for all or part of an overcharge passed on to it, the direct purchaser would still recover automatically the full amount of the overcharge that the indirect purchaser had shown to be passed on; similarly, following an automatic recovery of the full overcharge by the direct purchaser, the indirect purchaser could sue to recover the same amount. The risk of duplicative recoveries created by unequal application of the Hanover Shoe rule is much more substantial than in the more usual situation where the defendant is sued in two different lawsuits by plaintiffs asserting conflicting claims to the same fund. A one-sided application of Hanover Shoe substantially increases the possibility of inconsistent adjudications — and therefore of unwarranted multiple liability for the defendant — by presuming that one plaintiff (the direct purchaser) is entitled to full recovery while preventing the defendant from using that presumption against the other plaintiff; overlapping recoveries are certain to result from the two lawsuits unless the indirect purchaser is unable to establish any pass-on whatsoever. As in Hawaii v. Standard Oil Co. of Cal., 405 U. S. 251, 264 (1972), we are unwilling to “open the door to duplicative recoveries” under § 4.¹¹

Second, the reasoning of Hanover Shoe cannot justify unequal treatment of plaintiffs and defendants with respect to the permissibility of pass-on arguments. The principal basis for the decision in Hanover Shoe was the Court’s perception of the uncertainties and difficulties in analyzing price and output decisions “in the real economic world rather than an economist’s hypothetical model,” 392 U. S., at 493, and of the costs to the judicial system and the efficient enforcement of the antitrust laws of attempting to reconstruct those decisions in the courtroom.¹² This perception that the attempt to trace the complex economic adjustments to a change in the cost of a particular factor of production would greatly complicate and reduce the effectiveness of already protracted treble-damages proceedings applies with no less force to the assertion of pass-on theories by plaintiffs than it does to the assertion by defendants. However “long and complicated” the proceedings would be when defendants sought to prove pass-on, ibid., they would be equally so when the same evidence was introduced by plaintiffs. Indeed, the evidentiary complexities and uncertainties involved in the defensive use of pass-on against a direct purchaser are multiplied in the offensive use of pass-on by a plaintiff several steps removed from the defendant in the chain of distribution. The demonstration of how much of the overcharge was passed on by the first purchaser must be repeated at each point at which the price-fixed goods changed hands before they reached the plaintiff.¹³

It is argued, however, that Hanover Shoe rests on a policy of ensuring that a treble-damages plaintiff is available to deprive antitrust violators of “the fruits of their illegality,” id., at 494, a policy that would be furthered by allowing plaintiffs but not defendants to use pass-on theories. See, e. g., In re Western Liquid Asphalt Cases, 487 F. 2d 191, 197 (CA9 1973), cert. denied sub nom. Standard Oil Co. of Cal. v. Alaska, 415 U. S. 919 (1974); Brief for United States as Amicus Curiae 4-6, 12-13, 17-19.¹⁴ We do not read the Court’s concern in Hanover Shoe for the effectiveness of the treble-damages remedy as countenancing unequal application of the Court’s pass-on rule. Rather, we understand Hanover Shoe as resting on the judgment that the antitrust laws will be more effectively enforced by concentrating the full recovery for the overcharge in the direct purchasers rather than by allowing every plaintiff potentially affected by the overcharge to sue only for the amount it could show was absorbed by it.

We thus decline to construe § 4 to permit offensive use of a pass-on theory against an alleged violator that could not use the same theory as a defense in an action by direct purchasers. In this case, respondents seek to demonstrate that masonry contractors, who incorporated petitioners’ block into walls and other masonry structures, passed on the alleged overcharge on the block to general contractors, who incorporated the masonry structures into entire buildings, and that the general contractors in turn passed on the overcharge to respondents in the bids submitted for those buildings. We think it clear that under a fair reading of Hanover Shoe petitioners would be barred from asserting this theory in a suit by the masonry contractors.

In Hanover Shoe this Court did not endorse the broad exception that had been recognized in that case by the courts below — permitting -the pass-on defense against middlemen who did not alter the goods they purchased before reselling them.¹⁵ The masonry contractors here could not be included under this exception in any évent, because they transform the concrete block purchased from defendants into the masonry portions of buildings. But this Court in Hanover Shoe indicated the narrow scope it intended for any exception to its rule barring pass-on defenses by citing, as the only example of a situation where the defense might be permitted, a preexisting cost-plus contract. In such a situation, the purchaser is insulated from any decrease in its sales as a result of attempting to pass on the overcharge, because its customer is committed to buying a fixed quantity regardless of .price. The effect of the overcharge is essentially determined in advance, without reference to the interaction of supply and demand that complicates the determination in the general case. The competitive bidding process by which the concrete block involved in this case was incorporated into masonry structures and then into entire buildings can hardly be said to circumvent complex market interactions as would a cost-plus contract.¹⁶

We are left, then, with two. alternatives: either we must overrule Hanover Shoe (or at least narrowly confine it to its facts), or we must preclude respondents from seeking to recover on their pass-on theory. We choose the latter course.

