This article is adapted from a presentation made to the Fundamentals of Antitrust Law program offered by the Pennsylvania Bar Institute on June 22 and 24, 2004.
“No one, it appears, dwells longer than necessary in the land of Robinson-Patman.”1
Section 2(a) of the Clayton Act, better known as the Robinson-Patman Act 2(the Act), is the provision of the federal antitrust laws that deals with price discrimination. It was passed by Congress in 1936 in response to criticism that the Clayton Act did not adequately protect smaller retailers from the concentrated buying power of large chain stores to “curb and prohibit all devices by which large buyers gained discriminatory preferences over smaller ones by virtue of their greater purchasing power.”3 It can fairly be said that the Act is one of the most complex antitrust laws.4
Generally stated, section 2(a) of the Act restricts the ability of sellers to charge different prices for goods of like grade or quality that they sell to competing buyers.5 Sections 2(d) and (e) of the Act also proscribe discriminatory promotional payments or services not made available to all customers on proportionately equal terms.6 Section 2(c) of the Act addresses de facto price discrimination resulting from unearned brokerage payments.7 Section 2(f) of the Act prohibits buyers from knowingly inducing or receiving unlawful discriminatory prices.8 The language of the Act itself also provides three statutory defenses including the cost justification defense,9 the changed market conditions defense,10 and the meeting competition defense.11 The Act is enforced through both government mechanisms and private litigation. Although both the Federal Trade Commission and the Department of Justice are empowered to enforce the Act, there has been relatively little government activity in recent years.12 Private litigation is much more prevalent. Both treble damages and injunctive relief are available under the Act.13
II. Prima Facie Case
In order to make out a prima facie case under the Act, a plaintiff must establish all of the following conditions:
Each of these conditions will be discussed in more detail herein.
A. A seller must make two or more sales at different prices.
Under the Act, a discrimination in price is merely a price difference as between at least two purchasers.14 However, the discrimination should be sufficiently significant to have an impact on business operations as opposed to simply a de minimis effect. The price at issue is the net price paid by the purchasers after accounting for all discounts, and includes freight and delivery terms.15 In order to make out a prima facie case under the Act, the plaintiff must show that there have been two comparable, completed sales of the same commodity by the same seller that occurred reasonably in the same time period.16 Numerous courts in the Third Circuit and other circuits have held that a mere sales offer, bid or price quote cannot satisfy the two sales requirement.17
1. Refusals to Deal.
Nothing in the Act prohibits a seller from choosing to refuse to deal with a particular customer.18 Similarly, a buyer who is unable to obtain as much of an item as it wishes and must purchase its remaining needs from other sources does not have a price discrimination claim under the Act.19
2. Intra-corporate transfers.
An issue that often surfaces in determining whether two sales have been made, or whether the sales were made by the same seller, occurs when the allegedly favored buyer is an entity related to the seller. Some courts have applied a blanket rule that intra-corporate transfers are not sales for purposes of the Act.20 This approach is consistent with the Supreme Court’s ruling in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), that a wholly-owned subsidiary is incapable of conspiring with its parent for purposes of the Sherman Act. Other courts do not
favor this blanket rule21 and will examine whether the sale was used to hide discrimination or whether the favored “customer entity” is operated as a separate business, regardless of whether it is separately incorporated. These courts will consider various factors, such as whether the parent has “dominion and control” over some or all of the operations.22
The Tenth Circuit recently held that the Act did not apply to pricing issues involving a single agricultural cooperative and its members. See Bell v. Fur Breeders Agricultural Cooperative, 348 F.3d 1224 (10th Cir. 2003).
B. The sales must be in commerce.
The Act applies only to those sellers who are “engaged in commerce” and “acting in the course of such commerce . . . .”23 The “in commerce” requirement means that the Act applies only where at least one of the two transactions generate a discrimination that crosses a state line.24
Once an item enters commerce, it may leave the “flow of commerce” by being reprocessed into a different item before it is resold.25 This processing must alter the essential identity of the product in order to remove it from the flow of commerce for purposes of the Act.26
1. The Act does not apply to international transactions.
The alleged discriminatory sales must have been made in the United States. A seller may charge higher or lower prices for export or foreign sales without risk of violating the Act. For instance, in Rotec Industries, Inc. v. Mitsubishi Corp.27the Ninth Circuit recently held that allegedly unlawful brokerage payments made by a Japanese corporation to a Chinese corporation in connection with a construction project with the Chinese government could not be deemed to have occurred within the flow of commerce among the several states.
C. The sales must be of commodities.
To violate the Act, a seller must charge different prices for commodities, which may include “goods, wares, merchandise, machinery or supplies.” The term ‘commodities’ has been consistently interpreted to confine the Act’s application to tangible products rather than services or intangible items.28 When faced with a sale that is comprised of both a good and a service, courts generally attempt to discern the “dominant nature” of a transaction.29
For instance, in First Comics, Inc. v. World Color Press, Inc., 884 F.2d 1033 (7th Cir. 1989), cert. denied, 493 U.S. 1075 (1990), the Seventh Circuit held that the printing of comic books was a service rather than a commodity because the dominant nature of the transaction was the service of the printing rather than the actual books themselves.30
D. The commodities must be of like grade and quality.
The Act prohibits discrimination in price between “different purchasers of commodities of like grade and quality . . . .” 15 U.S.C. §13(a). In FTC v. Borden Co., 383 U.S. 637 (1966), the Supreme Court held that the test to determine if products were of like grade and quality was the characteristics of the products themselves, and that where the products were physically and chemically identical, they were deemed to be of like grade and quality. Mere differences in consumer preferences do not render products of unlike grade and quality. See id. at 643-44. Accordingly, the Court held that goods that were physically identified were of like grade and quality despite the fact that a different brand label distinguished the product in the minds of customers.
