Amicus Curiae Brief — Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc.

(7) | MAY 2.0 2008

No. 04-905 batterers

IN THE

Supreme Court of the United States

VOLVO TRUCKS NORTH AMERICA, INC.,

Petitioner,

Vv.

REEDER-SIMCO GMC, INC.,

Respondent.

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF OF THE AMERICAN PETROLEUM INSTITUTE AS

AMICUS CURIAE SUPPORTING PETITIONER

Of Counsel: Carolyn F. Corwin

Harry M. Ng Counsel of Record

Douglas W. Morris Gregory M. Lipper*

AMERICAN PETROLEUM COVINGTON & BURLING

INSTITUTE 1201 Pennsylvania Avenue, NW

1220 L Street, N.W. Washington, DC 20004-2401

Washington, DC 20005 (202) 662-6000

(202) 682-8000

Attorneys for Amicus Curiae

* Admitted in California, not

admitted in the District of

May 20, 2005 Columbia. Supervised by

principals of the firm

QUESTIONS PRESENTED

1. Whether Robinson-Patman Act liability may be

imposed based on transactions in which the disfavored

purchaser and the favored purchaser have not competed for

the same business.

2. Whether Robinson-Patman Act liability may be

imposed where the seller offers a price to a dealer in a

competitive bidding situation and the dealer makes no

purchase for that piece of business.

TABLE OF CONTENTS

Page

INTEREST OF AMICUS CURIAE....0.......cccccccecceeeceeeeeeeenees 1

EET 2

SUMMARY OF ARGUMENT.....000........cccccccsceseeseeeeeeneeeseenens 3

ia sce cndprectctinnensenenenenseonessnssnscscscoocceess 4

I. RPA LIABILITY SHOULD NOT BE IMPOSED

WHERE THE FAVORED AND DISFAVORED

DEALERS HAVE NOT COMPETED FOR THE

a 5

A. The Decision Below Departs from Settled Law......... 5

B. There Is No Legal Basis for Expansion of RPA

Liability Beyond Transactions in Which

Favored and Disfavored Purchasers Have

Competed for the Same Business. .....................0000+ 11

1. The Text of the RPA Does Not Support Such

aT 11

2. This Court’s Precedents Do Not Support Such

eT 12

3. The Legislative History Does Not Support

Such an Expansion. ............cccccccsseeseeeerseeeseeeeeeees 17

II. RPA LIABILITY SHOULD NOT BE IMPOSED

WHERE THE POTENTIAL CUSTOMER MAKES

a IEEE ccccccccssccscssccncnscssessnesboecssessseeceseceeseesoeees 19

SEITE cticecieencentnsnseccceovencesccsccsesessensvescscstevssecnecnecceces 23

TABLE OF AUTHORITIES

Page(s)

CASES

Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472

es Sa cicnicesaicensssinsintinsarianieseiieibiantniaaiindaiiiiiiiaianiiatibs 16

Bay-City Abraham Bros. v. Estee Lauder, Inc., 375 F.

Se 21

Best Brands Beverage, Inc. v. Falstaff Brewing Corp.,

ge rae 5,6

Bird & Son, In re, 25 F.T.C. 548 (1937) .......ccccccccceeeeceeeeeeeee 21

Boise Cascade Corp. v. FTC, 837 F.2d 1127 (D.C. Cir

Si iceressisnsniebinnssineiteepsiieaiaibaanbaitcaatiaasiaaaiasadeiheaiaseiasiinndasinianiinbinbadlindiatia 17

Brooke Group Ltd. v. Brown & Williamson Tobacco

Sig SI le Se ccmnncrenttmntneteniniennaaiatenniin 12

Bruce's Juices, Inc. v. American Can Co., 330 U.S. 743

ET cicehecerveeieeinsiaipiitensiahamacsanineaiiinideadetinainhiiiiaaceibaisiaiiainiaiiietelemiahia 19

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S.

ee iiniersinniniteieaciieincaiaahianhiniaacaetsiatcaeiantiiaaietiaaiaisiieaibiial 15

Chroma Lighting v. GTE Prods. Corp., 111 F.3d 653

SESEEEEEEDD GUI cesininiennistitiiesteuniarensininintisinidinssiesiiaassiiaaiialiieniaiaiiaiiiia 17

FTC v. Morton Salt Co., 334 U.S. 37 (1948) ............00+: 12, 19

FTC v. Sun Oil Co., 371 U.S. 505 (1963) .........cccccccceseeeeeeeee 13

Falls City Indus., Inc. v. Vanco Beverage, Inc., 460

ee EE ccrnsssnciunintenntinnnnimacinctnttiatmmnsisimaiiatataisithicie 13, 14

Fusco v. Xerox Corp., 676 F.2d 332 (8th Cir. 1982)............ 20 .

Great Atl. & Pac. Tea Co. v. FTC, 440 U.S. 69 (1979)....... 15

Infusion Resources, Inc. v. Minimed, Inc., 351 F.3d 688

(Sth Cir. 2003), cert. denied, 124 S. Ct. 2881 (2004)....... 6

il

J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524

oo: | 17

J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S.

of | ee ee 15

Lupia v. Stella d'Oro Biscuit Co., 586 F.2d 1163 (7th

ae 6

M.C. Mfg. Co. v. Texas Foundries, Inc., 517 F.2d 1059

Oe 6

Motive Parts Warehouse v. Facet Enters., 774 F.2d 380

ol 9

Mullis v. Arco Petroleum Corp., 502 F.2d 290 (7th Cir.

