STATE OF CALIFORNIA, ET AL., APPELLANTS V. ARC AMERICA CORPORATION, ET AL. No. 87-1862 In the Supreme Court of the United States October Term, 1988 On appeal from the United States Court of Appeals for the Ninth Circuit Brief for the United States as Amicus Curiae supporting Appellants TABLE OF CONTENTS Question Presented Interest of the United States Statement Summary of argument Argument: Congress did not preempt state statutes affording damage remedies to indirect purchasers A. Congress did not intend to interfere with the broad authority of the States to enact and enforce antitrust laws in aid of their police powers B. State statutes affording indirect purchasers a damage remedy do not create an irreconcilable conflict with federal law Conclusion QUESTION PRESENTED Whether Section 4 of the Clayton Act, 15 U.S.C. 15, construed by this Court in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), to bar treble damage actions by indirect purchasers under the federal antitrust laws, preempts state indirect-purchaser statutes. INTEREST OF THE UNITED STATES The United States has primary responsibility for enforcing the federal antitrust laws. This case presents the question whether the Clayton Act, which has been construed to provide no remedy to "indirect purchasers" in most cases, preempts state antitrust statutes that give a remedy to indirect purchasers. Because that question requires determination of congressional intent underlying federal antitrust laws enforced by the United States, and because the determination in this case may affect federal antitrust enforcement, the United States has a particular interest in its correct resolution. STATEMENT Beginning in 1976, 35 actions were filed in 12 federal district courts against a number of cement manufacturers, alleging a nationwide conspiracy to fix prices (J.S. App. A3). Appellants -- California, Minnesota, Alabama, and Arizona -- filed four of those actions. Each State sought to represent a class that included all governmental entities within the State that had purchased either cement or products containing cement (see id. at A73, A94, A110-A111, A127). The States' complaints alleged violations of Section 1 of the Sherman Act, 15 U.S.C. 1, and state statutes. California, Minnesota, and Alabama sought recovery for indirect purchases of cement, basing their claims on state statutes that indisputably permit indirect-purchaser suits. /1/ Arizona made a similar claim, /2/ but the question whether its statute permits indirect-purchaser suits is disputed (J.S. 9). In September 1977, the Judicial Panel on Multidistrict Litigation transferred all pending actions to the District of Arizona for coordinated pretrial proceedings (J.S. App. A3). In March 1979, the district court certified the actions as class actions and established three classes of cement purchasers. /3/ The second and third classes consisted, respectively, of California and Oregon and their political subdivisions. The first and broadest class was made up of all others who purchased cement during the relevant time period. Ibid. Between July 1979 and October 1981, the three classes entered into a series of settlement agreements with seven of the major defendants, which produced a settlement fund of more than $32 million (J.S. App. A4). /4/ The settlement agreements left distribution of the settlement fund for later resolution, subject to approval by the district court (id. at A4, A11). By an order dated January 21, 1985 (J.S. App. A27-A33), the district court approved a plan distributing the settlement fund. In response to claims by the direct purchasers that the States could not be compensated for their indirect purchases of cement because of this Court's intervening decision in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), the district court disallowed the claims of indirect purchasers. It held, without further discussion, that the state statutes on which Alabama, California, and Minnesota were relying to recover for indirect purchases "are clear attempts to frustrate the purposes and objectives of Congress, as interpreted by the Supreme Court in Illinois Brick, and, accordingly, are preempted by federal law" (J.S. App. A30-A31). The Ninth Circuit affirmed (J.S. App. A1-A26). It first suggested (id. at A21) that the state indirect-purchaser statutes could be construed to limit direct purchasers' recoveries under federal law to the amount of any overcharge that the direct purchaser itself had absorbed -- a construction that would "directly conflict with federal law." The court of appeals then concluded (ibid.) that, even if the state indirect-purchaser statutes were construed only as permitting indirect purchasers to bring claims in addition to the claims brought by direct purchasers, the indirect-purchaser claims asserted in this case would impermissibly interfere with the "policy goals" of Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968), and Illinois Brick. In particular, the court of appeals concluded that such claims would "complicate antitrust enforcement" (J.S. App. A21); "could also limit the recoveries of direct purchasers and thus reduce their incentives to bring antitrust actions" (id. at A22); and would "conflict most directly with federal policy because they create the risk of multiple liability for defendants" (id. at A22-A23). The court discerned in this Court's opinions "an express federal policy condemn(ing) multiple liability for antitrust defendants" (id. at A23). It concluded (ibid.) that, if state indirect-purchaser statutes were valid, then in certain circumstances (for example, if liability had been previously imposed under the state statute) the application of federal law could result in imposition of multiple liability in contravention of the holding of Illinois Brick. SUMMARY OF ARGUMENT In Illinois Brick and Hanover Shoe, this Court construed Section 4 of the Clayton Act, 15 U.S.C. 15, generally to preclude proof that the customer of an antitrust violator has passed on the overcharge to subsequent purchasers, and thus to preclude indirect purchasers from obtaining a treble damage remedy in most