However, two products are not of like grade and quality if there are bona fide physical differences which affect marketability.31 The extent of difference required to make products not of like grade and quality is not clear. Note also that some courts have held that the Act prohibits price discrimination only where customers are otherwise purchasing on like terms and conditions.32
In construing Robinson-Patman claims with respect to customized products, several courts have concluded that such products are not of like grade and quality because they are made to specific and unique customer preferences. See Wire Mesh Products, Inc. v. Wire Belting Assoc., 520 F.Supp. 1004, 1006-07 (E.D. Pa. 1981) (granting summary judgment where product in question, wire belts, manufactured to customer specifications); Lubbock Glass & Mirror v. Pittsburgh Plate Glass Co., 313 F.Supp. 1184, 1187 (N.D. Tex. 1970) (holding that sales of commercially installed doors and windows were unique and thus failed to satisfy like grade and quality requirement); Central Ice Cream Co. v. Golden Rod Ice Cream Co., 184 F.Supp. 312, 319 (N.D. Ill. 1960), aff’d, 287 F.2d 265 (7th Cir. 1961) (holding that ice cream made to customer’s special formula was of different grade and quality than ice cream made for other customers).
III. The Effect on Competition and Damage
The Act prohibits discrimination where “the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them . . .”33 The two types of injury to competition most commonly alleged under the Act are primary line injury and secondary line injury.34 It is not essential to prove actual injury, rather the test is whether a “reasonable possibility” exists that competitive harm will ultimately result from the defendant’s acts.35
While the elements and defenses for primary and secondary line cases are the same, the evidentiary requirements regarding proof of injury are substantially different. Primary line injury concerns injury to rivals of the alleged price discriminating seller. In the more frequent secondary line injury cases, the plaintiff is a competitor of a favored buyer. A plaintiff alleging secondary line injury can sue the seller under section 2(a) of the Act and/or the allegedly favored buyer for inducing discrimination under section 2(f).
A. Primary Line Injury
In a primary line case, the actual or threatened injury is to competition between the seller granting the discriminatory discount and other sellers.36 A plaintiff must show the possibility of harm either through a detailed analysis of market conditions or show an inference of harm through proof of predatory pricing.37 Evidence of a mere intent to capture sales is insufficient, rather to prove that pricing is predatory, it is necessary for a plaintiff to demonstrate a longer-term intent to possess market control that is plausible given evidence regarding market characteristics.38
The Supreme Court in Brooke Group held that the injury alleged in a primary line action under the Act “is of the same general character” as injury with respect to predatory pricing under section 2 of the Sherman Act. The decision emphasized that the focus of the injury inquiry must be on the competitive process. The Court noted that although a competitor may suffer from below cost pricing, that injury “is of no moment to the antitrust laws if competition is not injured: It is axiomatic that the antitrust laws were passed for the protection of competition, not competitors.”39 The Court set forth the following two part test for finding competitive injury under section 2(a) or section 2: “First, a plaintiff seeking to establish competitive injury resulting from a rival’s low prices must prove that the prices complained of are below an appropriate measure of its rival’s costs.”40 The second prerequisite for predatory pricing liability under either statute is a “demonstration that the competitor has a reasonable prospect, or, under § 2 of the Sherman Act, a dangerous probability of recouping its investment in below-cost prices.” Id. at 2588.41
B. Secondary Line Injury
In a secondary line case, the actual or threatened injury is to competition between the favored buyer who receives the discriminatory price and the disfavored customers of the seller. The existence of this type of injury may be directly established by evidence of displaced sales or by proof of a substantial price discrimination between competing purchasers over time.42 This inference, known as the Morton Salt inference, can be overcome “by evidence breaking the causal connection between a price differential and lost sales or profits.”43
The plaintiff must show that it lost customers or profits because the favored customer used the discount either to lower its resale prices or to otherwise solicit business.44 The favored and disfavored buyers must compete with each other functionally and geographically.45 In other words, there must be a competitive nexus between favored and disfavored purchasers or else there can be no injury to competition. In Falls City Industries, Inc. v. Vanco Beverage, Inc.,46 plaintiff, a wholesale beer distributor located in Indiana, alleged that a regional brewer located just across the border in Kentucky charged a lower price to a competing Indiana wholesale distributor. Although state law prohibited both distributors from selling across state lines to the other distributor’s customers, evidence showed that customers in Indiana drove into Kentucky to purchase beer from the favored distributor. The Falls City Court held that proof of the substantial price differentiation between the competing purchasers over time, in addition to proof of actual diversion of sales was sufficient to demonstrate the requisite prima facie proof of threatened competitive injury to plaintiff.
Where the evidence shows, however, that the favored and disfavored competitors were not actually in competition with each other, or with a resale customer shown to have received the discrimination, or where the alleged discrimination is not tied to any injury to plaintiff, courts have refused to find a section 2(a) violation. For example, in Dart Industries, Inc. v. Plunkett Co. of Oklahoma, Inc.,47 plaintiff, a terminated distributor claimed that its former supplier violated section 2(a) of the Act by charging higher prices to its distributors than those it charged to its direct-buying accounts. The Dart Industries Court held that this did not violate the Act in the absence of any evidence that the direct accounts competed with the plaintiff.48
Similarly, in Lycon, Inc. v. Juenke,49 the Fifth Circuit affirmed a grant of summary judgment for a manufacturer holding that the manufacturer’s practice of charging its distributors more than it charged end users does not violate the Act because the distributors were not in competition with end users. Such case law precludes liability under the Act in the common situation where a manufacturer offers more favorable discounts to direct-buying larger retailers than those offered to traditional wholesale distributors.