Ill

In considering whether to cut back or abandon the Hanover Shoe rule, we must bear in mind that considerations of stare decisis weigh heavily in the area of statutory construction, where Congress is free to change this Court’s interpretation of its legislation. See Edelman v. Jordan, 415 U. S. 651, 671 (1974); Burnet v. Coronado Oil & Gas Co., 285 U. S. 393, 406-408 (1932) (Brandeis, J., dissenting). This presumption of adherence to our prior decisions construing legislative enactments would support our reaffirmance of the Hanover Shoe construction of § 4, joined by eight Justices without dissent only a few years ago¹⁷ even if the Court were persuaded that the use of pass-on theories by plaintiffs and defendants in treble-damages actions is more consistent with the policies underlying the treble-damages action than is the Hanover Shoe rule. But we are not So persuaded.

Permitting the use of pass-on theories under § 4 essentially would transform treble-damages actions into massive efforts to apportion the recovery among all potential plaintiffs that could have absorbed part of the overcharge — from direct purchasers to middlemen to ultimate- consumers. However appealing this attempt to allocate the overcharge might seem in theory, it would add whole new dimensions of complexity to treble-damages suits and seriously undermine their effectiveness.

As we have indicated, potential plaintiffs at each level in the distribution chain are in a position to assert conflicting claims to a common fund — the amount of the alleged overcharge — by contending that the entire overcharge was absorbed at that particular level in the chain.¹⁸ A treble-damages action brought by one of these potential plaintiffs (or one class of potential plaintiffs) to recover the overcharge implicates all three of the interests that have traditionally been thought to support compulsory joinder of absent and potentially adverse claimants: the interest of the defendant in avoiding multiple liability for the fund; the interest of the absent potential plaintiffs in protecting their right to recover for the portion of the fund allocable to them; and the social interest in the efficient administration of justice and the avoidance of multiple litigation. Reed, Compulsory Joinder of Parties in Civil Actions, 55 Mich. L. Rev. 327, 330 (1957). See Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U. S. 102, 110-111 (1968); 7 C. Wright & A. Miller, Federal Practice and Procedure § 1602 (1972).

Opponents of the Hanover Shoe rule have recognized this need for compulsory joinder in suggesting that the defendant could interplead potential claimants under 28 U. S. C. § 1335.¹⁹ But if the defendant, for any of a variety of reasons,²⁰ does not choose to interplead the absent potential claimants, there would be a strong argument for joining them as “persons needed for just adjudication” under Fed. Rule Civ. Proe. 19 (a).²¹ See Comment, Standing to Sue in Antitrust Cases: The Offensive Use of Passing-On, 123 U. Pa. L. Rev. 976, 998 (1975). These absent potential claimants would seem to fit the classic definition of “necessary parties,” for purposes of compulsory joinder, given in Shields v. Barrow, 17 How. 130, 139 (1855):

“Persons having an interest in the controversy, and who ought to be made parties, in order that the court may act on that rule which requires it to decide on, and finally determine the entire controversy, and do complete justice, by adjusting all the rights involved in it.”

See Notes of.Advisory Committee on 1966 Amendment to Rule 19, 28 U. S. C. App., p. 7760; 7 C. Wright & A. Miller, supra, §§ 1604, 1618 ; 3A J. Moore, Federal Practice ¶ 19.08 (1974). The plaintiff bringing the treble-damages action would be required, under Fed. Rule Civ. Proc. 19 (c), to “state the names, if known,” of these absent potential claimants; they should also be notified by some means that the action was pending.²² Where, as would often be tlm case, the potential claimants at a particular level of distribution are so numerous that joinder of all is impracticable, a representative presumably would have to be found to bring them into the action as a class. See Fed. Rule Civ. Proc. 19 (d); 3A J. Moore, supra, ¶ 19.21.

It is unlikely, of course, that all potential plaintiffs could or would be joined. Some may not wish to assert claims to the overcharge; others may be unmanageable as a class; and still others may be beyond the personal jurisdiction of the court. We can assume that ordinarily the action would still proceed, the absent parties not being deemed “indispensable” under Fed. Rule Civ. Proc. 19 (b). See Provident Tradesmens Bank & Trust Co. v. Patterson, supra. But allowing indirect purchasers to recover using pass-on theories, even under the optimistic assumption that joinder of potential plaintiffs will deal satisfactorily with problems of multiple litigation and liability, would transform treble-damages actions into massive multiparty litigations involving many levels of distribution and including large classes of ultimate consumers remote from the defendant. In treble-damages actions by ultimate consumers, the overcharge would have to be apportioned among the relevant wholesalers, retailers, and other middlemen, whose representatives presumably should be joined.²³ And in suits by direct purchasers or middlemen, the interests of ultimate consumers are similarly implicated.²⁴

There is thus a strong possibility that indirect purchasers remote from the defendant would be parties to virtually every treble-damages action (apart from those brought against defendants at the retail level). The Court’s concern in Hanover Shoe to avoid weighing down treble-damages actions with the “massive evidence and complicated theories,” 392 U. S., at 493, involved in attempting to establish a pass-on defense against a direct purchaser applies a fortiori to the attempt to trace the effect of the overcharge through each step in the distribution chain from the direct purchaser to the ultimate consumer. We are no more inclined than we were in Hanover Shoe to ignore the burdens that such an attempt would impose on the effective enforcement of the antitrust laws.