SE 21

NYNEX Corp. v. Discon, Inc., 525 U.S. 128 (1998) .........+. 16

Republic Packaging Corp. v. Haveg Indus., Inc., 406 F.

Supp. 379 OLD. TE. 1976) ........0.cccccsccscescccveccscsscscsecsseses 22

Shaw's, Inc. v. Wilson-Jones Co., 105 F.2d 331 (3d Cir.

I cccenenssenacnacsnnssnnmentensesmenmemennmsmsemnnsmtientees 20, 21

Texaco, Inc. v. Hasbrouck, 496 U.S. 543 (1990) .........c0+0++ 14

United States v. Colgate & Co., 250 U.S. 300 (1919).......... 16

Verizon Communications, Inc. v. Law Offices of Curtis

V. Trinko, 540 U.S. 398 (2004) .........cccccccseeseeeceecsenneeneees 16

ill

STATUTE

Robinson-Patman Act, § 2, 15 U.S.C. §13 ........ccccccceeee passim

MISCELLANEOUS

I American Bar Association, Section of Antitrust Law,

ANTITRUST LAW DEVELOPMENTS (Sth ed. 2002)............- 5

H. R. Rep. No. 74-2287 (1936) .........c.ccccccccscsesssessceeeeess 18, 19

William C. Holmes, ANTITRUST LAW HANDBOOK

Seren isviitecshesenetniieieetinhinaeiaeaniatniiiaasceapaaamaasil 9.

14 Herbert Hovenkamp, ANTITRUST LAW (2d ed.

Siraora i cticthesiesntcnsernrinanensniaianaiitimnintiiisniniataiaiaussaaai passim

Frederick M. Rowe, PRICE DISCRIMINATION UNDER THE

ROBINSON-PATMAN ACT (1962)........c.ccccsecseeseseeseeseeseeees 17

NT 18, 19

Harry L. Shniderman & Bingham B. Leverich, PRICE

DISCRIMINATION IN PERSPECTIVE (2d ed. 1987).............+. 5

iV

This brief is submitted on behalf of the American

Petroleum Institute (“API”) as Amicus Curiae in support of

the Petitioner.’

INTEREST OF AMICUS CURIAE

API, a non-profit District of Columbia corporation, is

a national trade association for the U.S. oil and natural gas

industry. API’s more than 400 members cover all facets of

the industry, including exploration, production,

transportation, refining, and marketing.

API members face issues of compliance with the

Robinson-Patman Act (“RPA”) on a daily basis. Products

such as gasoline and lubricants are distributed through

networks of dealers and distributors. In establishing prices

for customers, API members seek to comply with the

provisions of the RPA and frequently seek counsel regarding

RPA requirements. API members therefore have an interest

in ensuring that judicial guidance in this area is well defined

and consistent with the statute. A large number of the RPA

cases decided by this Court and others involve the petroleum

industry.

API has frequently participated on its industry’s

behalf in legislative, administrative, and judicial proceedings

that present issues of national concern, including issues

involving interpretation of the RPA. This case presents such

issues. API believes that its participation as amicus curiae in

this case will provide the Court with a broader perspective on

the questions presented and will help to highlight the broad

' Pursuant to Rule 37.6, counsel for Amicus Curiae states that no counsel

for a party authored this brief in whole or in part and no person other than

Amicus Curiae, its members, and its counsel made a monetary

contribution to the brief’s preparation or submission.

significance of these questions. Both parties have consented

to API's participation, and the letters of consent are being

submitted with this brief.

STATEMENT

Petitioner Volvo Trucks North America, Inc.

(“Volvo”) sells trucks through a system of dealers located

throughout the United States. Respondent Reeder-Simco

GMC, Inc. (“Reeder”) is a Volvo dealer located in Fort

Smith, Arkansas. Reeder sued Volvo, alleging price

discrimination in violation of the Robinson-Patman Act, 15

U.S.C. §13 (“RPA”). The jury found that Volvo had violated

the RPA, and awarded damages. Petitioner’s Appendix

(“Pet. App.”) 6a-7a.

The United States Court of Appeals for the Eighth

Circuit affirmed. Pet. App. la-32a. The majority held that

Reeder had established the elements of an RPA violation. It

rejected Volvo’s argument that Volvo should not be held

liable for price discrimination in competitive bidding

situations where Reeder had failed to win the business and

thus had made no purchase from Volvo. /d. at 10a-lla. The

majority also concluded that Volvo could be held liable for

price discrimination where Reeder claimed injury in

connection with sales in which its competitor for the business

purchased trucks from another manufacturer. Among other

things, the majority found that Volvo intended to eliminate

some dealers like Reeder and held that this constituted

antitrust injury. /d. at 19a.

Judge Hansen concurred in part and dissented in part,

concluding that Reeder had failed to make out a claim under

the RPA. In his view, the majority had “attempt{ed] to fit a

Square peg into a round hole.” Pet. App. 27a. Judge Hansen

concluded that the RPA does not apply to competitive

bidding situations, where there is only a single purchase, and

2

that there is no RPA violation where there is no injury to

competition between Reeder and a favored purchaser. /d. at

27a-32a.

SUMMARY OF ARGUMENT

The decision below purports to be a routine

application of settled law under the RPA, but it actually

marks a broad and unprecedented expansion of that statute’s

scope. In the most troubling aspect of the opinion, the

majority concluded that a seller may be held liable for an

RPA violation based on price discrimination that had nothing

to do with competition between favored and disfavored

purchasers for a particular piece of business. In such

transactions, Reeder (Volvo’s customer) competed not

against another Volvo dealer, but against a dealer who

purchased from a different truck manufacturer. Thus, the

alleged discrimination did not affect competition between

Volvo dealers; the only effect was to reduce Reeder’s profits.

