3 A N TITR U ST
L E GAL I T Y OF “Z ONE P RI CI NG ” B Y O I L C OMPAN I E S UN DE R T HE G ASOLI NE D I V ORCEM ENT L A W A N D T HE R O B I NS ON P AT MAN A CT

J anuary28, 1994

The H onor abl e G ar

y R. A l exande r H ous e of D el egat es Y ou have r eques t ed our opi ni on w hether t he pr act i ce bym aj or o il co m p a n ies o f

“ z o n e p ric in g ” in d is trib u tin g g a so lin e to th e ir deal er s forr es al e t o t he p u b li c vi ol at es t he “vol unt aryal l ow ance ” uni form i t ypr ovi s i on of §10- 312 of the B us i nes s R egul at i on ( “B R ”) A r t i cl e, M ary l and C ode; and w hetherzone pr i ci ng vi o lat es fede r al o r S tate a n titru st law s, sp e c if ica llyth e R o b in so n -P a tm a n A c t o r its M a ryla n d a n a lo g u e
. B as ed on ouru nder s t andi ng of the r el evantfac t s , w e have con cl ud ed as fo l l ow s: 1

. Th e “ v o l u n t a r ya l l o wa n c e ” u n i f o r mi t yr e q u i r e me n ti n BR § 1 0 -31 2 (1) ap p li es on ly to t em p o rary p ri ce red u cti o n s th a t a re offe r ed t o a r et ai l deal ert o enabl e the dea l ert o m eetthe l ow erpr i ce of a c om pet ing d ea ler

. T he pr ovi s i on does notr equi r e thatt he w h o lesale p ri ce o f g aso li n e to all d ea lers o f o n e su p p li er b e u n ifo rm t hr oughoutM ary l and and doe s notpr ohi bi tzone pr i ci ng. 2. Z one pr i ci ng i n it self does notvi ol at e the R obi ns onPat m an A ct

. I f the pri ce d isc r i m i nat i ons i m pos ed byzone pr i ci ng caus e an i nj ur yt o compet i t i on, how ever , ther e m ay be a vi ol at i on of the R obi ns on- Pat m an A cti n t he geogr aphi c ar ea w her e the i njury o c c u rs
.4 [7 9 O p
. A tt ’y
I Backg r ound
T he M ary l and G as ol i ne D i vor cementL aw , B R §§10- 311 and 10- 312, m andat es t hatal l r et ai l gas ol i ne s ervi ce s t at i ons be oper at ed byi ndepende ntdeal er s and pr ohi bi t s o p er at i on of a r et ai l gas ol i ne se rv ice sta tio n b y a p ro d u c e r or re f in e r o f m o to r o il. T h e m a

jo r o il compani es s upp ly g asol i ne t o thei rdeal er s i n M ary l and and, or d i n a r i l y , l e a s e t h e s t a t i o n a n d e q u i p me n tt o t h e m. Th e d e al er ag ree m en t r eq u ir es th e d ea ler t o p u rch ase g aso li n e fro m the d ea ler’s s u p p lie r f

o r s a le u n d e r t h e b ra n d n a m e o f th e s u p p lie r. T he w hol es al e pr i ce thatt he dea l erpay s t o t he s uppl i erfor ga s o l i n e i s c a l l e d t h e d e a l e r t a n k wag o n p r i c e
. Th e d e al er t ank w ag o n p ri ce v aries f

rom d ayto d ayd u e to a v a ri e tyo f f ac tors in c lu d in g d e m a n d , av a ilab ili ty , an d su p p lie r s’ c o sts . E a c h re tail d e a le r s e ts th e re s a le p ri c e o f g a s o lin e to th e p u b lic

. U n d e r a z o n e p ric in g sy ste m , as w e u n d e r sta n d it, a n o il c o m p a n yd iv id e s th e sta te in to g e o g ra p h ic p ric e z o n e s
. T h e o il company cr eat es t he zones us i ng undi s cl os ed cr i t er i a. I n fac t , even t he numberof zone s r emai n undi s cl os ed. E ach r et ai l s t at i on of the par t i cul ar br and i n a gi ven pri ce zone pay s an i dent i cal t ank w agon pr i ce. E ach pr i ce z one, how ever , m ayr ece i ve a di ffe r entt ank w agon pr i ce f r om i t s s uppl i er
. D eal er s bas e the r et ai l pr i ce of gas ol i ne on t he t ank w agon pr i ce t hattheypayt o t he s uppl i er s
. Si nce e ach z one i n t he s t at e mayr ece i ve a di ffe r entt ank w agon pr i ce, the r et ai l pr i ce o f g a s o lin e f

o r o n e b r a n d w ill a ls o v a ry in th e s ta te

. See Cai n v. C h e v r o n U.S .A ., In c ., 7 5 7 F

. S u p p
. 1 1 2 0 (D

. O r. 1 9 9 1 ).
T he G as ol i ne D i vor cementL aw w as dr aft ed, i n part , t o pr event di s cr i m i nat i on among deal er s of the s ame br and o f g asol i ne. T he G ener al A s s embl ybel i eved thatal l d ea lers of the s ame br and of gas ol i ne s houl d be tr eat ed e q u al l ybyt hei rs uppl i erof gas ol i ne. G overnor v. E

xxon Corp. , 2 7 9 M d . 4 1 0 , 3 7 0 A .2 d 1 1 0 2 (1 9 7 7 ), a ff’d s u b n o m . E

xx o n C o r p . v . G o v e r n o r, 437 U

. S. 117 ( 1978)

. T he i nt ent o f th e f e d e ra l R o b in so n -P a tm a n A c t, 1 5 U .S .C . § 1 3 , an d its M ary l and anal ogue, §11- 204( a) ( 3) of the C om m er ci al L aw ( “C L ”) A r t i cl e, M ary l and C ode, i s t o m axi m i ze e qual i t yof opportun it i es among sm al l , i ndepende ntbus i nes s es bypr event i ng pri ce d is c ri m in a tio n b ys u p p lie rs o f g o o d s o f lik e g ra d e a n d q u a lity. FTCG en. 3] 5

