Supreme Court Declines Review Of Strict Price Discrimination Standard

The U.S. Supreme Court has declined to review Feesers, Inc. v. Michael Foods, Inc., 591 F.3d 191 (3d Cir. 2010), cert. denied, No. 09-1499, a competitor price-discrimination action brought under the Robinson-Patman Act, after the Court of Appeals for the Third Circuit instructed the district court to enter judgment as a matter of law for the defendants.

If adopted by other circuits, the legal standard articulated by the Third Circuit for price-discrimination claims brought by allegedly disfavored competitors would greatly limit such claims and make them more difficult to prove.

Feesers claimed that Michael Foods sold egg and potato products at a discounted price to Sodexo, allegedly Feesers’s competitor in the institutional food service industry, in violation of the Robinson-Patman Act because the discounted price was not made available to Feesers.  Feesers and Sodexo competed for food service contracts by submitting bids in response to requests for proposals by potential institutions for food supply and/or service. 

The Third Circuit held that Feesers’s claim failed, as a matter of law, to satisfy the Robinson-Patman Act requirement that the plaintiff suffer a “competitive injury” as a “competing purchaser,” because Feesers and Sodexo were not “each directly after the same dollar” of institutional sales at the time the allegedly discriminatory purchases from Michaels took place.  Because the institutional food service industry is a bid market, competition between Feesers and Sodexo for customers’ business occurred when the bids were submitted and before Feesers and Sodexo purchased egg and potato products from Michaels.  The court held that “[t]he relevant market at the time of the sale of Michaels’s products will have already been narrowed to one – the company that won the [customer’s] business.”  Accordingly, Feesers was unable to establish the competitive injury requirement.

This requirement that the competing parties be “going after the same dollar” at the time of the allegedly discriminatory act requires competitors suing under the Robinson-Patman Act to establish an unbroken causal chain from the allegedly unlawful price differential to the favored purchaser’s winning a specific sale because of that differential.  

Moreover, the Third Circuit noted the Supreme Court’s trend of narrowly construing the Robinson-Patman Act, and cited testimony by Seventh Circuit Judge Posner that, in practice, broad exercise of the Robinson-Patman Act often results in “‘anticompetitive’ effects that ‘promote rather than . . . prevent monopolistic pricing practices.’”