AlarMax Distributors Inc. may pursue price discrimination claims under the Robinson-Patman Act (RPA) against Honeywell International Inc., a federal judge in Pennsylvania ruled last week. Fire and security product distributor AlarMax alleges that Honeywell violated a decade-old settlement and supply agreement by engaging in unlawful pricing activity.
The current suit stems from a 2004 settlement in which Honeywell agreed to supply AlarMax with its security and fire products without discriminating against AlarMax in favor of other distributors. Honeywell also agreed not to use its market power to enter into exclusive lower-price agreements with third-party vendors. That settlement was reached after AlarMax presented Honeywell with a complaint alleging that Honeywell had planned to exclude AlarMax from access to its products, including through third-party vendors.
A Honeywell executive’s affidavit regarding pricing in an unrelated case last year, however, lead AlarMax to bring the instant suit. It accuses Honeywell of arranging that vendors favor a subsidiary distributor and AlarMax competitor, ADI Global Distribution. AlarMax alleges that Honeywell’s discriminatory pricing activity has cost it over $50 million per year.
Honeywell moved for dismissal of AlarMax’s RP claim on two separate grounds. First, it argued that AlarMax pleaded insufficient details for the court to permit the claim to proceed. Second, Honeywell asserted that AlarMax alleged no facts showing that Honeywell “knowingly” induced or received unlawful discriminatory prices.
In allowing the RP claims to survive, the court noted that a plaintiff need only allege “actual sales at two different prices to two different actual buyers” to satisfy the pleading standard under the RPA. AlarMax did not need to plead what products were at issue or when, from whom, and at what prices they were purchased.
“[T]he United States Court of Appeals for the Third Circuit has only distinguished situations involving ‘two actual sales’ from those involving only a single sale, and those in which only an offer to sell has been made,” the magistrate judge explained in a memorandum that was adopted in full by the district court.
The court further rejected Honeywell’s contention that AlarMax had not adequately pleaded that Honeywell knowingly induced discriminatory prices. The court found that the “strongest support for this assertion” came from Honeywell’s vendor agreement with ADI, which assured Honeywell “of better pricing from that vendor to the detriment of all of its competitors, including AlarMax.”
The judge also allowed five of AlarMax’s contract claims to move forward.