Antitrust Alert: Third Circuit Provides Important Clarification on "Competing Purchasers" for Robinson-Patman Act Price Discrimination Claim
On January 7, 2010, the U.S. Court of Appeals for the Third Circuit, in a 3-0 decision, reversed a district court's judgment against Sodexo, Inc., and another defendant in a Robinson-Patman Act (RPA) bench trial and directed entry of judgment in favor of the defendants. (Feesers, Inc. v. Michael Foods, Inc.; Sodexo, Inc., Nos. 09-2548, 09-2952, 09-2993.)
Sodexo had retained Jones Day to handle the appeal following the adverse district court decision. The Third Circuit decision clarifies the requirements for competing purchasers in RPA claims and also contains a useful discussion of the need to narrowly construe the RPA in order to avoid conflicts with broader antitrust policies supporting vigorous competition.
The plaintiff, a wholesale food distributor, alleged that Sodexo, a foodservice management company, had negotiated prices with a manufacturer of egg and potato products that were lower than the prices the manufacturer offered to the plaintiff. The plaintiff further alleged that Sodexo was thereafter able to use those lower prices to convince hospitals, schools, and other institutional customers to hire Sodexo to run the customers' foodservice operations in place of the customers themselves. As a result, the plaintiff claimed that it lost the opportunity to supply food products directly to the institutional customers because Sodexo as the new operator preferred to use a different wholesale distributor. The Third Circuit, in reversing the district court's decision, adopted Jones Day's argument that the plaintiff and Sodexo were not competing purchasers, as required by the RPA.
Specifically, the Third Circuit observed that any conceivable competition between the plaintiff and Sodexo (which did not itself perform any wholesale distribution function) was limited to the time when institutional customers were deciding whether or not to use a foodservice management company -- namely, when Sodexo was bidding to convince institutional customers to use a foodservice management company (and hire Sodexo and its preferred wholesale distributor) and when the plaintiff allegedly was bidding to convince institutions to run their own foodservice operations (and hire it as their distributor). The Third Circuit reasoned that Sodexo never placed purchase orders for food products for any particular institutional customer during any bidding competition for that customer. Instead, Sodexo placed purchase orders on behalf of a particular institution only after it had been hired by that institution to provide management services. In other words, the Third Circuit held that Sodexo had already won the bidding competition for an institution before it placed purchased orders for food products for that institution at the lower price, and as a result Sodexo and the plaintiff were never competing purchasers as required by the RPA. More generally, the Third Circuit emphasized the importance of narrowly construing the RPA in order to avoid a conflict between the RPA's limited prohibition on price discrimination and the broader policy of the antitrust laws supporting inter-brand price competition.
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Kathryn M. Fenton
Jones Day prepares summaries of significant antitrust enforcement, litigation, and policy events as a service to clients and interested readers, to provide timely insight on antitrust and competition law developments relevant to business, but not as legal advice on any specific matter. Please visit our Publication Request form to add your name to our distribution list.