Under an array of simplifying assumptions, economic theory provides a precise formula for calculating how the overcharge is distributed between the overcharged party (passer) and its customers (passees). If the market for the passer’s product is perfectly competitive; if the overcharge is imposed equally on all of the passer’s competitors; and if the passer maximizes its profits, then the ratio of the shares of the overcharge borne by passee and passer will equal the ratio of the elasticities of supply and demand in the market for the passer’s product.²⁵ Even if these assumptions are accepted, there remains a serious problem of measuring the relevant elasticities — the percentage change in the quantities of the passer’s product demanded and supplied in response to a one percent change in price. In view of the difficulties that have been encountered, even in informal adversary proceedings, with the statistical techniques used to estimate these concepts, see Finkelstein, Regression Models in Administrative Proceedings, 86 Harv. L. Rev. 1442, 1444 (1973), it is unrealistic to think that elasticity studies introduced by expert witnesses will resolve the pass-on issue. We need look no further than our own difficulties with sophisticated statistical methodology that were evident last Term in Gregg v. Georgia, 428 U. S. 153 (1976), and its companion cases. See id., at 184-185 (joint opinion of Stewart, Powell, and Stevens, JJ.); 233-236 (Marshall, J., dissenting); Roberts v. Louisiana, 428 U. S. 325, 354-355 (1976) (White, J., dissenting).

More important, as the Hanover Shoe Court observed, 392 U. S., at 493, “in the real economic world rather than an economist’s hypothetical model,” the latter’s drastic simplifications generally must be abandoned. Overcharged direct purchasers often sell in imperfectly competitive markets. They often compete with other sellers that have not been subject to the overcharge; and their pricing policies often cannot be explained solely by the convenient assumption of profit maximization.²⁶ As we concluded in Hanover Shoe, 392 U. S., at 492, attention to “sound laws of economics” can only heighten the awareness of the difficulties and uncertainties involved in determining how the relevant market variables would have behaved had there been no overcharge.²⁷

It is quite true that these difficulties and uncertainties will be less substantial in some contexts than in others. There have been many proposals to allow pass-on theories in some of these contexts while preserving the Hanover Shoe rule in others. Respondents here argue, not without support from some lower courts,²⁸ that pass-on theories should be permitted for middlemen that resell goods without altering them and for contractors that add a fixed percentage markup to the cost of their materials in submitting bids. Brief for Respondents 9-30; Tr. of Oral Arg. 36-48. Exceptions to the Hanover Shoe rule have also been urged for other situations in which most of the overcharge is purportedly passed on — for example, where a price-fixed good is a small but vital input into a much larger product, making the demand for the price-fixed good highly inelastic. Compare Philadelphia Housing Auth. v. American Radiator & Standard Sanitary Corp., 50 F. R. D. 13 (ED Pa. 1970), aff’d sub nom. Mangano v. American Radiator & Standard Sanitary Corp., 438 F. 2d 1187 (CA3 1971), with In re Master Key Antitrust Litigation, 1973-2 Trade Cas. ¶ 74,680 (Conn.). See Schaefer, supra n. 25, at 918-925.

We reject these attempts to carve out exceptions to the Hanover Shoe rule for particular types of markets.²⁹ An exception allowing evidence of pass-on by middlemen that resell the goods they purchase of course would be of no avail to respondents, because the contractors that allegedly passed on the overcharge on the block incorporated it into buildings. See supra, at 735. An exception for the contractors here on the ground that they purport to charge a fixed percentage above their costs would substantially erode the Hanover Shoe rule without justification. Firms in many sectors of the economy rely to an extent on cost-based rules of thumb in setting prices. See F. Scherer, Industrial Market Structure and Economic Performance 173-179 (1970). These rules are not adhered to rigidly, however; the extent of the markup (or the allocation of costs) is varied to reflect demand conditions. Id., at 176-177. The intricacies of tracing the effect of an overcharge on the purchaser’s prices, costs, sales, and profits thus are not spared the litigants.

More generally, the process of classifying various market situations according to the amount of pass-on likely to be involved and its susceptibility of proof in a judicial forum would entail the very problems that the Hanover Shoe rule was meant to avoid. The litigation over where the line should be drawn in a particular class of cases would inject the same “massive evidence and complicated theories” into treble-damages proceedings, albeit at a somewhat higher level of generality. As we have noted, supra, at 735-736, Hanover Shoe itself implicitly discouraged the creation of exceptions to its rule barring pass-on defenses, and we adhere to the narrow scope of exemption indicated by our decision there.

