Aug. 15, 2016 – Woodman’s Food Market sued Clorox Company for price discrimination when Clorox started selling larger bulk products to wholesale stores only. Recently, the U.S. Court of Appeals for the Seventh Circuit rejected Woodman’s federal claim.
The Robinson-Patman Act, 15 U.S.C. section 13, prohibits manufacturers from discriminating in favor of one “purchaser” against another purchaser by furnishing “any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased” unless all purchasers receive equal or similar terms.
The law, enacted in 1936, addressed a loophole in price discrimination laws by preventing manufacturers from offering “facilities or services,” such as advertising-related or other perks, as a way to provide indirect discounts to preferred purchasers.
Clorox packages some products in bulk. It was selling some of its bulk products to Woodman’s and other stores. But in 2014, Clorox announced that it would only sell those bulk products, with lower unit prices, to wholesale discount clubs.
Woodman’s argued that offering bulk products to wholesale clubs and not Woodman’s violated the Robinson-Patman Act. It said larger bulk packages, which are cheaper and provide convenience to shoppers who buy in bulk, were “services or facilities.” That is, Clorox was using special packaging that was not available to other purchasers.
But in Woodman’s Food Market Inc. v. Clorox Company, No. 15-3001 (Aug. 12, 2016), a three-judge panel for the Seventh Circuit Court of Appeals didn’t buy it.
[E]very other circuit to consider the issue has held that the terms ‘services or facilities’ … refer only to those services or facilities connected with promoting the product, rather than sweeping in any attribute of the product that makes it more desirable to consumers,” wrote Chief Appeals Court Judge Diane Wood.
“[T]he convenience of the larger size is not a promotional service or facility. This is not to say that it would be impossible under different facts to imagine package size or design as part of a ‘service’ or facility when combined with other promotion content.”
The panel noted examples, such as football-shaped packages, that could violate the law if not sold to all the manufacturers’ purchasers. But in this case, the panel concluded that selling large packages to discount clubs only did not violate the law.
After Woodman’s filed its complaint, Clorox stopped selling any products to Woodman’s and argued that Woodman’s is no longer a “purchaser” and has no rights under the Robinson-Patman Act. The district court in Wisconsin rejected Clorox’s mootness claim.
But the panel said the district court should revisit that argument on remand. It also reversed, concluding Clorox’s motion to dismiss should have been granted.