Reference no: EM131740324

Case Scenario: Volvo Trucks North America, Inc., sells its heavy-duty trucks through franchised dealers who compete in a competitive bidding process typically with dealers of other manufacturers but occasionally with another Volvo dealer. This bidding process usually begins with a buyer inviting bids on a contract of stated specifications. For example, Big City Paving Company would indicate it is in the market to buy three dump trucks. A Volvo dealer would contact Volvo Trucks for pricing information so it could develop a bid to submit to Big City. At the same time, Big City would be soliciting bids from dealers representing other manufacturers, but it probably would not be dealing with a second Volvo dealer. If the Volvo dealer's bid is accepted by Big City, the dealer submits its order to Volvo Trucks, which then manufactures the trucks. Sometimes, prior to the buyer accepting a bid, Volvo Trucks works with its dealer to provide additional discounts on the trucks in the hope that these discounts could win it the business. Reeder, a Volvo dealer in Arkansas, sued Volvo Trucks for price discrimination alleging that Volvo Trucks sometimes gave other dealers greater discounts than those given to Reeder. These discounts were not given on competing bids to the same buyer but on bids to various buyers.

At trial, Reeder won a $1.3 million judgment on the theory that Volvo Trucks was guilty of violating Section 2 of the Clayton Act as amended by the Robinson-Patman Amendment. The Eighth Circuit Court of Appeals affirmed this judgment and the tripling of the damages. The Supreme Court granted certiorari to determine if price discrimination occurs in a competitive bidding process involving specially ordered trucks sold to a specific customer. GINSBURG, J.: Section 2, when originally enacted as part of the Clayton Act in 1914, was born of a desire by Congress to curb the use by financially powerful corporations of localized price-cutting tactics which had gravely impaired the competitive position o! other sellers. Augmenting that provision in 1936 w1th the Robinson-Patman Act, Congress sought to target the perceived harm to competition occasioned by powerful buyers, rather than sellers; specifically, Congress responded to the advent of large chain stores, enterprises with the clout to obtain lower prices for goods than smaller buyers could demand. The Act provides, in relevant part: It shall be unlawful for any person engaged in commerce to discriminate in price between different purchasers of commodities of like grade and quahty, 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 Pursuant to § 4 of the Clayton Act, a private plaintiff may recover threefold for actual injury sustained as a result of a violation of the Robinson-Patman Act.

Mindful of the purposes of the Act and of the antitrust laws generally, we have explained that Robinson Patman does not ban all price differences charged to different purchasers of commodities of like grade and quality; rather, the Act proscribes price discrimination only to the extent that it threatens to injure competition. Our decisions describe three categories of competitive injury that may give rise to a Robinson-Patman Act claim: primary-line, secondary-line, and tertiary-line. Primary-line cases entail conduct-most conspicuously, predatory pricing-that injures competition at the level of the discriminating seller and its direct competitors. Secondary-line cases, of which this is one, involve price discrimination that injures competition among the discriminating seller's customers (here, Volvo's dealerships); cases in this category typically refer to "favored" and "disfavored" purchasers. Tertiary-line cases involve injury to competition at the level of the purchaser's customers . . To establish the secondary-line injury of which It complains, Reeder had to show that

(1) the relevant Volvo truck sales were made in interstate commerce;

(2) the trucks were of "like grade and quality";

(3) Volvo "discriminated in price between" Reeder and another purchaser of Volvo trucks; and

(4) "the effect of such discrimination may be to injure, destroy, or prevent competition" to the advantage of a favored purchase i.e., one who "received the benefit of such discmunanon. It is undisputed that Reeder has sansf1ed the fust and econd requirements. Volvo and the United States, as am1cus curiae, maintain that Reeder cannot sansfy the thud and fourth requirements, because Reeder has not ldennfied any differentially-priced transaction m which It was bot a "purchaser" under the Act and "in actual compennon with a favored purchaser for the same customer.