Although the plaintiff’s injury must be traceable to the discrimination, many courts have held that the plaintiff need not show that the discrimination was the sole cause of its injury.50 Unlike primary line cases, injury to a single competitor may be sufficient to demonstrate injury in secondary-line cases.51 The extent of the injury may be measured by lost sales or profits.52
1. Proof and Measurement of Damages
Proof of the presence or absence of competitive injury is often intertwined with proof of damages.53 While these should be separate steps, it is well established that a plaintiff must show a causal connection between the discriminatory prices and actual damages.54 Proof of the fact of damages requires a greater showing than is necessary for making out the competitive impact part of the prima facie case. An antitrust plaintiff under the Act must show that it has suffered injury caused by a discrimination in price in order to recover damages.55
There are three statutory defenses under the Act, in addition to the judicially-recognized defenses of functional discounts and availability. The statutory defenses are: meeting competition, cost justification, and changed conditions. 15 U.S.C. §§ 13(a), (b). The burden of proof for each of the defenses rests on the defendant. Each of the defenses will be considered briefly herein.
A. Meeting Competition Defense
A seller may rebut a prima facie violation of the Act by showing that the “lower price or the furnishing of services or facilities . . . was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor.” 15 U.S.C. § 13(b). The principle behind the defense is that sellers should be able to lower their prices in order to match the prices of their rivals, without violating the Act. The Supreme Court has held that the standard is whether the seller can “show the existence of facts which would lead a reasonable and prudent person to believe that the granting of a lower price would, in fact, meet the equally low price of a competitor.” United States v. United States Gypsum Co., 438 U.S. 422, 451 (1978). Territorial price differences that are responses to competitive conditions satisfy the requirements of the defense. See Falls City Indus., 60 U.S. at 448.
The lowering of price to meet the competition must be reasonably tailored to the competitive situation.56 It may only last as long, or encompass the same business line and geographic area as the price being met. See id. at 448-49. A seller may reduce prices in order to secure new customers or retain old ones. See id. at 446. The defense allows a seller to meet, not beat, a competitor’s price.
See id. The seller bears the burden of showing that the lower price was made in “good faith” for the purpose of meeting a competitor’s price. See id. at 439.
Of course, sellers should not contact competing sellers to verify the lower price because such contacts could ultimately lead to allegations of collusion and price fixing under Section 1 of the Sherman Act. See United States Gypsum, 438 U.S. at 456-59.
B. Cost justification
“Differences which make only due allowances for difference in cost of manufacture, sale, or delivery resulting from the differing methods or quantities” are excepted from the ban on price discrimination. 15 U.S.C. § 13(a). A seller may charge a lower price to one purchaser and not another where “justified by savings in the seller’s costs of manufacture, delivery or sale.” Texaco v. Hasbrouck,
496 U.S. 543, 556 (1990). The defense only extends to the actual cost differences resulting from the differing methods or quantities in which the commodities are sold or delivered.57 Defendants do not, however, have to justify every price discrepancy between purchasers and may establish the defense based on cost data developed for groups of purchasers.58
C. Changing Conditions
Section 2(a) of the Act permits, “price changes . . . in response to changing conditions affecting the market for or the marketability of the goods concerned, such as . . . actual or imminent deterioration . . . obsolescence . . . distress sales . . . or sales . . . in discontinuance of business in the goods concerned.” This defense is often utilized in cases involving seasonal or perishable goods that must be sold at a reduced price if they are to be sold at all.59 The changing conditions defense is absolute, but the burden of proof is on the party charged with discrimination.
D. Functional Discounts
Though not explicitly recognized in the text of the statute, functional discounts have been deemed permissible under the Act. In Texaco v. Hasbrouck, the Supreme Court stated that, “a functional discount is one given to a purchaser based on its role in the supplier’s distributive system, reflecting, at least in a generalized sense, the services performed by the purchaser for the supplier.”60 Functional discounts are permissible under the Act when they represent a reasonable reimbursement for actual marketing functions performed by the favored purchasers.61 The Court determined that a price differential “that merely accords due recognition and reimbursement for actual marketing functions” is not illegal.62
The key requirement is that all competing purchasers, regardless of the labels they are given, be treated equally. The Texaco Court rejected a mechanical interpretation that simply asked whether the favored and disfavored purchasers made their purchasers at the same distribution level, i.e. wholesale or retail, and precluded liability if this question was answered in the negative. Rather, evidence is required that the favored customer, whatever its level, performs some particular service for the seller.63 In Texaco, the evidence showed that no significant storage or other wholesaling services were actually performed by the favored wholesalers. Accordingly, the Supreme Court affirmed a jury verdict for plaintiffs.
