Today’s Opinion in Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc.

In a 7-2 opinion, the Supreme Court on Tuesday announced that the Robinson-Patman Price Discrimination Act primarily addresses price discrimination by large manufacturers on products sold by retailers in direct competition with each other. The Act did not create liability for manufacturers offering varying discounts to retailers not directly in competition with one another to sell specially-ordered goods.

The case, Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc., available here, involved plaintiff-respondent Reeder’s claim that defendant-petitioner Volvo had discriminated against them in offering discounts on bids for specially-ordered, heavy duty trucks. Reeder has been an authorized Volvo dealer since 1995, selling cars and trucks in both Arkansas and Oklahoma. Like other Volvo dealers, Reeder had been granted exclusive retail authority over a particular territory; customers seeking to special order heavy duty trucks would not normally contact more than one Volvo dealer, but if a customer did solicit multiple Volvo dealers for the same contract, Volvo’s policy was to provide equal discounts to all dealers seeking that particular bid.

As evidence of price discrimination, Reeder pointed to one case in which it competed with another Volvo dealer for a particular bid and Volvo initially offered a lower bid to Reeder, which it later increased to match the discount offered to the other dealer. Neither dealer won the bid. Reeder also pointed to a case in which it competed with another dealer and that dealer won the bid, after which Volvo increased the discount on the heavy trucks because the buyer insisted that it not pay a recent increase in Volvo prices. Along with these cases, Reeder offered several cases in which it competed with non-Volvo dealers and lost the bid, and a number of cases in which another Volvo dealer competed with non-Volvo dealers and won the bid. In light of this evidence, the jury founded over $1.3 million in damages, which the judge then trebled in entering its judgement on the Robinson-Patman claim.

The Eighth Circuit affirmed, noting that Reeder had both established himself as a “purchaser” within the meaning of the act and that it had shown actual price discrimination between sales of similar goods. It also held that a reasonable jury could have found that Reeder was in “actual competition” with the other Volvo dealers who had received greater discounts because they competed in the same “functional” and geographic market. The Supreme Court granted certiorari to decide whether a Robinson-Patman claim could be valid absent a showing that the manufacturer had discriminated between dealers competing to resell its product to the same retail customer.

Writing for the Court, Justice Ginsburg noted that the Robinson-Patman Act was never intended to prevent all price differentiation, but only such discrimination that would injure marketplace competition. Since Reeder was alleging a “secondary-line” case, it needed to show that Volvo had diverted profits from Reeder, a “disfavored purchaser,” to some other “favored purchaser” through its pricing system. As such, Reeder needed to show that it was in actual competition with a favored purchaser for a the Robinson-Patman claim to withstand scrutiny. None of the anecdotal evidence offered by Reeder, however, showed actual competition in the market for heavy duty trucks between Reeder and the allegedly favored purchasers.

Justice Ginsburg also noted that the primary purpose of federal antitrust law is interbrand competition, not intrabrand competition. The Robinson-Patman Act should be construed in the broader context of antitrust law, so that it need not be extended to protect competitors within the marketplace, but instead only need protect the competition itself.

Justice Stevens dissented, joined by Justice Thomas, first noting that the present case was arguably a “rather ordinary Robinson-Patman suit.” Volvo indeed did not contest the jury findings that it had price-discriminated against Reeder nor that Reeder operated in the same geographic market as a favored purchaser. Instead, Volvo had claimed that “each transaction was a separate market,” which Justice Stevens characterized as an interpretation “not faithful to the statutory text.”