The court of appeals’ conclusion that such

discrimination could form the basis for a finding of RPA

liability is inconsistent with settled law. Until the decision

below, the law was clear that price discrimination is not

actionable under the RPA unless two customers are

competing for the same business. If the requirement that the

favored and disfavored purchasers compete for the same

business is abandoned, serious practical problems will result.

Under such an open-ended view of the statute, it would be

difficult to counsel companies regarding what pricing

conduct is legal and competition would suffer.

There is no basis for this Court to adopt such an

interpretation. Neither the language of the RPA nor this

Court’s precedents support the court of appeals’ reading of

the statute. Nor does the legislative history support this

interpretation. The Court should reject such an unprece-

dented expansion of the RPA.

The Court should also reject the court of appeals’

conclusion that RPA liability may be imposed where a seller

quotes a price to a dealer engaged in competitive bidding and

the dealer fails to win the business and thus makes no

purchase. The statute is clear that there must be two

purchases in order for price discrimination to be actionable.

The Court should clarify that there can be no RPA liability in

such competitive bidding situations.

ARGUMENT

API members are deeply concerned with RPA

compliance and spend substantial time taking steps to ensure

that their employees act within the boundaries the courts

have established in this area. In devising pricing

arrangements, oil companies have relied on settled RPA law.

The decision below departs from settled law, abandoning

limits on RPA liability that are firmly grounded in the

statutory language and judicial precedent.

Theie is no basis for this departure from settled

precedent. The Court should therefore reverse the decision

below. in doing so, the Court should make clear that in

secondary line cases (1) RPA liability may be imposed only

in connection with transactions where the favored and

disfavored purchasers have competed for the same business;

and (2) RPA liability may not be imposed where the seller

quotes a price to a dealer engaged in competitive bidding and

the dealer fails to win the business and thus makes no

purchase. These conclusions are consistent with the statute,

with this Court’s precedents, and with congressional intent.

Such clear statements of the law would permit advisers to

counsel with confidence when addressing pricing practices.

I. RPA LIABILITY SHOULD NOT BE IMPOSED

WHERE THE FAVORED AND DISFAVORED

DEALERS HAVE NOT COMPETED FOR THE

SAME BUSINESS.

A. The Decision Below Departs from Settled Law.

Under the RPA, price discrimination alone is not

enough to constitute a violation. There must also be injury to

competition.’ Until the decision below, it was clear that

“[p]roving injury to competition at the buyer’s level—

secondary line injury—requires proof of competition

between the favored and disfavored purchasers.” I American

Bar Association, Section of Antitrust Law, ANTITRUST LAW

DEVELOPMENTS 477 (Sth ed. 2002) (citing cases).

“Generally, the favored and disfavored customers must be in

actual competition in the resale of the seller’s commodity for

a difference in price to have any likely competitive effect at

the buyer level.” Harry L. Shniderman & Bingham B.

Leverich, PRICE DISCRIMINATION IN PERSPECTIVE § 207.e, at

61 (2d ed. 1987) (discussing possible exception where sales

are to different functional levels).

Many courts of appeals have articulated this

requirement. For example, in Best Brands Beverage, Inc. v.

? Section 2(a) of the Robinson-Patman Act, 15 U.S.C. § 13(a), makes it

unlawful

to discriminate in price between different purchasers

of commodities of like grade and quality. . 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.

Falstaff Brewing Corp., 842 F.2d 578 (2d Cir. 1987), the

Second Circuit concluded that the wholesaler plaintiff had

failed to make out an RPA claim because it did not establish

that it had been in actual competition with a wholesaler in

another territory. In concluding that the plaintiff had failed

to prove the requisite likelihood of competitive injury

resulting from the alleged discrimination, the court

emphasized that a plaintiff must show that it was “engaged in

actual competition with the favored purchaser(s) as of the

time of the price differential” (id. at 584), and that there must

be a showing of “competitive contact” between recipients of

the price differential (id. at 585).

The Fifth Circuit has been even more explicit. In

discussing the required showing of “competitive contact,”

that court explained that “‘[o]nly if [the customers] are each

directly after the same dollar are they competing.’” Infusion

Resources, Inc. v. Minimed, Inc., 351 F.3d 688, 692-93 (Sth

Cir. 2003), cert. denied, 124 S. Ct. 2881 (2004) (quoting

M.C. Mfg. Co. v. Texas Foundries, Inc., 517 F.2d 1059, 1065

(Sth Cir. 1975)). In Infusion Resources, the court concluded

that the distributor had failed to prove an RPA violation,

despite its claim that it was competing nationwide with the

defendant’s other distributors, since it had not shown “actual

competition with a favored purchaser at the time of the

alleged price discrimination.” /d. at 693.°

* See also, e.g., M.C. Mfg. Co. v. Texas Foundries, Inc., 517 F.2d 1059,

1068 n.20 (Sth Cir. 1975) (under the RPA, “‘[c]ompetition is determined

by careful analysis of each party’s customers. Only if they are each

directly after the same dollar are they competing.’”) (quoting Ag-Chem.