Another defense not specifically provided for in the Act is the functional availability defense, which provides that if a seller makes a price reduction or service program functionally available to all, the seller should be protected from liability under the Act, even though some buyers may not accept the program.64 The Supreme Court implicitly recognized the defense in FTC v. Morton Salt Co., 334 U.S. 37, 42 (1948). In order to rely on the availability defense, a seller must show that the discount is actually available, not just theoretically available, to most customers. See id. Further, some courts have held that discounts are not “available” to disfavored customers if those customers are not aware of the discounts.65
V. Brokerage and Bribery
Section 2(c) of the Act provides that “it shall be unlawful for any person engaged in commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation . . . except for services rendered in the connection with the sale or purchase of goods . . . .” 15 U.S.C. § 13(c). This provision was designed to combat a practice allegedly employed by some chain stores in the 1930s that did not use brokers, but insisted on getting a discount as if they did. The commercial bribery/section 2(c) problem often arises in common business settings, such as when companies offer compensation programs directly to sales representatives of their customers. The FTC has promulgated rules that allow these programs so long as the employer is aware and consents, competing products are not targeted, and the program is available to competing firms on a proportionately equal basis.66
VI. Credit and the Robinson-Patman Act
Courts have looked at credit terms and interest payments in different ways. It is possible to argue that an extension of credit is an indirect price discrimination and should be covered by the Act. Credit may, however, have been denied strictly according to the ability of the purchaser to pay, as demonstrated by past payment problems. While credit terms are part of price, differing credit terms will not be considered discriminatory by most courts as long as there exists objective criteria that is followed by the seller in making credit determinations.67 Without such criteria, the motivation for the granting or denial of credit may become suspect, and deemed a pretext for discrimination.68
VII. Inducing a Discriminatory Price
Section 2(f) of the Act focuses on the conduct of buyers who “knowingly induce or receive a discrimination in price.” A buyer liability violation is derivative; in order to demonstrate a violation of section 2(f) a plaintiff must first establish a violation by the seller of section 2(a).69 Liability does not attach unless the buyer knew or should have known that the discrimination it induced or received was an illegal discrimination.70 Further, because of the derivative nature of section 2(f), the injury to competition requirements of section 2(a) apply to section 2(f) as well.71
The Supreme Court has held that a buyer must not only know the price it received was discriminatory, but also that the price was not covered by any of the seller’s affirmative defenses.72 By its terms, section 2(f) does not cover inducements of discriminatory promotional services or allowances. However, some courts have found liability for promotional services or allowances under section 2(f) simply by treating a promotional allowance as an indirect price discrimination if the amount paid to the favored buyer exceeds the cost of the service performed and effectively amounts to a windfall for the favored buyer.73
VIII. Promotional Allowances and Services
Sections 2(d) and 2(e) prohibit a seller from granting advertising and promotional allowances or services to particular customers in connection with the resale of a product unless the same allowances or services are available to all competing customers on proportionally equal terms. The seller is obligated to take steps reasonably designed to provide notice to competing distributors of the availability of promotional services and allowances.
Some substantial differences exist with respect to violations under these sections as opposed to section 2(a). Specifically, evidence of probable anticompetitive effect is not an element under sections 2(d) or (e), instead an affirmative case is established by proof of the discrimination itself.74 Further, the cost justification defense of section 2(a) is not applicable to cases arising under sections 2(d) or 2(e); the meeting competition defense on the other hand, is available. A wide range of services and facilities is covered by these sections including catalogs, in-store displays, advertising, prizes and special employee training. These provisions, though, are applicable only in connection with the resale by the favored purchaser and not in connection with the initial sale. For instance, in Haug Co. v. Rolls Royce Motor Cars, Inc.,75 the Second Circuit held special subsidies provided by a manufacturer to an allegedly favored dealer for free customer service stated a claim under section
A detailed guide for business compliance with sections 2(d) and 2(e) is contained in the Federal Trade Commission’s, Guides for Advertising Allowances and Other Merchandising Payments and Services, 6 Trade Reg. Rep. ¶ 39,062 (1990) (revised “Fred Meyer Guidelines”). In order to meet the requirements of the Act, a promotional program must offer all competing customers an opportunity to participate. The FTC also publishes “A Plain English Guide to Antitrust Law,” which can be found at http://www.ftc.gov/.
IX. State Laws
Over 20 states have price discrimination statutes similar to the Robinson-Patman Act. Litigation under these statutes has become increasingly common.76 For a description of the relevant statutes and case law for each state, see, ABA, Section of Antitrust Law, State Antitrust Practice and Statutes (1991). Several states also have statutes which prohibit price discrimination for certain commodities. Pennsylvania does not have a price discrimination statute.
A few states, including Pennsylvania, have statutes proscribing below cost pricing.77 One such statute, the Oklahoma Unfair Sales Act was recently interpreted by the Tenth Circuit in Star Fuel Marts, LLC v. Sam’s East, Inc.,78 to not require a finding of dangerous probability of recoupment in order to state a violation. The Star Fuel court affirmed the granting of an injunction against defendant gas retailer who was found to have been selling gasoline below cost, even though the defendant’s share of the relevant market was less than three percent and thus defendant could not have shown any possibility of recoupment.
1 Hugh C. Hansen, Robinson-Patman Law: A Review and Analysis, 51 Fordham L.Rev. 1113, 1118 (1983).
2 15 U.S.C. § 13(a)-(f).
3 FTC v. Henry Broch & Co., 363 U.S. 166, 168 (1960).
4 See Automatic Canteen Co. of America v. Federal Trade Commission, 346 U.S. 61, 65 (1953) (recognizing that “precision of expression is not an outstanding characteristic” of the Act.).
5 15 U.S.C. § 13(a).
6 15 U.S.C. § 13(d) and (e).
7 15 U.S.C. § 13(c).
8 15 U.S.C. § 13(f).
9 15 U.S.C. § 13(a).
10 15 U.S.C. § 13(a).
11 15 U.S.C. § 13(b).
12 15 U.S.C. §§ 21, 26.
13 15 U.S.C. §§ 15, 26.
14 See Texaco Inc. v. Hasbrouck, 496 U.S. 543, 559 (1990) (“a price discrimination within the meaning of Section 2(a) ‘is merely a price difference’”) (internal citations omitted); FTC v. Anheuser-Busch, Inc., 363 U.S. 536, 549 (1960); Alan’s of Atlanta, Inc. v. Minolta Corp., 903 F.2d 1414 (11th Cir. 1990); Continental Baking Co. v. Old Homestead Bread Co., 476 F.2d 97 (10th Cir.), cert. denied, 414 U.S. 975 (1973).
15 See Corn Prods. Refining Co. v. FTC, 324 U.S. 726 (1945); Liberty Lincoln-Mercury v. Ford Motor Co., 134 F.3d 557 (3d Cir. 1998); Conoco, Inc. v. Inman Oil Co., 774 F.2d 895 (8th Cir. 1985).