The concern in Hanover Shoe for the complexity that would be introduced into treble-damages suits if pass-on theories were permitted was closely related to the Court’s concern for the reduction in the effectiveness of those suits if brought by indirect purchasers with a smaller stake in the outcome than that of direct purchasers suing for the full amount of the overcharge. The apportionment of the recovery throughout the distribution chain would increase the overall costs of recovery by injecting extremely complex issues into the case; at the same time such an apportionment would reduce the benefits to each plaintiff by dividing the potential recovery among a much larger group. Added to the uncertainty of how much of an overcharge could be established at trial would be the uncertainty of how that overcharge would be apportioned among the various plaintiffs. This additional uncertainty would further reduce the incentive to sue. The combination of increasing the costs and diffusing the benefits of bringing a treble-damages action could seriously impair this important weapon of antitrust enforcement.

We think the longstanding policy of encouraging vigorous private enforcement of the antitrust laws, see, e. g., Perma Life Mufflers, Inc. v. International Parts Corp., 392 U. S. 134, 139 (1968), supports our adherence to the Hanover Shoe rule, under which direct purchasers are not only spared the burden of litigating the intricacies of pass-on but also are permitted to recover the full amount of the overcharge. We recognize that direct purchasers sometimes may refrain from bringing a treble-damages suit for fear of disrupting relations with their suppliers.³⁰ But on balance, and until there are clear directions from Congress to the contrary, we conclude that the legislative purpose in creating a group of “ 'private attorneys general’ ” to enforce the antitrust laws under § 4, Hawaii v. Standard Oil Co. of Cal., 405 U. S., at 262, is better served by holding direct purchasers to be injured to the full extent of the overcharge paid by them than by attempting to apportion the overcharge among all that may have absorbed a part of it.

It is true that, in elevating direct purchasers to a preferred position as private attorneys general, the Hanover Shoe rule denies recovery to those indirect purchasers who may have been actually injured by antitrust violations. Of course, as Mr. Justice Brennan points out in dissent, “from the deterrence standpoint, it is irrelevant to whom damages are paid, so long as some one redresses the violation.” Post, at 760. But § 4 has another purpose in addition to deterring violators and depriving them of “the fruits of their illegality,” Hanover Shoe, 392 U. S., at 494; it is also designed to compensate victims of antitrust violations for their injuries. E. g., Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U. S. 477, 485-486 (1977). Hanover Shoe does further the goal of compensation to the extent that the direct purchaser absorbs at least some and often most of the overcharge. In view of the considerations supporting the Hanover Shoe rule, we are unwilling to carry the compensation principle to its logical extreme by attempting to allocate damages among all “those within the defendant’s chain of distribution,” post, at 761, especially because we question the extent to which such an attempt would make individual victims whole for actual injuries suffered rather than simply depleting the overall recovery in litigation over pass-on issues. Many of the indirect purchasers barred from asserting pass-on claims under the Hanover Shoe rule have such a small stake in the lawsuit that even if they were to recover as part of a class, only a small fraction would be likely to come forward to collect their damages.³¹ And given the difficulty of ascertaining the amount absorbed by any particular indirect purchaser, there is little basis for believing that the amount of the recovery would reflect the actual injury suffered.

For the reasons stated, the judgment is reversed, and the case is remanded for further proceedings consistent with this opinion.

So ordered.

1 Section 4 of the Clayton Act, 38 Stat. 731, 15 U. S. C. § 15, provides:

“Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.”

2 The Court cited, as an example of when a pass-on defense might be permitted, the situation where “an overcharged buyer has a pre-existing ‘cost-plus’ contract, thus making it easy to prove that he has not been damaged . . . .” 392 U. S., at 494. See infra, at 735-736.

3 The Court explained the economic uncertainties and complexities involved in proving pass-on as follows:

“A wide range of factors influence a company’s pricing policies. Normally the impact of a single change in the relevant conditions cannot be measured after the fact; indeed a businessman may be unable to state whether, had one fact been different (a single supply less expensive, general economic conditions more buoyant, or the labor market tighter, for example), he would have chosen a different price. Equally difficult to determine, in the real economic world rather than an economist’s hypothetical model, is what effect a change in a company’s price will have on its total sales. Finally, costs per unit for a different volume of total sales are hard to estimate. Even if it could be shown that the buyer raised his price in response to, and in the amount of, the overcharge and that his margin of profit and total sales had not thereafter declined, there would remain the nearly insuperable difficulty of demonstrating that the particular plaintiff could not or would not have raised his prices absent the overcharge or maintained the higher price had the overcharge been discontinued. Since establishing the applicability of the passing-on defense would require a convincing showing of each of these virtually unaseertainable figures, the task would normally prove insurmountable. On the other hand, it is not unlikely that if the existence of the defense is generally confirmed, antitrust defendants will frequently seek to establish its applicability. Treble-damage actions would often require additional long and complicated proceedings involving massive evidence and complicated theories.” 392 U. S., at 492-493. (Footnote omitted.)

