In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 18-3735
MARION HEALTHCARE, LLC, et al.,
                                              Plaintiffs-Appellants,
                                 v.

BECTON DICKINSON & COMPANY, et al.,
                                              Defendants-Appellees.
                     ____________________

          Appeal from the United States District Court for the
                     Southern District of Illinois.
   No. 3:18-cv-01059-NJR-RJD — Nancy J. Rosenstengel, Chief Judge.
                     ____________________

   ARGUED SEPTEMBER 27, 2019 — DECIDED MARCH 5, 2020
                ____________________

   Before WOOD, Chief Judge, and KANNE and BARRETT, Circuit
Judges.
     WOOD, Chief Judge. Since the Supreme Court’s decision in
Illinois Brick v. Illinois, 

(1977), only those buyers
who purchased products directly from the antitrust violator
have a claim against that party for treble damages. “Indirect
purchasers” who paid too much for a product because cartel
or monopoly overcharges were passed on to them by middle-
men must take their lumps and hope that the market will
2                                                   No. 18-3735

eventually sort everything out. See, e.g., Sharif Pharm., Inc. v.
Prime Therapeutics, LLC, Nos. 18-2725 and 18-3003, 

at *2 (7th Cir. Feb. 24, 2020). Matters are different, how-
ever, when a monopolist enters into a conspiracy with its dis-
tributors. In such cases, “the first buyer from a conspirator is
the right party to sue.” Paper Sys. Inc. v. Nippon Paper Indus.
Co., 

, 631 (7th Cir. 2002).
    The plaintiffs in this case (“the Providers”) are healthcare
companies that purchased medical devices manufactured by
Becton Dickinson & Company. Healthcare providers often do
not purchase medical devices directly from the manufacturer;
instead, they join a group purchasing organization, known in
the trade as a GPO. The GPO negotiates prices with the man-
ufacturer on behalf of its members. It then presents the terms
to the provider, which has the opportunity to accept them or
reject them. If the provider agrees to the terms, it chooses a
distributor to deliver the product. The distributor then enters
into contracts with the healthcare provider and the manufac-
turer. These contracts obligate the distributor to procure the
products from the manufacturer and to sell them to the pro-
vider. The distribution contracts with the providers incorpo-
rate the price and other terms of the agreements that the GPO
negotiated, plus a markup for the chosen distributor.
    Our Providers purchased medical devices in the manner
just described. A GPO negotiated with Becton on the Provid-
ers’ behalf, and a distributor delivered the devices. Had Bec-
ton acted alone, selling its products to an independent distrib-
utor, which then sold them to a healthcare provider, no one
doubts that the Illinois Brick rule would bar the provider from
suing Becton for any alleged monopoly overcharges. But
these transactions were more complex. The Providers allege
No. 18-3735                                                    3

that Becton, the GPOs, and the distributors (to whom we refer
collectively as Becton unless the context requires otherwise)
joined forces in a conspiracy and engaged in a variety of anti-
competitive measures, including exclusive-dealing and pen-
alty provisions. Becton moved to dismiss, arguing that the Il-
linois Brick rule barred the case despite the Providers’ allega-
tions of conspiracy.
    The district court agreed with Becton that the Illinois Brick
rule applied on these facts and that dismissal was therefore
required. It found the conspiracy rule inapplicable not be-
cause of any failure to plead conspiracy adequately, but be-
cause this case did not involve simple vertical price-fixing.
This, we conclude, was in error. At the same time, we con-
clude that as of now the Providers have failed adequately to
allege the necessary conspiracy with the distributors, and per-
haps with the GPOs. Because the district court’s ruling de-
pended so heavily on an error of law relating to Illinois Brick,
we have decided to vacate the court’s decision and remand
for further proceedings.
                                I
    We present the facts in the light most favorable to the Pro-
viders without vouching for anything. Each of the Providers
has purchased conventional syringes, safety syringes, and
safety IV catheters from Becton. They allege that Becton
charges supracompetitive prices for these products. It is able
to do so, they assert, because it has monopoly power in the
relevant nationwide market and is unlawfully maintaining
that power through anticompetitive contract arrangements
among itself, the GPOs, and the distributors.
4                                                  No. 18-3735