16 The actual time period that is deemed “contemporaneous” for purposes of the Act will vary depending on the nature of the market for the goods in question. “There is no need that the sales be made precisely at the same time or place.” DeLong Equip. Co. v. Washington Mills Electro Minerals Corp., 990 F.2d 1186, 1202, amended, 997 F.2d 1340 (11th Cir.), cert. denied, 114 S. CT. 604 (1993); Black Gold, Ltd. v. Rockwool Indus., Inc., 729 F.2d 676 (10th Cir. 1984) (five month period not contemporaneous); Zwicker v. J.I. Case Co., 596 F.2d 305, 309 (8th Cir. 1979) (sales not contemporary w here one year difference in time); Innomed Labs, LLC v. Alza Corp., Civ. No. 01-8095, 2002 WL 31521084 (S.D.N.Y. Nov. 13, 2002) (denying summary judgment and finding nothing to support the position that contracts formed a few months apart cannot be considered contemporaneous).
17 See, e.g., Crossroads Cogeneration Corp. v. Orange & Rockland Utils., 159 F.3d 129, 142 (3d Cir. 1998) (citing Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209,
219-277 (1993) and holding that “merely offering lower prices to a customer does not state . . . a price discrimination claim.”); Robertson’s Battery Terminal, Inc. v. Pacific Chloride, Inc. 1992-2 Trade Cas. (CCH) ¶69,809 (6th Cir. 1992); Terry’s Floor Fashions, Inc. v. Burlington Indus., Inc., 568 F. Supp. 205, 216 (E.D.N.C. 1983), aff’d, 763 F.2d 604 (4th Cir. 1985) (“A sale at one price and a mere offer to sell at another price is insufficient to show a Robinson-Patman Act violation”); Capital Ford Truck Sales, Inc. v. Ford Motor Co., 819 F. Supp. 1555, 1574 (N.D. Ga. 1992); Vanco Indus. v. Specialty Plastic Prods., Inc., Civ. No. 88-8834, 1989 WL 47034, *2 (E.D. Pa. Apr. 25, 1989) (granting defendants’ motion to dismiss and holding that “price quotations or offers to sell are not sufficient to show price discrimination under the Robinson-Patman Act, the seller must have actually sold its products.”).
But see, American Can Co. v. Bruce’s Juices, 187 F.2d 919, 924 (5th Cir. 1951) (carving out narrow exception to the two sales requirement and holding that plaintiff was not bound to partake in defendant’s discriminatory practices merely so that it could “attain the status of a competing purchaser” and satisfy the Act’s two sales requirement); En Vogue v. UK Optical Ltd., 843 F. Supp. 838 (E.D.N.Y. 1994) (plaintiff can state a claim under section 2(a) even where there have been no sales, so long as there is a contract creating buyer-seller relationship).
18 See L & L Oil Co. v. Murphy Oil Co., 674 F.2d 1113, 1120 (5th Cir. 1982) (“It is well established that in order to allege a violation of §2(a) one seller must have made at least two actual sales to two actual buyers at different prices.”).
19 See Blackwood Gold, Ltd. v. Rockwool Industries, Inc., 729 F.2d 676 (10th Cir.), cert denied, 419 U.S. 869 (1974) (holding the Act is inapplicable to terms of sale except as they relate to
20 See, e.g., City of Mount Pleasant v. Assoc. Elec. Coop., Inc., 838 F.2d 268, 278 (8th Cir. 1988); Russ’ Kwik Car Wash, Inc. v. Marathon Petro. Co., 772 F.2d 214, 221 (6th Cir. 1985); O’Byrne v. Cheker Oil Co., 727 F.2d 159 (7th Cir. 1984); Security Tire & Rubber Co. v. Gates Rubber Co., 598 F.2d 962, 966 (5th Cir. 1979); Accurate Control Sys. v. Neopost, Inc., 2002 U.S. Dist. LEXIS 11340 (N.D. Ill. 2002).
21 See, e.g., Supra USA Inc. v. Samsung Elec. Co., Ltd., 872 Trade Cas. ¶67,760, 53 A.T.R.R. 813 (S.D.N.Y. 1983).
22 See, e.g., Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 879 (9th Cir. 1982); Barnosky Oils, Inc. v. Union Oil Co. of Cal., 665 F.2d 74 (6th Cir. 1981).
23 15 U.S.C. § 13(a).
24 Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 200 (1974). See also Precision Printing Co. v. Unisource Worldwide, Inc., 993 F. Supp. 338 (W.D. Pa. 1998) (holding that intrastate warehouse sales lose their intrastate character when they involve goods purchased in another state by a supplier based upon the anticipated needs of specific customers); Callahan v. A.E.V., Inc., 1994-2 Trade Cas. (CCH) ¶70,761 (W.D. Pa. 1994), aff’d and rev’d on other grounds, 182 F.3d 237 (3d Cir. 1999) (finding that beer retailer plaintiffs failed to meet “in commerce” requirement where shipments of beer by defendants, Pennsylvania wholesale beer distributors, to plaintiffs and other retailers were intrastate sales).
25 See, e.g., Bacon v. Texaco, Inc., 503 F.2d 946 (5th Cir. 1974).
28 See, e.g., Advo Inc. v. Philadelphia Newspapers, Inc., 51 F.3d 1191 (3d Cir. 1995) (affirming summary judgment for defendant publisher on Robinson-Patman claims because advertising sales could not be deemed commodities); Metro Communications Co. v. Ameritech Mobile Communications Inc., 984 F.2d 739, 745 (6th Cir. 1993) (holding cellular telephone service not a commodity for purposes of the Act).
29 See Metro Communications Co., 984 F.2d at 745 (“This court has ruled that the Robinson-Patman Act is applicable to transactions that involve the sale of goods and services only if the ‘dominant nature’ of the transaction is a sale of goods.”).