Equip. Co. v. Hahn, Inc., 350 F.Supp 1044, 1051 (D. Minn. 1972),

modified on other grounds, 480 F.2d 482 (8th Cir. 1973)); Lupia v. Stella

d'Oro Biscuit Co., 586 F.2d 1163, 1171 (7th Cir. 1978) (plaintiff who

claimed he lost sales in town where another distributor had a better

(continued...)

Based on these and other decisions, sellers have

understood that they generally may compete by offering

selective discounts to customers in different geographic

regions without fear of liability. They could offer different

prices to customers who were bidding on different contracts.

With some limitations, they could offer discounts to

customers at separate functional levels. In other words, they

could compete by discounting selectively so long as the

favored and disfavored customers were not competing for the

“same dollar.”

Were the Court to affirm the decision below, these

well-established limits on RPA liability would disappear and

competition would suffer. In affirming the judgment of the

district court, the court of appeals embraced a reading of the

RPA under which a seller may be held liable on the ground

that a disfavored purchaser lost sales or profits not to a

favored purchaser, but to a dealer that did not purchase from

that seller. In the four purchases that Reeder made from

Volvo and that the court of appeals cited as a basis for

imposing RPA liability, Reeder did not compete with another

Volvo dealer for the business. Rather, it competed only with

a non-Volvo dealer. Reeder had already successfully bid for

the sale to its customer, and Volvo’s allegedly discriminatory

prices did not cause Reeder to lose that sale—either to

another Volvo purchaser, or to anyone else. The only impact

of the allegedly higher price that Reeder paid was that it

earned less profit than it would have had Volvo offered a

lower price.

The court of appeals also cited situations in which

Reeder lost sales to a non-Volvo dealer, allegedly because

discount could not show an RPA violation since he could not show sales

he actually lost due to price discrimination).

Reeder did not receive a discount Volvo granted to another

Volvo dealer in connection with a different sale. Again,

there was no competition between two Volvo dealers for the

same business. The two allegedly discriminatory prices were

offered in connection with different transactions. In other

words, the favored and disfavored Volvo dealers were not

competing for the “same dollar.”

The practical result of this interpretation of the RPA

is to create great uncertainty for sellers. Before the decision

below, sellers could be comfortable competing by charging

different prices to dealers, so long as it was clear that those

dealers were not competitors for the same business. If the

decision below were affirmed, however, a seller would face ©

the prospect that pricing will be found to violate the RPA if a

plaintiff can show that another dealer received a lower price

in a different transaction, even when the two dealers did not

compete for the transaction at issue. There would be no clear

boundaries to potential liability. Under the court of appeals’

view of the statute, a jury could find an RPA violation based

on a discount the seller granted to a dealer in a distant

location, even if the favored and disfavored dealers never

actually pursued business from the same consumer. A seller

could no longer rely on identification of separate geographic

markets, concluding, e.g., that a selective discount to a dealer

hundreds of miles aw2y from other dealers was likely to be

lawful. In effect, RPA liability would be open-ended, it

would be difficult to provide meaningful guidance that would

allow sellers to avoid liability, and competition would suffer.

Our concern about this unwarranted and open-ended

expansion of RPA liability is magnified in light of the court

of appeals’ treatment of the requirement that the defendant’s

sales to the plaintiff and the favored buyer must be

reasonably contemporaneous. In the past, this principle has

helped to ensure that RPA liability is confined to situations in

which the discrimination actually limits competition between

8

favored and disfavored purchasers for the same resale

business.’ Here, however, the court of appeals was willing to

accept sales that took place months apart as evidence of price

discrimination. °

This treatment of the evidence reinforces our concern

that expansion of the RPA beyond situations in which

favored and disfavored purchasers compete for the same

business would have a particularly detrimental effect in

industries, such as the petroleum industry, where there are

* See, e.g., Motive Parts Warehouse v. Facet Enters., 774 F.2d 380, 389-

90 (10th Cir. 1985) (because two purchases were not contemporaneous,

plaintiff could not establish that the two purchasers competed with each

other); William C. Holmes, ANTITRUST LAW HANDBOOK § 4:3 (2004).

> The “evidence” of price discrimination the court cited includes the

following: (1) Volvo gave Reeder a 9% concession in March 1998,

compared with a 12.3% concession to another dealer in January 1998; (2)

Volvo gave Reeder a 19% concession in February 1997, compared with a

21% concession to another dealer in November 1997; (3) Volvo gave

Reeder a 24.2% concession in November 1996, compared with a 27.3%

concession to another dealer in February 1997; and (4) Volvo gave

Reeder a 13.27% concession in February 1996, compared with

concessions to other dealers of 18.04%, 15.42%, and 14.53% im,

respectively, September 1996, April 1996, and February 1996. See Pet.

App. 5a-6a. The court found such prices to be discriminatory even

though Volvo produced evidence that market conditions changed from

month to month. See id. at 14a.

If sellers in the petroleum industry must fcar RPA liability not only

when they charge different prices at the same time, but also when they

make sales separated by weeks or months, they will undoubtedly be more

reluctant to adjust prices in response to market conditions. See

14 Herbert Hovenkamp, ANTITRUST LAW 92313a (2d ed. 1999) (“Sudden

changes in demand, supply, or costs often affect the market price,

sometimes dramatically, and a sale made before such a change occurs

should not be paired wit. 2 sale made after such a change. To do so

would seriously limit s<. rs’ ability to respond to changing market

circumstances.”’).

frequent market fluctuations. Sellers in these businesses

must be able to increase and decrease prices to respond to

rapid changes in the market, including movements in the cost

of inputs and volatility at the retail level. In the gasoline

business, for example, sellers face daily (and even more

frequent) changes in the price of oil, based on many factors.