T he p aragr aph reads i n fu l l as fol l ow s: 1
E ac h pr oducer , r efi ner , or w hol es al erof m ot orfuel w ho s uppl i es m ot orfuel t o r et ail s ervi ce s t at i on dealer s: (1) sha ll ex tend all v o lun tary a llo w a n c e s u n if

o rm lyto a ll reta il s e rv ic e s ta tio n d e a le rs s u p p lie d

.... v . S u n O il C o ., 371 U

. S. 505, 520 ( 1963)

. T hi s opi ni on w i l l exami ne w hethert he pr i ce di s cr i m i nat i on cr eat ed by zone pr i ci ng of gas ol i ne i s pr ohi bi t ed byei t hert he G as o li n e D i vor cementL aw ort he R o b in s o n -P a tm a n A c t.
II

V ol untar y A l l ow ances U nderthe G as ol i ne D i vor cementL aw , a maj oroi l company t hats uppl i es gas ol i ne forr esa le b y r et ai l deal er s i n M ary l and may n o t o p e ra te a n y re tail sta tio n
. T h e sta tu te a lso re q u ire s a su p p lier to “ext end al l vol unt aryal l ow ance s uni form l y t o al l r et ai l deal er s ” that i ts uppl i es
. B R §10- 312( 1)

. T hi s s t atut e beca m e l aw i n 1974 and 1 s ur vi ved chal l enges t o i t s cons t i tut i onal i t yi n t he M ary l and C our tof A p p e a ls a n d th e U n ite d S ta te s S u p re m e C o u rt

. G overnorv. E xxon C or p. , 2 7 9 M d

. 4 1 0 , 3 7 0 A .2 d 1 1 0 2 ( 1 9 7 7 ), af f’ d s ub nom

. E

xxon C or p. v. G overnor , 4 3 7 U .S . 1 1 7 (1 9 7 8 ). Th e i n t e n to f

t h e Gen e r a l As s e mbl yi n p a s s i n g th e Gas o l i ne D i v o r c e me n t La w was t h a t a l l d e a l e r s s e l l i n g t h e s a me b r a n d of g a s o lin e w o u ld b e tr e a t e d e q u a lly b yth e irs u p p lie rs
. G overnorv. E xxon , 2 7 9 M d

. at 44 7

. T h is i n tent is r ef lected in the “v o lun tary a llo w a n c e ” p ro v is io n o f th e la w . I n G o v e r n o rv . E

xx o n , t he oi l compani es cont ended that t he uni form vol unt aryal l ow ance pr ovi s i on confl i ct ed w i t h the fe der al R o b in so n -P a tm a n A c t, 15 U .S .C . § 1 3 , an d w a s th e re f o re in v a lid underthe S u pr emacyC l aus e of the U ni t ed St at es C ons t i tut i on. Speci fi cal l y , t he oi l compani es ar gued t hat t he vol unt aryal l ow ance pr ovi s i on depr i ved t hem of a defe ns e ava i l abl e underthe R obi ns onPat m an A ct : t hata t empora r ypr i ce r educt i on t o a dea l erw as m ade6 [7 9 O p
. A tt ’y i n good fai t h t o m eet t he equal l y l ow pr i ce of a compet i t or
. 279 M d. a t 4 4 5

. See Pa r tI I I C be l o w. Th e Cou r to f App e a l s , a f

t e rd e f i ni ng t he term “vo l un t aryal l ow an c e ,” r ej ect ed the oi l com pan i es’ ar g u me n ta n d s t a t e d t h a tt h e Gas o l i n e Di v o r c e me n tLa w w a s n ot i nval i d undert he Supr emacy C l aus e, a hol di ng t hat w as aff i r m ed by th e S u p re m e C o u rt

. E

xxon v
. G overnor , 4 3 7 U .S . a t 1 3 3 -3 4

. T o d eterm ine th e m ea n ing o f “ v o lun taryall o w an ce , ” the C o u rt of A ppeal s ex am i ned the C om ptr ol l er ’ s s tudyof gas ol i ne r et ai l i ng i n M ary l and, aff

i davi t s fi l ed bythe oi l compani es , congr essio n al r epor t s deal i ng w i t h t he r et ai l m arket i ng of gas ol i ne, and the l egi s l at i ve hi s t or yof the s t atut e. U l t i m at ely , the C our tdefi ned the ter m a s “ tem p o ra ryp ric e re d u c tio n s in th e w h o les a le p ric e to a re tail deal ert o enabl e the dea l ert o m eett he l ow erpr i ce of a compet i ng r et ai l deal er
. ” G overnorv. E xxon , 2 7 9 M d

. at 44 7

. T h e C o u rt d e ter m in e d th a t th e p u rp o se o f “ v o lu n tar ya llo w ances” g ra n ted b yo il compani es w as t o hel p i t s deal er s r educe thei rr et ai l pr i ces i n or der t o compet e di r ect l yw i t h deal er s of anotherbr and. I f, forexampl e, a bra nd X r et ai l s t at i on l ow er s i t s pum p pr i ce of gas ol i ne and br and Y gr ant s a di s count t ank w agon pr i ce e xcl us i vel yt o i t s l ocal br and Y deal e ra c r o s s t h e s t r e e tf r o m t h e b r a n d X de a l e rt o h e l p th a to ne deal e r c ompe t e , t he di s c ou nt gr a nt e d t o t he br a nd Y de a l e r i s a
“ v o lu n tar ya llo w a n c e .” U n d e r B R § 1 0 -3 1 2 (1 ), if s u c h a d isc o u n t is g ra n te d to o n e re tail d e a ler in M a ry lan d , itm u st b e g ra n ted to a ll d e a le rs o f

th a t b ra n d

. T he vol unt aryal l ow ance pr ovi s i on of the G as ol i ne D i vor cementL aw pr ohi bi t s the gra nt i ng of t empora r ypr i ce r e d u c tio n s s o lelyto o n e re tail sta tio n o r g ro u p o f sta tio n s, b u t itis notot herw i s e appl i cabl e t o a maj oroi l comp an y ’s zone pr i ci ng sy stem