30 See also Union City Barge Line, Inc. v. Union Carbide Corp., 823 F.2d 129 (5th Cir. 1987) (granting summary judgment for defendants and finding dominant nature of redelivery and fuel storage was provision of service rather than sale of goods); Rankin County Cablevision v. Pearl River Valley Supply Dist., 692 F.Supp. 691 (S.D. Miss. 1988) (dominant nature of cable television is service-oriented).
31 See, e.g., A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 F.2d 1396 (7th Cir. 1989) (holding that special surplus eggs not necessarily of like grade and quality as other eggs); Wire Mesh
Prods., Inc. v. Wire Belting Ass’n, 520 F. Supp. 1004 (E.D. Pa. 1981) (granting defendant’s motion for summary judgment on the ground that the majority (70%) of wire belts manufactured and sold based on customer-dictated specifications and were therefore not of like grade and quality).
32 See Cleveland v. Viacom, Inc., 73 Fed. Appx. 736 (5th Cir. 2003), (concluding that ransactions at issue were “not reasonably comparable” when defendant undertook and committed to long-term purchases, while plaintiffs were free to choose or reject the products at their discretion and holding that such differences precluded any claim for price discrimination); but see Flash Elec., Inc. v. Universal Music & Video Distrib. Corp., Civ. No. 01-979, 2004 WL 764584 (E.D.N.Y. March 31, 2004) (finding that wholesale distributors stated claim that studio violated the Act despite allegedly incomplete designation of timing and location of competition and alleged price discrimination, and rejecting argument that differences between films precluded determination that they were of like grade and quality).
33 15 U.S.C. § 13(a).
34 Tertiary line injury occurs when competition among customers of a disadvantaged buyer allege injury. See Falls City Industries Inc. v. Vanco Beverages, Inc., 460 U.S. 428, 436 (1983).
35 See Falls City Indus., Inc. v. Vanco Beverage, Inc., 460 U.S. 428 (1983); J. Truett Payne Co., Inc. v. Chrysler Motors Corp., 451 U.S. 557 (1981).
36 See, e.g., Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993); Texaco Inc. v. Hasbrouck, 496 U.S. 543 (1990).
37 See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (holding that claim of primary price discrimination failed where though defendant priced below its average total cost, market conditions made it unlikely that defendant could recoup its lost profits through subsequent sustained supracompetitive pricing); Crossroads Cogeneration Corp. v. Orange & Rockland Utilities, Inc., 159 F.3d 129 (3d Cir. 1998) (affirming dismissal of primary line discrimination claim where plaintiff failed to allege predatory pricing or other anticompetitive market effects).
39 Brooke Group, 509 U.S. at 224.
40 Brooke Group, 509 U.S. at 222.
41 Id. at 224. See also, Lewis v. Philip Morris, Inc., 355 F.3d 515 (6th Cir. 2004); Indian Coffee Corp. v. Procter & Gamble Co., 752 F.2d 891 (3d Cir.), cert. denied, 474 U.S. 863 (1985) (holding that predatory intent could be inferred from Indian Coffee’s proof regarding Folger’s geographic pricing practices); Peerless Heater Co. v. Mestek, Inc., Civ. No. 98-6532, 2000 WL 637082 (E.D. Pa. May 11, 2000) (granting summary judgment for defendants on the ground that plaintiffs could not establish the essential element of recoupment).
42 Falls City Indus. v. Vanco Beverage, Inc., 460 U.S. at 435. See Federal Trade Comm’n v. Morton Salt Co., 334 U.S. 37 (1948); George Haug Co., Inc. v. Rolls Royce Motor Cars, Inc., 148 F.3d 136 (2d Cir. 1998) (stating that Brooke Group did not alter well established Morton Salt rule); Chroma Lighting v. GTE Prods. Corp., 111 F.3d 653 (9th Cir. 1997), cert. denied, 118 S. Ct. 357 (Oct. 20, 1997). But see Liberty Lincoln-Mercury v. Ford Motor Co., 134 F.3d 557 (3d Cir. 1998) (affirming dismissal of plaintiff’s Robinson-Patman claim on the grounds that plaintiff failed to describe an actionable price discrimination on the costs of vehicles it sold to the plaintiff); J.F. Feeser v. Serv-A-Portion, Inc., 909 F.2d 1524, 1538 (3d Cir. 1990).
43 Falls City, 460 U.S. at 435.
44 See, e.g., White Indus. v. Cessna Aircraft Co., 845 F.2d 1497, 1501-02 (8th Cir. 1988) (general unprofitability of business insufficient where recession in industry and no evidence of lost sales); Alan’s of Atlanta, Inc. v. Minolta Corp., 903 F.2d 1414, 1427 (11th Cir. 1990) (evidence suggesting that the favored competitor’s use of defendant’s discrimination to gain a promotional advantage may have caused a substantial decrease in plaintiff’s market share was sufficient to preclude summary judgment on the issue of injury). But see Tel-Instr. Elec. Corp. v. Teledyne Indus., Inc., 1991-1 Trade Cas. (CCH) ¶69,459 (4th Cir. 1991) (no liability under Act where plaintiff did not meet essential elements of buyer’s bid and would not have been awarded contract even if favored customer never submitted a bid); Allen Pen Co. v. Springfield Photo Mount Co. (1st Cir. 1981) (“To recover treble damages . . . plaintiff must make some showing of actual injury attributable to something the antitrust laws were designed to prevent.”).
45 See White Indus., Inc. v. Cessna Aircraft Co., 845 F.2d 1497, 1501 (8th Cir. 1988) (affirming finding that none of allegedly discriminatory sales occurred in geographic competition with plaintiff); National Distillers Chem. Corp. v. Brad’s Mach. Prods., Inc., 666 F.2d 492, 496 (11th Cir. 1982) (stating that even if other requisites of Act are met, recovery is precluded absent proof discrimination had negative effect on competition); Perkasie Indus. Corp. v. Advance Transformer, Inc., 1992-2 Trade Cas. (CCH) ¶70,046 (E.D. Pa. 1992).