“In a tight world oil market, even small changes in supply or

demand have been known to have a dramatic impact on

prices.” And “(t]he changes we have seen over the past year

— attributable to instability in some key oil producing

regions, bad weather and continued high demand — have been

far from small.”

In order to compete vigorously and successfully, a

broker in such a business must respond quickly, adjusting its

prices in different geographical areas as conditions change.

Likewise, gasoline suppliers must be able to react quickly to

localized needs of retailers, who operate in the context of

frequent changes to market conditions, including continuous,

transparent price adjustments reflected on highly visible price

signage. Particularly in view of the court of appeals’

willingness to accept sales that took place months apart as

evidence of price discrimination, its unprecedented

interpretation presents an especially significant threat for

sellers that must respond to frequent market changes.

* American Petroleum Institute, FY/ on Gasoline (Apr. 13, 2005), at

http://api-ec.api.org/filelibrary/FY1%20gasoline%204-13-05.pdf.

10

B. There Is No Legal Basis for Expansion of RPA

Liability Beyond Transactions in Which Favored

and Disfavored Purchasers Have Competed

for the Same Business.

The reading of the RPA embraced by the court of

appeals lacks a basis in the statutory text, this Court’s

interpretations of the RPA, or the legislative history.

Expansion of RPA liability beyond transactions in which

favored and disfavored purchasers compete for the same

business should be rejected.

1. The Text of the RPA Does Not Support Such

an Expansion.

The text of the RPA does not support imposition of

liability on a seller based on transactions in which the

plaintiff was not competing with a favored purchaser for the

same business. The statute makes it illegal to engage in price

discrimination “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.” 15

U.S.C. § 13(a) (emphasis added).

By its terms, then, the statute requires a harm to

competition, not just harm to a purchaser. Where alleged

discrimination between two purchasers does not affect any

transaction in which they are in competition for the same

business, there can be no harm to competition. Moreover,

the final clause of the quoted text refers to competition with a

person who grants or “receives the benefit of [the]

discrimination.” On its face, this language does not apply to

situations where the favored purchaser was not competing

with the plaintiff for a piece of business.

11

2. This Court’s Precedents Do Not Support Such

an Expansion.

This Court’s prior interpretations of the RPA do not

provide support for reading the statute to cover situations in

which the favored and disfavored purchasers are not

competing for the same business. The Court has previously

found violations of the RPA in secondary line cases only

when the price discrimination involved purchasers from the

same seller who were competing for the same business.”

In FTC v. Morton Salt Co., 334 U.S. 37 (1948), the

Court held that the defendant, a producer of salt, violated the

RPA because it offered discounts only to those wholesalers

and retailers that purchased a certain quantity of salt. The

Court observed that the “quantity discounts on Blue Label

and on other table salts were enjoyed by certain wholesalers

and retailers who competed with other wholesalers and

retailers to whom these discounts were refused.” /d. at 42

(emphasis added). The RPA violation was compounded

” In Brooke Group Lid. v. Brown & Williamson Tobacco Corp., 509 U.S.

209 (1993), a primary line injury case, the plaintiff alleged that the

defendant cigarette maker had introduced its own brand of generic

cigarettes and had sold them below cost and offered selective rebates to

certain wholesalers. The defendant had introduced these price cuts to

match the prices of a competitor cigarette maker. The Court held that the

defendant was entitled to judgment as a matter of law, emphasizing that

“the Robinson-Patman Act condemns price discrimination only to the

extent that it threatens to injure competition.” /d at 220. Indeed,

“Congress did not intend to outlaw price differences that result from or

further the forces of competition.” /d. This case - which demonstrates

how far a court can stray from the traditional bounds of RPA liability —

presents an appropriate occasion for the Court to make simularly clear that

a plaintiff in a secondary line injury case must demonstrate that price

discrimination has a detrimental effect on competition (not merely on

competitors).

12

because “special allowances were granted certain favored

customers who competed with other customers to whom they

were denied.” /d. (emphasis added). The Court reiterated

that “competition may be adversely affected by a practice

under which manufacturers and producers sell their goods to

some customers substantially cheaper than they sell like

goods to the competitors of these customers.” Id. at 50

(emphasis added).

In FTC v. Sun Oil Co., 371 U.S. 505 (1963), the

Court applied the RPA to circumstances in which price

discrimination affected competition between purchasers. The

defendant gasoline company had offered a price break to one

of its retailers so that the retailer could match the price cut of

a competitor selling a different brand of gasoline. However,

the defendant had not offered an equivalent discount to its

other retailers who operated in the same region and competed

with the favored retailer for the same business. There was

evidence that some of the retailers who did not receive the

discount had lost some of their customers to the favored

retailer. Jd. at 510. In holding that the defendant should be

held liable under the RPA, the Court highlighted that the

imjury arose to “the nearby . . . dealers competing with [the

favored dealer]” as a result of the price concessions. /d. at

518 (emphasis added).

The Court in Sun Oil warned against defining

“competitor” so broadly as to deprive the term of all meaning

and deter pro-competitive price discrimination. The

defendant had argued that “in order to eliminate the

possibility of having even a broad price cut deemed illegal

under [the RPA], it would of necessity have to extend the

benefits of the concessions to all of its dealers in an

unwarrantedly wide geographic area, perhaps nationwide.”