    In order to accomplish its goals, Becton took several steps.
The first addressed its relationship to the GPOs. Although the
GPOs are supposed to negotiate at arms’ length, with their
members’ best interests in mind, Becton ensured that their
loyalty would run to Becton, by bribing them with millions of
dollars annually in so-called administrative fees to include
anticompetitive terms in the contract. These terms include
penalty pricing for healthcare providers who fail to purchase
a certain amount of their devices from Becton. Second, the
Providers allege that the distributor agreements prop up the
unfair terms of the contracts that the GPOs negotiate. Third,
they allege that the agreements between Becton and the dis-
tributors include hidden commitments to make payments to
the GPOs based on the volume of Becton products sold under
the contracts. Becton pays distributors for selling more of its
products, and in return, the distributors agree to promote Bec-
ton products above the products of competitors. The Provid-
ers allege that this network of contracts allows Becton to
charge prices well above those of its competitors.
    Following industry practice, the Providers did not buy di-
rectly from Becton. They relied upon the GPO system de-
scribed above, unaware of the distortions Becton had intro-
duced. The distributors purchased the medical devices from
Becton at the rates negotiated by the GPOs, and the Providers
then purchased the devices from the distributors. Because
they did not purchase directly from Becton, the Providers
may pursue Becton itself only if they have properly alleged a
conspiracy.
                               II
   Section 4 of the Clayton Act states that “any person who
shall be injured in his business or property by reason of
No. 18-3735                                                     5

anything forbidden in the antitrust laws may sue therefor,”
and is entitled to treble damages for the violation. 15 U.S.C.
§ 15. In this instance, however, the words “any person” can-
not be taken literally. Instead, the Supreme Court has read
them in the context of the statute as a whole and has inferred
that certain limitations exist. One such limitation was an-
nounced in Illinois Brick, where the Court held that, in general,
a downstream plaintiff cannot sue an alleged monopolist or
cartel member on a theory that a middleman passed an anti-
competitive overcharge on to her. Under Illinois Brick, only a
purchaser who purchased goods directly from the monopolist
(or cartel member) can claim damages. That purchaser is en-
titled to the full value of the damages stemming from the
overcharge, even if it passed on some or all of the overcharge
to downstream purchasers and consequently mitigated the
damage it suffered. See Hanover Shoe, Inc. v. United Shoe Ma-
chinery Corp., 

(1968). A plaintiff who asserts that
it indirectly bore the brunt of an overcharge passed on by the
direct purchaser has no claim.
    The Supreme Court based its decision in Illinois Brick on
several rationales. First, the Court concluded that “whatever
rule is to be adopted regarding pass-on in antitrust damages
actions, it must apply equally to plaintiffs and 

. It did so in part because it feared that an asym-
metrical rule that prohibited a pass-on defense but permitted
offensive use of passing-on “would create a serious risk of
multiple liability for defendants.” 

Moreover, the
Court suspected that the difficulties in analyzing price and
output decisions would be prohibitive. 

The di-
rect purchaser is not necessarily free to pass on the full
amount of a monopoly overcharge; its range of action will be
constrained by the elasticity of demand in the downstream
6                                                    No. 18-3735

market. Furthermore, the Court believed that enforcement of
the antitrust laws would be better served “by concentrating
the full recovery for the overcharge in the direct purchasers
… .” 

   Although Illinois Brick rejected “attempts to carve out ex-
ceptions … for particular types of markets,” 

it did
carry forward the limited carve-out that Hanover Shoe had rec-
ognized for “a pre-existing cost-plus contract.” 