46 460 U.S. 428 (1983).
47 704 F.2d 496, 499 (10th Cir. 1983) (“Illegal price discrimination requires that the same product be sold at different prices to competitors.”).
48 See also Capital Ford Truck Sales Inc. v. Ford Motor Corp., 819 F.Supp. 1555, 1575 (N.D. Ga. 1992).
49 250 F.3d 285, 289 (5th Cir. 2001)
50 See, e.g., Hasbrouck v. Texaco, Inc., 830 F.2d 1513, 1520 (9th Cir. 1987), amended, 842 F.2d 1034 (9th Cir. 1987), aff’d, 496 U.S. 543 (1990); Allied Accessories & Auto Parts Co. v. General Motors Corp., 825 F.2d 971, 974 (6th Cir. 1987); Cf. Perkasie Indus. Corp. v. Advance Transformer, Inc., 1992-2 Trade Cas. (CCH) ¶70,046 (E.D. Pa. 1992).
51 See, e.g., Chroma Lighting v. GTE Prods. Corp., 111 F.3d 653 (9th Cir. 1997) (evidence that favored customers were offered prices that were 3 to 5 percent lower than the prices offered to plaintiff and 15 specific examples of lost sales and profits, as well as testimony from customers that they switched to favored distributors who offered lower prices found to be sufficient evidence to support the jury’s verdict for plaintiff); DeLong Equip. Co. v. Washington Mills Electro Minerals Corp., 990 F.2d 1186, 1202, amended by 997 F.2d 1340 (11th Cir. 1993); J.F. Feeser, Inc. v. Serv-A-Portion, 909 F.2d 1524, 1532-35 (3d Cir. 1990) (evidence that plaintiff was charged higher prices than its competitor and employee testimony that Feeser either lost sales or was forced to reduce prices to match competitor’s prices, if believed by a trier of fact, sufficient to support a finding that competitive harm had occurred).
52 See, e.g., J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 561-62 (1981) (mere fact that favored dealers paid lower prices did not establish injury); J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1532-35 (3d Cir. 1990) (injury can be found upon direct evidence of diverted sales, evidence of lost profits due to a forced cut in margins, and an expert report measuring the magnitude of the impact), cert. denied, 111 S. Ct. 1313 (1991).
53 See, e.g., White Indus., Inc. v. Cessna Aircraft Co., 845 F.2d 1497 (8th Cir.), cert. denied, 488 U.S. 856 (1988) (failure to show any actual injury precluded Robinson-Patman claims); Industrial Burner Sys. v. Maxon Corp., 275 F. Supp. 2d 878 (E.D. Mich. 2003) (denying summary judgment where genuine issue of material fact as to whether plaintiff and its competitors competed on the same functional level and in the same geographic market).
54 Perkins v. Standard Oil Co. of California, 395 U.S. 642, 648 (1969).
55 See, e.g., Stelwagon Mfg. Co. v. Tarmac Roofing Sys., Inc., 63 F.3d 1267 (3d Cir. 1995) (although there was evidence of substantial price differential, the evidence of lost sales or profits was insufficient; trial court improperly relied on anecdotal evidence of customer statements and expert testimony that failed to adequately link sales declines to price discrimination); American Booksellers Ass’n v. Barnes & Noble, Inc., 135 F.Supp.2d 1031 (N.D. Cal. 2001) (dismissing plaintiffs damages claim, but not injunction claims, because plaintiffs’ expert’s showing of average damages was not sufficient to show that the discounts defendants received caused actual injury to the individual plaintiffs, or the amount of those damages); Perkasie Indus. Corp. v. Advance Transformer, Inc., 143 F.R.D. 73 (E.D. Pa. 1992) (finding damage award to be excessive in that plaintiff’s own testimony was that damages amounted to $117,000).
56 The Seventh Circuit has listed the following factors to consider in determining if the defense is met: the extent of the seller’s past relationship with the buyer; the buyer’s relative size and reputation within the industry; whether the seller made efforts to corroborate the reported discount; reports of the same discount in the market at that time; the reasonableness of the discount in light of competitive circumstances in the marketplace; whether the seller was threatened with a termination of purchases if the discount was not met; and forms reporting the discount as required by the seller’s antitrust compliance policy. Reserve Supply Corp. v. Owens-Corning Fiberglass, 971 F.2d 37 (7th Cir. 1992); see also Perkasie Indus. Corp. v. Advance Transformer, Inc., 1992-2 Trade Cas. (CCH) ¶70,046 (E.D. Pa. 1992) (meeting competition defense is liberally construed and provides a complete defense).
57 See United States v. Borden Co., 370 U.S. 460, 467 (1962); Acadia Motors, Inc. v. Ford Motor Co., 844 Supp. 819, 831 (D. Me. 1994).
58 See American Motors Corp. v. FTC, 384 F.2d 247, 258-59 (6th Cir. 1968).
59 See, e.g., Comcoa, Inc. v. NEC Telephones, Inc., 931 F.2d 655 (10th Cir. 1991) (changed market conditions causing equipment at issue to become obsolete); A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 683 F.Supp. 680 (S.D. Ind. 1988), aff’d on other grounds, 881 F.2d 1396 (7th Cir. 1989), cert. denied, 494 U.S. 1019 (1990) (finding special prices offered fell within changing conditions defendse where evidence showed eggs were perishable commodity with short shelf life); Lambino & Sons v. Standard Fruit & S.S. Co., 1975-2 Trade Cas. (CCH) ¶ 60,527 (S.D. N.Y. 1975); (perishable fruit sold on different days); Valley Plymouth v. Studebaker-Packard Corp., 219 F.Supp. 608 (S.D. Cal. 1963) (outdated automobile models).
