- Supreme Court Hands Down First Robinson-Patman Act Decision in a Decade
- January 17, 2006
- Law Firm: Pepper Hamilton LLP - Philadelphia Office
Today the U.S. Supreme Court decided the first Robinson-Patman Act (Act) case in over a decade, holding that in a competitive bidding situation a manufacturer may not be held liable for secondary line price discrimination absent a showing that the manufacturer discriminated between purchasers competing to resell the same product to the same retail customer. The decision in Reeder-Simco GMC, Inc. v. Volvo Trucks North America, Inc. revolves around the Act's applicability in the sale of heavy-duty trucks through a competitive bidding process, and is important for all companies involved in competitive bidding markets.
Reeder-Simco, a heavy-duty truck dealer had sued its supplier, Volvo Trucks North America, alleging that Volvo violated the Act by quoting different prices to different dealers over several months. The jury initially returned a $1.3 million dollar verdict against Volvo that was automatically trebled pursuant to our antitrust laws. On appeal, the 8th Circuit Court affirmed the decision and denied Volvo's request for en banc review.
Unlike items sold in a grocery store, heavy-duty trucks are typically purchased after dealers submit bids to a prospective purchaser. To facilitate competitive bidding, manufacturers like Volvo offer special, bid-specific price concessions to a dealer based on the deal's competitive dynamics. Dealers typically do not sell trucks out of inventory; instead, when a dealer wins the bidding, that dealer places an order, which the manufacturer proceeds to fill.
In the Supreme Court, Volvo argued for reversal of the 8th Court's decision because it established liability under the Act on discrimination between price concessions Volvo offered to the plaintiff and other dealers on sales to different customers. The Court held that the type of competition the Act was designed to reach simply was not implicated in Reeder-Simco. Reeder-Simco could not show the required element of competitive injury under the Act because it failed to identify any transaction where it was both a "purchaser" under the Act and "in actual competition" with a favored purchaser for the same customer. Absent actual competition with a favored Volvo dealer, the Court held that Reeder-Simco could not establish competitive injury.
The Court specifically rejected the 8th Circuit's interpretation of the Act, which permitted liability to be based on comparisons between prices in different bidding situations with different customers. The Court refused to permit any inference of competitive injury "from evidence of such a mix-and-match, manipulable quality." Rather, the Court said the "relevant market becomes limited to the needs and demands of a particular end user. That Volvo dealers may bid for sales in the same geographic area does not import that they in fact competed for the same customer-tailored sales." With respect to the only two instances of "head-to-head" competition presented by Reeder-Simco, i.e. Reeder-Simco and other Volvo dealers competing for the same customer, the Court found that to the extent any discrimination existed at all between Reeder-Simco and a competing dealer, it was not of such magnitude as to substantially affect competition in the relevant transaction.
The Court also emphasized that the Act should be interpreted consistently with the broader policies of the antitrust laws to stimulate competition, as opposed to attempting to protect competitors. To that end, the Court affirmed its previous statements that interbrand competition is the "primary concern" of antitrust law. In this regard, the Court declined "to extend Robinson-Patman's governance" to cases where "there is no evidence that any purchaser possesses market power."
The Court's decision in Reeder-Simco is significant. It will impair the ability of disfavored customers from attempting to bring price discrimination claims in competitive bidding situations. It also clarifies the type of evidence needed to prove competitive injury in such situations. Finally, the decision reaffirms that the Act should be interpreted consistently with other antitrust laws in order to benefit competition as a whole, rather than individual competitors.