. T h e C o u rto f A p p ea ls ha s clea rl yd ef ined the v o lun tary al l ow ance pr ovi s i on t o r equi r e thatanyt empora r ypr i ce r educt i on offe r ed t o a dea l ert o enabl e the dea l ert o m eet t he l ow er pr i ce of a com p et i ng deal erm us tbe off er ed uni form l yt o al l deal er s i n t he sta te. 2 7 9 M d . at 4 5 2

. T h e p r o v isio n d o e s n o t re q u ire m a jo r o il c o m p a n ies to h a v e o n e u n if o rm tan k w a g o n p ric e f o r e v e ryre tail s ta tio n in th e s ta te

. I n G overnorv. Exx o n C or p. , the C o u rt o f

A p p e a ls c a re f

u lly d e f in e d th e ter m s u se d in th e sta tu te in o rd e r to d e f e a t th e o il compani es ’ cl ai m t hat t he s t atut e w as uncons t i tut i onal l yvague. 279 M d. at453- 455. T he C our t s ai d t hat t he t erm “vol unt aryal l ow ance ” does not r efe r t o any ot her t ype of as s i s t ance thatm i ghtbe ext endedG en. 3] 7

T hough w e have l i t t l e i nform at i on on how zone pr i ci ng 2 s y s t ems w or k i n M ary l and, t hey w er e exam i ned i n C ai n v. C hevr on U

. S. A

. , I nc. , 7 5 7 F

. S u p p
. 1 1 2 0 (D

. O r. 1 9 9 1 ). T h e re, th e c o u rt f o u n d th a t C h e v ro n d iv id e d th e C ity o f P o rtlan d in to 2 1 z o n e s w ith th e o b jec tiv e o f g ro u p in g a ll C h e v ro n se rv ice sta tio n s th a t co m p e te w ith o n e a n o ther fo r cu stom ers into o n e g eo g rap h ic zo n e. T h e c o u rt found thatt he zone s w er e es t abl i s hed byr efe r ence t o t r aff i c fl ow patt erns, l ocati on s o f com peti ng st at i on s, pri ce m ov em ent pat t erns, and natur al barr i er s t o t r aff i c fl ow
. T he gr oupi ng of r et ai l s ervi ce s t at i ons of one br and i n a geogr aphi cal zon e fo r the purpos e of est abli shi ng a w ho l esal e pri ce atw hich the o i l com pan ysel ls gas ol i ne t o t hos e dea l er s does not co m e underthe purvi ew of the vol unt aryal l ow ance pr ovi s i on. to d e a ler s s u c h a s re n t re lief , b u t sp e c if

ica llyis lim ited to “ c e rta in pr i c e d i s c o u n t s
. ” 2 7 9 M d

. a t 4 4 6 n
. 9

. Th u s , t h e me a n i ng of t he vol unt ary al l ow ance pr ovi s i on cannotbe expa nded t o pr ohi bi tzone p ri cing u n less the s o le reaso n fo r th e z o n es is to g ran t t em p o rary di s count s i n t he t ank w agon pr i ce t o deal er s i n s om e zone s and not t o all dealer s. 2
W e conc lud e t hatthe G as ol i ne D i vor cementL aw does not ad d r e s s t h e u s e o f

z o n e p r i c i n g b yo i l c o mpa n i e s t o s e tth e d e a l er ta n k w a g o n p ri c e s o f

g a s o lin e
. III T he R obi nson- P at m an A ct A . I ntr oducti on T he R obi ns on- Pat m an A ct , a 1936 amendm ent t o t he C l ayt on A ct , i s t he pr i nci pal fede r al s t atut e di r ect ed atpr i ce di s cr i m i nat i on. S e c tio n 2 (a ) o f

th e R o b in so n -P a tm a n A c t, 15 U .S .C . § 1 3 (a ), is in ten d e d to p ro h ib it p ric e d isc rim in a tio n b ya se ller to s im il a rly s i tuat ed buy er s w hen the ef fec tof th at d isc r i m i nat i on i nj ur es or l essens com peti t i on
. T he A ct provides in pert i nen tpartas fol l ow s:

T hati ts hal l be unl aw ful fo r a nyper s on engage d i n comm er ce, i n t h e co u r s e of s uch comm er ce .
. . t o di s cr i m i nat e i n pr i ce be t w een pur chas er s of comm odi t i es of l i ke gr ade a nd qual i t y . . . w her e t he ef fec t of s uch8 [7 9 O p
. A tt ’y di s cr i m i nat i o n m aybe s ubs t ant i al l yt o l es s en c o m p e tit io n o r te n d to c r e a te a m o n o p o lyin anyl i ne of c om m er ce, orinj ur e, des t r oy , or pr eventcompet i t i on w i t h anyper s on, w ho e ith e r gr a n ts or k n o w in g ly re c e iv e s th e b e n e f it of s uch di s cr i m i nat i on orw i t h cus t om er s of e i t h e ro f t h e m. C om m entat ors have c a l l ed the R ob i nson -Pat m an A ctthe m ost c o n t r o v e rs ia l a n d c o m p le x o f a ll a n titr u s t s ta tu te s
. S e e g e n e ra lly A B A S e c tio n o f

A n titr u s t L a w , M o n o g ra p h 4 , The R obi ns on- P atm an A ct : P ol i cy and Law , V ol

. I ( 1980)

. I thas been s ubj ectt o ext ens i ve i nt erpr et at i on byvar i ous fede r al ci r cui t cour t s of appeal s as w el l as t he U ni t ed St at es Supr eme C ou rt

. T h e Supr eme C our tonce obs erved tha t“pr eci s i on of expr es s i on i s notan out s t andi ng char act er i s t i c of the R obi ns on- Pat m an A ct

. ” A ut om at i c C ant een v
. FTC , 3 4 6 U .S . 6 1 (1 9 5 3 ).
T he Feder al T r ade C om m i s s i on and the D epart m entof J us t i ce h a v e a u th o rity to b rin g c a se s u n d e r § 2 (a ) o f th e A c t, an d p riv a te par t i es m ayfi l e s ui t s fori nj unct i ons and damages