60 496 U.S. 543, 554 n.11 (1990).
61 One question the Hasbrouck court left unresolved is whether the “reasonableness” of the functional discount should be reasonably related to the costs incurred by the buyer in performing the services at issue or the cost savings that accrued to the seller as a result of the buyer performing the services at issue.
62 Id. at 562.
63 See also American Booksellers Ass’n, Inc. v. Barnes & Noble, Inc., 135 F.Supp.2d 1031, 1061 (N.D. Cal. 2001) (stating the functional discount defense is “available to any purchaser who performs marketing or wholesaling functions for the seller, regardless of whether the purchaser is also a retailer.”).
64 See Comcoa, Inc. v. NEC Telephones, Inc., 931 F.2d 655, 664-65 (10th Cir 1991) (approving jury instruction for functional availability defense stating “the implementation of a discount program need not guarantee that all customers benefit to the same degree as other customers, as long as the program is evenly administered.”); DeLong Equipment Co. v. Washington Mills Abrasive Co., 887 F.2d 1499 (11th Cir. 1989) (reversing grant of summary judgment to defendant where plaintiff purchaser not given opportunity to buy lower priced grade of abrasive). Compare Metro Ford Truck Sales, Inc. v. Ford Motor Co., 145 F.3d 320 (5th Cir. 1998) (holding special wholesale discount program offered to all authorized dealers and designed to assist in bids to large volume customers of dealers did not violate the Act because it was offered on equal basis to all competing dealers); Bouldis v. U.S. Suzuki Motor Corp., 711 F.2d 1319, 1326 (6th Cir. 1983) (holding challenged purchase conditions “well within means of average Suzuki dealer.”).
65 See, e.g., Caribe BMW v. Bayerische Motoren Werke, 19 F.3d 745, 752 (1st Cir. 1994) (“We do not see how ordinarily one could say that a seller has made favored treatment ‘available’ to a disfavored customer if the disfavored customer does not know about the disfavored treatment.”).
66 The “Push Money” Rule, 16 C.F.R. § 14.7, 27 Fed. Reg. 4331 (May 5, 1962).
67 See, e.g., Kline, Inc. v. Lorillard, Inc., 878 F.2d 791 (4th Cir. 1989); Bouldis v. U.S. Suzuki Motor Corp., 711 F.2d 1319, 1325 (1983) (“Section 2(a) is not violated when the credit decisions are based upon legitimate business reasons.”). See also Craig v. Sun Oil Co. of Pa., 515 F.2d 221 (10th Cir. 1975), cert. denied 429 U.S. 829 (1976) (refusing to find violation of section 2(a) based upon differing credit terms based upon financial weaknesses of certain purchasers).
68 See, e.g., Cemar, Inc. v. Nissan Motor Corp., 897 F.2d 120 (3d Cir. 1990) (holding that in order to maintain action, plaintiff must show that the difference in credit terms caused injury to competition, and not just higher costs to the plaintiff); Kem-Tech, Inc. v. Mobil Corp., 86-1 Trade Cas. ¶66,947 (E.D. Pa. 1985) (plaintiff claiming injury from discriminatory credit terms must show that it was in competition with a favored buyer).
69 See Great Atl. & Pac. Tea Co. v. FTC, 440 U.S. 69, 76 (1979).
70 See Hygrade Milk & Cream Co. v. Tropicana Prods., 1994 U.S. Dist. LEXIS 1091 at *10 (S.D.N.Y. Feb. 1, 1994).
71 See, e.g., Intimate Bookshop, Inc. v. Barnes & Noble, Inc., Civ. No. 98-5564, 2003 WL 22251312 (S.D.N.Y. Sept. 30, 2003) (granting defendants’ motion for summary judgment on Section 2(f) claims where plaintiff’s damages evidence did not demonstrate a causal link between its alleged injuries and defendants’ allegedly unlawful conduct).
72 Great Atlantic & Pacific Tea Co. v. Federal Trade Commission, 440 U.S. 69 (1979); Automatic Canteen Co. of America v. Federal Trade Commission, 346 U.S. 61 (1953).
73 See, e.g., American Booksellers Ass’n, Inc. v. Barnes & Noble, Inc., 135 F.Supp. 2d 1031 (N.D. Cal. 2001) (holding disfavored buyers could base inducement claim regarding allegedly discriminatory advertisements as indirect price discrimination where payments bore no apparent relationship to actual services performed by favored customers); Intimate Bookshop, Inc. v. Barnes & Noble, Inc., 88 F.Supp.2d 133 (S.D.N.Y. 2000) (promotional payments to chain bookstores
unavailable to competing bookstore plaintiff could be challenged both under § 2(d) and under § 2(a) as indirect discrimination thus providing claim for disfavored buyer).
74 Great Atlantic & Pacific Tea Co. v. Federal Trade Commission, 440 U.S. 69, 79 (1979); Alan’s of Atlanta, Inc. v. Minolta Corp., 903 F.2d 1414, 1419 (11th Cir. 1990); Alterman Foods, Inc. v. Federal Trade Commission, 497 F.2d 993, 1000 (5th Cir. 1974). But see Eastern Auto Distributors v. Peugeot Motors of America, 795 F.2d 329 (4th Cir. 1986) (affirming directed verdict in favor of defendant where plaintiff able to show only a de minimis impact on competition).
75 148 F.3d 136 (2d Cir. 1998).
76 See, e.g., K-S Pharm, Inc. v. American Home Prods. Corp., 962 F.2d 728 (7th Cir. 1992) (Wisconsin statute); Retail Serv. Assocs. v. ConAgra Pet Prods. Co., 759 F. Supp. 976 (D. Conn. 1991) (suit under Connecticut Unfair Trade Practices Act).
77 See 73 P.S. § 213.
78 362 F.3d 639 (10th Cir. 2004).
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