Response to update on the economic implications of the Robinson-Patman Act
This is an Insight article, written by a selected partner as part of GCR's co-published content. Read more on Insight
|Volvo v Reeder|
|Court||US Supreme Court|
|Cause of action||Anticompetitive conduct|
|Also referenced||Robinson-Patman Act; FTC policy statement, June 2022|
In a GCR Class Actions Hub update published 16 May, economic consultants Noureen Akber and Leslie Davis expressed their view of the “economic implications” of the Supreme Court’s 2006 Volvo Trucks N Am, Inc v Reeder-Simco GMC, Inc (546 US 164 (2006)). In this observer’s view, the article both misstates and overstates the meaningful role of economists in secondary-line Robinson-Patman cases.
While the article correctly notes that plaintiffs alleging a secondary-line violation based on Volvo must show that they directly “competed with a favored purchaser”, Volvo did not involve sales to the “same end user consumer”. It involved sales to reselling dealers, which is a simpler case because end user consumers normally do not compete. More significantly, contrary to the view of the authors, I am unaware of any appellate court decision requiring the determination of a relevant market in Robinson-Patman cases. The plaintiff need only prove that the customers are competitors (“absent competition” the plaintiff “cannot establish the competitive injury required under the Act”, Volvo, 546 US at 177), which requires no input by an economist.
The authors then opine that a secondary-line plaintiff needs an economist “to undertake a systematic study of harm to competition”, which “could require rigorous econometric analysis to demonstrate either adverse pricing or output effects stemming from the challenged conduct”. In this author’s opinion, this disregards the fact that discriminatory pricing in such a case can readily be discerned from invoices and available related documents. Significantly, as stated in Volvo, the plaintiff need only show that the price discrimination “threatens to injure competition” (Id at 176) – that is, the statutory language specifies only that the effects of the discrimination “may be” to lessen competition to violate the act (15 USC §13(a)). Indeed, injury to competition is presumed if the case involves a significant price difference over a substantial period of time involving a product for resale (see FTC v Morton Salt Co, 334 US 37, 50-51 (1948)). I am unaware of any secondary-line decision in which a showing of output effects was needed or was even relevant to meet the modest statutory injury requirement for secondary-line cases.
Additionally, the authors suggest that an economist is needed to evaluate whether favourable pricing was “functionally available” to competing buyers, or whether the challenged supplier was “meeting competition” from a different brand of product. In practice, such information is readily ascertained in pre-trial discovery from marketplace facts.
The authors correctly state that an “economist might conduct a study to ascertain whether the price discrimination was cost justified”. However, such studies are not usually undertaken, particularly because the evidentiary requirements of the Robinson-Patman cost justification defence are rigorous, difficult and costly to meet (see Texaco, Inc v Hasbrouck, 496 US 543, 561 n18 (1990); American Booksellers Ass’n v Barnes & Noble, Inc, 135 F Supp 2d 1031, 1064 (ND Cal 2001)). On the other hand, economists often are needed to prove damages in Robinson-Patman cases (see Hasbrouck, 496 US at 571-73; Coastal Fuels of Puerto Rico v Caribbean Petroleum Corp, 175 F 3d 18, 23-25, 33-35 (1st Cir 1999)).
The authors then state that the “like quality and grade” statutory requirement requires “economic analyses assessing the price elasticity or substitutability” of the products at issue. In fact, the legal standard only requires a showing that any physical differences between the products affect their marketability (see FTC v Borden Co, 383 US 637, 638, 640-41 (1966); Utah Foam Prods v Upjohn Co, 154 F 3d 1212, 1217 (10th Cir 1998). That may require testimony by an industry expert, but certainly not by an economist.
The authors then discuss the difficulties in successfully wining a class action by direct or indirect customers. However, I would maintain that such challenges are more than difficult to win; they have been uniformly unsuccessful for more than 40 years (see, for example, Danvers Motor Co v Ford Motor Co, 543 F 3d 141 (3d Cir 2008) – challenged programme affected individual buyers differently, showing claim lacked the commonality required for class action; Ass'n of College Bookstores, Inc v Cambridge Univ Press, 990 F Supp 245, 249 (SDNY 1997) – “established rule” that class certification of Robinson-Patman claim is inappropriate due to the degree of individualized proof required; O’Connell v Citrus Bowl, Inc, 99 FRD 117 (EDNY 1983) – Robinson-Patman claims particularly ill-suited to class action treatment; Abernathy v Bausch & Lomb, Inc, 97 FRD 470 (ND Tex 1983) – proof of competitive injury too highly individualised to allow class certification; Mekani v Miller Brewing Co, 93 FRD 506 (ED Mich 1982) (same)).
The authors conclude by declaring that the economic analyses they recommend may become necessary soon because of “the renewed focus” by the FTC on Robinson-Patman after more than 30 years since its last case. The new focus, however, has largely addressed the possible use of Section 2(c) of the act to challenge the conduct of pharmaceutical benefit managers, who are sales agents and not sellers or purchasers. Moreover, there is no need to prove probable competitive harm under Section 2(c) (see FTC v Simplicity Pattern Co, 360 US 55, 65 (1959)) and neither the cost justification nor meeting competition defence applies (see Biddle Purchasing Co v FTC, 96 F 2d 687 (2d Cir 1938) – cost justification); Ideal Plumbing Co v Benco, Inc, 529 F 2d 972, 977 (8th Cir 1976)). In fact, the Supreme Court has said that the provision does not have “any built-in defensive matter” (see FTC v Simplicity Pattern Co, supra n 12) Accordingly, an economist’s role in a private suit, if any, would be extremely limited.
In sum, the Akber/Davis article reconfirms this observer’s view that Robinson-Patman – a statute enacted in 1936 to protect small businesses (at the time, against chains like A&P), including by bringing private suits – is usually an incompatible pairing with economists, whose complex work can be so essential elsewhere in the enforcement of antitrust laws.