. I n actual pr act i c e , t h e J u s t i c e Dep a r t me n td o e s n o tb r i n g a n yc a s e s u nder R obi ns on- Pat m an, and the Feder al T rade C om m i s s i on has not br oughtcas es i n r ece nty ear s
. M os tof the ca s es i nt erpr et i ng t he A ct hav e been broug ht bypri vate part i es. U ndert he M ary l and A nt i t rus tA ct , T i t l e 11, S u bt i t l e 2 of the C om m er ci al L aw ( “C L ”) A r t i cl e, M ary l and C ode, the A t t orney G e n e ra l’s O f

f ice m a yb rin g a p ric e d isc rim in a tio n a c tio n o n b e h a lf o f the S t at e t o recov er dam ages un der the R ob i nson -Pat m an A c t. T he A t t or neyG ener al m ayal s o br i ng a pr i ce di s cr i m i nat i on act i on i n St at e courtunderM ary l and’ s ver s i on of § 2( a) of the R obi ns onPat m an A ct , C L §11- 204( a) ( 3)

. I n i nt erp reti ng and enf or ci ng M a ry lan d ’s v e rsio n o f

th e R o b in so n -P a tm a n A c t, S tate c o u rts a re to b e “ g u i d e d b yt h e i n t e rp r e t a t i o n g i v e n b y t h e f e d e r a l c o u r t s
. . . . ” CL § 1 1 -2 0 2 (a )( 2 ). S e e Hin k le m a n v . Sh e ll O il C o ., 962 F. 2d 372, 379 (4 th C ir .), cer t

. deni ed , 1 1 3 S

. C t. 8 3 1 (19 9 2 ).
I n or dert o es t abl i s h a pr i m a f aci e cas e of pr i ce di s cr i m i nat i on u n d e rt h e Ro b i n s o n - P a t ma n Ac t , a p l a i n t i f f mu s td e mo n s t r a t e ( i ) two orm or e cons um m at ed s al es i n i nt er s t at e comm er ce, ( i i ) thati nvol ve comm odi t i es of l i ke gr ade and qual i t y , ( i i i ) i n w hi ch a di ffe r entpr i ce i s char ged byt he sa m e s el l ert o tw o orm or e pur chas er s forus e orG en. 3] 9

r es al e i n t he U ni ted S tat es , and ( i v) thatt he pr i ce di s cr i m i nat i on s u b s ta n tia lly in

ju re d c o m p e titio n
. Texaco I nc. v. H as br ouck, 496 U .S . 5 4 3 , 1 1 0 S .C t. 25 3 5 , 2 5 4 2 -4 3 (1 9 9 0 ). A n a b so lu te d e f e n se to a c h a rg e o f

p ric e d isc rim in a tio n is p r o v id e d in § 2 (b ) o f th e A c t, w hi ch s peci fi cal l ypr ovi des an exc ept i on forpr ic e di s cr i m i nat i ons gi ven by s uppl i er s t o t hei rcompet i ng r et ai l ercus t om er s w hen the d isc rim in a tio n is f

o r th e p u rp o se o f

m e e tin g in g o o d f

a ith th e e q u a lly lo w p ri c e o f

a c o m p e tin g s u p p lie r. T hi s anal y s i s w i l l exami ne w hetherzone pr i ci ng, bas ed on our under s t andi ng of how t he s y s t em w or ks i n M ary l and, vi ol at es §2( a) of the R obi ns on- Pat m an A ct , and w hether t he maj oroi l compani es t hats el l t hei rgas ol i n e t o t hei rdeal er s undera zone pr i ci ng s y s t em w oul d have a vai l abl e t o t hem t he “meet i ng compet i t i on” def ens e of §2( b) i f a pr i m a f

aci e c a s e o f

p ri c e d is c ri m in a tio n is p ro v e n
. B . S ecti on 2(a) O

ff en se F o r R o b in so n -P a tm a n p u rp o se s, a tra n sa c tio n is w ith in i nt er s t at e comm er ce i f “a tl eas tone of the tw o t r ans act ion s w hi ch w hen compar ed gene r at e a di s cr i m i nat i on, cr os s es a s t at e l i ne. ” G u lf O i l C or p. v. C opp P avi ng C o. I nc . , 419 U

. S. 186 ( 1979)

. Si nce no g a s o lin e is re f

in e d in M a ryla n d , see E xxon C orp. v. G overno r, 437 U .S . at 12 3, t he purchase of gasoli ne by an i nd epen den t dealer in M a ry lan d f

ro m th e d e a ler ’s s u p p lier is a tr a n sa c tio n in in ter sta te c o m m e rc e
. B e c a u se e a c h g ra d e o f g a so lin e so ld b ya p a r ti c u la r o il companyt o i t s deal er s i s i dent i cal , gas ol i ne meet s the “l i ke gr ade a n d q u a lity” re q u ir e m e n t o f th e A c t. See Texaco v

. H as br ouck , 110 S. C t

. at2543 n. 14. T he Supr eme C our tal s o hel d i n H as br ouck that a pr i ce di s cr i m i nat i on w i t hi n t he m eani ng of the R obi ns on- Pat m an Ac ti s me r e l y a p r i c e d i f f e r e n c e
. 1 1 0 S

. Ct

. a t2 5 4 4

. T h u s , i f t wo r et ai l deal er s of the s ame br and ar e r ece i vi ng di ffe r entt ank w agon pr i ces fr om t hei rs uppl i er , the pr i ce di ffer ence r equi r ementof the A cti s m et , an d an ana l y s i s of w hethera compet i t i ve i nj uryhas o c c u rr e d is n e c e s s a ry. T he pr i m aryi s s ue i n anycas e cha ll en gi ng zone pr i ci ng on R obi ns on- Pat m an gr ounds i s w hetherzone pr i ci ng i nj ur es compet i t i on. B efor e ther e ca n be a f ind ing of an in

ju ry to com pet i t i on beca us e of a pr i ce di s cr i m i nat i on, ther e m us t fi r s t be a10 [7 9 O p
. A tt ’y fi ndi ng t hat t he favor ed cust om er , w ho r ece i ves t he bene fi tof a pr i ce di s count , i s i n actual compet i t i o n w it h di s favor ed cus t om er s
. For i ns t ance , bu y e r s who per form di ffe r entfunct i ons i n t he s el l i ng chai n, s u c h a s wh o l e s a l e r s a n d r e t a i l e r s , d o n o tc o mp e t e f o rth e s a me cus t ome r s a n d a r e n o ti n c o mpe t i t i o n
. A pr i c e d i s c r i mi n a t i on betw een t hem w oul d not caus e a compet i t i ve i nj uryact i onabl e under th e R o b in s o n -P a tm a n A c t. Texaco v

