K&LNG
FEBRUARY 2006
Alert
Antitrust & Competition
Supreme Court Decides Robinson-Patman Act
Dealer Price Discrimination Case
On January 10, 2006, in its first ruling on the
Robinson-Patman Act (“RPA”) in sixteen years, the
United States Supreme Court ruled that a
manufacturer cannot be held liable for price
discrimination under the RPA, absent a showing that
the manufacturer discriminated between dealers
competing to resell to the same retail customer.
Volvo Trucks North America v. Reeder-Simco GMC,
Inc., 546 U.S. ____ (2006). The Supreme Court’s
decision upheld the main tenet of the RPA – that
manufacturers' cannot sell to purchasers at different
prices “where the effect of such discrimination may
be substantially to lessen competition,” 15 U.S.C. §
13(a) – but also allowed manufacturers working with
dealers bidding against dealers selling competing
manufactuerer’s products to retain some pricing
flexibility. The Supreme Court’s decision reversed a
decision by the United States Court of Appeals for
the Eighth Circuit (“Eighth Circuit”) that threatened
to significantly expand a manufacturer’s potential
liability for charging different prices to different
purchasers engaged in competitive bidding for
resale.
Volvo Trucks North America, Inc. (“Volvo”)
manufactures a line of heavy-duty trucks for
personal and vocational use. Reeder-Simco GMC,
Inc. (“Reeder”), an authorized Volvo dealer, sold
such trucks through a competitive bidding process to
end-user customers. Ordinarily as part of this
bidding process, customers pre-select certain dealers
representing various manufacturers to compete for
contracts and then request bids from those dealers
based on the customers’ specifications. Dealers
routinely negotiate with their manufacturer for price
concessions in order to submit the lowest bid price.
Reeder believed that Volvo stopped providing
Reeder with the same price concessions that Volvo
provided to its other dealers selling to other end-user
customers so that, pursuant to Volvo’s corporate
decision to reduce its number of dealers by half,
Volvo could eliminate Reeder’s dealership.
Subsequently, Reeder sued Volvo under the RPA for
price discrimination based on the disparate treatment
that Reeder received compared to other Volvo
dealers, primarily in sales to different customers.
After trial, the jury returned a judgment for Reeder
that, with trebled damages, amounted to $ 4,074,000.
The Eighth Circuit upheld the jury verdict, finding a
“reasonable possibility” that Volvo’s offering
different price concessions to its dealers, even when
those dealers were not competing for the same
contracts, illegally reduced competition among those
dealers.
In a 7-2 majority opinion by Justice Ginsburg, the
Supreme Court reversed the Eighth Circuit decision
and held that a manufacturer cannot be held liable
for price discrimination under the RPA, absent a
showing that the manufacturer discriminated
between dealers competing to resell to the same
retail customer. According to the Supreme Court,
the hallmark of the necessary “competitive injury”
under the RPA is “the diversion of sales or profits
from a disfavored purchaser to a favored purchaser.”
The Supreme Court focused on the fact that Reeder
failed to show that Volvo discriminated against
Reeder in actual competition against another Volvo
Kirkpatrick & Lockhart Nicholson Graham LLP
dealer for a particular customer. In neither the
purchase-to-purchase comparisons (where sales
were actually completed) or offer-to-purchase
comparisons (where there were only offers and sales
were not completed) did Reeder compete with
favored dealers “for the same customer.” Thus,
Reeder was not actually a competitor with any
favored Volvo dealer in any of those comparisons.
The Supreme Court noted that, in addition to failing
to prove discrimination in a head-to-head scenario
with other Volvo dealers, Reeder also failed to
present a “systemic study” that could prove a pattern
of discriminatory pricing when compared generally
to other Volvo dealers. The Supreme Court did not
decide the broader question of whether the RPA
reaches markets characterized by competitive
bidding and special-order sales, reasoning that even
if it did, the facts did not show price discrimination.
The Supreme Court’s opinion emphasized the
importance of interbrand competition, as opposed to
intrabrand competition, in antitrust law. The
Supreme Court argued that selective price
discounting and other strategies that may reduce
competition within brands are often essential to
fostering competition between brands. The Supreme
Court noted that a restrained interpretation of the
RPA is necessary in order to avoid stifling
interbrand competition through pricing inflexibility.
The Eighth Circuit’s interpretation would have
sharply limited the ability of manufacturers to
employ selective pricing strategies to react to market
conditions and compete effectively with other
brands.
A dissent, authored by Justice Stevens, adopted a
broader view of competition, arguing that firms
selling “in a single, interstate retail market” have
traditionally been treated as competitors under the
RPA. According to the dissent, by limiting the
2
analysis of competition to a discreet “transactionspecific” inquiry, the majority ignored the reality
that competition occurs over many transactions, with
the cumulative effect of price discrimination
possibly harming competition in the truck market,
even absent direct competition for a bid. The dissent
acknowledged that the RPA’s original intent of
protecting small retailers may no longer represent
“sound economic policy,” but Volvo’s attempt to
escape a contractual commitment and eliminate
firms from a competitive market provided a strong
reason for finding Volvo liable under the RPA.
Volvo Trucks does not mark a major shift in antitrust
practice related to price discrimination, particularly
because the Supreme Court refused to address the
broad question of whether the RPA reaches
competitive bidding and special-order sales
situations at all. The decision, however, does
provide some guidance for practitioners and the
business community with regard to competitive
bidding situations. First, although arguments remain
that offers to sell (as opposed to actual sales) do not
come within the purview of the RPA, manufacturers
can minimize their risk of antitrust liability by
providing the same concessions to all of their dealers
who are competing in direct head-to-head bidding
for the same end-user customer. Second, although
there still may be certain risks, manufacturers have
more leeway when granting concessions to dealers
who are not facing intrabrand competition in the sale
to a particular end-user but rather interbrand
competition.
Jennifer F. Shugars
jshugars@klng.com
412.355.8372
Ryan D. DeMotte
rdemotte@klng.com
412.355.6440
Kirkpatrick & Lockhart Nicholson Graham
LLP
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FEBRUARY 2006
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