circumstances. We agree with those holdings, both as a matter of statutory interpretation and as a matter of antitrust policy. A number of the States have reached a different conclusion, however, and have afforded indirect purchasers a damage remedy under state antitrust laws. Such divergent state approaches are not preempted unless there is a clear indication that Congress intended to make federal antitrust liability exclusive. The legislative history of the federal antitrust laws demonstrates a congressional intent to supplement, and not to displace, state antitrust enforcement. And Congress, as well as this Court, has repeatedly indicated in the years since a recognition that States enjoy broad authority to enact and provide for the enforcement of their own antitrust laws. The court of appeals based its conclusion that state indirect-purchaser statutes are preempted on the policies articulated by this Court in construing Section 4 of the Clayton Act. But neither Illinois Brick nor Hanover Shoe involved state law; nor does either decision refer to any congressional intent to preclude the States from adopting their own approaches. The court of appeals improperly equated policies appropriately taken into account by this Court in construing a federal statute with an affirmative congressional intention to require the States to conform their statutory remedies to the federal model. Thus, although this Court took account of the additional complexity that would be introduced into antitrust litigation by allowing proof that damages were passed on, as well as the deterrent effect of concentrating the right of recovery in the direct purchaser, no "irreconcilable conflict" (Rice v. Norman Williams Co., 458 U.S. 654, 659 (1982)) with Congress's purposes would be created by allowing the States to adopt remedies that will make the enforcement of their laws more complicated than related federal laws. The federal courts can refuse to exercise pendent jurisdiction over state claims if they will unduly complicate federal litigation (United Mine Workers v. Gibbs, 383 U.S. 715, 725-726 (1966)), and in any event this Court's focus on the complexity of proceedings that would result if an ambiguous federal statute were interpreted a certain way does not suggest that state legislatures are powerless to enact unambiguous statutes that require complex proceedings for their enforcement. Under the Supremacy Clause, state laws cannot affect the right of direct purchasers to recover under federal law. In any event, the court of appeals' concern about lessening the incentives of direct purchasers to bring suit was misdirected, because this Court's goal in Hanover Shoe and Illinois Brick was to enhance the deterrent effect of the antitrust laws, not to favor direct purchasers as such. The goal of deterrence is if anything probably furthered, not impeded, by permitting indirect purchasers to sue under state law. Similarly, the risk of multiple liability, on which the court of appeals relied heavily, creates no basis for preemption. There is no indication that Congress intended to establish federal antitrust remedies as a ceiling on the total liability a defendant must pay as a result of its anticompetitive activity. Under established principles of preemption, state and federal jurisdictions can exact separate penalties for a single act. ARGUMENT CONGRESS DID NOT PREEMPT STATE STATUTES AFFORDING DAMAGE REMEDIES TO INDIRECT PURCHASERS In Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), the Court concluded that Section 4 of the Clayton Act, 15 U.S.C. 15, does not permit indirect purchasers to recover damages under that statute in most circumstances. We fully support that result, and agree that this construction of the federal Act best serves the goal of antitrust enforcement. But the States have independently considered the issue of recovery by indirect purchasers, and a number have reached a different conclusion. /5/ Unless Congress has required, either explicitly or implicitly, that federal antitrust laws be the exclusive model for liability for anticompetitive activity, the States are free to adopt their own enforcement policies and remedies. Because we can discern no such intent on the part of Congress, we believe that, whatever one may think of the wisdom of affording antitrust remedies to indirect purchasers, the States are not precluded by federal law from pursuing such a course. The court below confused the policy considerations that properly informed this Court's construction of the federal statute with an affirmative congressional decision to preclude the States from pursuing different approaches. A. Congress Did Not Intend to Interfere With the Broad Authority of the States To Enact and Enforce Antitrust Laws In Aid of Their Police Powers 1. In any preemption analysis, "'(t)he purpose of Congress is the ultimate touchstone.'" Malone v. White Motor Corp., 435 U.S. 497, 504 (1978); see also Fidelity Federal S & L Ass'n v. De la Cuesta, 458 U.S. 141, 152 (1982); Schneidewind v. ANR Pipeline Co., No. 86-986 (Mar. 22, 1988), slip op. 6. Congress may explicitly define the extent to which its enactments preempt state law (see, e.g., Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 95-96 (1983)), or it may indicate, either explicitly or implicitly, an intention to occupy a field to the exclusion of state law. And, even if Congress has not entirely displaced state regulation in a particular field, state law may be preempted to the extent it conflicts with federal law. See Hines v. Davidowitz, 312 U.S. 52, 67 (1941); Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-143 (1963); Schneidewind v. ANR Pipeline Co., No. 86-986 (Mar. 22, 1988), slip op. 6-7. Federal regulation will not be deemed to preempt state regulatory power, however, "in the absence of persuasive reasons -- either that the nature of the regulated subject matter permits no other conclusion, or that the Congress has unmistakably so ordained" (Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. at 142). Courts may not seek out a conflict where none clearly exists, or concern themselves with hypothetical possibilities. Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 130-131 (1978); Huron Portland Cement Co. v. Detroit, 362 U.S. 440, 446 (1960). Moreover, if state regulation is in aid of the usual police powers of the State, there is a presumption that Congress did not intend to interfere with state regulation. Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977); Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. at 144-147; California v. Zook, 336 U.S. 725, 734 (1949); Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947). "This assumption provides assurance that the 'federal-state' balance, United States v. Bass, 404 U.S. 336, 349 (1971), will not be disturbed unintentionally by Congress or unnecessarily by the courts." Jones v. Rath Packing Co., 430 U.S. at 525. This Court's approach, "supported by decisions extending back to the turn of the century," is to temper any implied-preemption analysis "by the conviction that the proper approach is to reconcile 'the operation of both statutory schemes with one another rather than holding one completely ousted.'" Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ware, 414 U.S. 117, 127 & n.8 (1973) (quoting Silver v. New York Stock Exchange, 373 U.S. 341, 357 (1963)); accord De Canas v. Bica, 424 U.S. 351, 357-358 n.5 (1976). The Court therefore "is generally reluctant to infer preemption" (Exxon Corp. v. Governor of Maryland, 437 U.S. at 132). 2. Neither the Sherman Act nor the Clayton Act expressly preempts state antitrust laws and remedies. And it is well settled that Congress did not intend to displace state regulation of anticompetitive practices, which has traditionally been undertaken by the States in the exercise of their police powers (see L. Sullivan, Antitrust 155-156 (1977)). In 1890, when the Sherman Act was enacted, 21 States had supplemented the common law with statutory antitrust legislation. See Mosk, State Antitrust Enforcement and Coordination with Federal Enforcement, A.B.A. Sec. Antitrust L. Proc., Aug. 6-10, 1962, at 358, 363; 21 Cong. Rec. 2456 (1890). /6/ Congress acted because the various state laws were perceived as inadequate to deal with nationwide and regional anticompetitive combinations. See, e.g., 21 Cong. Rec. 2456, 2457, 2459-2460, 2568 (1890). The Sherman Act was intended to complement the States' efforts to control "the great evil that now threatens us." 21 Cong. Rec. 2456-2457 (1890) (remarks of Sen. Sherman). Senator Sherman stated: "Each State can and does prevent and control combinations within the limit of the State. This we do not propose to interfere with." Id. at 2456. Congress's purpose was "to aid the States in declaring null and void these combinations and agreements in restraint of trade." 21 Cong. Rec. 2563 (1890) (remarks of Sen. Sherman). "No attempt (was) * * * made to invade the legislative authority of the several States or even to occupy doubtful grounds." H.R. Rep. 1707, 51st Cong., 1st Sess. 1 (1890). Indeed, because of the narrow view of the federal government's Commerce Clause powers generally recognized in 1890 (see generally Cantor v. Detroit Edison Co., 428 U.S. 579, 632-637 (1976) (Stewart, J., dissenting)), Senator Sherman believed that a substantial number of conspiracies in restraint of trade would continue to be subject only to state regulation. See, e.g., 21 Cong. Rec. 2462 (1890); see also id. at 4091, 4099 (Reps. Culberson and Bland stating that States had a duty to supplement the federal Act to cover anticompetitive activity outside the federal sphere); H.R. Rep. 1707, 51st Cong., 1st Sess. 1 (1890) (same statement). Congress's intent was simply "to arm the Federal courts within the limits of their constitutional power that they may co-operate with the State courts in checking, curbing, and controlling the most dangerous combinations." 21 Cong. Rec. 2457 (1890) (remarks of Sen. Sherman). Today, because of expanded interpretations of the Commerce Clause, the federal and state spheres overlap substantially. But to construe state remedies as preempted by federal remedies because of the expanded scope of the modern Commerce Clause would "transform() a generous principle of judicial construction -- namely the 'retroactive' expansion of the jurisdictional reach of the Sherman Act to the limits of an expanded judicial conception of the commerce power -- into a transgression of the clearly expressed congressional intent not to intrude on the regulatory authority of the States." Cantor v. Detroit Edison Co., 428 U.S. at 637 (Stewart, J., dissenting). In the years since 1890, Congress repeatedly has indicated its understanding that state antitrust remedies may coexist with federal antitrust remedies. For example, in considering the Capper-Volstead Act of 1921, 7 U.S.C. 291, 292 (which contains an exemption for agricultural cooperatives from federal antitrust laws, but no express preemption of state antitrust laws regulating such organizations), Congress indicated that it expected state law to continue to forbid some such cooperatives, notwithstanding the federal decision to permit them. /7/ In more recent amendments to the Omnibus Crime Control and Safe Streets Act of 1968, Congress has provided seed money to the States to fund antitrust enforcement programs, thus recognizing the States' power to pursue such programs (see Act of Oct. 15, 1976, Pub. L. No. 94-503 Tit. I, Section 116, 90 Stat. 2415). And, in still more recent legislation granting limited exemptions from the federal antitrust laws, Congress has chosen to preempt state antitrust remedies expressly. See National Cooperative Research Act of 1984, 15 U.S.C. (Supp. IV) 4303(c); Export Trading Company Act of 1982, 15 U.S.C. 4016, 4002(a)(7). These express preemption provisions reflect Congress's understanding that, in the absence of such provisions, the States would be free to pursue independent and potentially conflicting private remedies. See S. Rep. 98-427, 98th Cong., 2d Sess. 14 (1984) ("(t)he protections afforded by title II to joint R & D programs from treble damages under Federal law would be largely vitiated by continuing treble damage exposure under State law"). This