4 Section 1 of the Sherman Act, c. 647, 26 Stat. 209, as amended, 15 U. S. C. § 1, provides in relevant part:

“Every contract, combination in the form¹ of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal . . . .”

5 Private treble-damages actions brought by masonry contractors, general contractors, and private builders were settled, without prejudice to this suit. 536 F. 2d, at 1164.

6 The responses to petitioners’ interrogatories indicated that only four of the plaintiffs represented by the State purchased concrete block directly from one of the petitioners. 67 F. R. D. 461, 463 (ND Ill. 1975). Only 7% of the 700 public entities named as plaintiffs were apparently able to state the cost of the concrete block used in their building projects. Brief for Petitioners 5 n. **. In the only example cited to us by the parties, the cost of the concrete block was reported as less than one-half of one percent of the total cost of the project. Id., at 21 n. *.

7 The District Court based its grant of summary judgment against the indirect purchaser plaintiffs not on the ground that this Court’s construction of § 4 in Hanover Shoe barred their attempt to show that the masonry and general contractors passed on the overcharge to them, but rather on the ground that these indirect purchasers lacked standing to sue for an overcharge on one product — concrete block — that was incorporated by the masonry and general contractors into an entirely new and different product — a building. 67 F. R. D., at 467-468. Although the Court of Appeals held that these indirect purchasers did have standing to sue for damages under § 4, it agreed with the District Court’s reading of Hanover Shoe. 536 F. 2d, at 1164-1167. Because we find Hanover Shoe dispositive here, we do not address the standing issue, except to note, as did the Court of Appeals below, 536 F. 2d, at 1166, that the question of which persons have been injured by an illegal overcharge for purposes of § 4 is analytically distinct from the question of which persons have sustained injuries too remote to give them standing to sue for damages under § 4. See Handler & Blechman, Antitrust and the Consumer Interest: The Fallacy of Parens Patriae and A Suggested New Approach, 85 Yale L. J. 626, 644-645 (1976).

8 Compare Mangano v. American Radiator & Standard Sanitary Corp., 438 F. 2d 1187 (CA3 1971), aff’g Philadelphia Housing Auth. v. American Radiator & Standard Sanitary Corp., 50 F. R. D. 13 (ED Pa. 1970), with In re Western Liquid Asphalt Cases, 487 F. 2d 191 (CA9 1973), cert. denied sub nom. Standard Oil Co. of Cal. v. Alaska, 415 U. S. 919 (1974); West Virginia v. Chas. Pfizer & Co., 440 F. 2d 1079 (CA2), cert. denied sub nom. Cotler Drugs, Inc. v. Chas. Pfizer & Co., 404 U. S. 871 (1971), and the decision below, Illinois v. Ampress Brick Co., 536 F. 2d 1163.

9 See infra, at 734-735.

10 Post, at 753 (Brennan, J., dissenting); post, at 765-766 (Blackmun, J., dissenting); Brief for United States as Amicus Curiae 4-6, 15-21; Tr. of Oral Arg. 50-54, 57-60; West Virginia v. Chas. Pfizer & Co., 440 F. 2d, at 1086-1088; Boshes v. General Motors Corp., 59 F. R. D. 589, 592-598 (ND Ill. 1973); In re Master Key Antitrust Litigation, 1973-2 Trade Cas. ¶ 74,680, p. 94,978 (Conn.); Carnivale Bag Co. v. Slide-Rite Mfg. Corp., 395 F. Supp. 287, 290-291 (SDNY 1975). See also Brief for State of California as Amicus Curiae 6-12.

11 In recognition of the need to avoid duplicative recoveries, courts adopting the view that pass-on theories should not be equally available to plaintiffs and defendants have agreed that defendants should be allowed to assert a pass-on defense against a direct purchaser if an indirect purchaser is also attempting to recover on a pass-on theory in the same lawsuit. E. g., In re Western Liquid Asphalt Cases, 487 F. 2d, at 200-201; West Virginia v. Chas. Pfizer & Co., 440 F. 2d, at 1088. See also Comment, Standing to Sue in Antitrust Cases: The Offensive Use of Passing-On, 123 U. Pa. L. Rev. 976, 995-998 (1975); Comment, Mangano and Ultimate-Consumer Standing: The Misuse of the Hanover Doctrine, 72 Colum. L. Rev. 394, 410 (1972); Brief for United States as Amicus Curiae 25. Various procedural devices, such as the Multidistrict Litigation Act, 28 U. S. C. § 1407, and statutory interpleader, 28 U. S. C. § 1335, are relied upon to bring indirect and direct purchasers together in one action in order to apportion damages among them and thereby reduce the risk of duplicative recovery. These procedural devices cannot protect against multiple liability where the direct purchasers have already recovered by obtaining a judgment or by settling, as is more likely (and as occurred here, see n. 5, supra); acknowledging that the risk of multiple recoveries is inevitably increased by allowing offensive but not defensive use of pass-on, e. g., Comment, 123 U. Pa. L. Rev., supra, at 994, proponents of this approach ultimately fall back on the argument that it is better for the defendant to pay sixfold or more damages than for an injured party to go uncompensated. E. g., Comment, 72 Colum. L. Rev., supra, at 411; Tr. of Oral Arg. 58 (“a little slopover on the shoulders of the wrongdoers ... is acceptable”). We do not find this risk acceptable.

