District Of New Jersey Denies Summary Judgment On Robinson-Patman Rebates Claims
04/23/2019On April 1, 2019, Judge William J. Martini of the United States District Court for the District of New Jersey denied defendants’ motion for summary judgment in a Robinson-Patman Act suit. Marjam Supply Co. v. Firestone Building Products Co. LLC, et al., Case No. 2:11-cv-07119 (D.N.J. 2019). The Court found that plaintiff raised triable issues of fact regarding defendants’ selective offering of rebates, discounts, and other financing programs under the Robinson-Patman Act’s price discrimination provisions.
Plaintiff alleged that defendants, manufacturers of roofing materials, offered rebates and discounts on a selective basis to certain distributors. Plaintiff alleged that it did not receive these preferential terms, and that defendants therefore violated Sections 2(a) and 2(d) of the Robinson-Patman Act. 15 U.S.C. § 13. Section 2(a) prohibits price discrimination related to the initial sale of goods to customers, while 2(d) prohibits a seller from offering different promotions or benefits that help customers resell the products at issue.
Robinson-Patman claims have four elements: (1) sales made to two separate purchasers in interstate commerce; (2) the products sold were of the same grade and quality; (3) defendant discriminated in pricing between the two purchasers; and (4) the discrimination had a prohibited effect on competition. The Court’s opinion focused on the fourth element, noting it requires proof of a competitive injury (a reasonable possibility that competition was harmed by the price difference) as well as an antitrust injury (a causal connection between the discriminatory price and actual damages).
The Court found that plaintiff provided sufficient direct and indirect proof of “competitive injury.” The Court noted that direct proof included employees’ testimony that customers bought from plaintiff’s competitor after learning that the competitor’s prices were lower, as well as an expert report analyzing competitors’ increasing sales of defendants’ products to plaintiff’s customer base concurrent with plaintiff’s decreasing sales. As for indirect evidence, the Court applied a presumption of harm (the “Morton Salt inference”) under which a showing of price discrimination that persists over time is sufficient to establish competitive injury even where there is no direct evidence of displaced sales. The Court applied the Morton Salt inference on the basis of witness declarations attesting that defendants offered higher rebates at greater frequencies to plaintiff’s competitors over the course of two years.
Defendants argued that plaintiff was also unable to establish “antitrust injury” because it failed to show that the alleged disparate treatment caused injury and that, in any event, the alleged injury was not the type meant to be remedied by the Robinson-Patman Act. The Court rejected these arguments on the grounds that plaintiff had presented evidence sufficient to make a prima facie showing of harm to competition based on price discrimination. In particular, plaintiff offered testimony from competing distributors and defendants’ own employees noting that rebates allowed competitors to have better margins and offer lower prices to customers, while plaintiff was squeezed on profits. The Court found that plaintiff had lost customers from 2009-2011, that those customers had shifted their purchases to plaintiff’s competitors because of the competitors’ lower prices, and that plaintiff had lost profits as a result. With respect to plaintiff’s Section 2(d) claim, the Court determined that similar standards applied for showing competitive injury and antitrust injury, and thus held that plaintiff presented sufficient evidence to create a triable issue of fact.
Defendants also unsuccessfully argued that the existence of “inter-brand” competition with other roofing manufacturers precluded antitrust, because plaintiff had the option to distribute other manufacturers’ products. The Court found this to be a triable issue of fact for two reasons. First, it was unclear that plaintiff could distribute competing products because defendant threatened to end plaintiff’s distributorship if plaintiff carried another manufacturers’ products. Second, some key customers used only defendants’ roofing products, so no viable product substitute existed.
Although Robinson-Patman Act cases are relatively uncommon, this case is an example of such a case that may be viable and can survive summary judgment. Companies should be cognizant of the Robinson-Patman Act’s requirements when implementing discount or rebate programs.