Court also has recognized the States' broad authority to legislate in the antitrust field. "That State legislatures have the right * * * to prevent unlawful combinations to prevent competition and in restraint of trade, and to prohibit and punish monopolies, is not open to question." Waters-Pierce Oil Co. v. Texas, 212 U.S. 86, 107 (1909) (citing National Cotton Oil Co. v. Texas, 197 U.S. 115 (1905), and Smiley v. Kansas, 196 U.S. 447 (1905)); see also Watson v. Buck, 313 U.S. 387, 403 n.6 (1941); Southern Motor Carriers Rate Conf. v. United States, 471 U.S. 48, 56 & n.19 (1985); Exxon Corp. v. Governor of Maryland, 437 U.S. at 133; Puerto Rico v. Shell Co., 302 U.S. 253, 271 (1937) (criminal provisions of Sherman Act do not preempt similar Puerto Rican law); Standard Oil Co. v. Tennessee, 217 U.S. 413, 421-422 (1910) (upholding state antitrust law against claim that it interfered with interstate commerce). /8/ B. State Statutes Affording Indirect Purchasers A Damage Remedy Do Not Create An Irreconcilable Conflict With Federal Law Despite the clear authority of the States to enact and provide for the enforcement of antitrust laws, the court of appeals held that state indirect-purchaser remedies are preempted because they conflict with federal law. In our view, however, there is no "irreconcilable conflict" (Rice v. Norman Williams Co., 458 U.S. 654, 659 (1982)). It is not a "physical impossibility" to comply with both federal and state laws. Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. at 142-143; see Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 257 (1984) (it is not physically impossible to pay federal fines and state-imposed punitive damages for the same incident). The state statutes do not authorize or mandate conduct that violates the antitrust laws or any other federal laws. See Rice v. Norman Williams Co., 458 U.S. at 661; see also California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980); Schwegmann Bros. v. Calvert Corp., 341 U.S. 384 (1951). Indeed, what is at issue in this case is not the scope of liability but remedies. /9/ The fact that the substantive prohibitions of the state and federal laws are in harmony makes it "particularly inappropriate" to infer preemption (Exxon Corp. v. Governor of Maryland, 437 U.S. at 132). Like the state laws at issue, the Sherman Act prohibits the price fixing alleged in this case. The purposes of the state and federal private damage remedies correspond as well: Congress and the States both seek to compensate victims of antitrust violations and use antitrust civil recoveries to deter future violations of the antitrust laws. Union Carbide Corp. v. Superior Court, 36 Cal. 3d 15, 20-22, 679 P.2d 14, 17-18, 201 Cal. Rptr. 580, 583-584 (1984); Illinois Brick, 431 U.S. at 746. The court of appeals, relying on the opinions in Illinois Brick and Hanover Shoe, nevertheless held (J.S. App. A19, A25) that state indirect-purchaser statutes "stand() as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." See Hines v. Davidowitz, 312 U.S. 52, 67 (1941) (footnote omitted); CTS Corp. v. Dynamics Corp. of America, No. 86-71 (Apr. 21, 1987), slip op. 8. Neither Illinois Brick nor Hanover Shoe, however, contains any reference to state law or a congressional intent to preempt. Indeed, although the Court in those cases was engaged in a task of statutory interpretation, its decisions rested on a weighing of competing policy concerns rather than an analysis of statutory text and legislative history. Despite the limited nature of the inquiry undertaken by the Court in Illinois Brick and Hanover Shoe, the court of appeals discerned in those decisions three federal policies that it believed state indirect-purchaser statutes would obstruct: "(1) avoiding unnecessarily complicated litigation; (2) providing incentives to direct purchasers to bring private damages actions; and (3) avoiding multiple liability for defendants" (J.S. App. A20-A21). The policies to which the court of appeals referred are important and relevant to the proper construction of a federal statute, especially in the absence of specific evidence as to Congress's intent in enacting the provision. /10/ This Court's conclusion that those policies would be served by its construction of the federal statute, however, does not establish a congressional intent to preempt state statutes reflecting differing policy judgments. The court of appeals' analysis would dramatically expand Davidowitz, requiring the States not only to avoid interference with Congress's affirmative purposes but also to refrain from adopting any remedy that Congress declines to adopt for federal purposes. But in the absence of any evidence that Congress intended to make federal remedies exclusive, Davidowitz does not require the States to adhere to Congress's judgments as to the most efficacious remedies. Viewed from this perspective, the three policy considerations identified by the court of appeals give rise to no conflict between federal and state law. 1. In Hanover Shoe, the Court held that a defendant in an antitrust case may not invoke a "pass-on" defense -- that is, a defense that alleges that the overcharge claimed by the plaintiff was passed on by the plaintiff to others in the distribution chain and that the overcharge therefore did not injure the plaintiff (see 392 U.S. at 487-488, 491-492). Concluding that the pass-on defense "would require a convincing showing of * * * virtually unascertainable figures" and that "the task would normally prove insurmountable" (id. at 493), the Court was unwilling to require federal courts enforcing a federal statute to embark on such "long and complicated proceedings involving massive evidence and complicated theories" (ibid.) Subsequently, in Illinois Brick, indirect purchasers sought to use the pass-on theory offensively. The Court decided that determined that the rationale of Hanover Shoe -- "that the attempt to trace complex economic adjustments to a change in the cost of a particular factor of production would greatly complicate * * * already protracted treble-damage proceedings" -- applies equally to assertion of pass-on