Antitrust - Supreme Court Rules in Favor of Robinson-Patman Act Defendant: Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 860 (2006)
On January 10, 2006, the Supreme Court held that the Robinson-Patman Act does not make a manufacturer of specially-ordered goods liable for offering discounts of differing sizes to retailers that are not in direct competition. See Volvo Trucks North Am., Inc. v. Reeder-Simco GMC, Inc.,
546 U.S. 860 (2006). In a 7-2 opinion, the Court reversed an Eighth Circuit ruling that a truck manufacturer had violated the Robinson-Patman Act because it gave smaller discounts on custom-made trucks to the plaintiff retailer than
it had given to other retailers of custom-made trucks. Because the alleged price discrimination did not concern direct competition between the retailers, the Court held that the plaintiff retailer had failed to show competitive injury
as required by Robinson-Patman.
The Truck Trade
Heavy-duty trucks are often custom-made for customers, and thus not manufactured until a customer has placed an order. See Volvo Trucks, 546 U.S. at 866. Frequently, the customer seeking to order trucks will solicit
competitive bids from retailers of different brands. See id. Although it is rare, sometimes customers will solicit bids from multiple retailers of the same brand. See id. at 867. After being invited
to bid, truck retailers seek a discounted wholesale price from the manufacturer in order to offer the potential customer a low retail price. See id. at 866. The manufacturers routinely grant these discounts in order to gain
a competitive advantage over other brands. See id. at 866-67. The customer then special orders a truck through the retailer it selected through the bidding process. See id.
Reeder-Simco’s Claim Against Volvo
Reeder-Simco GMC, Inc. ("Reeder-Simco"), a truck retailer, alleged that Volvo Trucks North America, Inc. ("Volvo"), a truck manufacturer, violated the Robinson-Patman Act by offering it smaller discounts than it
offered to other, favored retailers. Id. at 867. As a consequence, Reeder-Simco alleged it did not sell trucks it could have sold with a better discount and lost profits on trucks it did sell. See id. at 867-88.
Reeder-Simco alleged that Volvo did not offer it comparable discounts because of a plan to eliminate it and nearly half its other retailers and to direct business towards the favored retailers that would remain. Id. at 867.
Reeder-Simco offered evidence of alleged price discrimination through comparisons of discounts it received with those received by other Volvo retailers. Id. at 867-68. Reeder-Simco presented evidence that, in four successful
and several unsuccessful bids against retailers of other brands, Reeder-Simco received smaller discounts from Volvo than Volvo retailers sold trucks in transactions in which Reeder-Simco did not bid. Id. at 871. On two occasions
where Reeder-Simco bid against another Volvo retailer, Reeder-Simco received the same initial discount as the other dealer, as was Volvo’s stated policy. Id. at 867. On the first occasion, in which neither retailer
won the bidding, Volvo gave Reeder-Simco a discount, then increased the size of the discount to match a concession offered to the other Volvo retailer. Id. On the second occasion, Volvo gave Reeder-Simco the same discount
as the other Volvo retailer, but the other retailer won the bidding. Id. Volvo later offered the other retailer a larger discount because the customer refused to pay the difference in price caused by an intervening price
increase of Volvo trucks. Id.
Procedural History
After a trial in an Arkansas federal district court, a jury awarded Reeder-Simco $1.4 million, which was trebled under the Robinson Patman Act to $4.1 million. Id. at 868. The jury also awarded Reeder-Simco approximately $500,000
for violations of Arkansas state law. Id. at 868 n. 2. Volvo appealed both the state and federal claims, and a divided panel of the Eighth Circuit affirmed the lower court decision on both grounds. Id.
The appeals court found that Reeder-Simco was a "purchaser" within the meaning of the Act, that Volvo had made sales to Reeder-Simco and another Volvo dealer at two different prices, and that Volvo was in direct competition
with favored Volvo dealers. Id. at 868-69. The court found that Reeder-Simco lost money it would not have lost if it had been afforded price concessions comparable to those received by Volvo’s favored dealers. Id. The appeals court rejected Volvo’s argument that the Act did not apply to special-order sales because these were not the sorts of transactions meant to be governed by the Act. Id. at 868.
Judge Hansen dissented from the Eight Circuit decision. Id. at 869. The dissent argued that Robinson-Patman Act cases typically involve purchasers and sellers that carry an inventory of fungible goods; for example, big-box
retailers and their suppliers. Id. The dissent argued that the Robinson-Patman Act simply did not apply to the special order, competitive bidding transaction at issue in this case. Id.
Supreme Court Decision
The Supreme Court granted review on the Robinson-Patman Act claim and reversed the Eighth Circuit. The Court found that Reeder-Simco could not establish competitive injury as required by the Act because it did not show actual competition
between itself and a favored Volvo dealer. Id. at 871. The Court first examined those transactions in which Reeder-Simco competed against dealer of other brands, whether or not the company was successful in the bidding.
Id. The Court found that Reeder-Simco could not show competitive injury based on these transactions because they did not represent competition with favored Volvo dealers for the same customer. Id. Further, the Court
held that these transactions could not support an inference of competitive injury because Reeder-Simco had not tied these transactions to any systematic study, nor had Reeder-Simco attempted to identify transactions in which it had
received a more favorable price than other dealers. Id.
Although Reeder-Simco may have competed with other Volvo dealers for the opportunity to submit a bid on a potential sale, the court found that this sort of preliminary competition was not affected by the alleged price discrimination,
because a dealer does not seek a price discount from Volvo until after it has been selected to submit a bid. Id. at 871-72. The Court found that once a retailer is selected to bid, the relevant market for the transaction
becomes limited to the particular needs of the customer; unless the customer selects more than one dealer to bid, dealers are not in direct competition with one another. Id. Thus, Reeder-Simco could not claim competitive
injury for claims where Reeder-Simco did not bid against other Volvo dealers. Id.
The Court next turned to the two instances in which Reeder-Simco bid against another Volvo dealer. Volvo argued that Reeder-Simco did not satisfy the Robinson Patman Act’s requirement that a plaintiff be a "purchaser"
because a Volvo dealer that unsuccessfully bid on a sale never purchased a truck in that transaction. Id. at 872. The Court sidestepped this argument, however, holding that even if the Act applied in that situation, Reeder-Simco
had still not established that it had been disadvantaged when bidding against other Volvo dealers. Id. The Court pointed out that Reeder-Simco had received the same price during bidding on both transactions in which it bid
against another Volvo dealer. Id. The court held that if price discrimination between two bidding dealers existed at all, it did not substantially affect competition. Id.
The Court finally stressed that the Robinson-Patman Act was primarily aimed at competition between brands, not competition within a brand. Id. at 872-73. The Court argued that the act should be interpreted so as to
protect competition, as opposed to protecting competitors. Id. at 872. Even if the Robinson-Patman Act could be interpreted in the way in which Reeder-Simco desired, the Court stated that it would resist
such an interpretation as inconsistent with the general goals of the act. Id.
Conclusion
Reeder-Simco involves a very unusual fact scenario under a very difficult statute. There has long been an active debate about under what circumstances the price discrimination prohibitions of the Robinson-Patman Act make economic sense. As such, theories that seek to apply the Act to a broader range of activity face a considerable uphill battle. Here, the Court did not completely foreclose Robinson-Patman Act claims in the competitive bidding scenario. But it is unlikely that many viable claims can be asserted under constraints applied by the Court.