Morton Salt Presumption Of Injury Under Robinson-Patman Act

Plaintiffs and appellants, the disfavored purchasers in a Robinson-Patman Act case, were twenty-eight retail pharmacies who alleged that the pharmaceutical manufacturer defendants had charged them higher prices than those charged since the early 1990s to the favored purchasers, who typically received discounts and rebates. The favored purchasers included HMOs and pharmacy benefit managers, who manage benefits for insurers and HMOs. Plaintiffs claimed that the price differentials harmed their ability to compete, causing them to lose customers to the favored purchasers. After years of discovery, the district court granted summary judgment and dismissed plaintiffs' Robinson-Patman Act claims (15 U.S.C. sections 13(a), (d), and (f), 15 and 26) for failure to prove competitive or antitrust injury. The court of appeals affirmed. Cash & Henderson Drugs, Inc. v. Johnson & Johnson, 799 F.3d 202 (2d Cir. 2015).1

The Second Circuit relied on the language of the Robinson-Patman Act itself as setting forth competitive injury as an essential element of a claim brought under that Act:

the effect of such discrimination [the price differential] may be substantially to lessen competition . . . or to injure, destroy, or prevent competition with any person who . . . knowingly receives the benefit of such discrimination . . . .

Cash & Henderson, 799 F.3d at 209, quoting Section 2(a) [15 U.S.C. Section 13(a)]. The Second Circuit placed great emphasis on the word "substantially."

The court ruled that the key to showing competition may have been substantially lessened is sales lost by the disfavored purchasers to the favored purchasers. Cash & Henderson, supra, at 210 ("the 'hallmark of the requisite competitive injury' is the diversion of sales to a favored purchaser" [quoting Volvo Trucks of North America v. Reeder-Simco GMC, Inc., 546 U.S. 164, 177 (2006)]). This can be shown in either of two alternative ways: "[1] showing substantial discounts to a competitor over a significant period of time, known as the Morton Salt inference, or [2] proof of lost sales to favored purchasers." Cash & Henderson, 799 F.3d at 210, citing Falls City Indus., Inc. v. Vanco Beverage, Inc., 460 U.S. 428, 435 (1983); also citing FTC v. Morton Salt Co., 334 U.S. 37, 50-51 (1948) (violation inferred from lengthy, substantial price discrimination between competitors). The Morton Salt inference may still be alive and well. It continues to be cited by the Supreme Court. Cash & Henderson...