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01-2925 Paper Systems Inc., et al. v. Nippon Paper Industries Co., Ltd.

By: dmc-admin//February 11, 2002//

01-2925 Paper Systems Inc., et al. v. Nippon Paper Industries Co., Ltd.

By: dmc-admin//February 11, 2002//

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“Holding Nippon Paper jointly and severally liable with the other four manufacturers, for the conspiracy’s entire sales, is compatible with Hanover Shoe, Illinois Brick, and Utilicorp. Certainly it does not undermine these decisions, which are themselves designed to improve deterrence. Nor does this suit pose any risk of double recovery; sales to Japan Pulp & Paper and Mitsui have been carved out of the case, because those entities own the right to recover on account of their own purchases. The difficulty of tracing overcharges through the chain of distribution therefore is unimportant; duplicative recovery has been blocked at the outset. It remains necessary to determine the amount of the overcharge, and if this cannot be established in any other way (for example, by the conspirators’ own agreement) then it is necessary to determine the elasticities of supply and demand. But this prospect is present in every cartel case; it is not occasioned solely by the presence of intermediaries. The monopoly overcharge is the excess price at the initial sale – here, from the five manufacturers to their initial customers. Calculations are complicated by the fact that two of the five (Appleton and Kanzaki) provide some distribution services, and thus may charge higher initial prices than do the other three. But disaggregating these expenses to impute a transfer price from the manufacturing to the distribution arm of the two vertically integrated firms does not transgress Illinois Brick because the process cannot lead to multiple recovery.

“If Nippon Paper participated in a cartel of thermal fax paper (something that remains to be determined) then it is jointly and severally liable for the cartel’s entire overcharge. That the plaintiffs did not buy from Nippon Paper directly, or at all, does not matter. As long as Nippon Paper’s direct customers hold the exclusive right to damages for its own output, the holding and goals of Illinois Brick have been satisfied. It was improper to dismiss Nippon Paper as a defendant while its status as a member of the cartel remains to be determined.”

Reversed and remanded.

Appeal from the United States District Court for the Eastern District of Wisconsin, Adelman, J.

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