Price Discrimination In Disguise: Promotional Service Discrimination Claims Under The Resurging Robinson-Patman Act

• Published date: 17 July 2023
• Subject Matter: Finance and Banking, Antitrust/Competition Law, Media, Telecoms, IT, Entertainment, Commodities/Derivatives/Stock Exchanges, Antitrust, EU Competition , Advertising, Marketing & Branding
• Law Firm: Winston & Strawn LLP
• Author: Mr Conor A. Reidy, Adam Dale, Michael Toomey and Garrett Heller

With a potential comeback in store for the Robinson-Patman Act (RPA), companies need to be able to identify, address, and ideally avoid risks that may be embedded in complex pricing structures and supply chain relationships. This is especially true for those companies that have not had a regimented compliance system in place during the RPA's years of dormancy. Companies need to be aware that the RPA forbids certain veiled price discrimination accomplished by paying for or directly providing promotional services.

This is the third post in a Competition Corner series discussing recent updates on RPA enforcement, as well as risks and best practices.¹

Recall that prohibited price discrimination, under section 2(a) of the RPA, occurs where a seller completes two or more contemporaneous sales of commodities to two separate purchasers for different net prices, presenting a threat of injury to competition.

The RPA also targets certain side benefits provided to preferred customers that function as potential workarounds for more explicit price discrimination. For example, Section 2(d) of the RPA forbids a seller from paying for services or facilities connected to a favored customer's resale of the seller's commodity (or processing/handling thereof) unless this payment is available on proportionally equal terms to other competing customers. These services and facilities include advertisements, demonstrations or demonstration materials, special packaging, and in-store displays when they are used to facilitate the buyer's resale of the seller's commodities to consumers. Similarly, Section 2(e) forbids a seller itself from providing promotional services unless such services are available on proportionally equal terms to other competing customers. These provisions seek to address the risk that manufacturers will provide valuable services to preferred purchasers to effectively offer a discount despite technically selling their products to the preferred and non-preferred customers at the same price. Note also that while a price discrimination claim under Section 2(a) requires allegations of a competitive injury, those allegations arenotrequired for claims under Sections 2(d) or 2(e).

The requirement that services or facilities be provided to competing customers on a "proportionally equal" basis does not require that the seller provide the exact mathematically same allowance to each customer. Rather, a seller is permitted to have a single policy that grants different...