• Supreme Court to Review Significant Robinson-Patman Act Decision
  • June 15, 2005
  • Law Firm: Weil, Gotshal & Manges LLP - New York Office
  • The Supreme Court has agreed to consider the Eighth Circuit's 2-1 decision in Reeder-Simco GMC, Inc. v. Volvo Trucks NA, Inc.,1 which held that pricing practices of Volvo Trucks NA ("Volvo") violated the Robinson-Patman Act. This is the first Robinson-Patman case to be heard by the Supreme Court since 1993, despite the fact that sellers and resellers of commodities are probably more affected in their day-to-day marketing activities by that statute than by any other antitrust statute. The issues raised in Reeder-Simco present the Court with the opportunity to bring the Robinson-Patman Act closer to conformity with the law developed under the principal antitrust statutes.

    Background

    Volvo distributes its heavy trucks through a network of independent dealers who sell to industrial and commercial users. These end users typically solicit competitive bids from several dealers representing different manufacturers, and then purchase from the dealer offering the most attractive bid. What makes the industry unusual is that most heavy trucks are built to order by the manufacturer after the end user has agreed to buy from a dealer. Because of the high cost of heavy trucks, it can be prohibitively expensive for a dealer to maintain an inventory of trucks sufficient to meet the needs of its potential customers, who generally contract to buy a number of trucks from the successful bidder. For that reason, a dealer purchases trucks from Volvo only after an end user has accepted the dealer's bid.

    During the competitive bidding process, Volvo often grants a dealer an additional discount from its published wholesale price in order to permit the dealer to submit lower bids to be competitive with other dealers -- generally dealers selling heavy trucks purchased from other manufacturers. Volvo decides on a case-by-case basis whether to offer the additional discount, and how large the discount will be, based on each competitive situation. Therefore, Volvo may offer a different price to a dealer in connection with a bid to one end user than it may offer to a dealer in connection with a bid to another end user. Significantly, when two or more Volvo dealers are competing to sell to the same end user, Volvo's practice is to offer the same discount to each. Head-to-head competition between Volvo dealers for the same end user, however, is the exception rather than the rule. Most end users solicit a bid from only one Volvo dealer.

    The Eighth Circuit Decision

    The evidence considered by the Eighth Circuit involved three fact patterns. (1) Two situations (out of hundreds) in which, as a result of unique factual circumstances, Reeder, the plaintiff, was offered a lower discount than a competing Volvo dealer, and lost the bid to that dealer. As a result, in both instances Reeder did not purchase any trucks from Volvo for the customer involved; (2) a number of instances in which another Volvo dealer received a greater discount with respect to transactions for which Reeder had not bid; and (3 ) a number of situations in which Reeder competed only against dealers that bought trucks from manufacturers other than Volvo, and as to which Reeder either won or lost a bid.

    Reeder argued, first, that it would have won the two bids it lost to other Volvo dealers had it been given the greater discount provided to the competing Volvo dealers. Second, Reeder contended that it would have made more profit on successful bids against other Volvo dealers or dealers purchasing from other manufacturers had it received a greater discount from Volvo similar to the discounts Volvo had provided to dealers in transactions elsewhere as to which Reeder was not involved. Third, Reeder claimed that it would have won some of the bids it lost to dealers of other manufacturers had it been given the greater discounts Volvo provided other Volvo dealers in other transactions elsewhere. Thus, all of the transactions before the Eighth Circuit had one or both of two characteristics: either Reeder did not purchase any trucks from Volvo in connection with the transaction; or, Reeder did not compete against another Volvo dealer for the sale.

    As to the two head-to-head transactions Reeder lost to Volvo dealers receiving a more favorable price, the Eighth Circuit majority ruled that, although Reeder did not purchase any trucks, it nevertheless was a "purchaser" for purposes of Section 2(a) of the Robinson-Patman Act ("Section 2(a)"), which applies to discriminations in price charged by the same seller to two or more "purchasers." The majority reasoned that Reeder did in fact purchase trucks from Volvo in other situations where it had contemporaneously bid -- either against other Volvo dealers or dealers of other manufacturers.2 The majority also ruled that the evidence was sufficient to show competitive injury, which it described as lost profits or sales by Reeder, and the fact that favored Volvo dealers had received substantial price reductions even though Reeder had not competed in the applicable transactions.3

    Judge Hansen, who dissented, described the majority opinion as an "attempt to fit a square peg into a round hole." In his view, status as a "purchaser" is "inexplicably intertwined with the existence of actual competition and the potential threat thereto."4

    Although Reeder did compete with other Volvo dealers, it had put into evidence "only two occasions where Reeder competed with a 'favored' Volvo dealer for an actual sale."5 The other comparisons with sales made by Volvo to dealers with whom Reeder did not compete for the applicable business were irrelevant, "because there was no actual competition between the two dealers at the time of the sales to the separate and different end users."6 Judge Hansen particularly criticized the majority for finding liability when Volvo's conduct allegedly injured Reeder's ability to compete with non-Volvo dealers. Such injury, he concluded, "is not the type of injury to competition that the RPA was intended to prevent."7