. H as br ouck , 110 S. C t

. at2543. L i kew i s e, t her e i s no act i onabl e di s cr i m i nat i on w i t hi n t he meani ng of §2( a) for pr i ce di ffe r ence s gr ant ed bya s uppl i ert o cus t om er s w ho a re in d if f e re n t g e o g ra p h ica l m a rk e ts a n d th u s d o n o t co m p e te w ith e a c h o th e r. B es tB r ands B eve r age v. Fa ll staf f B r ew i ng C o. , 842 F .2 d 5 7 8 (2 d C ir . 1 9 8 7 ).
W h e t h e r re ta il sta tio n s c o m p e te w ith e a c h o th e r is s tr ic tl y a fac tual i s s ue. I n B ar

gai n C arW

as h I nc. v. Standar d O i lC o. (I ndi ana ), 46 6 F

. 2d 11 63 (7th C i r. 19 72 ), t he co urtexam i ned t he u se byone defe ndant , A m er i can O i l , of zone pr i ci ng forr et ai l gas ol i ne stat ion s in C h icag o
. T h e e v iden ce in tha t case sh o w ed that there w ere 2 2 z o n e s w ithin a m il e a n d a h alf rad ius o f th e p lai n ti ff ’s A m e ric a n sta tio n , c o n tain in g a p p ro x im a tely4 0 A m e ric a n re tail s t at i ons
. T he courtfound that the A m er i can z ones di d notr epr es ent sep ara te co m p eti ti v e m ark ets f o r the s ale o f g aso li n e. T h e C o u rt stat ed thati tw as “r eadi l yappar ent ” thatt he pl ai nt i ff, B ar gai n C ar W as h, compet ed w i t h A m eri can r et ai l s t at i ons i n the zone s s ur r oundi ng B ar gai n. 466 F. 2d at1168.
B arga i n C ar W

ash and o ther ca ses i ndi cat e t hatw hen zone s cr eat ed by a s uppl i er ar e geogr aphi cal l y cl os e orarbi t r ar i l ychos en, a n d th e re is a re a so n a b le p o ss ib ili tyth a t a d e a ler ’s c u sto m e rs w o u ld be l i kel yt o cr os s o v er fro m one ar ea t o another , then the fa vor ed deal er s m aybe found t o be i n compet i t i on w i t h t he di s favor ed deal er s
. Forexampl e, i n D

. L. I ngr am v. P hi l l i

ps P etr ol eum C o. , 259 F. Supp. 176 ( D

. N

. M

. 1966) , t he courtfound that t w o gas ol i ne w h o les a ler s w e re in p ra c tica l c o m p e tit io n w ith e a c h o th e r. D e sp ite bei ng i n t w o s epar at e s t at es , eac h di d bus i nes s i n an ar ea c om pr i s i ng a “ sin g le h o m o g e n e o u s e c o n o m ic u n it” a n d c u sto m e rs f ro m b o th s ta te s p a tr o n iz e d e a c h o f th e b u s in e s s e s . 2 5 9 F . S u p p . a t 1 8 2

. See Fal l s C i t y I ndus tr i es , I

nc. v. V anco Bever age, I

nc . , 460 U

. S. 428 (1 9 8 3 ); B est B rand

s B everag e, Inc. v. Fall staff B rew i ngC orp . 842 F

. 2 d 5 7 8 (2d C ir

. 1 9 8 7 ).G en. 3] 11

T he Mo rto n Sa lt

“i nfer ence of i nj ury ” t es thas been a ffi r m ed 3 b yt he Supr eme Court i n m or e r ece nt R obi ns on- Pat m an cas es
. In Fa lls C ity In d u s tr ie s v . V a n c o , t he C our ts ai d t hati f the di s favor ed (c o n tin u e d ...) D et erm i ni ng w hether r et ai l s t at i ons w i t hi n one zone cr eat ed by an oi l companycompet e w i t h deal er s of the s am e b rand i n ot her z o n e s in M a ry lan d re q u ire s a f a c tu a l an a ly sis o f

th e z o n e s. T h is a n a ly si s w ou l d incl ud e a stud yof the gu i deli nes t hat w ere used in det erm i ni ng t he boundar i es of the zone , the pr i m arys our ces of the c u sto m e rs f

o r e a c h d e a ler in th e z o n e , an d o th e r sim ilar e c o n o m ic fac t or s
. I f t he zones ar e dr aw n narr ow l y , as i n B arga i n C ar W ash , th e re is u su a llya c o m p e tit iv e n e x u s b e tw e e n th e re tail d e a ler s in so m e f av o red an d d isfav o red p ri ce zo n es. H o w ev er, i f th e z o n es a re d r a w n b r o a d l y )for exampl e, w i t h one zone fort he W as hi ngt on ar ea an d an ot herzone f

ort he B al t i m or e ar ea ) i t i s m ore diffi cultto prove a ctual com peti t i on betw een d eal ers i n the tw o zo nes. E v iden ce o f a ctua l com p eti ti o n b e tw e en d ea lers i s ess en ti al fo r a p r im a fa c ie c a s e u n d e r t h e R o b in s o n -P a tm a n A c t. Be s tBr ands B eve r age v. Fal l

s taf f B r ew i ng C or

p. , 8 4 2 F .2 d a t 5 8 4

. O nce t he compet i t i ve r el at i ons hi p has been e s t abl i s hed betw een r et ai l deal er s of t he s ame br and i n s epar at e zone s , t he fi nal s t e p i n m aki ng a p rim a fa c ie cas e under§2( a) i s t o pr ove thatt he p ri ce d iscri m ination su b stan ti all y injured co m p eti ti o n
. T h e injury nece s s aryt o pr ove a vi ol at i on of the A ct m ayoccuron anyone of t hr ee l evel s i n t he s el l i ng ch ain. T hes e l evel s i ncl ude i nj uryatthe l e v e l o f t h e s e l l e r ’ s c o m p e t i t o r s , k n o w n a s a p r i m a ry l i n e i n j u r y; i n j u r y a tt h e l e v e l o f

