Pass-on Defense Law and Legal Definition

Pass-on defense is an antitrust defense that a member of the distributive chain who was overcharged or undercharged passed on the allegedly excessive price adjustment to reflect the charge and thereby suffered no damage. Under federal antitrust law, only direct purchasers can sue for antitrust overcharge damages and they also have the ability to recover treble damages irrespective of the fact whether they passed on the overcharge to their customers as downstream prices.

The pass-on defense is a great obstacle to recovery. The cases sustaining this defense to a treble damage action for an overcharge hold that a plaintiff should prove that s/he paid an inflated price and absorbed the overcharge and could not overcome its impact by passing it on to the subsequent purchaser at a higher price. This defense is also known as the passing on defense.