Legal Definitions - indirect evidence

The indirect-purchaser doctrine is a principle within antitrust law that allows a party who did not directly buy a product or service from the original seller to still bring a lawsuit against that original seller for certain antitrust violations, particularly price discrimination. This doctrine applies when an intermediary party (such as a distributor or retailer) is considered a mere conduit or "sham" because the original seller effectively controls the terms and pricing of the sale to the ultimate buyer. In such cases, the court "looks past" the intermediary to treat the ultimate buyer as if they had purchased directly from the original seller, thereby granting them the legal right (standing) to sue.

• Example 1: Software Licensing

  Imagine a major software company, "InnovateTech," sells its enterprise software licenses exclusively through a network of certified resellers. InnovateTech dictates the exact pricing, terms, and conditions for all end-user sales, leaving no room for the resellers to negotiate or set their own prices. If InnovateTech charges different large corporations significantly different prices for the same software licenses without justification, a corporation that purchased through one of these resellers might invoke the indirect-purchaser doctrine.

  Explanation: Even though the corporation bought the software from a reseller, a court could view the reseller as a "sham middle party" because InnovateTech controlled all the critical sales terms and pricing. This application of the indirect-purchaser doctrine would allow the corporation to sue InnovateTech directly for alleged price discrimination, despite not being a direct customer of InnovateTech.

• Example 2: Specialized Medical Equipment

  Consider a manufacturer of highly specialized medical devices, "HealthGear Inc.," which sells its products to hospitals through a network of authorized distributors. HealthGear Inc. sets a uniform national price for these devices and strictly prohibits distributors from altering it or offering discounts. If HealthGear Inc. engages in a scheme to charge certain hospitals significantly higher prices than others for identical devices, a hospital that purchased through a distributor could potentially use the indirect-purchaser doctrine.

  Explanation: The hospital, despite buying from a distributor, could argue that the distributor was not an independent pricing entity but merely a channel for HealthGear Inc.'s pricing. By applying the indirect-purchaser doctrine, the court would treat the hospital as if it purchased directly from HealthGear Inc., giving it the legal standing to challenge the manufacturer's alleged price discrimination.

• Example 3: Branded Restaurant Supplies

  A national fast-food franchisor, "BurgerBlast," requires all its franchisees to purchase specific branded ingredients and supplies exclusively from a designated supplier, which is a subsidiary of BurgerBlast. BurgerBlast sets the prices for these supplies, and the franchisees have no ability to negotiate or seek alternative suppliers. If BurgerBlast charges different franchisees varying prices for the same mandatory supplies without justification, a franchisee might argue they are an indirect purchaser from BurgerBlast (via its subsidiary).

  Explanation: Although the franchisee technically buys from BurgerBlast's subsidiary, the court might apply the indirect-purchaser doctrine because BurgerBlast effectively controls the pricing and supply chain, making the subsidiary a "sham middle party" in terms of independent pricing. This would grant the franchisee the right to sue BurgerBlast directly for alleged price discrimination regarding the supplies.