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The 3rd U.S. Circuit Court of Appeals recently issued an opinion reversing the district court in Feesers Inc. v. Michael Foods Inc., a case involving the interpretation of Section 2(a) of the Robinson-Patman Act, 15 U.S.C. Section 13(a). The 3rd Circuit’s majority opinion, written by Judge Majorie O. Rendell, addresses when parties should be considered competitors for purposes of the Robinson-Patman Act and which party bears the burden of proof to show actual injury to competition. The plaintiff in the case, Feesers Inc., distributes food and food-related products to institutional customers. Feesers filed suit against two companies, Sodexho Inc. and Michael Foods Inc. Michael Foods sold egg and potato products directly to Feesers and to Sodexho � a food management and services company � indirectly through a distributor, usually Sysco Corp. While Feesers only distributes food and food-related products, Sodexho provides facility management and operation services to its clients and only provides these clients with food and food-related products. In its complaint, Feesers alleged that Michael Foods violated Section 2(a) of the Robinson-Patman Act by selling its products at lower prices to Sodexho, albeit indirectly through distributors. In addition, Feesers claimed that Sodexho violated Section 2(f) of the Robinson-Patman Act by knowingly inducing the discriminatory pricing. All parties eventually moved for summary judgment. In ruling on the motions, the district court stated that Feesers had proffered enough evidence to prove price discrimination by Michael Foods. However, District Judge Sylvia Rambo entered judgment in favor of the defendants based on her factual finding, which relied on expert testimony, that Feesers could not “adduce sufficient evidence to establish that Feesers and Sodexho are actual competitors within the meaning of � the Robinson-Patman Act.” Feesers appealed to the 3rd Circuit on the limited issue of competitive injury. The majority reversed on the grounds that the district court erred by using the wrong legal standard in determining that the alleged discriminatory pricing had a prohibited effect on competition. Further, the majority concluded that the district court incorrectly placed the burden to prove “actual” injury to competition on Feesers. Rendell, joined by Judge Ruggero J. Aldisert, held that Feesers needed to establish only “a reasonable possibility” that the discriminatory pricing may harm competition in order to show competitive injury. Under this test, according to the majority, Feesers did not have to prove actual harm to competition, but only that it was in competition with Sodexho. This showing, Rendell stated, would create a rebuttable presumption that there was competitive injury and shift the burden of proof on to the defendants. The court found, relying on the U.S. Supreme Court’s 1948 FTC v. Morton Salt Co. case, that the district court “improperly put the burden on Feesers to prove that a difference in the price of products causes facilities to switch from buying from Feesers to buying from Sodexho. � This was error. The burden is on defendants to show the absence of the causal link.” For these reasons, the 3rd Circuit reversed the district court’s granting of the defendants’ motions for summary judgment and remanded the matter to the district court for proceedings consistent with its opinion. Michael Foods and Sodexho did not seek reconsideration by the panel of the court or review by the court en banc. The case is now on remand to Rambo, who recently held, “Accordingly, at trial Feesers will bear the initial burden of presenting evidence on the element of competitive injury, which it must establish by proving both that Feesers competed with Sodexho and that there was discrimination over time by Michael Foods. If Feesers establishes an inference of competitive injury, the burden will shift to Defendants to rebut that inference by showing the absence of a causal link between the price discrimination and lost sales or profits.” The Robinson-Patman Act is entering a new phase of scrutiny. After 12 years of silence on the subject, the Supreme Court addressed the Robinson-Patman Act during its 2006 term in Volvo Trucks North America Inc. v. Reeder-Simco GMC Inc. In that case, the Supreme Court � reversing the 8th Circuit, which had upheld a multimillion-dollar jury verdict for plaintiff � concluded that a manufacturer may not be held liable for secondary-line price discrimination under the Robinson-Patman Act absent a clear showing by the plaintiff alone that the manufacturer discriminated between dealers competing to resell the same product to the same retail costumer. There, the plaintiff was found by the Supreme Court to have failed to show that it actually competed against the favored dealers. The Supreme Court left the burden of proving impact on competition squarely on plaintiffs and did not require, as the Feeser court allowed, any shifting of that burden to the defendants. While the Supreme Court’s decision in Volvo Trucks clearly made it more difficult for plaintiffs to bring discriminatory pricing cases under Section 2(a) of the Robinson-Patman Act, the 3rd Circuit’s decision in Feesers