Court Opinion

ID: 9472308
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:56:08.171218+00
Date Added: 2024-06-11T17:42:51.505450
License: Public Domain

*518TATE, Circuit Judge,
concurring in part, dissenting in part:
I concur in the majority’s resolution of the new trial issues raised by Eximco on appeal. I respectfully dissent, however, from the majority’s holding that the district court properly granted a directed verdict against Eximco insofar as its Robinson-Pat-man Act claims. I would conclude that the evidence presented by Eximco was sufficient to raise a jury-triable issue on Exim-co’s claims of Robinson-Patman price discrimination.
It is with some diffidence that I differ from my brethren of the majority, for their scholarly opinion demonstrates far more knowledge of economic theory and of the intricacies of antitrust legislation than I possess. Nevertheless, the majority’s conclusion that, as a matter of law, the price discrimination here presented for the jury's determination did not arguably present a Robinson-Patman Act violation — thus justifying the directed verdict here affirmed — is ultimately based upon economic theory and reasons of economic efficiency that, in my opinion, are contrary to the legislative (and perhaps economically inefficient) Robinson-Patman Act objectives of protecting, not competition, but instead the competitor, especially a small businessman.
I.
By way of overview, let me quote some general observations from ABA Antitrust Section, Monograph No. 4, The Robinson-Patman Act: Policy and Law, Volume I (1980):
Enacted in 1936 to strengthen and expand the 1914 Clayton Act’s prohibition of price discriminations harmful to competition, the Robinson-Patman Act has generated some of antitrust’s most enduring and heated controversies. Opposition to the Act has come from government and bar association task forces, legal scholars, economists and businessmen, who have viewed the Act as inconsistent with basic competition policy, distributive efficiencies, and marketplace realities. Their criticisms frequently have been accompanied by calls for repeal or reform. In 1976, the U.S. Department of Justice joined the opposition with a published report on the Act containing alternative legislative proposals aimed at repeal or reform. All of the proposals for satisfactory change have come to naught, however, due to the unswerving support the Act has received from small businessmen, many of whom regard its continued existence as essential to their survival.
Id. at 1.
Essentially three substantive justifications have been offered in favor of a separate price discrimination statute such as the Robinson-Patman Act. A price discrimination statute is said to be necessary (1) to ensure equal competitive opportunity to the small businessman; (2) to control predatory pricing practices; and (3) to prevent encroaching monopoly in distribution. Moreover, advocates have argued that a separate price discrimination statute in general and the Robinson-Patman Act in particular do not place an undue burden on efficient firm behavior.
Id. at 22.
Here, Trane, the manufacturer, furnished its product to Shepherd, an independent corporate entity, at a price lower than it furnished its product to the plaintiff Ex-imco, a retailer competing for the same customers in the same market as did Shepherd. (In fact, the record indicates that the price at which the products were sold by Trane to Eximco was higher in some instances than the price that Shepherd quoted to the customers for whom Shepherd was competing with Eximco.)
The majority holds, however, that this price discrimination does not fall afoul of the Robinson-Patman Act because Shepherd (although an entirely independent entity and a corporation owned by local businessmen) acted as an agent or distributor for the manufacturer Trane in selling Trane’s goods, which were not “sold” to Shepherd for resale but were, rather, furnished by Shepherd to the customer by *519delivery through Trane on a price-list set by Trane. Admittedly, from a practical economic point of view, the economic activities of Shepherd could be considered no different than that of a salaried employee of Trane selling products in competition with a retailer reselling products purchased from Trane, the latter not within the prohibition of the Robinson-Patman Act. The trier of fact might well so find.
However, the Robinson-Patman Act politico-economic objectives are cast in terms of protecting one competing local businessman from a price-discrimination by a manufacturer in favor of another competing local businessman. Such discriminatory price treatment is not statutorily allowable in favor of one independent retailer over another, even though the manufacturer might itself be able to compete with the latter by offering lower prices to the public. This Robinson-Patman protection of one local retailer from a manufacturer’s price discrimination in favor of another local entity may be economically illogical, but it is statutorily mandated.
