The federal government stands to lose a potential $205 million in antitrust damages from pending cases along unless Congress acts to undo the effects of a recent Supreme Court decision, the administration said yesterday.
The court held last month that consumers - whoever they are, whether governmnets or not - who end up paying higher prices for products because of illegal price fixing can't sue the violator for damages unless they were direct purchasers.
John H. Shenefield, acting assistant attorney general for antitrust, said yesterday the decision is likely to foreclose the government from collecting anything in three pending antitrust damage suits against makers of ampicillin, tetracycline, and reinforcing steel bars because the government purchased the products at the alleged inflated prices from distributors, not directly from the manufacturers.
"In many cases, state and local governments, and the federal governments, have suffered millions of dollars of damages as indirect purchasers," Shenefield told the Senate Antitrust and Monopoly Subcommittee during hearings yesterday.
Their inability to collect damages "alone would require congressional action," he said.
The subcommittee is considering a bill introduced by its chairman Edward M. Kennedy (D-Mass.) and Sens. Robert Morgan (D-N.C.) and John C. Danforth (R-Mo.) which would make sure that persons could sue to recover damages they had "in fact" suffered whether they were direct or indirect purchasers.
Shenefield said direct purchasers of products most often are middlemen - wholesalers and distributors - who often pass on the overcharges that result from a price fixing conspiracy and so have suffered no real injury. Even if they had, they lack the incentive to risk making their suppliers unhappy by suing them.
"Thus, in a substantial number of cases, we're faced with the fact that indirect purchasers are the only available parties to see that an antitrust violator is not allowed to retain its ill-gotten gains," he said.
In other testimony, former Sen. Hugh Scott (R-Pa.) assailed the court for its decision, contending it had "flouted the will and purpose of Congress in a most crass fashion."