Even
that exception, however, has been interpreted narrowly, as
the Court demonstrated when it found that a public utility’s
prices, by law passed on to final consumers, did not qualify.
See Kansas v. UtiliCorp United, Inc., 

(1990). The
present case, however, does not depend on that exception or
any other deviation from the general rule, as we will see.
     Even the strictest application of the Illinois Brick rule re-
quires the court to identify which entity is the seller and
which the direct purchaser. The case of Reiter v. Sonotone
Corp., 

(1979), illustrates this point. In that case,
Sonotone was vertically integrated, and so it sold its hearing
aids directly to final consumers. One such consumer brought
a class action against five companies, alleging illegal price-fix-
ing and other antitrust violations. The defendants argued that
the Clayton Act’s requirement of injury in one’s “business or
property” did not encompass consumer harm, but the Court
rejected that narrow reading, finding instead that the term
“property” “comprehends anything of material value owned
or possessed,” 

and thus easily covered the con-
sumer’s loss of money. But the critical point here is that the
consumer was the first direct purchaser from the cartel mem-
ber, and so her suit was not barred by the recently announced
Illinois Brick rule.
No. 18-3735                                                       7

    Vertical integration can occur either by internalizing func-
tions within one firm, as one sees in Reiter, or by contract. But
contractual vertical integration presupposes independent
firms. In that instance, as we explained in Toys “R” Us v. Fed.
Trade Comm’n, 

(7th Cir. 2000), the manufacturer
has an incentive to get the best deal it can from its distributors,
both in terms of price and in terms of necessary services. 

That will cause the manufacturer to sell its goods to
whichever distributor will accomplish the distribution func-
tion as efficiently as possible. The manufacturer’s interests
thus align with those of the consumer who buys from the dis-
tributor, not with those of the distributor.
    This dynamic breaks down if there is a conspiracy be-
tween the manufacturer and the distributor and the point of
that conspiracy is to support supracompetitive prices for the
ultimate consumer. Rather than keeping both its prices (inclu-
sive of distribution costs) as attractive as possible (i.e. as low
as possible) for consumers, as one would expect in a compet-
itive market, the manufacturer/distributor conspiracy has a
way to extract supracompetitive profits from consumers. Or
at least it can do so if it has enough market power. But market
power is a separate element of a plaintiff’s claim. The only
point here is that Illinois Brick is not a barrier to suit on behalf
of a purchaser who dealt with a member of the conspiracy.
    This is what we mean when we speak of a conspiracy “ex-
ception” to the Illinois Brick rule. It is not so much a real ex-
ception as it is a way of determining which firm, or group of
firms collectively, should be considered to be the relevant
seller (and from that, identifying which one is the direct pur-
chaser) for purposes of the rule. We recognized this point in
Paper 

. In that case, paper distributors
8                                                     No. 18-3735

sued paper manufacturers that had allegedly conspired to fix
prices. The distributors had purchased some of the products
through trading houses that allegedly had participated in the
conspiracy. We found that the distributors had a claim under
the antitrust laws, because they were “the first purchasers
from outside the conspiracy.” 

They faced no Illinois
Brick bar, because they dealt directly with the conspiracy and
were thus entitled to the full amount of its overcharge. 

See also Fontana Aviation, Inc. v. Cessna Aircraft Co., 

, 481 (7th Cir. 1980) (“We are not satisfied that the Il-
linois Brick rule directly applies in circumstances where the
manufacturer and the intermediary are both alleged to be co-
conspirators in a common illegal enterprise resulting in in-
tended injury to the buyer.”); In re Brand Name Prescription
Drugs Antitrust Litig., 

, 604–05 (7th Cir. 1997).
    The fact that antitrust liability is joint and several rein-
forces the appropriateness of looking to the first sale outside
the conspiracy. See Paper 

(“Nothing
in Illinois Brick displaces the rule of joint and several liability,
under which each member of a conspiracy is liable for all
damages caused by the conspiracy’s entire output.”). That is
why we said in Paper Systems that it is better to think of the
right to sue co-conspirators not as an exception to Illinois
Brick, but instead as a rule inhering in Illinois Brick that allo-
cates the right to collect 100% of the damages to the first non-
conspirator in the supply chain. 