Here, however, by directed verdict we conclude that, as a matter of law, this preferential price treatment of one local entity over another local entity can never constitute prohibited Robinson-Patman Act price discrimination. I dissent because this issue was withdrawn from decision by the trier of fact, for reasons more particularized below.
II.
Initially, I cannot agree with the majority’s extension of Security Tire & Rubber Co. v. Gates Rubber Co., 598 F.2d 962 (5th Cir.), cert. denied, 444 U.S. 942, 100 S.Ct. 298, 62 L.Ed.2d 309 (1979), to find that Trane and its sales agent Shepherd were a single economic entity. Distinguishably, the Security Tire case held that transfers of products between a parent and its wholly-owned subsidiary are not separate sales to a benefitted customer but rather are “the economic equivalent of intra-company transfers of goods”, and thus “are not the type of transactions the Robinson-Patman Act meant to regulate.” Id. at 966-67. The distribution agent in Security Tire was a wholly-owned subsidiary of the parent manufacturer; hence, its profits were essentially those of the manufacturer and, presumably, the manufacturer would direct the distribution activities of the subsidiary to further its—the manufacturer’s—economic interests. It is not legally illogical, therefore, to view the manufacturer and distributor in such a circumstance to be a “single economic entity”, since both entities have identical economic and profit-making interests.
In the present case, however, Shepherd is a profit-making entity entirely independent of Trane. , Shepherd has an economic incentive to maximize its Trane sales (by securing preferentially lower prices from Trane) so as to maximize its profits, even to the point of running other Trane distributors (such as Eximco) out of business. Contrariwise, Trane as a manufacturer has an interest in maintaining as extensive a distribution system as possible for its products, an influence upon Trane to establish and maintain distributors such as Eximco—: distributors that, differingly, Shepherd would prefer to eliminate in order to increase its own sales. Eximco’s business competitor, in the sense of which entity has an incentive to seek to eliminate Eximco from the market, appears to have been Shepherd—not Trane. In light of these differing economic incentives and business motives, I cannot view Trane and Shepherd as a single economic entity for Robinson-Patman Act purposes.
Normal market-place economics would usually obviate the dangers to be posed by the manufacturer Trane against its own distributors, of both primary-line (selling below cost) and secondary-line (unfair price discrimination) economic activity that the Robinson-Patman Act was designed to eliminate. For .this reason, for Robinson-Patman Act purposes, we can consider Trane and its subsidiaries as a single economic entity. See Security Tire, supra. However, for the reasons noted earlier, we *520cannot similarly treat Trane and Shepherd as a single entity.
For these reasons, I believe that a secondary-line analysis may apply to this case (viewing Eximco and Shepherd as competitors), if both are found to be “purchasers” of the Trane products in question. I agree with the majority that the passage of title of the Trane equipment cannot be used as a talisman to determine whether a party is a “purchaser” under the Act. See supra, at 516 (n. 9). Indeed, the determination of whether a party is a “purchaser” must be governed by the substance and not the form of the transactions at issue. Reines Distributors, Inc. v. Admiral Corporation, 257 F.Supp. 619 (S.D.N.Y.1965). It is thus a factual issue as to whether the use of a consignee-type distributor (for delivery to customers) at prices lower than the distributor’s competitors is prohibited price-discrimination, no less than if the product was directly “sold” to the distributor at a discriminatorily lower price. See Utah Pie Company v. Continental Baking Co., 386 U.S. 685, 87 S.Ct. 1326, 18 L.Ed.2d 406 (1967). This factual issue was, in my opinion, incorrectly withdrawn from the jury by the improvidently granted directed verdict.
Here, Shepherd quoted prices from & list provided by Trane, but acted as a independent sales entity, in full competition with Eximco for the same customers. To be sure, the evidence does not mandate a conclusion that Shepherd is a purchaser under the Act — only that such an issue does exist and was improperly cut short of jury fact-resolution by the grant of the directed verdict. By sustaining the directed verdict here granted, the majority as a matter of law exempts this type of consignee price-discrimination from Robinson-Patman Act application and comes perilously close to authorizing easy evasion of the Act by permitting a manufacturer to ignore the objectives of the statute simply by casting its sales to competing retailers in the form of deliveries on order or on consignment to preferred local competitors, characterized as a “distributor.”
I therefore respectfully dissent.