District Of New Jersey Denies Building Materials Manufacturer’s Motion For Summary Judgment In Alleged Price Discrimination Lawsuit
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  • District Of New Jersey Denies Building Materials Manufacturer’s Motion For Summary Judgment In Alleged Price Discrimination Lawsuit

    On April 1, 2019, Judge William J. Martini of the United States District Court for the District of New Jersey denied Firestone Building Products Company LLC’s motion for summary judgment on price discrimination claims brought by a building materials distributor.  Marjam Supply Co. v. Firestone Bldg. Prod. Co., LLC, No. 2:11-cv-7119, 2019 WL 1451105 (D.N.J. Apr. 2, 2019).  Plaintiff alleged that defendant, a manufacturer of building materials, offered its roofing products to several of plaintiff’s competitors (“Favored Distributors”) at terms more favorable than those offered to plaintiff through a variety of non-uniform rebate, discount and financing programs in violation of Sections 2(a) and 2(d) of the Robinson-Patman Act.  Plaintiff claimed that due to the disparate terms offered by the manufacturer, Favored Distributors were able to offer the manufacturer’s products to plaintiff’s major customers at lower prices than plaintiff and that it lost significant business as a result.

    Judge Martini first addressed defendant’s motion for summary judgment on plaintiff’s Section 2(a) claim.  A prima facie Section 2(a) claim requires a plaintiff to prove four elements:  (1) that sales were made to two different purchasers in interstate commerce; (2) that the product sold was of the same grade and quality; (3) defendant discriminated in price as between the two purchasers; and (4) that the discrimination had a prohibited effect on competition.  Defendant argued, inter alia, that there was no genuine issue of material fact as to whether plaintiff suffered competitive or antitrust injuries.  Judge Martini disagreed, finding that plaintiff-distributor had provided enough direct and indirect evidence of competitive injury, as well as antitrust injury, to create a triable issue for the jury.  

    With respect to direct evidence of competitive injury, Judge Martini pointed to deposition testimony that plaintiff lost customers and sales because its prices were higher than its competitors, despite plaintiff lowering its prices several times to the point where the business was no longer profitable.  Further, rather than relying entirely on hearsay evidence as to customer motivation, plaintiff presented data-based expert evidence demonstrating that its sales to its major customers generally decreased from 2009-2011, while the Favored Distributors’ sales to the same customers increased, as well as contemporaneous business communications on point.  Evidence of the diversion of sales or profits from a disfavored purchaser to a favored purchaser, the court found, is the “hallmark of the requisite competitive injury.”  With respect to indirect evidence of competitive injury, Judge Martini found that plaintiff had offered proof of substantial price discrimination over time between competing purchasers in the form of inequitable rebates and terms of sale offered to the Favored Distributors, and that this was sufficient to establish the presumption of an injury to competition.  Further, because plaintiff had offered affirmative causation evidence that must be credited on a defense motion for summary judgment, the defense evidence offered to break the causal link between defendant’s conduct and plaintiff’s injury and to rebut the presumption of injury would need to be addressed at trial, not summary judgment.       

    With respect to antitrust injury, Judge Martini found that plaintiff had sufficiently demonstrated a link between the alleged price discrimination and plaintiff’s ability to compete to raise a triable issue of material fact.  Stating that the “connection between a distributor’s purchase and sale price may be so obvious that no evidence is required,” the court also found that plaintiff had an ample record of evidence, including deposition testimony about how distributors factored rebates into their pricing and how rebates affected prices, to meet its burden of showing “some damage flowing” from the Robinson-Patman violation.

    Judge Martini also rejected the defense argument that inter-brand competition between defendant and other roofing product manufacturers precluded finding the “requisite injury to competition.” Judge Martini found that plaintiff’s evidence that defendant threatened to revoke plaintiff’s distributorship if it carried another manufacturer’s products and that some major customers exclusively used defendant-branded roofing products, which prevented plaintiff from swapping manufacturers and continuing to compete for those customers’ business, was sufficient to create triable issue as to whether defendant’s conduct injured inter-brand competition.  Based on this analysis, Judge Martini denied the manufacturer’s motion for summary judgment. 

    Judge Martini’s decision is an important reminder that, while Robinson-Patman claims are relatively uncommon and generally disfavored for sound economic reasons, Robinson-Patman claims with sufficient evidentiary support can survive a motion for summary judgment.