A contrary rule
that looked behind the conspiracy to the role each member
played would render upstream antitrust violators effectively
immune from suit through the simple expedient of conspiring
with a middleman or distributor to pass on the inflated prices.
Other circuits to consider the issue have come to the same
conclusion. See Insulate SB, Inc. v. Advanced Finishing Sys., Inc.,
No. 18-3735                                                         9

(8th Cir. 2015); Lowell v. Am. Cyanamid Co., 

(11th Cir. 1999); Arizona v. Shamrock Foods Co., 

(9th Cir. 1984).
     The district court here recognized that Illinois Brick does
not bar suits brought by direct purchasers from a conspiracy,
but it thought nonetheless that the Providers’ suit could not
go forward. It found that the existence of a conspiracy mat-
tered only for cases of price fixing, as opposed to other forms
of anticompetitive activity; as we noted, it thus saw no need
to delve into the adequacy of the conspiracy allegations. In its
view, cases outside of the arena of price fixing implicated the
same considerations that led the Supreme Court to adopt the
Illinois Brick rule in the first place. In particular, it thought that
it would be too difficult to calculate which portion of the over-
charge the distributor had absorbed or to ascertain how much
of the distributor’s profits came from fair pricing rather than
anticompetitive overcharges.
     We see nothing in either the Illinois Brick line of cases or
the conspiracy line that supports this distinction. The central
point of Illinois Brick is to allocate the right to recover to one
and only one entity in the market. It is just as easy to do that
in the present case, where that entity is the Provider group
and the mechanisms that the conspiracy uses to push up
prices include exclusive dealing arrangements and bribes or
kickbacks, as it is if the entity is the same Provider group but
the anticompetitive activity is a more direct agreement to raise
prices. Whatever difficulties there may be in calculating dam-
ages in a case such as this one, they are not enhanced by the
complex downstream tracing that the Court rejected in both
Illinois Brick and UtiliCorp. Indeed, UtiliCorp reinforced the
need for one simple rule, when the Court stated that it would
10                                                  No. 18-3735

be “an unwarranted and counterproductive exercise to liti-
gate a series of exceptions” to the Illinois Brick rule in cases
where “economic assumptions underlying” the rule “might
be 

.
     The relevant inquiry in determining the applicability of Il-
linois Brick focuses on the relationship between the seller and
the purchaser, not the difficulty of assessing the overcharge.
The Supreme Court confirmed this in Apple Inc. v. Pepper, 

(2019). There, consumers who had purchased
“apps” from Apple’s “App Store” sued, arguing that Apple
had monopolized the retail market for the sale of iPhone apps
and had used its power to overcharge consumers. Apple ar-
gued that the critical question was “who sets the price,” 

not who was the direct seller. It reasoned that because it
did not set the retail price, it could not be sued under Illinois
Brick, even though the consumers had purchased the apps di-
rectly from it. The Court rejected this argument, holding that
Illinois Brick “established a bright-line rule where direct pur-
chasers … may sue antitrust violators from whom they pur-
chased a good or service.” 

details of Apple are
different from the facts before us, the same rule applies. Apple
confirms that Illinois Brick is a bright-line rule allocating the
right to sue to direct purchasers alone, not a rule that requires
analysis of competing policy justifications in each case. The
relationship between the buyer and the seller, rather than the
nature of the alleged anticompetitive conduct, governs
whether the buyer may sue under the antitrust laws.
    Becton has other arguments, however. It contends that
when a manufacturer and a distributor have agreed to resell
a product at a specific, anticompetitive price, there is no Illi-
nois Brick “pass on,” because the indirect purchaser is the first
No. 18-3735                                                   11

party to have paid the overcharge. This eliminates the Illinois
Brick concerns about tracing passed-on overcharges. But that
says nothing about allocating the right to sue. If anything, it
reinforces the conclusion that the Providers hold that right on
these facts.
    Becton also claims that treating the conspiracy as the rele-
vant entity in cases involving anticompetitive conduct other
than price fixing would swallow the Illinois Brick rule entirely.
It argues that allowing the conspiracy exception in cases such
as this one would permit plaintiffs to circumvent Illinois Brick
by asserting in every case that the defendant and the middle-
man had formed a conspiracy together. But plaintiffs would
do so at their peril: Federal Rule of Civil Procedure 11, 28
U.S.C. § 1927 (counsel’s liability for costs incurred from vexa-
tious and unreasonable conduct), and the court’s inherent au-
thority all protect against such abuses. Furthermore, a com-
plaint that does not lay out a plausible case for relief will be
dismissed. See Bell Atlantic Corp. v. Twombly, 

