The federal price discrimination law, the Robinson-Patman Act, is often criticized as being antithetical to the antitrust laws in that it sometimes promotes price uniformity rather than price competition. In Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc., ____ U.S. ____ (2006), the Supreme Court took a major step towards harmonizing Robinson-Patman with other antitrust laws. Not only did the court raise the bar on the competitive injury requirements in secondary line cases, but it stated that the Robinson-Patman Act should not be construed to discourage price reductions that are the hallmark of interbrand competition and should be limited to cases where the favored purchaser has market power.

Volvo involved the application of the price discrimination laws to the resale of trucks subject to a competitive bidding process based on end user customer specifications. The plaintiff was a Volvo truck dealer, and end user customers would contact it and other truck dealers to bid on special order trucks they wished to purchase. Such dealers would then seek concessions or discounts from Volvo to use in the competitive bidding process, both against other Volvo dealers and dealers who sold other brands of trucks. A dealer would get the concessions only if it won the bid. While plaintiff identified two instances where it competed with other Volvo dealers for the same customer, the balance of plaintiff’s evidence related to transactions in which it did not participate at all but other Volvo dealers got bigger concessions than plaintiff did on those in which it did participate. As a result, plaintiff alleged its sales and profits declined and that Volvo was likely to eliminate it as a dealer entirely under its announced program to reduce the number of dealers while enlarging the territory of the remaining dealers. The jury found in favor of plaintiffs and awarded $1.3 million.

Justice Ginsberg, writing for the Court in a 7-2 decision, began by noting that Robinson-Patman was a depression-era statute passed to stop large chain stores from obtaining lower prices from suppliers than smaller stores. Justice Ginsberg then emphasized, however, that the Act does not ban all price differences but only those that threaten to injure competition. In a secondary line case – where the discrimination arises between dealers purchasing from the same seller – the requisite competitive injury is generally shown by a diversion of sales or profits from the disfavored dealer to the favored one. Under the Morton Salt inference, competitive injury is inferred from a significant price differential over a substantial period of time.

The Eighth Circuit found competitive injury under Morton Salt based on the fact that plaintiff and the favored Volvo dealers competed at the same functional level. The Supreme Court held this was insufficient unless they competed for the same customer as only then could the requisite diversion of sales from a disfavored to a favored dealer occur. In the two instances plaintiff identified where it competed with other Volvo dealers, in neither could it be said that a sale was diverted from plaintiff to the favored dealer. In the first, while Volvo initially gave the other dealer higher concessions than plaintiff, it later offered plaintiff the same concessions and neither got the sale anyway. In the second instance, Volvo initially gave plaintiff and the other Volvo dealer the same concessions, and only increased those to the other dealer after it had won the sale. The rest of plaintiff’s diversion evidence related to concessions Volvo offered dealers on sales where plaintiff did not bid at all, which plaintiff then compared to those Volvo offered it on sales where plaintiff competed with non-Volvo dealers. Plaintiff won some, lost others, but the common thread was that Volvo gave plaintiff smaller concessions on these transactions than it gave other Volvo dealers on other transactions.

Justice Ginsberg stated that such “mix-and-match, manipulable” evidence was insufficient for competitive injury, and bears no relation to the type of pricing conduct the Act was designed to prohibit. There is no discrete favored purchaser akin to a chain store or large independent department store. While plaintiff may compete with other Volvo dealers in a broad geographic area, the price competition at issue here does not arise until after a retail customer has selected the dealers to submit a bid. The relevant market is limited to those dealers selected to compete for the sale to a particular customer. If plaintiff was not one of the dealers selected to bid for a particular customer, then it could not suffer competitive injury since no sale was diverted from plaintiff to a favored purchaser. Merely bidding for sales in the same geographic area is not sufficient to meet the competitive injury requirement.

Both Volvo and the government’s amicus brief urged the Court to hold that Robinson-Patman does not reach competitive bidding markets involving special order sales but rather is limited to sales from inventory. Given its competitive injury analysis, the Court stated “We need not decide that question today.” Justice Ginsberg did, however, conclude her opinion by stating that the Robinson-Patman Act should be construed, like other antitrust laws, to promote interbrand competition and “[i]n the case before us, there is no evidence that any favored purchaser possesses market power, the allegedly favored purchasers are dealers with little resemblance to large department stores or chain operations, and the supplier’s selective discounting fosters competition among suppliers of different brands.” The opinion closes by cautioning against constructions of Robinson Patman which extend beyond the prohibitions of the Act and thus give rise to price uniformity in conflict with other antitrust legislation.

Justices Stevens and Thomas dissented with the former authoring the dissenting opinion. Justice Stevens noted that Volvo did not challenge the jury’s finding of price discrimination and plaintiff’s theory of the case was that Volvo was attempting to squeeze it out by limiting the concessions offered it vis-a-vis other dealers. The major thrust of the dissent, however, was simply that the court had historically defined competitors as those who sell “in a single, interstate retail market” and competition should not be evaluated by the transaction specific inquiry adopted by the majority. Justice Stevens states it is unclear whether the majority holding is limited to franchised dealers who do not maintain inventories, or excludes virtually all franchisees from the effective protection of the Act. In either event, he concluded, “it is not faithful to the statutory text.”

Volvo is quite significant in two respects. First, its holding raises the competitive injury bar. The requirement that the discrimination diverts sales from the same customer to the favored dealer, rather than just occur in the market generally, goes beyond that thought necessary under Morton Salt. Second, the Court’s suggestion that Robinson-Patman be limited to power buyers is a rather direct signal to the lower courts to construe the Act narrowly. Robinson Patman is often criticized, with some justification, as a statute that promotes price uniformity and diminishes true price competition. See, e.g., Antitrust Modernization Commission Hearings, July 28, 2005, Statement of Professor Herbert Hovenkamp ( The Supreme Court has sent a strong message in Volvo that Robinson-Patman should not be construed in a manner that places it in conflict with the Sherman Act or other antitrust legislation.

Carlton A. Varner