Moreover, even if ways could be found to bring all potential plaintiffs together in one huge action, the complexity thereby introduced into treble-damages proceedings argues strongly for retaining the Hanover Shoe rule. See Part III, infra.

12 That this rationale was more important in the decision to bar the pass-on defense than the second reason — the concern that if pass-on defenses were permitted indirect purchasers would lack the incentive to sue and antitrust violators would retain their ill-gotten gains, see supra, at 725-726, is shown by the fact that the Court recognized an exception for pre-existing cost-plus contracts, which “mak[e] it easy to prove that [the direct purchaser] has not been damaged.” 392 U. S., at 494. (Emphasis added.) The amount of the stake that the customers of the direct purchaser have in a lawsuit against the overcharger is not likely to depend on whether they buy under a cost-plus contract or in a competitive market, but the Court allowed a pass-on defense in the former situation because the pre-existing cost-plus contract makes easy the normally complicated task of demonstrating that the overcharge has not been absorbed by the direct purchaser. See Note, The Effect of Hanover Shoe on the Offensive Use of the Passing-on Doctrine, 46 So. Cal. L. Rev. 98, 108 (1972).

13 Offensive use of pass-on by the last purchaser in the distribution chain is simpler in one respect than defensive use of pass-on against a direct purchaser that sells a product to other customers. In the latter case, even if the defendant shows that as a result of the overcharge the direct purchaser increased its price by the full amount of the overcharge, the direct purchaser may still claim injury from a reduction in the volume of its sales caused by its higher prices. This additional element of injury from reduced volume is not present in the suit by the final purchaser of the overcharged goods, where the issue regarding injury will be whether the defendant’s overcharge caused the plaintiff to pay a higher price for whatever it purchased. But the final purchaser still will have to trace the overcharge through each step in the distribution chain. In our view, the difficulty of reconstructing the pricing decisions of intermediate purchasers at each step in the chain beyond the direct purchaser generally will outweigh any gain in simplicity from not having to litigate the effects of the passed-on overcharge on the direct purchaser’s volume.

14 We are urged to defer to evidence in the legislative history of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 90 Stat. 1394r-1396, 15 U. S. C. § 15c et seq. (1976 ed.), that Congress understood Hanover Shoe as applying only to defendants. Post, at 756-758 (Brennan, J., dissenting); Brief for 47 States as Amici Curiae L4-15, n. 6; Brief for United States as Amicus Cunae 14-15, and n. 12. The House Report (apparently viewing the issue as one of standing, cf. n. 7, supra) endorsed the Ninth Circuit’s view of “the pro-enforcement thrust of Hanover Shoe” in In re Western Liquid Asphalt Cases, supra, and criticized lower court decisions barring pass-on arguments by plaintiffs. H. R. Rep. No. 94-499, p. 6 n. 4 (1975). In addition, one of the sponsors of this legislation, Representative Rodino, clearly assumed that the issue of offensive use of pass-on under § 4 would be resolved favorably to plaintiffs by this Court. See 122 Cong. Rec. H10295 (daily ed., Sept. 16, 1976).

Congress made clear, however, that this legislation did not alter the definition of which overcharged persons were injured within the meaning of § 4. It simply created a new procedural device — parens patriae actions by States on behalf of their citizens — to enforce existing rights of recovery under § 4. The House Report quoted above stated that the parens patriae provision “creates no new substantive liability”; the relevant language of the newly enacted § 4C (a) of the Clayton Act tracks that of existing § 4, showing that it was intended only as “an alternative means ... for the vindication of existing substantive claims.” H. R. Rep. No. 94-499, supra, at 9. “The establishment of an alternative remedy does not increase any defendant's liability.” Ibid. Representative Rodino himself acknowledged in the remarks cited above that this legislation did not create a right of recovery for consumers where one did not already exist.

We thus cannot agree with the dissenters that the legislative history of the 1976 Antitrust Improvements Act is dispositive as to the interpretation of § 4 of the Clayton Act, enacted in 1914, or the predecessor section of the Sherman Act, enacted in 1890. Post, at 756-758. The eases cited by Mr. Justice Brennan, post, at 765 n. 24, to support his reliance on this legislation all involved specific statutory language that was thought to clarify the meaning of an earlier statute. E. g., Red Lion Broadcasting Co. v. FCC, 395 U. S. 367, 380-381 (1969) (language in 1959 amendment to § 315 of the Communications Act approved fairness doctrine adopted by FCC under the “public interest” standard of the original Act). Here, by contrast, Congress borrowed the language of §4 in adding the parens patriae section. The views expressed by particular legislators as to the meaning of that language in §4 “cannot serve to change the legislative intent of Congress . . . ‘since the statements were [made] after passage of the [Clayton] Act.’ ” Regional Rail Reorganization Act Cases, 419 U. S. 102, 132 (1974), quoting National Woodwork Mfrs. Assn. v. NLRB, 386 U. S. 612, 639 n. 34 (1967).