Id. at 526. But the Court reassured the defendant that “[tJhe

mere existence of a competitive continuum . . . does not

require that market limits be indefinitely extended with

13

absurd results in the form of unwarranted nationwide or

otherwise overly broad measures of competitive impact.” /d

at 526-27. Rather, the RPA demands “realistic appraisals of

relevant competitive facts” so as not to outlaw selective

discounts that have no real effect on intrabrand competition.

Id. at 527.

Further, in Falls City Indus., Inc. v. Vanco Beverage,

Inc., 460 U.S. 428 (1983), the Court considered an RPA

claim against a brewery that sold its beer more cheaply to its

Kentucky wholesaler than to its Indiana wholesaler. There

was evidence that customers living in Indiana purchased beer

in Kentucky, so that the two wholesalers competed for the

business of the same consumers. /d. at 433. The Court

applied the “meeting competition” defense and remanded for

determination of whether the defendant lowered its price in

Kentucky to meet the equally low price of a competitor

brewery. Before doing so, however, the Court reiterated that

an RPA plaintiff must demonstrate “a reasonable possibility

that a price difference may harm competition.” /d. at 434-35.

In Texaco, Inc. v. Hasbrouck, 496 U.S. 543 (1990),

Texaco sold gasoline to retailers in Spokane, Washington, at

its retail tank wagon prices, while granting substantial

discounts to two distributors located in Spokane. Both of the

distributors supplied gasoline to independent stations located

in Spokane and also sold gasoline directly to consumers. /d.

at 548-49. There was evidence that Texaco executives

believed that the dramatic growth of one of the distributors

(during a period when the retailers were losing business) was

attributable to the magnitude of the discount the distributor

received. /d. at 551. The Court concluded that the discounts

to the distributors constituted illegal price discrimination and

that a presumption of adverse effect on competition was

appropriate “[t]o the extent that [the distributors] competed

with [the retailers] in the retail market.” Jd. at 570.

14 ™

We are aware of no decision of this Court that even

comes close to suggesting that the RPA could be applied to

situations in which the favored and disfavored purchasers did

not compete for the same business. Rather, this Court’s RPA

cases point in the opposite direction.*

In addition, where favored and disfavored purchasers

have not competed for the same business, price

discrimination does not result in antitrust injury. An antitrust

plaintiff must establish an injury “that flows from that which

made defendants’ acts unlawful.” Brunswick Corp. v. Pueblo

Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977); sce also J.

Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557,

562 (1981). Here it is the difference in price between

favored and disfavored purchasers that the RPA makes

unlawful. But the injury Reeder allegedly experienced is a

loss of profits—a result of the high price it paid, rather than

of any difference from the price charged to another Volvo

dealer. Reeder also claims to have lost sales, but again any

such losses were to non-Volvo dealers; these losses might

have resulted from the high purchase price Reeder paid, but

* Moreover, recognizing the benefits of selective discounting, this Court

has warned against expansive interpretations of the RPA. More than 25

years ago, the Court commented that “interpretations of the Robinson-

Patman Act which extend beyond the prohibitions of the Act” may “help

give rise to a price uniformity and rigidity in open conflict with the

purposes of other antitrust legislation.” Great Atl. & Pac. Tea Co. v.

FTC, 440 U.S. 69, 80 (1979) (internal quotations omitted). Among other

things, the ability to reduce price selectively spares sellers from the

Hobson's choice between price cuts for all and price cuts for none. “The

empirical evidence suggests that when sellers are forbidden from making

selective price cuts, they generally respond by making none at all, for

giving an across-the-board discount to all buyers is too expensive.” 14

Hovenkamp 4 2340b1. The result is that all consumers end up paying

15

not from any difference in the prices paid by Reeder and

another Volvo dealer.

In order to have antitrust injury in a secondary line

RPA case, there must be some prospect of diversion of sales

involving buyers who are competing with each other. Where

two dealers are competing for the “same dollar,” the

disfavored dealer suffers harm resulting from price

discrimination if it loses that dollar of business. But where

the disfavored dealer loses a piece of business to a dealer

who buys from another seller, its injury does not result from

any price discrimination subject to the RPA. That loss has

no connection to the alleged violation and, thus, there is no

antitrust injury.

The court of appeals, citing Volvo’s plan to reduce

the overall number of dealers in its distribution system,

asserted that “the elimination of some dealers like [Plaintiff] .

. . ls precisely the type of injury the antitrust laws were meant

to prevent.” Pet. App. 19a. But we are aware of no evidence

in the history of the RPA that Congress intended to constrain

the ability of a supplier to limit the size or structure of its

distribution network.

In other contexts, this Court has recognized that under

the antitrust laws businesses may deal—and refuse to deal—

as they see fit. When applying the Sherman Act, the Court

has placed “a high value . . . on the right to refuse to deal

with other firms.” Aspen Skiing Co. v. Aspen Highlands

Skiing Corp., 472 U.S. 585, 601 (1985). The Sherman Act

“does not restrict the long:recognized right of [a] trader or

manufacturer engaged in an entirely private business, freely

to exercise his own independent discretion as to parties with

whom he will deal.” United States v. Colgate & Co., 250

U.S. 300, 307 (1919); see also Verizon Communications, Inc.

v. Law Offices of Curtis V. Trinko, 540 U.S. 398 (2004);

NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 137 (1998)

16

(“The freedom to switch suppliers lies close to the heart of

the competitive process that the antitrust laws seek to

encourage.”’)