    In Judge Hansen's view, all the factors necessary to state a claim have to be present in the same relevant transaction for liability to be imposed. "To the extent that the court looks for the existence of one factor in one transaction and the existence of another factor in a second transaction, I conclude that the proof in this case is too tenuous and requires too many inferences piled atop inferences to reach the court's result."8

    The Certiorari Petition

    Volvo's Petition for certiorari urged the Supreme Court to rule, first, that in the two head-to-head situations in which it lost bids to favored Volvo dealers, Volvo did not "discriminate in price between different purchasers of commodities," as required by Section 2(a), because Reeder did not purchase any trucks from Volvo with regard to either of those transactions. As to the transactions where Reeder claims it would have made more profits on sales it actually made if it had received the greater discount other Volvo dealers received for other transactions as to which it had not competed or, when it competed only against non-Volvo dealers, Volvo argues that because Reeder did not compete against Volvo dealers in such transactions, there was no harm to "competition with any person who C9 knowingly receives the benefit of a C9 discrimination" by a defendant, as is required under Section 2(a). In sum, Volvo is arguing that a discriminatory offer cannot violate A4 2(a) because the Robinson-Patman Act prohibits discriminations only between "purchasers," and that the statute cannot be violated when a discrimination does not divert sales or profits from a disfavored purchaser to a favored purchaser from the same supplier.

    Analysis

    It is likely that the Supreme Court will reverse the Eight Circuit decision for two reasons. First, prior to this decision, it was well established that Section 2(a) applies only to consummated sales to two "purchasers" at two different prices. An offer to sell that is not consummated has always been considered outside the statute's coverage.9 The Eighth Circuit deemed those cases distinguishable because in this instance Reeder contemporaneously was a purchaser of heavy trucks in connection with transactions other than the two in which in had unsuccessfully bid. For this reason, the court ruled that Reeder was a competing "purchaser." However as stressed by the dissenting Judge, because of the unique facts involved in the heavy truck industry, in which purchases are made only after a dealer has been a successful bidder, the fact that Reeder was a purchaser in other transactions elsewhere should not have made it a "purchaser" as to transactions when it did not consummate a purchase.

    Second, as to the transactions when Reeder actually made a purchase, either: (1) its prices were compared with Volvo's prices to other dealers in other transactions not involving Reeder; or (2) it beat out a non-Volvo dealer -- not a purchaser from the same seller -- transactions that clearly are outside the scope of the statute. The law is well established that Section 2(a) only applies when goods have been sold contemporaneously by the same seller to two buyers at different prices.10

    Of even more significance, there are two major antitrust policy reasons for reversing the Eighth Circuit's Reeder-Simco decision. First, the Supreme Court has stressed that interbrand competition should be the principal focus of the antitrust laws.11 The Eighth Circuit has turned this policy on its head by penalizing Volvo for its pricing assistance to its dealers in their interbrand competition so that the court could avert a perceived reduction in intrabrand competition. Second, the law developed in the Supreme Court under the principal antitrust statutes requires an antitrust plaintiff to demonstrate that overall competition in the market was injured as a result of alleged unlawful conduct.12 Injury suffered solely by a single plaintiff is insufficient to satisfy this requirement. However, a number of circuit courts have ruled that injury to an individual purchaser is sufficient to meet the Robinson-Patman Act's injury to competition requirement.13 Reeder-Simco provides the Supreme Court with the opportunity to resolve these Robinson-Patman Act anomalies, and in doing so to bring the Act closer to conformity with the policies of the principal antitrust statutes.

    1. 374 F.3d at 701 (8th Cir. 2004).
    2. 374 F.3d at 709.
    3. Id. at 712-13.
    4. Id. at 718.
    5. Id.
    6. Id. at 719.
    7. Id.
    8. Id.
    9. See, e.g., Crossroads Cogeneration Corp. v. Orange & Rockland Utils, Inc., 159 F.3d 129 (3rd Cir. 1998); Robertson's Battery Terminal, Inc. v Pacific Chloride, Inc., 961 F.2d 1578 (6th Cir. 1992). In fact, there is an Eighth Circuit decision to this effect. Fusco v Xerox Corp., 676 F.2d 332 (8th Cir. 1982).
    10. See, e.g., Terry's Floor Fashions, Inc. v. Burlington Indus., Inc., 763 F.2d 604, 615 (4th Cir. 1985); Shaw's, Inc. v. Wilson-Jones Co., 105 F.2d 604, 615 (3d Cir. 1939); Maier-Schule GMC, Inc. v. General Motors Corp., 780 F. Supp 984, 989 (W.D.N.Y. 1991).
    11. Continental TV, Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 52 n.19 (1977).
    12. See Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993); Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 338 (1990); Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 109-10, (1986); and Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977).
    13. See George Haug Co. v. Rolls Royce Motor Cars, Inc., 148 F.3d 136, 144 (2d Cir 1998); Chroma Lighting v. GTE Prods. Corp., 111 F.3d 653 (9th Cir.), cert. denied, 522 U.S. 943 (1997); and J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1533 (3d Cir. 1990), cert. denied, 499 U.S. 921 (1991).