Court Opinion

ID: 8981565
Source: CourtListenerOpinion
Date Created: 2022-11-27 11:29:01.454666+00
Date Added: 2024-06-11T17:10:41.897049
License: Public Domain

STAPLETON, Circuit Judge,
concurring and dissenting:
I agree with the court that the defendants were not entitled to summary judgment on the plaintiffs’ secondary-line Robinson-Patman Act claim. However, I respectfully dissent from the court’s reversal of the summary judgment in favor of the defendants on plaintiffs’ Sherman Act claim. Because Feeser has not met its burden of producing evidence tending to show that the challenged price discrimination affected competition in a relevant market as required under § 1 of the Sherman Act, 15 U.S.C. § 1, I would affirm the summary judgment entered against Feeser on its second claim.
As the court finds, the language of § 2(a) of the Robinson-Patman Act, its legislative history, and Supreme Court precedent interpreting it compel the conclusion that a victim of secondary line price discrimination may show “competitive injury” regardless of the general health of the victim’s business or the market in which the victim operated. Moreover, as the court’s opinion also demonstrates, Feeser met its burden of producing evidence tending to show a reasonable possibility that Serv-A-Portion’s discriminatory pricing practices are harmful to competition between Feeser and the beneficiaries of that discrimination. Falls City Industries, Inc. v. Vanco Beverage, Inc., 460 U.S. 428, 434-35, 103 S.Ct. 1282, 1288, 75 L.Ed.2d 174 (1983). It did this both by presenting direct evidence of lost sales, and by producing sufficient evidence of a substantial price discrimination between itself and its competitors over time, so as to implicate the Morton Salt inference. Id. In the latter regard it is especially significant that Feeser has produced evidence indicating that Serv-A-Portion’s discriminatory pricing was -passed on by its favored distributors in the form of lower resale prices. FTC v. Morton Salt, 334 U.S. 37, 47, 68 S.Ct. 822, 828-29, 92 L.Ed. 1196 (1948) (a showing that price discrimination was sufficient in amount to influence resale prices was “in itself ... adequate to show competitive injury”). Finally, by its evidence of lost sales alone, Feeser has produced sufficient evidence to meet its burden at the summary judgment stage of creating a genuine issue of material fact as to whether the challenged price discrimination actually injured it for purposes of § 4 of the Clayton Act. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n. 9, 89 S.Ct. 1562, 1571 n. 9, 23 L.Ed.2d 129 (1969) (the “burden of proving the fact of damage under § 4 of the Clayton Act is satisfied by ... proof of some damage flowing from ... [the antitrust violation]; inquiry beyond this point goes only to the amount and not the fact of damage”); Falls City, 460 U.S. at 437, 103 S.Ct. at 1290 (if some of a plaintiff’s injury is attributable to price discrimination, defendant is responsible' to that extent).1 I also agree that there is a genuine dispute as to whether Juniata can be considered a “purchaser” with standing to sue under our precedent in Klein v. Lionel Corp., 237 F.2d 13 (3d Cir.1956), and Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105 (3d Cir.1980), cert. denied, 451 U.S. 911, 101 S.Ct. 1981, 68 L.Ed.2d 300 (1981), and that the district court therefore erred in entering summary judgment against Ju-niata on this ground.
I part company with the court, however, when it concludes that Feeser has tendered *1546sufficient evidence to raise a genuine issue of material fact as to whether the price discrimination at issue in this case caused an adverse, anticompetitive effect in a relevant market for purposes of § 1 of the Sherman Act. To the contrary, Feeser failed to make any significant response to Serv-A-Portion’s summary judgment argument that Feeser was unable to show an injury to competition in a. relevant market. In particular, Feeser introduced no market analysis of any kind purporting to show that Serv-A-Portion’s discriminatory pricing arrangement with Weis (assuming such an agreement existed)2 produced an adverse, anticompetitive effect within a relevant product and geographic market. This left the record silent about an essential element of Feeser’s § 1 claim.
A vertical restraint, such as an agreement between Serv-A-Portion and Weis to deal with each other on more favorable terms than Serv-A-Portion would deal with Feeser, is not a per se violation of § 1, but must be dealt with under a rule of reason analysis. See Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 108 S.Ct. 1515, 99 L.Ed.2d 808 (1988) (vertical restraints, such as an agreement between a manufacturer and a dealer to terminate another “price cutting” dealer, are not per se violations of § 1 absent an agreement between the conspiring dealer and the manufacturer as to resale prices); Alliance Shippers v. Southern Pacific Transportation Co., 858 F.2d 567, 570 (9th Cir.1988) (“vertical arrangements resulting in price discrimination are not per se violations of the Sherman Act”); Seaboard Supply Co. v. Congoleum Corp., 770 F.2d 367, 375 (3d Cir.1985) (“that a manufacturer may give preferential pricing and delivery terms to one distributor does not establish a per se violation of section 1 of the Sherman Act even though other distributors suffer losses in sales”).