While we do not lightly disagree with the reading of Hanover Shoe urged by these legislators, we think the construction of § 4 adopted in that decision cannot be applied for the exclusive benefit of plaintiffs. Should Congress disagree with this result, it may, of course, amend the section to change it. But it has not done so in the recent parens patriae legislation.

15 In a separate trial pursuant to Fed. Rule Civ. Proc. 42(b), the District Court held that the defendant shoe machinery manufacturer was not permitted to assert a pass-on defense against its customer. 185 F. Supp. 826 (MD Pa.), aff’d, 281 F. 2d 481 (CA3), cert. denied, 364 U. S. 901 (1960). The District Court indicated that pass-on defenses were barred against “consumers” who use the defendant’s product to make their own but not against “middlemen” who simply resell the defendant’s product. 185 F. Supp., at 830-831. Both on interlocutory appeal and after trial on the merits, the Court of Appeals affirmed on the basis of the District Court’s reasoning. See 392 U. S., at 488 n. 6.

16 Another situation in which market forces have been superseded and the pass-on defense might be permitted is where the direct purchaser is owned or controlled by its customer. Cf. Perkins v. Standard Oil Co., 395 U. S. 642, 648 (1969); In re Western Liquid Asphalt Cases, 487 F. 2d, at 197, 199.

17 The sole dissenting Justice in Hanover Shoe did not reach th*e pass-on question. 392 U. S., at 513.

18 In this Part, we assume that use of pass-on will be permitted symmetrically, if at all. This assumption, of course, reduces the substantial risk of multiple liability for defendants that is posed by allowing indirect purchasers to recover for the overcharge passed on to them while at the same time allowing direct purchasers automatically to collect the entire overcharge. See supra, at 730-731. But the possibility of inconsistent judgments obtained by conflicting claimants remains nonetheless. Even this residual possibility justifies bringing potential and actual claimants together in one action if possible.

19 See n. 11, supra. Interpleader under Fed. Rule Civ. Proc. 22(1) often would be unavailable because service of process for rule interpleader, as contrasted with statutory interpleader, does not run nationwide. See 3A J. Moore, Federal Practice ¶ 22.04[2] (1974).

20 For example, a condition precedent for invoking statutory interpleader is the posting of a bond for the amount in dispute, 28 U. S. C. § 1335 (a) (2), see 3A J. Moore, supra, ¶ 22.10, and a defendant may be unwilling to put up a bond for the huge amounts normally claimed in multiple-party treble-damages suits. For a discussion of other circumstances in which statutory interpleader may be “impractical,” see McGuire, The Passing-On Defense and the Right of Remote Purchasers to Recover Treble Damages under Hanover Shoe, 33 U. Pitt. L. Rev. 177, 197-198 (1971).

21 Rule 19 (a) provides in part:

“A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties, or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.”

22 See the comment of the Advisory Committee on the 1966 Amendment to Rule 19: “In some situations it may be desirable to advise a person who has not been joined of the fact that the action is pending, and in particular cases the court in its discretion may itself convey this information by directing a letter or other informal notice to the absentee.” 28 U. S. C. App., p. 7760.

23 E. g., Philadelphia Housing Auth. v. American Radiator & Standard Sanitary Corp., 50 F. R. D. 13 (ED Pa. 1970), aff’d sub nom. Mangano v. American Radiator & Standard Sanitary Corp., 438 F. 2d 1187 (CA3 1971) (suit against manufacturers of plumbing fixtures on behalf of all homeowners in the United States). There often will be more levels of distribution or manufacture between the defendant and the ultimate consumers than the two levels (masonry and general contractors) in this case. For example, in Philadelphia Housing Auth., supra, the plaintiffs included homeowners who had bought used rather than new homes and who therefore had to show that each time their houses changed hands the sellers passed on part of the plumbing manufacturers’ original overcharge. 50 F. R. D., at 19-20, 25-26. Treble-damages suits by ultimate consumers against any of the manufacturers of industrial raw materials or equipment that have been charged in recent Government price-fixing suits would involve not only several levels within a distribution chain, but also several separate chains of distribution; for example, chromite sand is used to make ingots, ingots are used to make steel, and steel is used to make consumer products. Handler & Blechman, supra n. 7, at 640 n. 77, and see id., at 636-637 (citing Justice Department price-fixing suits against defendants far removed from consumers).

