Frictions and Sticking Points: Applying the Textbook Model to the Analysis of Cost Pass-Through in Indirect Purchaser Class Actions

Abstract

Indirect purchaser class actions are a prevalent avenue for the civil recovery of damages resulting from antitrust violations such as price fixing and monopolization. Although both direct purchaser and indirect purchaser actions are commonplace in antitrust, there are key differences between these types of cases, particularly with respect to the issue of pass-through, which is relevant when determining the appropriateness of class certification in indirect purchaser actions. In this paper, we explain how the generic textbook models that are often used and cited in indirect purchaser class actions to support the claim of pass-through to all or substantially all class members are based on highly restrictive assumptions. We also provide several examples that describe why the simple application of these restrictive models to real world situations can lead to mistaken inferences and conclusions.