theories by plaintiffs (431 U.S. at 732). It found the "costs to the judicial system and the efficient enforcement of the antitrust laws" (ibid.) that would result from allowing plaintiffs to use pass-on theories to be unacceptably high. See also id. at 741-745. The court of appeals viewed these decisions as precluding recovery under state indirect-purchaser statutes that would also "complicate antitrust enforcement" (J.S. App. A21). It observed, no doubt correctly, that since plaintiffs will often bring federal and state antitrust claims together in federal court, "complications are unavoidable" (id. at A22). But the Court's decisions in Illinois Brick and Hanover Shoe were intended to promote efficient administration of federal antitrust claims, by limiting the issues that would be litigated under the federal statutes. They did not address the wisdom of state legislatures in submitting state antitrust recovery to "long and complicated proceedings" (392 U.S. at 493). There is no Clayton Act policy to limit the complexity of antitrust proceedings under state law. To the extent that the Court in Illinois Brick and Hanover Shoe discerned a congressional policy to limit the demands placed on the federal judiciary by a federal statute, such a policy is not relevant here. /11/ As the court of appeals acknowledged (J.S. App. A21-A22), indirect-purchaser claims will not complicate federal damage claims if brought in a state court. To be sure, the state indirect-purchaser claims at issue in this case were before the district court as pendent state claims (J.S. App. A64, A87, A104, A122). But whether the federal court should accept jurisdiction of those claims is governed by the body of law dealing with pendent jurisdiction, not by the policies of the Clayton Act. It is well established that a federal court may decline to exercise pendent jurisdiction if the state claims impose significant additional burdens. United Mine Workers v. Gibbs, 383 U.S. 715, 725-726 (1966); see also 13B C.A. Wright, Federal Practice and Procedure Section 3567.1, at 122-132 (1984). It is one thing to say that, because rights created by state law require complicated proceedings for their enforcement, the federal courts will not enforce those rights themselves in an exercise of pendent jurisdiction but will instead leave the matter to state courts. It is quite a different thing to say, as the Ninth Circuit did here, that the complicated proceedings required to vindicate state-created rights are a justification for holding that the State has no power to create those rights at all. Moreover, even if one accepts the court of appeals' gloomy view that federal courts will inevitably be drawn into complex proceedings that require them to sort out direct and indirect purchasers' claims under federal and state law, the court of appeals was still wrong to treat that as a justification for holding that the State has no power to create indirect-purchaser recovery rights. The reason why avoiding complicated proceedings was an important consideration in Hanover Shoe and Illinois Brick is that Congress itself had provided no clear guidance on the indirect-purchaser question. Therefore, concerns of public policy that would be relatively insignificant if Congress's intent were readily ascertainable took on greater weight. As this Court subsequently described its Hanover Shoe and Illinois Brick holdings (Blue Shield v. McCready, 457 U.S. 465, 475 n.11 (1982) (emphasis added), quoting Hanover Shoe, 392 U.S. at 493)), (T)he feasibility and consequences of implementing particular damages theories may, in certain limited circumstances, be considered in determining who is entitled to prosecute an action brought under Section 4. Where consistent with the broader remedial purposes of the antitrust laws, we have sought to avoid burdening Section 4 actions with damages issues giving rise to the need for "massive evidence and complicated theories," where the consequence would be to discourage vigorous enforcement of the antitrust laws by private suits. But the limited role that this Court has allowed this consideration to play in determining the reach of the federal statute hardly supports the notion of the court of appeals that the States are forbidden from making a different policy choice about the desirability of complicated proceedings than the one that has been made at the federal level. Only by forgetting this Court's many reminders about the reluctance with which preemption is to be inferred (see pp. 8-9, supra) could a court find preemption on such a slender basis as this. 2. The Court in Illinois Brick and Hanover Shoe also noted that allowing pass-on theories in federal suits could reduce the deterrent effect of private suits, by decreasing the incentive of direct purchasers -- the class most likely to act as "private attorneys general" -- to sue. The Court reasoned that, if effective measures for allocating overcharges in the chain of distribution could be fashioned, direct purchasers' recoveries would be diminished by the recoveries of indirect purchasers. But, since the indirect purchasers would have only a "tiny stake" and little incentive to sue, the overall deterrent effect of federal civil damage suits would be reduced. Hanover Shoe, 392 U.S. at 494; see also Illinois Brick, 431 U.S. at 725-726, 734-735, 745-746. This Court's decisions, however, do not elevate maximizing the direct purchasers' incentives to sue into an end in itself. Rather, those decisions make clear that the direct purchasers' incentive to sue is merely a means to an end -- enhancing the deterrent effect of the antitrust laws. The court of appeals therefore erred in interpreting Illinois Brick and Hanover Shoe to favor a policy of maximizing incentives for direct purchasers per se (see J.S. App. A20-A21). /12/ As between the two possibilities that the Court seriously considered in Hanover Shoe and Illinois Brick -- allowing direct purchasers and only direct purchasers to sue for the entire amount of an overcharge, versus allowing both direct purchasers and any indirect purchasers to sue, and requiring apportionment of the