t h e b u ye r s , k n o w n a s a s e c o n d a r y l i n e i n j u r y; an d injuryat th e lev el of the b u y er’s cu stom ers, kn o w n as a tert iary lin e in ju ry
. In ju ryto c o m p e tit io n c a u se d b yz o n e p ric in g , w h e re in d ea lers rece iving a f

av o rab le t an k w ag o n p ri ce co m p ete w ith d ea lers o f th e sa m e b ran d p a y in g a h igh er tan k w ag o n p ri ce , is seco n d ary l i ne i nj ur y , beca us e i toccur s atthe buy er ’ s l evel of compet i t i on. T h e l eading case on second ary l i ne i njur i es t o com peti t i o n is F TC v. Mor t on S a ltC o. , 3 3 4 U. S

. 3 7 ( 1 9 4 8 )

. Th e r e t h e S u p r e me C our thel d t hatpr oof of a s ubs t ant i al and s us t ai ned pr i ce di s cr i m i nat i on i n t he s al e of pr oduct s forr esal e i n an amount s uffi ci entt o i nfl uence r es al e pr i ces i s s uffi ci ent t o r ai s e an i nfer ence o f in ju ry to c o m p e titio n
. See A B A A nt i t rus tSect i on, M onogr aph 4, The R obi ns on- P atm an A ct : P ol i cy & Law , V ol

. I , at97 ( 1980)

. T he 312 [7 9 O p
. A tt ’y

(

. . . cont i nued) 3
cus t om ers how s pr oof of s ubs t ant i al pr i ce di s cr i m i nat i on overt i m e, then a reaso n ab le p o ssibil ity ex ist s that a price diff ere n ce m ayh arm compet i t i on. 460 U

. S. at437. I n Texaco v

. H as br ouck , t h e S u p r e me C our thel d t hatfort he p lai n ti ff t o pr ove compet i t i ve i nj uryunder R obi ns on- Pat m an, t he pl ai nt i ff ne ed onl ys how t hat a s ubs t ant i al p ri ce d iscri m ination ex ist ed b etw e en h im self a n d h is co m p eti tors overa per i od of t i m e. 110 S. C t

. at2551. C our tal s o fou nd t hati ti s notnece s s aryt o pr ove thatt he pr i ce dis cri m i nati on actuall yharm ed co m peti t i on bu ton l ythat there i s a r eas onabl e pos s i bi l i t yt hatthe di s cr i m i nat i on had s uch an e ffe cton c o m p e titio n . 3 3 4 U .S . a t 4 7

. I nj ur yt o compet i t i on m ayal s o be pr oven byevi dence t hatt he pr i ce di s cr i m i nat i on caus ed an i nj uryt o a sp ec ifi c compet i t orw ho di d notr ece i ve the bene fi tof t he pri ce di s cr i m i nat i on. I n Fa lls C ity I ndus tr i es , t he Supr eme C our ts ai d thati f a p lai nt i ff c om pet i t or s how s di r ectevi dence of l os ts al es caus ed byt he di s cr i m i nat i on, then a “ rea so n ab le po ssibil itythat a p ri c e d iffe ren ce m ayh arm c o m p e titio n ” e x is ts

. 4 6 0 U .S

. a t 4 3 4 -3 5

. Ac c o r d , Fe e s e rv
. S e r v -AP or t i on, I

nc. , 9 0 9 F

. 2 d 1 5 2 4 (3d

. C ir

. 1 9 9 0 ).
T hus , i n or der t o pr ove t hatzone pr i ci ng vi ol at es t he R obi ns onPat m an A ct , i t i s nece s s aryt o pr ove a s us t ai ned and s ubs t ant i al pr i ce d isc rim in a tio n su f

f icie n t to in f

lu e n c e th e f

a v o re d c u sto m e rs’ re sa le pr i ce ort o pr ove thata dea l eri n a di s favor ed zone s uffe r ed a s al es orpr ofi tdecl i ne ca us ed byt he mo re fa v o r abl e t ank w agon pr i ce a compet i t ori n a di ffe r entzone r ece i ved.
I n B arga i n C ar W

ash , t he fe der al courtdet erm i ned thatt he p ri ce zo n es c rea ted b yS tand ard O il resu lt ed in a c o m p eti ti v e inju ry bot h undert he Mo rto n Sa lt rule and beca us e B ar gai n s uffe r ed a di r ecti nj ur y as a r es ul t of t he pr i ce di s cr i m i nat i on. I n t hatcas e, t he c o u rt e x a m in e d th e a m o u n t an d d u ra tio n o f th e d isc o u n ts g ra n ted to eac h of B ar gai n’ s appr oxi m at el y40 compet i t or s i n 12 di ffe r entpr i ce zones s ur r oundi ng B ar gai n. I tal s o exami ned the ext entt o w hi ch t hi s di s cr i m i nat i on caus ed a di ver s i on of bus i nes s fr om B ar gai n and th e d e g re e o f