Under a rule of reason analysis, a vertical restraint violates § 1 only if either its purpose or its effect is to adversely affect competition in a relevant market. Columbia Metal Culvert Co. v. Kaiser Aluminum & Chemical Corp., 579 F.2d 20, 26 (3d Cir.) (“[I]n the context of § l’s prohibition of conspiracies in restraint of trade, except where practices fall under a judicially created per se ban, a finding of illegality presupposes a determination in any given case that the effect upon competition in the marketplace is substantially adverse.”) (quotations omitted), cert. denied, 439 U.S. 876, 99 S.Ct. 214, 58 L.Ed.2d 190 (1978); accord Garshman v. Universal Resources Holding, Inc., 824 F.2d 223, 231 (3d Cir.1987); Tunis Bros. Co., Inc. v. Ford Motor Co., 763 F.2d 1482, 1490 (3d Cir.1985), vacated on other grounds, 475 U.S. 1105, 106 S.Ct. 1509, 89 L.Ed.2d 909 (1986); Cernuto, Inc. v. United Cabinet Corp., 595 F.2d 164, 166 (3d Cir.1979); Coleman Motor Co. v. Chrysler Corp., 525 F.2d 1338, 1346 (3d Cir.1975). Thus, unlike the Robinson-Pat-man Act, the Sherman Act protects competition in the marketplace and not individual competitors harmed by price discrimination. Monahan’s Marine, Inc. v. Boston *1547Whaler, Inc., 866 F.2d 525, 529 (1st Cir.1989).
As a result, Feeser cannot defeat summary judgment by merely showing that Feeser and other disfavored distributors lost sales because Weis, Tartan and Sky were able to offer lower prices to end users of Serv-A-Portion portion control products as a result of the pricing advantage they received from Serv-A-Portion, and that Serv-A-Portion realized that this would occur. Seaboard Supply Co., 770 F.2d at 375; Monahan’s Marine, Inc., 866 F.2d at 525 (where favoritism in prices for certain dealers was not likely to concentrate the relevant market or drive smaller dealers out, the fact that a disfavored dealer was harmed did not render a price discrimination agreement unreasonable under § 1); Zoslaw v. MCA Distributing Corp., 693 F.2d 870, 887 (9th Cir.1982) (indicating “that the price discrimination which results where buyers seek competitive advantage from sellers encourages the aims of the Sherman Act, a respect in which the Sherman Act is inconsistent with the aims of the Robinson-Patman Act,” and affirming a grant of summary judgment against a plaintiff victimized by price discrimination where plaintiff did not show an adverse effect on competition in the relevant market), cert. denied, 460 U.S. 1085, 103 S.Ct. 1777, 76 L.Ed.2d 349 (1983). The Sherman Act is not offended by unfair subsidies to some competitors that result in a price war and diminished profits for some disfavored competitors, unless those subsidies lead to diminished price competition in the relevant market and higher prices for consumers. AAA Liquors, Inc. v. Joseph E. Seagram & Sons, 705 F.2d 1203, 1207-08 (10th Cir.1982) (section 1 allows a supplier to start a “price war,” and does not require suppliers to offer the same prices to customers in a given geographical area, absent a purpose to exclude disfavored buyers from the relevant market or some adverse effect on competition in that market), cert. denied, 461 U.S. 919,103 S.Ct. 1903, 77 L.Ed.2d 290 (1983); cf. Tunis Bros. Co., Inc. v. Ford Motor Co., 763 F.2d at 1490 n. 13 (“[I]n addition to showing the existence of a conspiracy or combination, plaintiffs must show an adverse impact on competition to prove a section 1 claim. The termination of a dealer or rejection of a dealer application, even if done unfairly, does not by itself establish injury to competition.”).
Because the Sherman Act protects competition and not competitors, Feeser had to show that the complained of price discrimination had an adverse effect on competition in a relevant market defined by product and geographic scope.3 On the record before us, however, it would be impossible to rationally conclude that Serv-A-Portion’s pricing practices were intended to4 or were *1548likely to lead to a substantial lessening of competition in some designated market. Indeed, there is nothing in the record indicating that the complained of price discrimination did anything other than spark a vigorous round of competition in a portion control market which was already extremely competitive. Nothing in the record indicates that disfavored distributors like Fees-er could not easily transfer to another manufacturer of portion control products. The only disfavored distributor that dropped Serv-A-Portion portion control products was R & R, and R & R did not retreat from competition with Weis in the portion control market. Instead, it began to distribute other brands of portion control products, and thus increased interbrand competition in the relevant market. The fostering of just such competition is, of course, the “primary concern of the antitrust laws.” Business Electronics Corp., 485 U.S. at 726, 108 S.Ct. at 1520-21.5 Nor is this a case where a plaintiff without market power was disfavored by an agreement between a supplier and a powerful distributor who forced the agreement on the supplier so as to harm the plaintiff. There is no evidence that Feeser is smaller than Weis, or has less market power than Weis. Monahan’s Marine, 866 F.2d at 529.
Rather, the only inference that could be drawn from this record would be that the discriminatory pricing was unlikely to have an adverse effect on the portion control market (1) because disfavored distributors like Feeser could easily begin to distribute other brands of portion control products; (2) because Serv-A-Portion, according to Feeser, favored not one, but three distributors of its own products and both the in-trabrand competition among them and the interbrand competition in the market would prevent them from exploiting their status in a way that would hurt consumers; and (3) because there are no discernible barriers to entry to this market.
I thus conclude that the present record does not reflect a material dispute of fact as to whether the alleged agreement between Serv-A-Portion and Weis had an adverse impact on competition in a relevant market. I would affirm the judgment in favor of the defendants on the Sherman Act claim.

