Wednesday, May 20, 2009

Price Discrimination Law Violated by Manufacturer and Distributor

A federal court in Pennsylvania recently found that Michael Foods, Inc. (a food manufacturer) engaged in price discrimination in violation of the Robinson-Patman Act by selling eggs and potatoes at higher prices to Feesers, Inc. (a food distributor) than to Sodexho, Inc., which is Feesers' primary competitor. See Feesers, Inc. v. Michael Foods, Inc., No. 1:04-cv-576, 2009 WL 1138126 (M.D. Pa. April 27, 2009) (.pdf order). The court also found that Sodexho induced the discriminatory pricing in violation of the Robinson-Patman Act. The court reasoned that Sodexho received from Michael Foods substantially lower prices over time compared to Feesers, which put Feesers at a competitive disadvantage. The court ordered Michael Foods to no longer offer discriminatory prices and ordered Sodexho to no longer induce or receive discriminatory prices.

The Michael Foods federal court decision signals that the Robinson-Patman Act is alive and well and can be a powerful tool to ensure a level playing field for retailers, wholesalers, and distributors. Before Michael Foods, many in the industry have viewed the Robinson-Patman Act as outdated and relatively unenforced. As a result, compliance with the Act has grown lax. But the Michael Foods decision demonstrates that the Act continues to have teeth and can be used to remedy instances in which retailers, wholesalers, or distributors are put at a competitive disadvantage because they are not receiving manufacturer discounts and allowances at levels commensurate with their competition. In the wake of Michael Foods, industry stakeholders should expect to see more Robinson-Patman cases in the future.

 

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