In the latest development in Woodman’s Food Market v. Clorox—the saga between Clorox and Woodman’s that last year generated a landmark Robinson-Patman Act (RP Act) decision by the Seventh Circuit—Clorox is asking the district court to dismiss Woodman’s remaining Sherman Act claims. If granted, the motion would bring an end to this suit.
Woodman’s, a retail grocer based in the Midwest, brought an action challenging Clorox’s policy of only selling large packs of its products to wholesale discount clubs. Woodman’s brought claims under Section 2(e) of the RP Act, which prohibits sellers from furnishing “services or facilities” to promote products unless such services or facilities are offered to all customers on proportionally equal terms, arguing that the size of Clorox’s large packs constituted a promotional “service.” The amended complaint also included claims under the Sherman Act, alleging that Clorox entered into a conspiracy in restraint of competition to refuse to deal with Woodman’s and to prevent Woodman’s from competing in the market area, based on Clorox’s decision to stop selling directly to Woodman’s.
Last year, the Seventh Circuit ruled that Woodman’s could not sustain a claim under the RP Act, rejecting the notion that product package size is a promotional “service” under Section 2(e) of the RP Act. (We covered the Seventh Circuit’s decision here.) In February, the Supreme Court declined to review the Seventh Circuit’s ruling. With the RP Act claim gone, the case is back in the district court for resolution of Woodman’s remaining claim under the Sherman Act.
In its recent supplemental brief, Clorox argues that the Sherman Act claim should be dismissed because Woodman’s has failed to show antitrust injury. According to Clorox, Woodman’s two theories of injury are that (1) Clorox’s policy will result in club stores charging higher prices to consumers for club-size products, and (2) as a result of Clorox’s decision to no longer sell directly to Woodman’s, Woodman’s will have to pay higher prices for Clorox products by purchasing them through wholesalers.
Regarding the first, Clorox argues Woodman’s theory is insufficient as a matter of law because “no case remotely supports the proposition that a price increase on only one size of one manufacturer’s products could ever constitute antitrust injury.” Clorox claims the complaint lacks the factual allegations necessary to demonstrate that any retailer would be able to increase the price of Clorox club-size products. Instead, Clorox points out, the allegations in the complaint are inconsistent with this theory because the complaint alleges that as a result of Clorox’s policy, club stores “will be able to offer Clorox products at lower prices” than Woodman’s.
As to the second, Clorox asserts that refusal to sell Clorox products directly to Woodman’s cannot constitute antitrust injury because it will not result in harm to competition across the market. Clorox also points out that Woodman’s attack on this policy “runs headlong into Clorox’s right to choose its own customers” under United States v. Colgate, 250 U.S. 300 (1919).
Woodman’s is scheduled to file a reply brief on May 12. We will continue to monitor this case.