B a rg a in ’s c o m p e tit o rs’ p ro f it m a rg in s a s c o m p a re d to B ar gai n’ s pr ofi tm ar gi n. T he cour t found t hat r et ai l s ervi ce s t at i ons i n ot herzones apartfr om B ar gai n rec ei ved an a ver age e l even per centdi s count i n t he t ank w agon pri ce of gas ol i ne overa one y ear per i od i n r el at i on t o B ar gai n, and t hat t hi s w as s uffi ci ent t o m eettheG en. 3] 13
Mo rto n Sa lt t es t of a s us t ai ned and subs t ant i al pr i ce di s cr i m i nat i on. 466 F. 2d at 1174. T he courtal s o found thatt he l ow erpr i ces gr ant ed B ar gai n’ s compet i t or s i n s urr ound ing zo n es su b stan ti all yco n tr ibut ed t o B ar gai n’ s l os s of s al es and ul t i m at e bus i nes s fai l ur e. 466 F. 2d at 1175. Subse quentcas es have f ound com p eti t i ve i nj uryi n gas ol i ne m arket s w her e the pr i ce di ffe r ent i al s w ere as l ow as 1. 8¢ t o 6¢ a g a llo n
. Texaco v. H

as br ouck , 1 1 0 S .C t. at 2 5 3 0 ; I ngr am v. P hi l l i

ps , 2 5 9 F . S u p p 1 7 6 (D .N .M . 1 9 6 6 ). C onver s el y , i f pr i ce di scrim i nat i on i s nei t hers us t ai ned nor su b stan ti al in am o u n t, o r i f th e los t sal es b ya c o m p eti n g d ea ler are m i ni m al , t h e r e i s n o i n j u r yt o c o mpe t i t i o n d u e t o th e p r i ce di s cr i m i nat i on. I n Am e r i c an O i lCom pa ny v
. FTC , 3 2 5 F .2 d 1 0 1 (7 th C i r
. 1 9 6 3) , t he courtr ever s ed a f i ndi ng byt he FT C t hatA m er i can had vi ol at ed the R obi ns on- Pat m an A ctbys el l i ng gas ol i ne ata l ow er d e a ler tan k w a g o n p r ic e to d e a ler s in S m yrn a , G e o rg ia th a n to d ea lers a p p ro x im ately1 5 m il es a w ayin M ariett a, G eo rgia, ov er a s e v e n t e e n d a yp e r i o d , n o t wi t h s t a n d i n g e v i d e n c e t h a tAm e r i c an deal er s i n t he tw o t ow ns s har ed m an y o f t he s ame cus t om er s
. T he cour thel d t h at pr i ce di s cr i m i nat i on per se does notcons t i tut e a v io latio n o f

§ 2 (a ) o f

th e R o b in s o n -P a tm a n A c t an d w e n t o n to exami ne the ac tual eff

ectof the di s crim inat i on. T he C ourtfound t hat a subst anti a l b u t tem po rary pr i ce di s cr i m i nat i on i n favorof Sm yr na dea l er s had onl y a sl i ght eff ect on compet i t i on and thata de m in im is i nj ur yi s nots uffi ci en t f ora p rim a fa c ie vi ol at i on of the R obi ns on- Pat m an A ct

. 325 F. 2d at106. T hus , t o det erm i ne if a zone pr i ci ng s y s t em vi ol at es the R obi ns on- Pat m an A ct , one mustexami ne (i ) t he hi s t oryand back groun d o f t he sy st em ; (i i ) the co m peti t i ve p at t ern of the zon es; ( i i i ) t he pr i ce di ffe r ent i al s betw een z ones overatl eas ta one y ear peri od ; (i v) the ef

fectt he pri ce differ enti al has had on pu m p p ri ces; (v ) th e e c o n o m ic e f

f e c ts th a t th e g ra n tin g o f p ric e d if

f e re n tials to deal er s i n di ffe r entzones has had on compet i t i on betw een de al er s of t he sam e brand l ocated i n differ ent pri ce zon es; and (vi ) w hetherl ost sa les c a n b e d ire c tlya ttribu ted to th e tan k w a g o n p ric e g ra n ted to deal er s i n a fa vor ed zone. T he cas es s ugges ta hi gh l i kel i hood t hat a compet i t i ve i nj ur yexi s t s foranys us t ai ned di ffe r ent i al s above the d e m in im is lev e l in a h ig h lyc o m p e tit iv e in d u stryw ith lo w p ro f it m a r g i n s l i k e t h e r e t a i l g a s o l i n e i n d u s t r y. T o s um m ar i ze, zone pr i ci ng i n i t s el f do es n o tvi ol at e the R obi ns on- Pat m an A ct

. I f t he pr i ce di s cr i m i nat i on i m pos ed byzone pr i ci ng caus es an i nj ur yt o com pet i t i on, how ever , t her e maybe a vi ol at i on of the A ct i n t he ar ea w her e t he i nj ury occur s
. I f the pr i ce14 [7 9 O p
. A tt ’y di s cr i m i nat i ons byanyoi l companyar e s us t ai ned, su b s t ant i al , and p e rv a siv e , the A tto rn e yG e n e ra l co u ld se e k a n in ju n c tio n o n b e h a lf o f t h e S t a t e t o p r o h i b i to r c ha n g e th e z o n e p r i c i n g s y s t e m. A l t ernat i vel y , a pr i vat e pl ai nt i ff w ho can pr ove thatther e i s a ca us al connec t i on betw een the p l a i n t i f f’ s i n j u rya n dth e p r i ce di s cr i m i nat i on c a n , u n d e r th e A c t, se e k d a m a g e s a n d a n in ju n c tio n in f

e d e ra l co u rt. 1 5 U .S .C . § § 1 5 a n d 2 6

. C . S ecti on 2(b) D efense A s uppl i er of gas ol i ne w ho comm i t s a p rim a fa c ie vi ol at i on of §2( a) of the R obi ns on- Pat m an A ct m ay be abl e t o es cape l i abi l i t yby es t abl ishi ng t hatt he pr i ce di s cr i m i nat i on w as forthe purpos e of m eet i ng t he equa l l yl ow t ank w agon pr i ce of a compet i t or
. T he s ocal l ed “meet i ng compet i t i on” def ens e i s cont ai ned i n §2( b) of the R obi ns on- Pat m an A ct , 15 U

. S. C

. §13( b) , and i tpr ovi des i n pert i nent p a rt: T h a t n o th in g h e re in c o n tain e d sh a ll p re v e n t a

s el l err ebut t i ng t he p rim a fa c ie cas e thus m ade bys how i ng t hathi s l o w er pr i ce orthe furni s hi ng of s ervi ces orfac i l i t i es t o any pur chas erorpur chas er s w as m ade i n good fa ith t o m eet an equal l y l ow pr i ce of a compet i tor, orthe s ervi ces orfac i l i t i es fu rnish ed b ya c o m p eti tor. T h e S u p rem e C o u rth as h eld th at th is de fe n se “ ‘req u ir es th e se ll er, w ho has know i ngl ydi s cr i m i nat ed i n pr i ce, t o s how t he exi s t ence of fac t s w hi ch w oul d l ead a r eas onabl e and pru dentper s on t o bel i eve t hatt he gr ant i ng of a l ow erpr i ce w oul d i n fac t m eet t he equal l yl ow pr i ce of the compet i t or
. ’ ” Fal ls C it y I ndus tr i es , I

nc. v. V anco B eve r age, I

nc. , 4 6 0 U

. S. at438 ( quot i ng U ni t ed Stat es v. U

ni t ed Stat es G yps um C o. , 438 U

. S. 422 ( 1978) )

