Judicial Rulings

A setback of deterrence to white-collar crime
THE U.S. Supreme Court ruled June 9 in Illinois Brick v. Illinois that indirect purchasers could not recover damages for overcharges resulting from illegal price fixing. Illinois had brought suit against the company for violation of the Sherman Antitrust Act, charging that price fixing by the block manufacturers raised construction costs on some state buildings.

In denying damages the court pointed to the difficulty of determining the amount of damages through complex legal actions involving "massive evidence and complicated theories."

The impact of the decision, however, was seen by some as a major setback for deterrence of antitrust violations. C. Ray Marvin of the National Association for Attorneys General said it is "absolutely vital that this decision be thrown out immediately." And John Shenefield, acting assistant attorney general in charge of the Justice Department's antitrust division, called the ruling a "disheartening development."

"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,'" the ruling said.

Critics called the 6-3 decision a weakening of white-collar crime law enforcement. It means that consumers of products with illegally-set prices can't sue for damages unless they directly bought from the price-fixer. Some say that direct buyers are unlikely to sue, because they don't want to upset their suppliers and can pass on their higher costs anyway.

The Wall Street Journal's Stan Crock called the ruling "ironic" in light of the court's recent acceptance of the death penalty for use as a deterrent, pointing out that "if deterrence works anywhere it works in this area, where the economic crimes are based on cost-benefit analysis and aren't done in the heat of passion." 

30 / September 1977 / Illinois Issues