overcharge among them -- we have little doubt that the Court correctly discerned that the former alternative would provide the greater deterrent effect, for the reasons the Court gave in its opinions. But those are not the alternatives here. The right of direct purchasers to a full recovery without any pass-on defense is guaranteed by federal law as construed in Hanover Shoe and thus under the Supremacy Clause cannot be taken away by any state statute. /13/ Accordingly, the state statutes cannot themselves be applied to require apportionment between direct and indirect purchasers of any federal damages recovered. /14/ The only question here is whether federal law makes direct purchasers the only proper antitrust plaintiffs, even in the face of state statutes giving indirect purchasers the right to sue, or whether the indirect purchasers' state-law rights will be recognized in addition to the direct purchasers' federal-law rights. As between those alternatives, it cannot be maintained that the latter, which simply creates additional liability for the same conduct and thus adds additional disincentives to those that already exist under federal law, meaningfully undermines the goal of deterrence. To be sure, there may be rare situations in which permitting additional plaintiffs to sue for damages in addition to those already available would marginally reduce rather than increase overall deterrence. The court of appeals focused (J.S. App. A22) on one situation in which that might be true: where the defendant has insufficient assets to pay all the claims of the direct and indirect purchasers. In that scenario, each direct purchaser might recover less than the full amount of its claim, and therefore the incentive of each direct purchaser to sue would be less than it would be if only direct purchasers could sue. Conceivably, the deceased litigation incentive of the direct purchasers in this situation could be large enough to offset the increased litigation incentive of the indirect purchasers, thus reducing the overall deterrent effect of the antitrust laws. Such a hypothetical situation, however, provides no basis for holding that state indirect-purchaser laws so frustrate federal objectives that they are preempted. The fact that a state law might marginally reduce the deterrence of antitrust violations in rare cases is no basis for holding that the same law, which in other cases could increase the deterrence of antitrust violations, is on the whole so contrary to federal policy as to justify its preemption in all cases. The general thrust of state laws permitting indirect-purchaser suits is consistent with the federal policy of deterring antitrust violations, and that policy therefore provides no basis for holding such laws to be preempted. In observing that state indirect-purchaser statutes are not antithetical to federal antitrust law, we do not mean to suggest that we agree with the States' decision that such statutes make for good antitrust policy. We do not regard as insufficient the deterrence provided by the federal rule, as articulated in Hanover Shoe and Illinois Brick. Nor would we advocate as a matter of antitrust policy a regime in which both direct and indirect purchasers are entitled to recover for the same overcharge with all the added complexities that entails. The question here, however, is not whether the state statutes are wise but whether they stand as an obstacle to accomplishment of the purposes of Congress. 3. The court of appeals found the "most direct()" conflict with federal policy in "the risk of multiple liability for defendants" if state indirect-purchaser statutes are not preempted (J.S. App. A22-A23). /15/ But there is no federal policy against antitrust violators having to pay amounts cumulating to more than three times the overcharge. /16/ This Court determined only that Congress did not intend an antitrust defendant to be held liable for more than one set of treble damages under Section 4 of the Clayton Act. See Note, supra, 34 Stan. L. Rev. at 212. There was no suggestion in Illinois Brick or Hanover Shoe that this rule governs liabilities imposed by separate sovereigns. /17/ It was well established before the Sherman Act was enacted in 1890 that state and federal sovereigns could simultaneously command obedience to prohibitions relating to the same act, and that each could impose sanctions for disobedience. "Where a person owes a duty to two sovereigns, he is amenable to both for its performance; and either may call him to account." Ex parte Siebold, 100 U.S. 371, 387-389 (1879). "The people of the United States resident within any State are subject to two governments: one State, and the other National; but there need be no conflict between the two. * * * The citizen * * * owes allegiance to the two departments, so to speak, and within their respective spheres must pay the penalties which each exacts for disobedience to its laws. In return, he can demand protection from each within its own jurisdiction." United States v. Cruikshank, 92 U.S. 542, 550-551 (1875). One consistent application of that principle has been this Court's repeated holdings that it is not a violation of the Double Jeopardy Clause for a State and the federal government both to prosecute and punish a defendant for a single crime. See United States v. Lanza, 260 U.S. 377, 382 (1922) (the States and the federal government are "two sovereignties, deriving power from different sources, capable of dealing with the same subject matter within the same territory," and "an act denounced by * * * both national and state governments is an offense against the peace and dignity of both and may be punished by each"); Abbate v. United States, 359 U.S. 187 (1959); United States v. Wheeler, 435 U.S. 313, 316-317, 320 (1978); Heath v. Alabama, 474 U.S. 82, 88-89, 92-93 (1985). This Court's preemption cases also support the principle that the States are not limited to the remedies established by Congress but may provide additional or different remedies for the same conduct. See, e.g., Silkwood v. Kerr-McGee Corp., 464 U.S. at 256 (state tort remedies are available for nuclear