seems to make it easier. The obvious tension between the 3rd Circuit’s majority decision in Feesers and the Supreme Court’s binding decision in Volvo Trucks was recognized by the dissenting opinion in Feesers, which was written by Judge Kent Jordan. Quoting Volvo Trucks, the dissenting opinion stressed that “the Supreme Court has recently emphasized the Act should be construed ‘consistently with broader policies of the antitrust laws.’” Objecting to the majority’s holding, Jordan continued by stating that an “interpretation of the Act that protects individual distributors rather than competition between brands ignores the ‘primary concern’ of the antitrust laws with interbrand, rather than intrabrand, competition. � We should be following the Supreme Court’s lead in resisting such an interpretation. Instead, the decision today goes beyond even the protection of competitors to the protection of non-competitors.” The majority in Feesers made only a passing reference in a footnote to Volvo Trucks, saying there that plaintiff’s evidence failed to show any continuous competition between plaintiff and the favored dealers. The majority did quote the Supreme Court’s statement in Volvo Trucks. “A permissible inference of competitive injury may arise from evidence that a favored competitor received a significant price reduction over a substantial period of time.” However, in Volvo Trucks, the Supreme Court did not hold that the burden of proof ever shifted to the defendants, as the majority in Feesers found. The reasoning of the majority of the court in Feesers appears to be in conflict with the Supreme Court’s reasoning in Volvo Trucks, particularly the policy goals articulated therein. First, the Feesers decision shifts to defendants part of the burden of showing actual harm to competition. Feesers does so by creating a rebuttable presumption of harm to competition whenever a plaintiff establishes only “a reasonable possibility” that the discriminatory pricing may harm competition. That seemingly new standard is not elaborated upon in the majority’s opinion. Thereafter, the defendant bears the burden of proving that actual harm did not occur, the majority held. In Volvo Trucks, on the other hand, the Supreme Court did not impose the burden of demonstrating harm to competition upon anyone except the plaintiff. Further, based on the policies underlying the Robinson-Patman Act, the Supreme Court in Volvo Trucks declined to permit an inference of competitive injury, as had been allowed under Morton Salt, where “there is no discrete ‘favored’ dealer comparable to a chain store or a large independent department store.” As the dissenting opinion in Feesers correctly stressed, Volvo Trucks “declined to apply the Morton Salt inference” and Feesers never alleged that Sodexho was comparable to a chain store or a large business entity. The majority’s opinion allowing such an inference where the reasonable possibility test is met would appear at odds with the Supreme Court’s pronouncements in Volvo Trucks. Moreover, it should be noted that the Supreme Court’s 1977 decision in Brunswick Corp. v. Pueblo Bowl-O-Mat Inc. seemed equally clear, in the context of a Sherman Act antitrust case; the same burden of showing competitive injury remained solely on the plaintiff, with no burden shifting to defendants: “Plaintiffs must prove antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.” The 3rd Circuit’s subsequent 1991 decision in Tunis Brothers Co. Inc. v. Ford Motor Co., relying upon Brunswick, said the same thing: “The plaintiffs must have demonstrated some harm to the competitive landscape.” Attorneys and companies doing business in the 3rd Circuit must now consider the implications of the 3rd Circuit’s Feesers decision in asserting or defending a discriminatory pricing claim under Section 2(a) of the Robinson-Patman Act. Rather than following the direction of the Supreme Court in Volvo Trucks in interpreting the act, the Feesers court, by expanding the situations in which the inference of competitive injury applies, has effectively eased the burden on plaintiffs, at least for purposes of summary judgment, by shifting the burden of proof in part (not merely an available defense) on defendants to establish that actual harm to competition did not occur. Whether the 3rd Circuit or the Supreme Court will resolve the tension between the Volvo Trucks and Feesers decisions sometime soon remains to be seen. Carl W. Hittinger is a partner in the litigation group at DLA Piper in its Philadelphia office, where he concentrates his practice on complex commercial litigation with particular emphasis on antitrust and unfair competition matters. Hittinger is also a frequent lecturer and writer on antitrust issues and has extensive experience counseling clients on all aspects of civil and criminal antitrust law. He can be reached at 215-656-2449, or [email protected] . John D. Huh is an associate with the firm in Philadelphia where he focuses his practice on antitrust and complex commercial litigation. Prior to joining the firm, he served as a judicial law clerk to the Honorable William H. Yohn Jr. of the U.S. District Court for the Eastern District of Pennsylvania.

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