In view of the broad recognition of this principle

under the Sherman Act, there is no reason to think that

Congress would have abandoned it in the RPA by imposing

liability where a supplier sought to limit the group of

customers to which it would sell, without expressly noting

such a change. In fact, Congress expressly provided in the

RPA that nothing in the statute “shall prevent persons ...

from selecting their own customers in bona fide transactions

and not in restraint of trade.” 15 U.S.C. § 13(a). °

3. The Legislative History Does Not Support

Such an Expansion.

Courts that have interpreted the RPA to protect

individual competitors—even when competition has not

suffered—have typically relied on legislative history.'° But

the RPA’s legislative history “has often been misread, or at

least overread.” 14 Hovenkamp 4 2342a. Congress intended

the RPA to close loopholes that were interfering with

existing antitrust laws, not to advance a new and different set

of policies. The House committee report explained that “the

antitrust-law legislation has been frequently violated with

impunity, and has been inadequately enforced throughout

much of the period since its inception; this has resulted in the

® Indeed, it has long been understood that the RPA does not restrict

refusals to deal. See Frederick M. Rowe, PRICE DISCRIMINATION UNDER

THE ROBINSON-PATMAN ACT §4.1, at 45-48 (1962).

'° See, e.g., Chroma Lighting v. GTE Prods. Corp., 111 F.3d 653, 657

(9th Cir. 1997); J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524,

1533 (3d Cir. 1990); see also Boise Cascade Corp. v. FTC, 837 F.2d

1127, 1158 (D.C. Cir. 1988) (Mikva, J., dissenting).

17

control of large areas of the industrial field by great

combinations and by monopolistic practices having neither

legal nor economic justification.” H. R. Rep. No. 74-2287, at

5 (1936). The focus was primarily on fostering competition

in the marketplace, rather than on the economic health of

customers. Congress enacted the RPA “to restore, so far as

possible, equality of opportunity in business by strengthening

antitrust laws and by protecting trade and commerce against

unfair trade practices and unlawful price discrimination, and

also against restraint and monopoly for the better protection

of consumers, workers, and independent producers,

manufacturers, merchants, and other businessmen.” Jd. at 3

(emphasis added).

But Congress stressed that the antitrust laws’ overall

purpose—promoting and protecting competition—weuld be

unchanged. The Senate committee report explained that,

“{wJhile the bill as now reported closes [some] dangerous

loopholes, it leaves the fields of competition free and open to

the most efficient ....”. S. Rep. No. 74-1502, at 4 (1936).

The House committee report instructed that “[{t]here is

nothing in [the RPA] to fix prices, or enable the fixation of

prices; nor to limit the freedom of price movements in

response to changing market conditions.” H. R. Rep. No. 74-

2287, at 17. Instead, the RPA preserved the “unhindered

opportunity to demonsuate through efficiency, service, and

low prices to the public [the] right to survival in business.”

Id. at 4-5.

When the committee reports did talk about preventing

harm to individual competitors, they did so only to

acknowledge that harm to competition often arises from harm

to competitors. For instance, the Senate report explained

that “the more immediately important concern is in injury to

the competitor victimized by the discrimination. Only

through such injuries, in fact, can the larger general injury

result, and to catch the weed in the seed will keep it from

18

coming to flower.” S. Rep. No. 74-1502, at 4 (emphasis

added). This and other passages suggest that “Congress’s

concern was not with injury to . . . competitors for its own

sake. Rather, it was because Congress believed that an injury

to individual competitors was an essential prerequisite to

injury to competitive conditions generally, and it wanted to

reach such injury to competitive conditions before it had a

chance to mature.” 14 Hovenkamp § 2342d.'' Such history

does not support, much less mandate, expansion of the RPA

to situations in which favored and disfavored purchasers do

not compete for the same business.

Il. RPA LIABILITY SHOULD NOT BE IMPOSED

WHERE THE POTENTIAL CUSTOMER MAKES

NO PURCHASE.

API’s members have long relied on another clear and

consistent tenet of RPA jurisprudence: the “two-purchaser

rule.” By its terms, the statute applies only when the seller

“discriminate[s] in price between different purchasers.” 15

U.S.C. § 13(a) (emphasis added). This Court has confirmed

- the point, explaining that “no single sale can violate the

Robinson-Patman Act. At least two transactions must take

place in order to constitute a discrimination.” Bruce's Juices,

'' Moreover, when specifically mentioning harm to competitors, the

committee reports referred primarily to harm resulting from large

purchasers’ coercion of discounts from manufacturers. The House report

warned, for instance, that “the evidence is overwhelming that price

discrimination practices exist to such an extent that the survival of

independent merchants, manufacturers, and other businessmen is

seriously imperiled and that remedial legislation is necessary.” H. R.

Rep. No. 74-2287, at 3; see also Morton Salt, 334 U.S. at 43 (“The

legislative history of the Robinson-Patman Act makes it abundantly clear

that Congress considered it to be an evil that a large buyer could secure a

competitive advantage over a small buyer solely because of the large

buyer’s quantity purchasing ability.”).

19

Inc. v. American Can Co., 330 U.S. 743, 755 (1947). And

for nearly 70 years, the courts have reiterated that

The discrimination in price . . . must be

practiced “between different purchasers”.

Therefore at least two purchases must have

taken place. The term purchaser means

simply one who purchases, a buyer, a vendee.

It does not mean one who seeks to purchase, a

person who goes into the market-place for the

purpose of purchasing. In other words, it does

not mean-a prospective purchaser, or one who

wishes to purchase, as the [plaintiff] contends.