. T he m eet i ng compet i t i on defe ns e of §2( b) i s absolu te, r egar dl es s of anyadver s e ef fec ton c o m p e titio n c a u s e d b y th e p ri c e d is c ri m in a tio n
. Standar d O i l C o. v. FTC , 3 4 0 U .S . 2 3 1 , (1 9 5 1 ).
A m er i can O i l C om pany , one of the def endant s i n B ar

gai n C ar W ash , ar gued that even i f t he cour t found thati thad enga ged i n pr i ce d isc rim in a tio n , it h a d d o n e so to m e e t th e c o m p e tit io n it fa c e d in m etr opol it an C hi cago. A ccor di ng t o the court , t he “meet i ng compet i t i on” def

ens e w oul d be ava i l abl e t o A m er i can i f the l ow erG en. 3] 15

U n d er F TCv . Su n O il , 371 U

. S. 505 ( 1963) , the “meet i ng 4 c o m p e tit io n ” d e f

e n se is n o t av a ilab le to a su p p li e r th a t lo w e rs its w hol es al e pr i ce t o ai d i t s deal er s i n compet i t i on w i t h a dea lert hat l ow er ed i t s r et ai l pr i ce w i t hout s uppor t fr om i t s s uppl i er
. I n s uch a situ ati o n , the s u p p lie r i s n o t i n co m p eti ti o n w ith it s d ea ler’s c o m p e tito r a n d c a n n o t in v o k e th e § 2 (b ) d e f e n s e
. p ric e g ra n ted to th e f

a v o re d c o m p e tit o rs o f

B a rg a in w a s g ra n ted to m e e t an e q u a llylo w p ric e m a d e b y a c o m p e tit o r o f A m e ric a n to its deal er s w ho ar e i n compet i t i on w i t h A m er i can’ s deal er s
. 466 F. 2d at1175. T he courtfound that A m er i can ha d vi ol at ed §2( a) of the R o b in so n -P a tm a n A c t b u t se n t th e c a se b a c k to th e d istric t co u rt to exami ne w hether A m er i can c oul d pr ove thi s “meet i ng compet i t i on” d e f e n s e
. I n G overnorv. E

xxon , t he M ary l and C our tof A ppeal s hel d that t he §2( b) defe ns e w as r es t r i cted t o a s i tuat i on i n w hi ch a s uppl i er o f f e re d a tan k w a g o n d isc o u n t to a d e a ler in o rd e r to m e e t an e q u a lly l ow pr i ce of

fer ed t o t hats ame deal erby another oi l company
. T hat situ ati o n d o es n o t occ u r i n the g aso li n e ind u stry , b ec au se a ll d ea lers of one br and pur chas e thei r gas ol i ne fr om t he suppl i er of t hatbr and; t herefore, t he C ou rt held t hat t he §2(b) defe nse w as un ava ilab le to th e m a jo r o il co m p a n ie s in M a ry lan d . 2 7 9 M d . at 4 5 1 -5 2 . In its affi r m ance , t he Supr eme C our ts i gnal ed thati tw as aw ar e of the contr aryhol di ng on t he ava i l abi l i t yof the §2( b) d ef ense byt he Seventh C i r cui ti n B arga i n C ar W ash but l eft t he i s s ue unr es ol ved. 4 3 7 U .S . at 1 2 9 n .2 0 a n a c c o m p a n y in g tex t. 4

IV C oncl usi on I n s um m ary , i ti s ouropi ni on t hat zone pr i ci ng i t s el f does not vi ol at e B R §10- 312( 1) orfede r al and St at e pr ice di s cr i m i nat i on l aw s
. I f the purpos e of the zones is to gr antvol unt aryal l ow ance s onl yt o s el ect ed dea l er s ori f the ef fec tof pr ice zo n es is t o caus e a compet i t i ve i nj ur y , t hei rus e mayvi ol at e the G as ol i ne D i vor cement L aw o r th e R o b inso n -P atm an A ct i n p arti cu lar area s in the S tat e. In or dert o pr ove a c om pet i t i ve i nj ury , a pr i vat e pl ai nt i ff orgovernm ent e n f o r c e me n ta g e n c ymu s ts h o w th a t t h e z o n e s a r e s o n a r r o wl yd r a wn t hatdeal er s i n di ffe r entzones compet e w i t h eac h ot her , thatthe16 [7 9 O p
. A tt ’y d ea lers i n di ffe r entzones r ece i ve s ubs t ant i al and s us t ai ned di ffe r ence s i n t he t ank w agon pr i ce gr ant ed fr om thei rs uppl i er , and th a t th e in

ju rysu f f e re d is n o t d e m in im is

. A z o n e p ric in g sy ste m w ill al s o vi ol at e §2( a) of the R obi ns on- Pat m an A ct i f evi dence i s offe r ed p ro v in g th a t a p a rticu lar d e a le r lo st s a les b e c a u se o f th e f a v o ra b le pri ce gr anted t o i t s com peti t or. If evidence i s off ered suffici en t to pr ove a p rim a fa c ie cas e of a vi ol at i on of §2 (a) o f t he R obi ns onPat m an A ct , t he “meet i ng compet i t i on” def ens e w oul d n o tbe a v a ila b le to th e d is c ri m in a to r u n d e r M a ryla n d la w .

J. Jo sep h C u rran , Jr. A t t or ney G ener al
Jo h n R . T e n n is A s s is tan t At to rn ey G ener al

Ja c k S c h w a rtz C hi ef C ouns el O pi ni ons and A dvi ce