(2007). A plaintiff is not entitled to resort to frivolous accusa-
tions of conspiracy to evade the Illinois Brick rule; the allega-
tion must still reach the level of baseline plausibility.
    We recognized in Paper Systems that a different problem
might arise in some cases: “[p]erhaps if a conspirator defects
and sues its former comrade, that snitch would come to own
the right to 

. Until that happens,
however, we held that the plaintiffs “are entitled to collect
damages from both the manufacturers and their intermediar-
ies if conspiracy and overcharges can be established.” 

this case even hints at a distributor who defected
and then sued, and so we have no need to explore this possi-
bility further.
12                                                    No. 18-3735

    The district court thus erred in holding that the Illinois
Brick rule bars the first purchasers outside of a conspiracy
from suing under the antitrust laws except in cases where ver-
tical price fixing is alleged. Provided that our plaintiffs have
properly alleged a conspiracy, they may sue for whatever
form of anticompetitive conduct they are able plausibly to al-
lege.
                                III
    The mere fact that the Providers are proper antitrust plain-
tiffs from the Illinois Brick standpoint does not resolve the
question whether they have adequately alleged a conspiracy.
We turn therefore to that question, beginning with their accu-
sation that Becton conspired with its distributors.
    The role of the distributors is critical to the Providers’ case.
That is because the distributors are the entities from which the
Providers purchased the products at issue. If the distributors
were not part of the alleged conspiracy, then Providers’ case
falls apart: no conspiracy, no direct purchaser status, no right
to recover. The distributors would be the proper plaintiffs in
such a situation and could sue Becton, as other distributors
have done in other cases against Becton. See, e.g., In re Hypo-
dermic Prods. Antitrust Litig., 484 F. App’x 669 (3d Cir. 2012).
    In order to show an antitrust conspiracy, the Providers
must prove that “the manufacturer and others had a con-
scious commitment to a common scheme designed to achieve
an unlawful objective.” Monsanto Co. v. Spray-Rite Service
Corp., 

, 768 (1984). In a case such as this one, where
the plaintiffs allege that participants in a market at different
levels of the distribution chain entered into a conspiracy, the
plaintiffs must show that similarly situated members of the
No. 18-3735                                                    13

conspiracy coordinated not only with the manufacturer, but
also with each other. If the plaintiffs do not adequately allege
this type of coordination, they have made, at best, an allega-
tion of a number of different conspiracies, not of a single con-
spiracy.
    The Providers allege that Becton and the distributors were
members of a “hub-and-spokes conspiracy.” This type of con-
spiracy requires a plaintiff to allege both that there was a cen-
tral coordinating party (the “hub”), and that each participant
(along the “rim”) recognized that it was part of the greater
arrangement, and it coordinated or otherwise carried out its
duties as part of the broader group. In other words, a “hub-
and-spokes conspiracy” requires a “rim” connecting the vari-
ous horizontal agreements. See, e.g., In re Musical Instruments
& Equip. Antitrust Litig., 

, 1192 (9th Cir. 2015). As
applied to our case, the Providers must allege that the distrib-
utors, in addition to coordinating with Becton, would not
have attempted to inflate prices without assurance that each
distributor was abiding by the agreement and behaving in the
same way.
    The complaint before us does not accomplish this. The
Providers allege only that the distributors “enforce” the terms
of the contracts that the GPOs negotiated and then assess the
Providers an additional fee for the distributors’ services. The
complaint has nothing to say about any involvement that the
distributors may have in inflating the prices, or whether they
coordinate among each other or with Becton or the GPOs as
part of the conspiracy. The Providers ask us instead to find
that the distributors are members of the conspiracy because
they buy and sell the devices according to the terms of con-
tracts that the GPOs allegedly negotiated in a crooked
14                                                  No. 18-3735

fashion. But this allegation is insufficient to find a conspiracy
between the distributors and Becton.
    The Providers argue that we should not demand such di-
rect evidence, and that there is enough here to infer an agree-
ment among the distributors. They rely heavily upon Toys “R”
Us, 