A hallmark of the requisite competitive injury, our decisions indicate, is the diversion of sales or profits from a disfavored purchaser to a favored purchaser. We have also recognized that a permissible inference of competitive injury may arise fr eviderce that a favored competitor received a sigmficant pnce reduction over a substantial period of time. Absent actual competition with a favored Volvo do aler however, Reeder cannot establish the competitive 111Jury reqmred under the Act. The evidence Reeder offered at trial falls into three categories:

(1) comparisons of concessions Reeder received for four successful bids against non-Volvo dealers, with larger concessions other successful Volvo dealers received for different sales on which Reeder did not bid (purchase-to-purchase comparisons);

(2) comparisons of concessions offered to Reeder in connection with several unsuccessful bids against non-Volvo dealers, with greater concessions accorded other Volvo dealers who competed successfully for different sales on which Reeder did not bid (offer-to-purchase comparisons); and

(3) evidence of two occasions on which Reeder bid against another Volvo dealer (head-to-head comparisons).

The Court of Appeals concluded that Reeder demonstrated competitive injury under the Act because Reeder competed with favored purchasers at the same functional level and within the same geographic market. As we see it, however, selective comparisons of the kind Reeder presented do not show the injury to competition targeted by the Robinson-Patman Act. Both the purchase-to-purchase and the offer-topurchase comparisons fall short, for in none of the discrete instances on which Reeder relied did Reeder compete with beneficiaries of the alleged discrimination for the same customer. Nor did Reeder even attempt to show that the compared dealers were consistently favored vis-a-vis Reeder. Reeder simply paired occasions on which it competed with non-Volvo dealers for a sale to Customer A with instances in which other Volvo dealers competed with non-Volvo dealers for a sale to Customer B. The compared incidents were tied to no systematic study and were separated in time by as many as seven months.

We decline to permit an inference of competitive illJLirY from evidence of such a mix-and-match ' manipulable quality. No similar risk of manipulation occurs in cases akin to the chain-store paradigm. Here, there is no discrete "favored" dealer comparable to a chain store or a large independent department store-at least, Reeder's evidence is insufficient to support an inference of such a dealer or set of dealers. For all we know, Reeder, on occasion, might have gotten a better deal vis-a-vis one or more of the dealers in its comparisons. Reeder did offer evidence of two instances in which it competed head to head with another Volvo dealer. W hen multiple dealers bid for the business of the same customer, only one dealer will win the business and thereafter purchase the supplier's product to fulfill its contractual commitment. Because RobinsonPatman prohibits only discrimination between different purchasers, Volvo and the United States argue, the Act does not reach markets characterized by competitive bidding and special-order sales, as opposed to sales from inventory. We need not decide that question today.

Assuming the Act applies to the head-to-head transactions, Reeder did not establish that it was disfavored vis-a-vis other Volvo dealers in the rare instances in which they competed for the same sale - let alone that the alleged discrimination was substantial. Reeder's evidence showed loss of only one sale to another Volvo dealer, a sale of 12 trucks that would have generated $30,000 in gross profits for Reeder. Per its policy, Volvo initially offered Reeder and the other dealer the same concession. Volvo ultimately granted a larger concession to the other dealer, but only after it had won the bid. In the only other instance of head-to-head competition Reeder identified, Volvo increased Reeder's initial17 percent discount to 18.9 percent, to match the discount offered to the other competing Volvo dealer; neither dealer won the bid. In short, if price discrimination between two purchasers existed at all, it was not of such magnitude as to affect substantially competition between Reeder and the "favored" Volvo dealer. For the reasons stated, the judgment of the Court of Appeals for the Eighth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.

1. What is the holding of the trial court? The Eighth Circuit Court of Appeals?

2. What does the Supreme Court mean by the levels of price discrimination?

3. What required elements of price discrimination are missing from the sales model used in the heavy-duty truck market?