incidents despite exclusive federal regulation of nuclear safety, because Congress was aware of state remedies and tolerated tension between state and federal schemes); Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. at 141-142 (more stringent state standards for locally shipped produce are acceptable); Exxon Corp. v. Governor of Maryland, 437 U.S. at 131 (state law bans what federal law permits, but is not preempted); see also California v. Zook, 336 U.S. at 729-732. The States and the federal government have established rules that, in some circumstances, afford different parties causes of action against the same antitrust violator for the same conduct. Our own view is that the federal rule is superior, for all the reasons articulated in this Court's Illinois Brick and Hanover Shoe decisions. But some States, including California, Minnesota, and Alabama have placed an emphasis on compensating all injured parties -- even at the risk, apparently, of requiring antitrust violators to pay out more than three times the overcharge. /18/ Congress has indicated no affirmative intention to preclude the establishment of such additional causes of action under state law. To the contrary, as we have noted (see pp. 9-12, supra), the legislative history of the federal antitrust laws demonstrates Congress's specific intention not to interfere with state antitrust enforcement. Accordingly, the usual presumption that the federal government welcomes coordinate state enforcement "to combat (a particular) evil" (California v. Zook, 336 U.S. at 737; Union Brokerage Co. v. Jensen, 322 U.S. 202, 209 (1944)) applies with particular force here. As this Court observed in Parker v. Brown, 317 U.S. 341, 351 (1943), "(i)n a dual system of government in which, under the Constitution, the states are sovereign, save only as Congress may constitutionally subtract from their authority, an unexpressed purpose to nullify a State's control over its officers and agents is not lightly to be attributed to Congress." Such an "unexpressed purpose" cannot be inferred here, and accordingly, state statutes allowing recovery by indirect purchasers for overcharges resulting from anticompetitive activities are not preempted by the Clayton Act. See Crown Oil Corp. v. Superior Court, 177 Cal. App. 3d 604, 223 Cal. Rptr. 164, appeal dismissed, 479 U.S. 879 (1986); Note, supra, 34 Stan. L. Rev. at 212; Note, State Indirect Purchaser Statutes: The Preemptive Power of Illinois Brick, 62 B.U.L. Rev. 1241 (1982). CONCLUSION The judgment of the court of appeals should be reversed, and the case remanded for further proceedings. Respectfully submitted. CHARLES FRIED Solicitor General CHARLES F. RULE Assistant Attorney General THOMAS W. MERRILL Deputy Solicitor General KENNETH G. STARLING Deputy Assistant Attorney General ROY T. ENGLERT, JR. Assistant to the Solicitor General CATHERINE G. O'SULLIVAN MARION L. JETTON Attorneys NOVEMBER 1988 /1/ See J.S. App. A97 (citing Ala. Code Section 6-5-60 (1975) ("(a)ny person * * * injured or damaged by an unlawful trust, combine or monopoly, or its effect, direct or indirect, may, in each instance of such injury or damage, recover the sum of $500.00 and all actual damages")); J.S. App. A116 (citing Cal. Bus. & Prof. Code Section 16720 et seq. and a state unfair competition statute); see also Cal. Bus. & Prof. Code Section 16750(a) (West 1987 & Supp. 1988) (action to recover "three times the damages sustained * * * may be brought by any person who is injured in his or her business or property * * * regardless of whether such injured person dealt directly or indirectly with the defendant"); J.S. App. A132 (citing Minn. Stat. Sections 325-8011-325-8028 (1978)); see also Minn. Stat. Ann. Section 325D.57 (West Supp. 1988) ("(a)ny person * * * injured directly or indirectly * * * shall recover three times the actual damages sustained"). /2/ See J.S. App. A80 (citing Ariz. Rev. Stat. Ann. Section 44-1402); see also Ariz. Rev. Stat. Ann. Section 44-1408 (1987) (the State or any other person "threatened with injury or injured in its business or property by a violation of this article may bring an action for * * * damages sustained"). /3/ The court also certified a fourth class, entities that purchased ready-mix concrete for delivery within the State of Arizona (J.S. App. A3). /4/ Pursuant to the settlement agreements, the plaintiffs released all claims, under state law or federal law, based on either direct or indirect purchases of cement. See, e.g., J.S. App. A141, A153, A154-A155. /5/ At least 12 jurisdictions, in addition to California, Minnesota, and Alabama, have indirect-purchaser statutes that expressly give indirect purchasers standing to sue. Others have statutes that, like Arizona's, may be interpreted to permit indirect-purchaser suits. See U.S. Amicus Br. in support of appellants' Jurisdictional Statement 6 n.8. /6/ The federal statute that the court of appeals held has preemptive effect in this case, Section 4 of the Clayton Act, 15 U.S.C. 15, extends to victims of violations of any of the antitrust laws the remedy originally provided under Section 7 of the Sherman Act, 26 Stat. 210. See H.R. Rep. 627, 63d Cong., 2d Sess. 14 (1914). Section 7 of the Sherman Act was repealed in 1955 (Act of July 7, 1955, ch. 283, Section 3, 69 Stat. 283) on the ground that it was no longer needed because Section 4 of the Clayton Act provides an equivalent remedy. See S. Rep. 619, 84th Cong., 1st Sess. 2-3 (1955). /7/ H.R. Rep. 24, 67th Cong., 1st Sess. 2 (1921) ("In States where it is illegal to operate an association such as the ones permitted under this bill, it will * * * be practically impossible to operate under this legislation, as the bill only grants the right to operate in interstate and foreign commerce. That is the only power that Congress can confer upon such associations."). /8/ In holding that Ohio's statutory scheme, which specifically precludes the application of any statute of limitations to antitrust suits under state law, was not preempted by the four-year statute of limitations in Section 4B of the Clayton Act, 15 U.S.C. 15b, one court of appeals remarked