197 ALI-ABA Continuing Professional Education Product Distribution and Marketing June 20-22, 2012 San Francisco, California Price Discrimination and Related Issues By John F. Collins Dewey & LeBoeuf LLP New York, New York
198 I. INTRODUCTION... 1 II. OVERVIEW OF THE ACT... 1 A. Codification... 1 B. Section 2... 1 C. Section 3... 2 D. Exemptions... 2 E. Enforcement... 2 III. PRICE DISCRIMINATION UNDER THE ROBINSON-PATMAN ACT... 2 A. Introduction to the Prima Facie Case... 2 1. Statutory language of Section 2(a)... 2 2. Most notable recent development... 3 B. Elements of a Section 2(a) Violation... 4 1. Summary of the elements of a Section 2(a) violation... 4 2. Two completed sales to two different purchasers... 4 3. Reasonably contemporaneous... 6 4. By the same seller... 7 5. Engaged in commerce... 8 6. Of commodities... 10 7. Of like grade and quality... 12 8. For use, consumption or resale within the United States or any territory thereof... 14 9. At different/discriminatory prices... 14 10. With injurious effect... 19 C. Defenses to a Section 2(a) Prima Facie Case... 27 1. Itemized... 27 2. Section 2(a) Cost Justification Defense... 27 3. Section 2(a) Changing Conditions Defense... 28 4. Section 2(b) Meeting Competition Defense... 29 IV. EXEMPTIONS FROM THE PRICE DISCRIMINATION PORTION OF THE ROBINSON-PATMAN ACT... 32 A. The Cooperative Exemption... 32 1. The statute... 32 2. Interpretation... 32 B. Charitable Institution Exemption... 33 1. The statute... 33 2. Case Law Interpretation... 33 3. FTC Official Guidance... 33
199 4. FTC Unofficial Guidance... 34 V. SECTION 2(c) BROKERAGE PAYMENTS... 34 A. The Violation... 34 1. Relevant statutory language... 34 2. The elements... 35 B. Court Interpretations of Prima Facie Case... 35 1. Price discrimination not required... 35 2. The services rendered exception to Section 2(c) violations... 35 3. Section 2(c) and Commercial Bribery... 35 4. No requirement of antitrust injury... 36 VI. SECTIONS 2 (d) AND 2(e) DISCRIMINATORY ALLOWANCES OR SERVICES... 37 A. The Statute and the Elements... 37 1. Section 2(d) -- allowances... 37 2. Section 2(e) -- services... 37 3. Interpreted... 38 4. Elements of a prima facie violation of Section 2(d) or Section 2(e)... 38 5. No anti-competitive injury requirement... 38 6. The Fred Meyer Guides... 39 B. The Scope of a Section 2(d) or Section 2(e) Violation... 39 1. Promotional services or facilities... 39 2. Resale required... 40 3. Proportionality... 40 4. Among competitors... 41 C. Defenses to Section 2(d) or Section 2(e) Violation... 42 1. Meeting competition defense... 42 2. Cost justification defense... 42 D. Section 2(a) Compared to Sections 2(d) and (e)... 42 E. Slotting Allowances... 42 1. FTC official comment... 42 2. Unofficial FTC guidance... 42 3. R.J. Reynolds Tobacco Co. v. Philip Morris Inc., 60 F.Supp. 2d 502 (M.D.N.C. 1999). (Philip Morris preliminarily enjoined, under Section 1 of the Sherman Act, from using new Retail Leaders display allowance program that gave convenience store outlets promotional allowances conditioned on their acceptance of various displays and restrictions on competitors displays.... 44 4. In re McCormick & Company, Inc., Docket No. C-3939 (Agreement Containing Consent Order April 27, 2000) ii
200 Federal Trade Commission enters into Agreement Containing Consent Order that certain price discrimination practices of McCormick & Company, including certain slotting allowances, constitute secondary-level price discrimination in violation of Section 2(a).... 44 5. Federal Trade Commission also held public hearings on slotting allowance issues, www.ftc.gov/bc/slotting/index.htm, and issued a report entitled Slotting Allowances in the Retail Grocery Industry: Selected Case Studies of Slotting Allowances in Five Product Categories (Nov. 2003).... 44 VII. SECTION 2(f) BUYER LIABILITY... 44 A. The Violation... 44 1. Statutory language... 44 2. Elements... 45 3. Liability derivative... 45 B. Jurisdictional Elements... 46 C. Enforcement... 46 1. Automatic Canteen... 46 2. Knowledge required... 46 D. Allowances or Services... 46 VIII. PRICE DISCRIMINATION AND STATE LAW... 46 A. Comparison with the Robinson-Patman Act... 46 IX. BIBLIOGRAPHY... 47 A. Legislative History... 47 B. Principal Commentaries... 47 APPENDIX A APPENDIX B APPENDICES iii
201 ROBINSON-PATMAN ACT I. INTRODUCTION The Robinson-Patman Act was enacted in 1936 to solidify and enhance the Clayton Act s attack on discriminatory pricing. The Act was designed to address specific types of harmful pricing behavior, in particular the favoring of then newly developing chain stores over long established, independent, but smaller retailers. The Act itself has been criticized as being convoluted and unnecessarily complex, as well as out of step with the rest of the antitrust laws. Although cases under the Act are now infrequently brought by the Federal Trade Commission and the Department of Justice, there has been a significant amount of private litigation in recent years. It has, however, become increasingly difficult for plaintiffs to win Robinson-Patman Act cases. This has been due primarily to the difficulties a plaintiff faces in proving antitrust injury. II. OVERVIEW OF THE ACT A. Codification The Robinson-Patman Act is codified at 15 U.S.C. 13, 13a, 13b, and 21a. An amendment was added in 1938 at 15 U.S.C. 13c. The Act itself has three main sections, starting with section 2 (there is no section 1 of the Act). The Act is usually referred to according to its internal sections 2, 3 and 4, and not its United States Code sections. B. Section 2 2(a) --Prohibits price discrimination; sets forth the defenses of cost justification and changing conditions. 2(b) --Sets forth the third defense against price discrimination of meeting competition. 2(c) --Outlaws both the payment and receipt of brokerage fees, except for services actually rendered. 2(d) --Prohibits discriminatory payments for services or facilities provided by the customer on behalf of the seller. 2(e) --Prohibits discriminatory provision of services or facilities by the seller to the customer. price. 2(f) --Creates liability for knowingly receiving or inducing a discriminatory See 15 U.S.C. 13.