Reference no: EM131473303

Question: VOLVO TRUCKS NORTH AM., INC v. REEDER-SIMCO GMC, INC., 546 U.S. 164 (2006)

FACTS Reeder-Simco GMC, Inc. (Reeder), was a franchised regional dealer of Volvo heavy-duty trucks. It sold those trucks to retail customers. Generally, customers would solicit bids from dealers of various truck manufacturers; more rarely, a customer would solicit bids from two or more dealers franchised by the same manufacturer. The dealer would then request a discount off the wholesale price from the manufacturer. Volvo Trucks North America, Inc. decided on a case-by-case basis whether to offer dealers a discount off the wholesale price, and if so, how much of a discount. Volvo's stated policy in the rare cases in which a retail customer solicited a bid from more than one franchised dealer was to offer the same discount to each dealer. The dealers would use the price offered by Volvo in preparing their bids to potential customers. The dealer would then place an order only for those trucks for which it had successfully obtained a buyer, and the trucks would be specially-built to the customer's specifications by Volvo.

Reeder filed a suit under the Robinson-Patman Act, alleging that its sales and profits had declined because Volvo offered other dealers more favorable price discounts. Reeder's claims were apparently fueled, at least in part, by its suspicion that it was one of several dealers that Volvo had targeted for termination as part of a cost-saving measure. The trial court entered judgment for Reeder; the Court of Appeals for the Eighth Circuit affirmed. Volvo appealed to the U.S. Supreme Court. DECISION The U.S. Supreme Court reversed, finding that Volvo was not liable for secondary-line price discrimination under the Robinson-Patman Act because there was no showing of discrimination between dealers competing to sell to the same retail customers. The Court explained the purposes of the RobinsonPatman Act as follows: [The] Robinson-Patman [Act] does not "ban all price differences charged to different purchasers of commodities of like grade and quality"; rather, the Act proscribes "price discrimination only to the extent that it threatens to injure competition." To show price discrimination that injures competition among Volvo's dealerships, Reeder had to show, among other things, that

(1) Volvo "discriminate[d] in price between" Reeder and another purchaser of Volvo trucks; and

(2) "‘the effect of such discrimination may be to injure, destroy, or prevent competition' to the advantage of a favored purchaser."

Volvo argued that Reeder had not identified any differentially-priced transaction in which it was both a "purchaser" under the Act and "in actual competition" with a favored purchaser for the same customer. The Court agreed, concluding that Reeder had failed to bring in evidence to show that it had suffered an injury under the Robinson-Patman Act. The Court noted: Reeder did offer evidence of two instances in which it competed head to head with another Volvo dealer. When multiple dealers bid for the business of the same customer, only one dealer will win the business and thereafter purchase the supplier's product to fulfill its contractual commitment. However, the Court went on to note that Reeder did not show that Volvo had discriminated against it in these head-to-head transactions: Reeder's evidence showed loss of only one sale to another Volvo dealer, a sale of 12 trucks that would have generated $30,000 in gross profits for Reeder.

Per its policy, Volvo initially offered Reeder and the other dealer the same concession. Volvo ultimately granted a larger concession to the other dealer, but only after it had won the bid. In the only other instance of head-to-head competition Reeder identified, Volvo increased Reeder's initial 17% discount to 18.9%, to match the discount offered to the other competing Volvo dealer; neither dealer won the bid. In short, if price discrimination between two purchasers existed at all, it was not of such magnitude as to affect substantially competition between Reeder and the "favored" Volvo dealer. The Court ultimately concluded that Reeder was asking it to expand the reach of the Robinson-Patman Act to cases of a type the Act was never intended to reach. Such an extension, the Court found, would be inconsistent with "broader policies of the antitrust laws."