by Alain Baudry
The Minnesota Supreme Court has recently issued a sweeping decision that opens the door to expanded anti-trust suits by consumers in any case involving allegations of price fixing. In Lorix v. Crompton Corporation A05-2148 (August 2, 2007), the Court rejected Federal Law (Illinois Brick v. Illinois, 431 U.S. 720, 731-32) and ruled that indirect purchasers have standing to pursue violations of Minnesota's antitrust statutes.
Lorix was a class action lawsuit brought by a Minnesota consumer alleging that she was overcharged for automobile tires as a result of defendants' conspiracy to fix the prices of rubber-processing chemicals. The district court dismissed the plaintiff's complaint because she was neither a consumer or customer in the rubber processing chemical industry with non-speculative damages and there was a risk of double recovery by both direct and indirect purchasers. The Minnesota Court of Appeals affirmed, ruling that a Minnesota antitrust plaintiff "had to be a participant or competitor in the market restrained by the alleged antitrust violation." 720 N.W.2d 15, 19 (2006).
In a sweeping pro-plaintiff decision, the Minnesota Supreme Court reversed. It recognized that antitrust standing doctrine was intended to provide "some prudential limits" so that not every consumer could sue to recover for every antitrust violations based on the ripple effects through the economy. The Lorix court declined to identify what those limits were, finding instead that Lorix fell comfortably within those limits as an "end user of a consumer good whose price was inflated by anticompetitive conduct earlier in the chain of manufacture." The Court noted that as an end user, Lorix was in fact the party most likely to be injured by price fixing overcharges because she lacked the ability to pass on her overcharges to others. The fact that Lorix bought a tire, not chemicals, was irrelevant. "An anti-trust violator should not escape liability simply because, by happy accident, its price-fixed goods are consumed in the manufacturing process."
The Court similarly rejected concerns that Lorix's alleged damages were too complex and remote to be remedied as the type of concerns that had motivated the United States Supreme Court in Illinois Brick, and which the Minnesota legislature had rejected in 1984 in amending the Minnesota antitrust statute.
Although the Supreme Court recognized that Lorix might not be able to prove damages, or that her damages would be minimal, and that she faced a challenge meeting class certification requirements, it nonetheless ruled that Minnesota antitrust law afforded her an opportunity to try.
The Lorix decision opens the door to a raft of satellite consumer lawsuits in any case involving allegations of price fixing or overcharging. This increases the risk for manufacturers and other retailers of engaging in conduct that falls in the grey zone of antitrust. For example, just this past term, the United States Supreme Court ruled that minimum resale price fixing would no longer be deemed a per se violation of federal antitrust laws, and instead would be judged under the rule of reason. Leegin Creative Leather Prods., Inc. v. PSKS, Inc., __ S. Ct. __ (June 28, 2007) (slip op.) Manufacturers contemplating adoption of minimum resale pricing policies still run the risk that the policy will be successfully challenged under the rule of reason by a federal anti-trust plaintiff, or challenged under state law. They now face the added risk of a lawsuit under Minnesota state antitrust law on behalf of consumers who purchase the manufacturer's products.
The Lorix decision encourages consumers, and lawyers eager to try class action suits, to challenge manufacturer pricing programs under Minnesota state rather than federal law.
Please contact the Maslon Competitive Practices/Unfair Competition Practice Group if you would like additional information.
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