, but that case does not support their position.
We held in Toys “R” Us that in certain circumstances, an
agreement between horizontally situated market participants
can be inferred for the purpose of an antitrust conspiracy,
even in the absence of an express agreement. In that case, Toys
“R” Us had sent letters to major toy manufacturers, indicating
that it would not carry the manufacturers’ toys unless the
manufacturers agreed to withhold certain highly desirable
toys from warehouse clubs. The FTC found that it would not
have made economic sense for any individual manufacturer
to capitulate to these demands, unless it knew that its com-
petitors would also play along. 

That finding, we
concluded, was supported by substantial evidence. It was
thus permissible to infer that even if the manufacturers did
not expressly agree to join a conspiracy with one another, they
had functionally joined the conspiracy because they were as-
sured that their competitors would all follow the same anti-
competitive strategy.
    Here, by contrast, the Providers have not alleged that the
distributors engaged in parallel conduct, much less that they
coordinated their actions to engage in illegal activity. In their
complaint, the Providers list three activities they say the dis-
tributors have undertaken “in furtherance of the conspiracy.”
First, the distributors agree to distribute Becton’s products
pursuant to anticompetitive contractual terms. Second, the
distributors enforce Becton’s penalty pricing system, which
No. 18-3735                                                      15

penalizes the healthcare providers if they switch to a different
manufacturer. Third, the distributors make payments to the
GPOs based on the volume of sales under the contracts.
    These allegations, whether taken alone or together, do not
suffice to describe a hub-and-spokes conspiracy. All the Pro-
viders have alleged is that the distributors buy and sell the
devices in accordance with the terms of the contracts that the
GPOs have negotiated. They have made no argument that the
distributors played any role in setting the anticompetitive
pricing or that there was any quid pro quo according to which
Becton compensated them for participating in the alleged an-
titrust conspiracy. The fact that the distributors pay a fee to
the GPOs for the latter’s role in negotiating the contracts is not
anticompetitive conduct on its own; indeed, it is to be ex-
pected. Without an allegation that the distributors have par-
ticipated in the conspiracy or knowingly engaged in parallel
anticompetitive conduct, the Providers cannot sue the distrib-
utors under the antitrust laws.
    As the complaint now stands, the Providers have not
shown that the distributors made a conscious commitment to
participate in an illegal scheme. Without any allegation that
the distributors coordinated with Becton to profit from the an-
ticompetitive scheme, their case is barred under Illinois Brick.
    In a last-gasp effort, the Providers argue that they should
be given a chance to amend their complaint, given the legally
flawed and relatively unexplored reason that underlay the
district court’s ruling. The United States, appearing as amicus
curiae, agrees that the district court’s Illinois Brick analysis was
incorrect and supports vacating the district court’s judgment
and remanding for further proceedings. The distributors con-
tend in response that the Providers have waived the
16                                                     No. 18-3735

opportunity to amend their complaint, because they did not
focus on Illinois Brick’s application to conspiracies in their
opening brief. But the opening brief did cite Paper Systems, it
did discuss the rule that direct purchasers from antitrust con-
spiracies are entitled to sue under Illinois Brick, and it stressed
the conspirators’ joint and several liability. This is more than
enough to avoid waiver in this court. The district court, too,
extensively discussed what it called a conspiracy exception,
and so there was no waiver at that level either.
    What the Providers could not have foreseen was the dis-
trict court’s categorical rejection of Illinois Brick for the type of
anticompetitive activity they were alleging—a rejection that
did not depend on any additional detail about the structure
of the conspiracy. Now that we have straightened out the Illi-
nois Brick side of things, we conclude that the Providers
should have an opportunity to file an amended complaint,
provided that they believe they can adequately plead that the
distributors were part of the putative conspiracy. Any such
amended complaint should also plausibly indicate (if possi-
ble) how, if at all, the GPOs might be liable.
                                IV
    We VACATE the judgment of the district court and REMAND
for further proceedings in accordance with this opinion.