The Robinson-Patman Act, a New Deal-era law aimed at curbing price discrimination, has long been considered a dormant corner of antitrust and pricing law. Recent RPA litigation in the auto dealership industry in late 2016, however, indicates that reports of the law’s death are greatly exaggerated.
A Revived RPA?
In October 2016, after three years of litigation, a two-week trial, and a day of deliberation, the jury in Mathew Enterprise, Inc., Stevens Creek v. Chrysler Group found that Fiat Chrysler’s dealer incentive program did not violate the RPA’s ban on price discrimination.1 The verdict was a win for Chrysler and other car manufacturers, as it vindicated dealer incentive programs that are fairly common in the industry. The fact that the case got to trial, however, signals that the RPA can still open automotive firms and similarly-structured manufacturers to price discrimination lawsuits. In fact, Stevens Creek was but one of several cases presenting RPA claims in late 2016. This recent trend demonstrates that the RPA continues to create legal headaches for unwary manufacturers.
At issue in Stevens Creek was Chrysler’s Volume Growth Program, under which Chrysler paid a bonus to dealers who met or exceeded monthly sales objectives. While the plaintiff initially succeeded in meeting these objectives, it began to falter when a competing Chrysler dealership opened a new location nearby in late 2010. The plaintiff complained that the VGP did not account for the entrance of new dealers, and further that Chrysler used a different formula for calculating the new dealer’s VGP targets. The plaintiff also alleged that over the course of a year, the new dealer received more VGP payments while selling fewer cars relative to the plaintiff, which allowed the new dealer to purchase cars from Chrysler at a lower net payment in violation of Section 2(a) of the RPA.
When Chrysler moved for summary judgment, the plaintiff countered that Chrysler failed to use a “uniform pricing policy” for competing dealerships – which included sales incentive payments under the VGP – that were “functionally available on an equal basis.”2 The court found for the plaintiff, concluding that the availability question was a disputed issue of fact for the jury. In so ruling, the court also found that evidence of a 2.3 percent price difference (roughly $700 per vehicle) was sufficient to trigger the Morton Saltinference – a rebuttable inference of competitive injury that arises if the plaintiff demonstrates “substantial” price discrimination between competing purchasers over time.3
The Recent Trend of Dealer RPA Cases
Stevens Creek is one of several RPA cases from late 2016 that should get manufacturers’ attention –only one of which (spoiler alert) was resolved in favor of the defendant.
Bedford Nissan v. Nissan North America: In Bedford,4 the plaintiff alleged that Nissan NA “unilaterally chose [a rival dealer] as its preferred dealer in the [relevant market]” by offering “cash and incentive payments” that were not available to other Nissan dealers in the same market. In attempting to fend off this claim, Nissan did not counter that these incentive payments were tied to any objective measure such as volume, but instead contended that plaintiff could not show that Nissan made contemporaneous discounts, rebates, or refunds that it did not make for the plaintiff. As a fallback position, Nissan argued that the plaintiff could at best show a reduction in intrabrand competition – a secondary concern of the antitrust laws that is not typically actionable under the RPA.5
Sioux City Truck and Trailer v. Ziegler, Inc.: In Sioux City,6 the plaintiff alleged that the defendant, with whom plaintiff had a decades-long dealership arrangement, offered new and different terms under which the plaintiff would pay higher prices for parts than it had under the parties’ existing agreement. The plaintiff further alleged that defendant stated it would terminate the parties’ relationship if the plaintiff did not agree to the new terms, and that plaintiff’s regional competitors had not faced the same “take-it-or-leave-it” arrangement from defendant. Accordingly, the plaintiff refused the defendant’s new unfavorable terms, and brought suit alleging that the defendant’s differential offering of the new terms was discriminatory under the RPA. The defendant argued that because the plaintiff did not purchase products under the new terms, it was not actually discriminated against under the RPA’s “two purchaser rule” – i.e., the plaintiff must allege actual sales at two different prices to two different buyers.7
Napleton’s Arlington Heights Motors v. FCA US LLC: Napletons,8 another case involving Fiat Chrysler and a disgruntled dealer, featured a class of plaintiffs who asserted that Chrysler and conspiring dealers agreed to a scheme where the conspiring dealers would report falsely inflated sales reports in order to qualify for volume discounts and cash incentives. This scheme, according to plaintiffs, allowed the conspiring dealers to receive favorable pricing from Chrysler which was unavailable to non-conspiring dealers. Chrysler defended itself on the grounds that the plaintiffs could identify neither specific dealers to whom plaintiffs lost business nor specific price differences between conspiring and non-conspiring dealers paid over time.
The defendants had at best a mixed track record in these RPA cases. As explained above, Stevens Creekwas resolved in favor of the defendant, but only after the case reached a jury – hardly a comforting prospect for other RPA defendants. Ultimately, Chrysler was able to persuade the jury that the plaintiff could have lowered its prices to sell more vehicles, as other dealerships had done to qualify for the incentives at issue. The jury found that the VGP was functionally available to plaintiff, and thus any loss by Stevens Creek was due to its irrational decision to maintain high prices relative to its competition.
Bedford and Napletons, on the other hand, resulted in losses for the defendants at the motion to dismiss phase. In Bedford, the court was unconvinced of the defendant’s arguments that the incentive program at issue at worst spurred intrabrand competition, noting that “Nissan dealers in the same geographic market are also competing for new car buyers generally, impacting interbrand competition in the same market.”9 In Napletons, the court was convinced that plaintiffs had provided sufficient detail regarding specific conspiring dealerships and specific losses from the alleged inflated sales report scheme to proceed to discovery.
In Sioux City, on the other hand, the court was unconvinced by plaintiff’s argument that its RPA claim was valid under Bruce’s Juices, a decades-old Fifth Circuit case which created an exception to the two-purchaser rule if the plaintiff’s “failure to [make a purchase] was directly attributable to defendant's own discriminatory practice.”10 The court found that the Bruce’s Juice’s exemption has been disfavored in subsequent case law, and that “merely receiving a discriminatory price offer will not suffice” to state a claim under the RPA.11
Art of Dealership Management
As these cases demonstrate, the RPA is alive and well in the dealership context, and could well resurface in other industries given some plaintiffs’ recent successes in surviving motions to dismiss. These plaintiffs’ victories should remind potential RPA defendants that the best defense against these lawsuits is a good offense of transparent pricing initiatives coupled with clear communications with all distributors about pricing and incentive policies.