Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc.
163 L. Ed. 2d 663, 126 S. Ct. 860 (2006)
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Rule of Law:
To state a claim for secondary-line price discrimination under the Robinson-Patman Act, a plaintiff must show that it was in actual competition with the favored purchaser for the same retail customer at the time the manufacturer imposed the price differential.
Facts:
- Volvo Trucks North America, Inc. (Volvo) manufactures heavy-duty trucks and sells them through franchised dealers, including Reeder-Simco GMC, Inc. (Reeder).
- Sales typically occur through a customer-specific competitive bidding process, where a customer requests bids and a dealer then asks Volvo for a wholesale price concession to formulate its bid.
- A dealer only purchases a truck from Volvo after its bid to a retail customer is successful.
- In 1997, Volvo announced a "Volvo Vision" program aimed at reducing its total number of dealers.
- Reeder suspected it was being targeted for elimination and alleged that Volvo offered other dealers more favorable price concessions.
- Reeder's primary evidence compared concessions it received on successful bids against non-Volvo dealers with more favorable concessions other Volvo dealers received on different sales in which Reeder did not participate.
- In the two instances Reeder bid head-to-head against another Volvo dealer, Volvo either equalized the concessions or granted a larger concession to the competitor only after the competitor had already won the bid.
Procedural Posture:
- Reeder-Simco GMC, Inc. sued Volvo Trucks North America, Inc. in the U.S. District Court (trial court) for violations of the Robinson-Patman Act and Arkansas state law.
- A jury returned a verdict for Reeder, awarding over $1.3 million in damages on the Robinson-Patman Act claim, which the court trebled.
- The District Court denied Volvo's motion for judgment as a matter of law.
- Volvo, as appellant, appealed the judgment to the U.S. Court of Appeals for the Eighth Circuit.
- A divided panel of the Eighth Circuit affirmed the trial court's judgment in favor of Reeder, the appellee.
- The U.S. Supreme Court granted Volvo's petition for a writ of certiorari.
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Issue:
Does a manufacturer violate the Robinson-Patman Act by offering different price concessions to its franchised dealers in a competitive bidding process when the dealers are not contemporaneously competing to resell its product to the same retail customer?
Opinions:
Majority - Justice Ginsburg
No. A manufacturer is not liable for secondary-line price discrimination under the Robinson-Patman Act without a showing that it discriminated between dealers who were contemporaneously competing to resell to the same retail customer. The purpose of the Act's secondary-line protection is to prevent injury to competition that arises from the diversion of sales or profits from a disfavored purchaser to a favored one. This requires actual competition between the purchasers for the same business. Reeder's evidence, which consisted of 'mix-and-match' comparisons of its bids for one customer with other dealers' bids for different customers, fails to establish this necessary element. Such comparisons do not support a permissible inference of competitive injury because they do not show that Volvo sold at a lower price to Reeder's actual competitors. The Robinson-Patman Act protects interbrand competition, not individual competitors, and extending it to this scenario would conflict with broader antitrust principles by potentially creating price rigidity.
Dissenting - Justice Stevens
Yes. The majority's decision adopts a novel, transaction-specific concept of competition that ignores the reality that dealers in the same geographic market are in continuous competition. Under the established precedent of FTC v. Morton Salt, an inference of competitive injury arises when a manufacturer sells goods to one retailer at a higher price than to its competitors in the same market over time. Volvo's discriminatory pricing forced Reeder to either accept lower profit margins or pass higher costs to customers, both of which impair its ability to compete in the broader market, regardless of whether it competed for the exact same customer on a specific transaction. By ignoring this ongoing competitive harm, the court's holding insulates manufacturers from liability and effectively eliminates the Act's protection for franchisees in special-order, competitive bidding markets.
Analysis:
This decision significantly narrows the scope of the Robinson-Patman Act's secondary-line price discrimination provision, particularly in industries that rely on competitive bidding for customized products. It clarifies that 'competition' under the Act requires a direct, head-to-head contest for the same customer, not merely operating in the same general geographic market. By rejecting claims based on comparisons of discrete, non-competing transactions, the ruling makes it substantially more difficult for disfavored purchasers in such markets to prove competitive injury. The Court's reasoning reinforces the modern antitrust principle that the law protects interbrand competition as a whole, rather than shielding individual competitors from legitimate, albeit unequal, market outcomes.
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