Jobbers Who Buy Through Qualified Buying Groups Are Not Indirect Purchasers under the Illinois Brick Decision

Created: 11/11/01; Last Update: 11/11/01 20:00

The autoparts plaintiffs made the following argument, in their memorandum of law dated January 12, 2001 in opposition to defendants' motion to dismiss the amended complaint for alleged insufficiency of pleading, that plaintiffs who bought auto parts through a specific type of auto-parts buying group were the same as direct purchasers from manufacturers, and should not be treated as indirect purchasers under the Illinois Brick decision of the U.S. Supreme Court:

Plaintiffs' Argument in Their Memorandum of Law:




At page 27 (last paragraph) of defendants' main memorandum, defendants argue that in Appendix D "no fewer than 140 plaintiffs are expressly alleged to be '100% indirect' purchasers".

There are 249 plaintiffs (of which 106 are related plaintiffs with plaintiff numbers bearing a letter ranging from "b" to "hh") annexed to plaintiff numbers 1-145.

These 249 plaintiffs have listings in Appendix D setting forth competitive information about their respective businesses. All but 3 of the plaintiffs are in direct competition with one or more of the defendants, as set forth in Appendix D, which is usually set forth in the first line of the description for a specific plaintiff, followed by the plaintiff's locations and the defendants' competing locations. At the end of each plaintiff listing, there is a statement about "direct purchases" and/or "indirect purchases".

There are 21 plaintiffs who only buy directly from manufacturers (pltf ## 1 18, 32, 33, 37, 43b, 48, 51a, 51b, 57, 70, 47a, 74b, 81a, 81b, 82, 88, 129, 133, 134 and 142).

There are exactly 54 plaintiffs who buy 100% indirectly (excluding plaintiffs who buy from affiliated direct purchasers), as follows: pltf ## 2, 4, 5, 9, 12, 14, 15, 19, 23, 26, 29, 34, 35, 39, 41, 42, 45, 50, 53, 65, 69, 76, 78, 79, 83, 86, 87a, 87b, 87c, 87d,e,f,h, 87d,e,g, 89, 90, 91a, 91b, 91c, 92, 94, 95, 100, 105, 108, 112, 113, 115, 116, 125, 126, 128, 132, 138, 139a, 139b and 141. Defendants at page 27 of their main memorandum state there are "no fewer than 140 plaintiffs ... expressly alleged to be '100% indirect' purchasers".

This is not the case. There are only the above 54 plaintiffs, and 2 of these (pltf ## 76 and 95) buy some of their parts through buying groups (as set forth in Appendix C).

There are 57 plaintiffs who buy some or all of their parts through buying groups which plaintiffs allege (in Paragraph 52-C-1 of the complaint, with supporting facts) amount to direct purchases from the manufacturers involved. These buying groups and the plaintiffs purchasing some or all of their parts purchases through them are set forth in Appendix C to the complaint (the pltf ## are: 6, 11, 13, 18, 28, 30a, 37, 38, 40, 43b, 46, 47, 49, 51b, 55, 56, 58, 60, 62, 67a, 71, 76, 88, 95, 97b, 103m, 110, 117, 121, 127, 136, 140, and 143, with 30a buying for 30a-30b, 43b buying for 43a-43b, 51b buying for 51a-51b, 67a buying for 67a-67h, 97b buying for 97a-97c, and 103m buying for 103a-103m - making a total of 57 plaintiffs.

Subparagraph C-1 of said Paragraph 52 states:

[start of sub-quote]

C-1. "Buying Group" refers to an incorporated or non-incorporated association of auto-parts jobbers and WD's as members formed by its members to obtain lower per unit prices from auto-parts manufacturers than the individual members are or were able to obtain as an individual purchaser; the Buying Group does not buy or inventory any parts; the members order directly from the manufcturers; the manufacturer ships directly to the member; and the billing or "paperwork" for a transaction usually includes the name of the member, the name of the Buying Group and the name of the manufacturer. Payment by the member is made directly to the manufacturer or is routed through the Buying Group. Title goes directly from the manufacturer to the member. The Buying Group may act as a credit facility for the transaction. The prices paid by members of a Buying Group are generally substantially higher than the prices per unit paid by each of the defendants when purchasing the same goods from the same manufacturer.

[end of sub-quote]

All of the paragraphs of the complaint relating to buying groups are: Paragraphs 52-C1, 52-C2, 52D, 52F, 52G, 55, 78-P, 78A, 78B and Appendix C, which clearly show that plaintiffs alleging they are buying parts from buying groups as to specific manufacturers are buying directly from the manufacturers, notwithstanding any other allegations saying such plaintiffs are making indirect purchases. Plaintiffs allege at Paragraph 78A-B of the complaint that they allege in the alternative to the "indirect purchase" allegation that their buying group purchases are actually direct purchases as to the manufacturers involved, as follows:

[start of sub-quote:]

Direct Purchasers: Buying Groups and Non-Overlapping Damages

78A. Each of the plaintiffs listed in Appendix C hereto (incorporated by reference hereby), by its purchases through one or more buying groups, has purchased some or all of its auto parts directly from one or more of the manufacturers to the extent set forth in Appendix D hereto (incorporated by reference hereby) for all or part of the period from 2/16/96 to the present.

78B. Each of the plaintiffs listed in Appendix C is a "direct purchaser" of all auto parts purchased by the plaintiff from the Manufacturers by use of the Buying Group(s) listed for the plaintiff. This allegation is in the alternative to any allegation for such plaintiff in Appendix D that its purchases were indirect.

[end of sub-quote]

The remainder of the plaintiffs purchase some of their parts directly from the specified manufacturers and the rest indirectly as to the same specified manufacturers. When the term "indirect purchase" was used as to plaintiffs ## 30a-b, 64a-l, 67a-h, 73a-c, 80a-b, 93a-c, 97a-c, 103a-m, 120a-s, 130a-hh this was alleged with an explanation that the purchases were made from an affiliate, which bought parts directly, and to such extent the plaintiffs are direct purchasers, as plaintiffs have alleged at Paragraph 78C, as follows:

[start of sub-quote:]

78C. Each of the plaintiffs in each of the plaintiff groups (e.g., 64a-64l, 67a-67h, 120a-120s) is under common control, through parent-subsidiary or other affiliate relationship, and is thereby a direct purchaser for its transactions to the extent of any auto-parts purchases made directly from the manufacturer by any member of the group.

The allegations are not as described by defendants. There are 52 plaintiffs out of 249 plaintiffs who have not bought directly to any extent, and these plaintiffs (as well as all indirect purchases by all of the other plaintiffs) should be actionable under Sections 2(f) and 2(c) of the Robinson-Patman Act for the reasons set forth in Points II and IV above.

Note: The Court in the auto-parts case held that the parties should obtain discovery and present all evidence relating to buying at a future time in the case (meaning, in a summary judgment motion or during trial).

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Copyright © 2001 by Carl E. Person