that, "(s)ince Congress was well aware that there were state antitrust laws in effect and chose not to preempt them, we believe that neither did it intend to preempt anything in them." Pinney Dock & Transport Co. v. Penn Central Corp., 838 F.2d 1445, 1482 (6th Cir. 1988), cert. denied, No. 88-72 (Oct. 3, 1988). Although the court's absolutist statement may sweep too broadly, it properly indicates that the presumption against preemption of state remedial legislation in the antitrust field is well established. /9/ Even when the scope of liability is at issue, the line of "state action cases" beginning with Parker v. Brown, 317 U.S. 341 (1943), holds that the Sherman Act does not deprive States of their power to enact statutes that displace competition altogether, even though the core policy of the Sherman Act is to promote competition. See, e.g., Hoover v. Ronwin, 466 U.S. 558, 567-568 (1984) ("under the Court's rationale in Parker, when a state legislature adopts legislation, its actions constitute those of the State * * * and ipso facto are exempt from the operation of the (federal) antitrust laws"). Given this latitude to depart from even the core procompetitive policy of the Sherman Act, it is anomalous to suggest that the States must invariably conform to particular policies that this Court has invoked in determining appropriate federal remedies for antitrust violations. /10/ The court of appeals, however, misunderstood one of the policies animating this Court's decisions in Hanover Shoe and Illinois Brick. See p. 19, infra. /11/ Congress itself on occasion has been willing to cope with the complexities of calculating passed-on costs, and this Court has upheld the constitutionality of requiring claimants of a tax refund to prove that they did not pass on increased costs. See Anniston Mfg. Co. v. Davis, 301 U.S. 337, 347-356 (1937). /12/ The very same passages from those opinions that the court of appeals relied on have been cited by this Court for a quite different proposition (Blue Shield v. McCready, 457 U.S. 465, 473 n.10 (1982)): "Only by requiring violators to disgorge the 'fruits of their illegality' can the deterrent objectives of the antitrust laws be fully served. Hanover Shoe Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 494 (1968). See * * * Illinois Brick Co. v. Illinois, 431 U.S. 720, 746 (1977)." /13/ No one has suggested that the state statutes at issue in this case would be construed to allow a passing-on defense against a direct purchaser, in an action in which the direct purchaser asserts its federal-law right to recover treble damages. Nor would the state statutes take away from the direct purchaser and give to the indirect purchaser a portion of the damages recovered under the federal statute that is attributable to passed-on overcharges. If any state statute is so construed, it would be preempted as so applied, as being in direct conflict with the direct purchaser's federal recovery rights set forth in Hanover Shoe. See Note, Indirect Purchaser Suits Under State Antitrust Laws: A Detour Around the Illinois Brick Wall, 34 Stan. L. Rev. 203, 208 n.24 (1981); Hines v. Davidowitz, 312 U.S. at 67. In this regard, we agree with the court of appeals (J.S. App. A21), but we believe the court was not at that point addressing the genuine issues that would in fact be raised by application of the state statutes. /14/ In this case, of course, there presumably will be some reduction of the direct purchasers' recovery from the settlement fund if the indirect purchasers are also allowed to share in the settlement fund. That result occurs, however, not because the state statutes take anything away from the direct purchasers but because the direct purchasers elected to participate in a settlement in which the defendants' total liability is fixed and to leave for later resolution the question whether they must share that fund with the indirect purchasers. /15/ The court of appeals did not explain how closely the state statute would have to resemble the federal antitrust laws for liability to be considered duplicative. Not only "little" Sherman Acts, but other state laws providing damages for anticompetitive actions, could be considered to duplicate Clayton Act damages. /16/ Essentially for the reasons given by the court of appeals (J.S. App. A24), we assume for the purpose of analysis that some or all of the indirect-purchaser claims in this case are duplicative of direct-purchaser claims. See U.S. Amicus Br. in support of appellants' Jurisdictional Statement 15 & n.18. Unlike the court of appeals, however, we believe that the state statutes survive federal scrutiny even on that assumption. /17/ Indeed, there is not even a rule protecting defendants against additional liability under other federal provisions. For example, under federal law alone a defendant may be required to pay criminal fines in addition to treble damages. See, e.g., New York v. Hendrickson Bros., 840 F.2d 1065, 1086 (2d Cir. 1988); see also Clayton Act Section 5, 15 U.S.C. 16(a) (criminal conviction can be used as prima facie evidence of antitrust violation in subsequent civil suit); 18 U.S.C. (Supp. IV) 3623(c)(1) (repealed effective Nov. 1, 1987) (authorizing criminal penalties amounting to twice the defendant's pecuniary gain or twice the victim's pecuniary loss). /18/ It is possible that the States' indirect-purchaser statutes might be construed, as a matter of state statutory interpretation rather than federal preemption, to deny indirect purchasers any recovery that would duplicate a direct purchaser's recovery. The court of appeals, however, did not address any such question of state statutory construction (J.S. App. A24), nor do we. This case does not involve any issue about allowing a single plaintiff to recover damages twice for the same overcharge, under both federal and state law. Such recovery would generally be barred by recognized principles concerning merger and splitting causes of action. See Restatement (Second) of Judgments Sections 18, 24-25 (1982). See also U.S. Amicus Br. in support of appellants' Jurisdictional Statement 16 n.20 (collecting cases).