. I cannot agree with the court’s suggestion that there are "de minimis violations” of the Robinson-Patman Act that do not count as such. I acknowledge that circumstances may exist where price differentials are so de minimis that they could not create a reasonable possibility that competition between the favored and disfavored purchasers would be harmed. Where, however, “ 'the record indicates a price differential substantial enough to cut into the purchaser’s profit margin ... [or one] that, if reflected in a resale price cut, would have a noticeable effect on the decisions of customers in the retail market, an inference of injury may be properly indulged.’" Boise Cascade Corp. v. FTC, 837 F.2d 1127, 1153 (D.C.Cir.1988) (Mikva, J. dissenting) (quoting Foremost Dairies, Inc. v. FTC, 348 F.2d 674, 680 (5th Cir.1965)).

. As was the district court, I am willing to assume, for purposes of analyzing whether Fees-er has produced sufficient evidence of adverse competitive impact under § 1 of the Sherman Act, that the agreement alleged in Feeser’s complaint existed, i.e., a conspiracy between Serv-A-Portion and Weis whereby Weis would receive more favorable prices than Feeser. However, if an independent ground for affirmance were not available, affirmance might well be appropriately based on the lack of record evidence of a conspiracy, given that discovery in this case went on for over a year prior to the order limiting discovery to issues of competitive injury, and Feeser’s Rule 56(f) affidavit did not indicate what additional discovery it needed to uncover evidence of an illegal agreement. See Dowling v. City of Philadelphia, 855 F.2d 136 (3d Cir.1988) ("This court has interpreted Rule 56(f) as imposing a requirement that a party seeking further discovery in response to a summary judgment motion submit an affidavit specifying, for example, what particular information is sought; how, if uncovered, it would preclude summary judgment; and why it has not previously been obtained.”); see also, Hancock Industries v. Schaeffer, 811 F.2d 225, 230 (3d Cir.1987); Koplove v. Ford Motor Co., 795 F.2d 15, 18 (3d Cir.1986); Mid-South Grizzlies v. National Football League, 720 F.2d 772, 781 (3d Cir.1983), cert. denied, 467 U.S. 1215, 104 S.Ct. 2657, 81 L.Ed.2d 364 (1984). Feeser was well apprised of the need to produce adequate evidence on this element of its claim, and filed a, albeit inadequate, Rule 56(f) affidavit to respond to this portion of Serv-A-Portion’s motion.

