Court’s Denial of Summary Judgment on Price Discrimination Claims Reminds Suppliers to Properly Structure Discount Programs

In a recent decision, the Northern District of California denied Chrysler’s motion for summary judgment to defeat a Robinson-Patman Act price discrimination claim.  Mathew Enterprise, Inc. v. Chrysler Group LLC, 2016 U.S. Dist. LEXIS 108693 (N.D. Cal. Aug. 2, 2016) (opinion filed August 15, 2016 and available here).  The decision serves as a reminder of the relatively low bar for establishing competitive and antitrust injury for Robinson-Patman Act purposes, and counsels in favor of carefully structuring discount programs to avoid any potential litigation down the road.

Chrysler had a volume discount program under which it provided incentive payments to dealers that met or exceeded sales objectives.  The discounts were based in part on the dealer’s sales history.  The plaintiff dealer met its sales objectives for a number of months, but after a competing Chrysler dealer entered the market, the plaintiff missed its targets – which did not take into account the fact of new market entry.  Eventually the plaintiff was again able to reach its targets, but for 11 months it lost incentives of about 2.3%, or $700 per vehicle.  The plaintiff sued Chrysler for price discrimination under Section 2(a) of the Robinson-Patman Act.

Because the plaintiff did not have direct evidence that, e.g., a particular customer did not purchase from the plaintiff, but instead purchased from a competing dealer at a lower price, the court agreed with Chrysler that the plaintiff had not presented direct evidence of diverted sales or profits, i.e., direct evidence of competitive injury.  However, the court ruled that the plaintiff did present enough evidence to trigger the “Morton Salt” presumption, named after FTC v. Morton Salt Co., 334 U.S. 37 (1948), under which a prima facie case of competitive injury can be established by proof of substantial price discrimination between competing purchasers over time.  See id. at 46-47.  The district court rejected Chrysler’s argument that a 2.3% price difference over 11 months was insufficient to trigger the presumption.

The court then concluded that the plaintiff had also presented enough evidence of causation of an antitrust injury, rejecting Chrysler’s argument that the plaintiff could only establish causation by showing that it lost sales to favored competitors.  “[A] plaintiff can establish causation through circumstantial evidence, just as . . . a plaintiff can establish antitrust injury through circumstantial evidence where a § 2(a) violation has been established.”  In the court’s view, the plaintiff presented sufficient circumstantial evidence of causation in the form of evidence that (1) the market was competitive and price-sensitive, (2) surrounding dealers were favored, (3) those dealers used incentive payments to lower their relative pricing, and (4) the plaintiff’s sales fell during the alleged price discrimination period while those of surrounding dealers rose (and the reverse happened after the price discrimination period ended).

Assuming without deciding that the functional availability of discounts defense is an element of a plaintiff’s case, the court also rejected Chrysler’s argument that its discounts were functionally available to all dealers.  The plaintiff’s objectives were 121% of its sales during the alleged discrimination period, while a competitor’s were 87%.  Further, Chrysler calculated the plaintiff’s sales objectives using a different formula.  The court concluded that these facts established that Chrysler did not use a “uniform pricing policy” and that the discounts were therefore not “functionally available on an equal basis.”

Chrysler did not argue in its motion that it had sufficient evidence to rebut a Morton Salt presumption, only that such a presumption was unwarranted.  While the court cautioned the plaintiff that “gaps in its evidence may make it difficult to withstand Chrysler’s anticipated rebuttal evidence” concerning a lack of any harm to competition, the case illustrates the difficulty of persuading a court to throw out price discrimination claims at the motion to dismiss or even summary judgment stage.  Suppliers should check to ensure either that they are not engaging in price discrimination or that they are firmly within the bounds of one of the recognized defenses to a Robinson-Patman claim (such as functionally available discounts).