24 E. g., Donson Stores, Inc. v. American Bakeries Co., 58 F. R. D. 481 (SDNY 1973) (motion to intervene by a putative class of 20 million consumers of bread in treble-damages action against bread manufacturers). Cf. Handler & Blechman, supra, n. 7, at 653 (arguing that the effect of legislation authorizing States to bring treble-damages actions on behalf of their citizens, see n. 14, supra, will be to interject claims on behalf of large classes of consumers into treble-damages suits brought by middlemen). Thus in this ease the plaintiff housing authorities, App. 20, presumably have passed on part of the alleged overcharge to their tenants and subtenants, who would have to be brought into the suit before damages could be fairly apportioned.

25 An overcharge imposed by an antitrust violator or group of violators on their customers is analytically equivalent to an excise tax imposed on the violator’s product in the amount of the overcharge. The effect of such an overcharge can be calculated using the economic theorems for the incidence of an excise tax. See Schaefer, Passing-On Theory in Antitrust Treble Damage Actions: An Economic and Legal Analysis, 16 Wm. & Mary L. Rev. 883, 887, 893 (1975), and sources cited in id., at 887 n. 21.

26 Thus, in the instant case respondents have offered to prove that general and masonry contractors calculate their bids by adding a percentage markup to the cost of their materials, Brief for Respondents 20-23, rather than by attempting to equate marginal cost and marginal revenue as required by an explicit profit-maximizing strategy.

27 Mr. Justice Brennan in dissent argues that estimating a passee’s damages requires nothing more than estimating what the passer’s price would have been absent the violation, and suggests that apportioning the overcharge throughout the distribution chain is “no different from and no more complicated” than the initial task of estimating the amount of the overcharge itself. Post, at 758-759, and n. 14. But as the dissent recognizes, post, at 749 n. 3, unless the indirect purchaser is at the end of the distribution chain it can claim damages not only from the portion of the overcharge it absorbs but also from the portion it passes on, which causes a reduction in sales volume under less than perfectly inelastic demand conditions. See n. 13, supra. The difficulties of the task urged upon us by the dissenters cannot be so easily brushed aside.

In any event, as we understand the dissenters’ argument, it reduces to the proposition that because antitrust cases are already complicated there is little harm in making them more so. We disagree.

28 See, e. g., West Virginia v. Chas. Pfizer & Co., 314 F. Supp. 710, 745-746 (SDNY 1970), aff’d, 440 F. 2d 1079 (CA2 1971); Boshes v. General Motors Corp., 59 F. R. D., at 597.

29 We note that supporters of the offensive use of pass-on, other than litigants in particular cases, generally have not contended for a halfway rejection of Hanover Shoe that would permit offensive use of pass-on in some types of market situations but not in others. See, e. g., Tr. of Oral Arg. 57 (United States as amicus curiae); Note, The Defense of “Passing On” in Treble Damage Suits Under the Antitrust Laws, 70 Yale L. J. 469, 476, 478 (1961); commentators cited in n. 11, supra.

30 See, e. g., In re Western Liquid Asphalt Cases, 487 F. 2d, at 198; Wheeler, Antitrust Treble-Damage Actions: Do They Work?, 61 Calif. L. Rev. 1319, 1325 (1973).

31 Commentators have noted that recoveries in treble-damages actions aggregating large numbers of small claims often have failed to compensate the individuals on behalf of whom the suits have been brought. E. g., Handler, The Shift from Substantive to Procedural Innovations in Antitrust Suits — the Twenty-Third Annual Antitrust Review, 71 Colum. L. Rev. 1, 9-10 (1971); Wheeler, supra, n. 30, at 1339; Kirkham, Complex Civil Litigation — Have Good Intentions Gone Awry?, 70 F. R. D. 199, 206-207 (1976).

The dissenting opinion of Mr Justice Brennan appears to suggest that the 1976 parens patriae legislation, see n. 14, supra, provides an answer to this problem of compensating indirect purchasers for small injuries. Post, at 764 n. 23. Quite to the contrary, the Act “recognizes that rarely, if ever, will all potential claimants actually come forward to secure their share of the recovery,” and that “the undistributed portion of the fund . . . will often be substantial.” H. R. Rep. No. 94-499, p. 16 (1975). The portion of the fund recovered in a parens patriae action that is not used to compensate the actual injuries of antitrust victims is to be used as “a civil penalty . . . deposited with the State as general revenues,” Clayton Act §4E(2), 15 U. S. C. § 15e (2) (1976 ed.), enacted by the 1976 Act, or “for some public purposes benefiting, as closely as possible, the class of injured persons,” such as reducing the price of the overcharged goods in future sales. H. R. Rep. No. 94-499, supra, at 16. That Congress chose to provide such innovative methods of distributing damages awarded in a parens patriae action under newly enacted § 4C of the Clayton Act, 15 U. S. C. § 15c (1976 ed.), does not eliminate the obstacles to compensating indirect purchasers bringing traditional suits under § 4.

1 The block was sold to various general and special contractors who had successfully bid to construct public buildings. The State was thus an indirect purchaser of the block.