United States: Revised "Fred Meyer Guides" Leave Treatment Of Key Robinson-Patman Act Provisions Unchanged

While hardly ever enforced in modern times by government enforcement agencies, and rarely the subject of antitrust treble damage actions, Sections 2(d) and (e) of the Robinson Patman Act (15 U.S.C. §§ 13(d) and (e)) have had a colorful heritage.  In response to the Supreme Court's decision in FTC v. Fred Meyer, Inc., 390 U.S. 341 (1968), the Federal Trade Commission issued its Guides for Advertising Allowances and Other Merchandising Payments and Services, codified at 16 CFR, Part 240 (1969).  The "Fred Meyer Guides", as they are generally referred to, were revised in 1990, and most recently in November 2014.  In the wake of efforts through the years to better equate the aims and goals of Robinson-Patman enforcement with those of the other antitrust laws, there has been a vigorous debate over modifications.  These included proffered amendments suggested by the American Bar Association Section of Antitrust Law, the Antitrust Law Institute, and others.

Modernization and harmonization was arguably called for in the wake of the Supreme Court's decision in Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164 (2006).  Volvo concerned a manufacturer's uneven provision of price supports to dealers endeavoring to meet competition from dealers of other brands.  The Supreme Court held that absent a showing of actual competition with a favored Volvo dealer, the plaintiff could not establish competitive injury.  The Court made clear that the purpose of all of the antitrust laws, including the Robinson-Patman Act, is to protect interbrand competition, and not individual dealers claiming intrabrand discrimination.

While changes were made in the 2014 Fred Meyer Guides, nothing has changed as to the application of Sections 2(d) and (e).  Commentators urged the Federal Trade Commission to make clear that pursuant to Volvo, Sections 2(d) and 2(e) would only apply where there was evidence of "injury to competition", as opposed to injury to a competitor.  This would have equated the anticompetitive effects analysis of these Sections to the basic price discrimination Section (2)(a).  The Federal Trade Commission declined to adopt these recommendations.  While it recognized that proof of competitive effects would be sound enforcement policy, it simply revised the Guides to state its own intent to enforce the Act only in cases of likely harm to the competitive process.  Where enforcement is pursuant to a private treble damage action, a treble damage plaintiff must allege and prove injury to the competitive process, even under Section 2(d) and 2(e), which otherwise is "per se" in an action by a governmental enforcement agency.  This is because private enforcement is grounded in Section 4 of the Clayton Act.

A recent decision from a Wisconsin district court confirms that the 2014 Fred Meyer Guides revisions leave the treatment of Sections 2(d) and 2(e) unchanged.  Woodman's Food Market, Inc. v. The Clorox Company, Case No. 14-cv-734-slc, Feb. 2, 2015 (U.S. D.C. W.D. Wisc.)

Woodman's Food Market, Inc. ("Woodman's") had been a longtime customer of The Clorox Company ("Clorox").  Woodman's had purchased over 480 "stock keeping units" ("SKUs") from Clorox.  Historically, Woodman's purchased "large pack" products from Clorox.  These products are larger containers or packages of a product that typically it has offered to customers at a cost savings per unit.  In 2014, Clorox announced its "Differentiated Products Offering Plan."  It announced to Woodman's that it would be classified in a different channel than was Sam's or Costco.  As a result, Sam's and Costco could purchase the same products in the larger package offerings at lower prices.  Thus, Clorox was considering the new larger container plan as an offering of a new product, and not simply a larger configuration of an existing product already being purchased by Woodman's.

Woodman's brought a civil action for declaratory and injunctive relief.  It sought a declaration that Clorox's "Differentiated Products Offering Plan" violated the price discrimination provisions of Sections 2(d) and 2(e).

Woodman's decision to frame its action in terms of declaratory and injunctive relief, rather than as a treble damage suit, was arguably intended to avoid the aforementioned requirement in treble damage actions of proving an injury to the competitive process.  In labeling its large pack offerings as "differentiated products marketing", Clorox argued that the larger size packaging constituted a separate, and "differentiated" product, which need not be offered to competing purchasers.  While noting the semantic differences, the District Court rejected the argument.  It noted that Section 2(e) declares that it is unlawful for any person to discriminate in favor of one purchaser against another purchaser of a commodity bought for resale by contracting to furnish or furnishing, or by contributing to the furnishing of, any "services or facilities" connected with the processing, handling, sale or offering for sale of such commodity upon terms that according to all purchasers on proportionately equal terms.

This places in issue the question whether packaging the same goods and materials in larger size offerings constitutes the furnishing of a "service or facility" or a "separate product".  In other words, the question may be translated as "does the promotional service or facility offered" somehow aid the buyer in reselling the product, such as advertising, packaging, informational brochures, and the like.  Areeda Hovenkamp, XIV Antitrust Law Section 2363(e) at p. 291 (3d ed. 2012).  As the offering of a larger size grouping of the same product may be referred to in the vernacular as "packaging", it would, indeed, seem to be in violation of Section 2(e).  Clorox argued that by labeling its program "differentiated products", a package size is not a "promotional service".  The Court disagreed.  In the absence of case law to the contrary, the Court noted that this had been the interpretation by the Federal Trade Commission since 1969, as revised in 1990, and again as further revised in 2014.  The same products in a larger package is not "differentiated".  It is a product of "like grade and quality".

In light of the continued enforcement agency interpretation of the proper application of the statute, it seems appropriate to paraphrase the Rodgers and Hart song, "My Funny Valentine":

". . .  don't change a hair for me, not if you care for me."

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