Pass-on Defense: A Key Concept in Antitrust Law Explained

Q: Who can use the pass-on defense?

Typically, it is used by suppliers or manufacturers being sued by direct purchasers for overcharges.

Q: Can I still sue if I passed on the overcharge?

Yes, you can still sue for damages, but the pass-on defense may complicate your case.

Definition & Meaning

The pass-on defense is a legal argument used in antitrust cases. It asserts that a business, which has been overcharged for a product or service, has passed that extra cost onto its customers. Consequently, the business claims it did not suffer any actual financial loss from the overcharge. Under federal antitrust laws, only the direct purchasers"those who buy directly from the seller"can sue for damages related to these overcharges. They can also seek treble damages, which means they can recover three times the amount of the overcharge, regardless of whether they passed on the increased costs to their own customers.

Table of content

Legal Use & context

The pass-on defense is primarily used in antitrust litigation, which is a branch of law that promotes fair competition and prevents monopolistic practices. This defense is significant in cases involving price-fixing or other anti-competitive behaviors. Users can benefit from understanding this defense when navigating legal disputes related to pricing and competition. Legal forms and templates provided by US Legal Forms can assist businesses in preparing necessary documentation if they find themselves involved in such legal actions.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

(hypothetical example) A manufacturer purchases raw materials at an inflated price due to price-fixing by suppliers. The manufacturer then raises prices for its products to cover the increased costs. If the manufacturer tries to sue for damages, the supplier may use the pass-on defense, arguing that the manufacturer passed the costs to customers and therefore did not incur a loss.

Comparison with related terms

Term	Definition	Difference
Pass-on Defense	A defense claiming that a business passed on overcharges to customers.	Focuses on the lack of actual loss due to price adjustments.
Treble Damages	A legal remedy allowing recovery of three times the actual damages.	Related but distinct; treble damages can be claimed regardless of the pass-on defense.
Direct Purchaser Rule	A principle stating only direct buyers can sue for antitrust damages.	Establishes who has standing to bring a lawsuit, unlike the pass-on defense.

Common misunderstandings

What to do if this term applies to you

If you believe you have been overcharged and are considering legal action, it's important to gather documentation showing the inflated prices you paid. Consult with a legal professional who specializes in antitrust law to understand your options and the likelihood of success in your case. Additionally, you can explore US Legal Forms for templates that can help you prepare necessary legal documents.

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Quick facts

Only direct purchasers can sue for antitrust overcharge damages.
Treble damages can be claimed regardless of passing on costs.
The pass-on defense can complicate recovery efforts for businesses.

Key takeaways

Frequently asked questions

What is the pass-on defense?

It is a legal argument claiming that a business did not suffer a loss from an overcharge because it passed the cost to its customers.