Shaw's, Inc. v. Wilson-Jones Co., 105 F.2d 331, 333 (3d Cir.

1939).

As the instant case illustrates, the two-purchaser

requirement has particular application where prospective

purchasers have themselves bid for sales to third parties.

When multiple dealers are bidding for the business of the

same customer, there is—by definition—only one dealer who

will win the business and purchase the supplier’s product to

fulfill that commitment. API members that offer products in

competitive bidding situations have relied on the virtually

unanimous view of the courts that sales to successful bidders

and offers to unsuccessful bidders fall outside the RPA.

Until the decision below, “a sale at one price plus either an

offer to sell at a higher price or a refusal to sell at any price

[was] generally thought not to violate the Act.” Fusco v.

Xerox Corp., 676 F.2d 332, 335 (8th Cir. 1982).

The court of appeals disregarded this principle.

Reeder and another Volvo dealer sought to win a bid from a

retail purchaser; Reeder’s competitor won the bid; and

Reeder alleged that Volvo gave the competitor a better price

than it offered to Reeder. Because it had lost the bid, Reeder

20

never purchased the trucks from Volvo—at best Reeder

merely attempted to purchase. But according to the court of

appeals, because Reeder had purchased from Volvo on other

occasions, it constituted a “purchaser” that could claim injury

from transactions in which it did not purchase from Volvo.

See Pet. App. 10a.

This sort of end-run around the RPA’s two-purchaser

rule contravenes settled law. See Bay-City Abraham Bros. v.

Estee Lauder, Inc., 375 F. Supp. 1206, 1218 (S.D.N.Y. 1974)

(“{iJn defining a purchaser as referred to in [the RPA] care

must be taken to distinguish between a purchaser, and one

who is merely a past purchaser or a prospective purchaser’).

In the competitive-bidding transactions, moreover, Reeder’s

alleged injury is not that it was forced to pay too high a

price—because there was no sale, it paid no price. Rather,

Reeder asserts that Volvo’s allegedly discriminatory price

prevented it from purchasing from Volvo. But the RPA

“does not require a seller to create or to maintain a customer

relationship with any buyer or prospective buyer.” Mullis v.

Arco Petroleum Corp., 502 F.2d 290, 294 (7th Cir. 1974)

(Stevens, J.).' Shaw’s itself—the case that set forth the

“classic and accepted definition of the term ‘purchaser’”

(Estee Lauder, 375 F. Supp. at 1218)—tuled in favor of a

seller who refused even to quote prices to its customer. 105

F.2d at 332.

Disregard of the two-purchaser rule not only expands

the scope of RPA liability in a manner that directly

contradicts the terms of the statute; it also creates particula-

"2 See also, e.g., In re Bird & Son, 25 F.T.C. 548, 553 (1937) (the RPA

“does not purport to interfere with the right of a seller to select his

customers. He may discriminate in the choice of his customers. Not until

there is discrimination in price among those chosen does (the RPA] have

any application.”) (emphasis added).

21

problems when combined with the court of appeals’ holding

discussed in part I above. A seller that grants a discount to

its dealer to help it fashion a winning bid for one contract

may find it is liable under the RPA if a disappointed bidder

for a different contract insists that it should have received the

same discount. Even though the two dealers are not bidding

on the same contract, and are thus not competing for the

same business, the supplier might be held liable under the

court of appeals’ interpretation of the RPA. However, any

injury to the disappointed bidder does not flow from a

difference in the prices the seller offers to its dealers; at most,

it results simply from the high price offered to the

disappointed bidder. Again, there is no antitrust injury.

The two-purchaser requirement spares the courts from

playing indeterminate guessing-games. As one court has

explained,

for a plaintiff to show injury under the act .. .,

consummated transactions are needed so that

concrete, non-speculative price comparisons

are available. In contrast, preliminary

bargaining or offering circular prices are of

such a speculative nature that without actual

sales as a measure, the Court would be

burdened with unduly post hoc speculative

economic analysis in an _ increasingly

expanded number of cases.

Republic Packaging Corp. v. Haveg Indus., Inc., 406 F.

Supp. 379, 381 (N.D. Ill. 1976). This case illustrates such

concerns. In the transactions in which Reeder did not

purchase from Volvo, the court of appeals simply assumed

that Reeder’s bid would have won the business if only Volvo

had offered a lower price. That is far from clear, however,

and in one case it appears to be demonstrably false: Volvo

22

did not offer Reeder’s competitor a lower price until after the

competitor had won its bid. See J.A. 352-53.

There is no basis for requiring such speculation. The

Court should reject the court of appeals’ disregard of the two-

purchaser rule.

CONCLUSION

There is no basis—in the language of the statute, in

the precedents of this Court, or in the legislative history—for

expanding the RPA to cover transactions in which favored

and disfavored purchasers do not compete for the same

business. Nor is there any basis for discarding the two-

purchaser requirement in the context of competitive bidding.

The court of appeals’ decision should be reversed.

Respectfully submitted,

Of Counsel: Carolyn F. Corwin

Harry M. Ng Counsel of Record

Douglas W. Morris Gregory M. Lipper*

AMERICAN PETROLEUM COVINGTON & BURLING

INSTITUTE 1201 Pennsylvania Avenue,

1220 L Street, N.W. NW

Washington, DC 20005 Washington, DC 20004-2401

(202) 682-8000 (202) 662-6000

Attorneys for Amicus Curiae

* Admitted in California, not

admitted in the District of

Columbia. Supervised

May 20, 2005 principals of the firm by

23