. The record is unclear as to the precise geographic area allegedly affected by the unlawful agreement alleged by Feeser. Nor is it apparent whether Feeser contends that the product market is all portion control products or whether it contends that Serv-A-Portion portion control products can in themselves constitute a product market for § 1 purposes. Columbia Metal Culvert Co. v. Kaiser Aluminum & Chemical Corp., 579 F.2d 20, 27 (3d Cir.1978), (quoting Brown Shoe Co., Inc. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 1523-24, 8 L.Ed.2d 510 (1962)) ("The outerbounds of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it.’’). Fees-er does advance the proposition that Serv-A-Portion products occupy a unique niche in the portion control market because of their combination of moderate price and good quality. This proposition suggests that if Serv-A-Portion’s distributors fail to maintain their prices at a reasonable level, end users will either switch to higher quality products (made price competitive because of Serv-A-Portion’s increased prices) or considerably cheaper products (the rise in Serv-A-Portion’s prices not being justified by the quality difference between its products and cheaper ones). *1548ket. The Sherman Act is not designed as a general prohibition on unfair business practices, it is designed to protect consumers and absent some purpose to harm them or some adverse effect upon their interests, the Act is not concerned with harm to a particular competitor.

. With respect to intent, Feeser’s amended complaint alleges only an agreement to engage in price discrimination, and does not allege that this agreement was designed to drive it from the portion control product market altogether. Compare Coleman Motor Co. v. Chrysler Corp., 525 F.2d 1338, 1347 (3d Cir.1975) ("A combination of distributors, which through unfair practices eliminates a competitor and leaves it in such a condition that it lacks the ability to continue business as an interbrand competitor, has an adverse effect on competition,”).
In its briefs to the district court' and this court, Feeser has, at best, vaguely alleged that Serv-A-Portion intended to hamper Feeser’s ability to compete with Weis in sales of Serv-A-Portion’s portion control products. No record *1548evidence supports this assertion, however. Further, the proposition that Serv-A-Portion would intend to do this seems facially implausible. As Judge Breyer has explained, a "supplier himself typically has an economic interest in encouraging competition among his dealers, and thus preventing the emergence of any ‘dealer monopoly.' Other things being equal, a profit-maximizing dealer monopolist would set retail prices that, from the supplier’s perspective, are too high and unduly restrict the product’s sales." Monahan’s Marine, Inc. v. Boston Whaler, Inc., 866 F.2d 525, 526 (1st Cir.1989); see also Continental T. V. Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 56 & n. 24, 97 S.Ct. 2549, 2560 & n. 24, 53 L.Ed.2d 568 (1977) (indicating that economists believe that once a manufacturer sets its own price, the manufacturer desires intrabrand competition among its distributors since this leads to lower retail prices and increased sales). Most important, as I discuss infra, even if Serv-A-Portion intended to give Weis an unfair advantage over Feeser, this would not violate § 1 unless it was part of a plan to cause some adverse effect on competition in a relevant mar-

. Continental T. V. Inc. v. GTE Sylvania, Inc., 433 U.S. at 52 n. 19, 97 S.Ct. at 2558 n. 19 ("Inter-brand competition is the competition among the manufacturers of the same generic product ... and is the primary concern of antitrust law.... The degree of intrabrand competition is wholly independent of the level of intrabrand competition confronting the manufacturer. Thus, there may be fierce intrabrand competition among the distributors of a product produced by a monopolist and no intrabrand competition among the distributors of a product produced by a firm in a highly competitive industry. But when interbrand competition exists ... it provides a significant check on the exploitation of intrabrand market power because of the ability of consumers to substitute a different brand of the same product.”).