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Chapter 50 - The Clayton Act, the Robinson–Patman Act, and Antitrust Exemptions and Immunities
D. Clayton Act Section 8
1. Discuss the language of Section 8 and the competitive threat at which the statute is
aimed.
a. Note the fairly recent changes in the statute's language.
Example: Problem Case #10.
E. The Robinson-Patman Act
1. Discuss the historical origins of Section 2 of the Clayton Act and the concerns that led
Congress to amend Section 2 by passing the Robinson-Patman Act in 1936.
2. Note the narrower "in commerce" jurisdictional test that applies to the Robinson-Patman
Act. This test is delineated in Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186 (1974).
For another case on point, see Zoslaw v. MCA Distrib. Corp., 693 F.2d 870 (9th Cir.
1982).
3. Discuss the statutory language of Section 2(a) and note the limitations inherent in that
language.
a. The Act potentially applies only if contemporaneous sales have been made to
different purchasers at different prices. Thus, a sale to a wholly owned subsidiary
will not count as a sale to a different purchaser. See, e.g., Eximco v. Trane, 737 F.2d
505 (5th Cir. 1985). You may also want to note the existence of the "same seller"
doctrine, under which a wholly owned subsidiary's sales are attributed to its parent
for purposes of Section 2(a) only if the parent actively controls the subsidiary or its
sales. See, e.g., Acme Refrigeration of Baton Rouge, Inc. v. Whirlpool Corp., 785
F.2d 1240 (5th Cir. 1986).
b. Because discriminatory sales are required for a violation, the statute does not apply
to:
1) Sellers who merely quote a discriminatory price or refuse to sell except at a
discriminatory price.
2) Price discrimination in lease and consignment transactions.
c. Because the statute only refers to price discrimination in the sale of "commodities," it
does not apply to price discrimination involving real estate, intangibles, or services.
d. The commodities sold under discriminatory prices must be "of like grade or quality"
in order for a potential violation to have occurred. This generally means that some
physical difference is necessary to justify a differential price. See, e.g., Hartley &
Parker, Inc. v. Florida Beverage Corp., 307 F.2d 916 (5th Cir. 1952). Differences in
labels or brand names are insufficient to justify discriminatory pricing. See FTC v.
Borden Co., 383 U.S. 637 (1966).
e. Not all price discrimination in the sale of commodities to separate purchasers violates
Section 2(a). Only price discrimination that has a probable anticompetitive effect is
prohibited by the Act.
1) To prove a primary level violation of the Act, the plaintiff must show that the
defendant's discriminatory pricing either threatened to injure competition with
the plaintiff or did in fact injure such competition. Thus, proof of either
predatory intent or a potential threat to competition is required. Proof of
"predatory pricing" is often offered in such cases. For a classic example, see
Utah Pie Co. v. Continental Baking Co., 386 U.S. 685 (1967). Be certain,
however, to discuss the Supreme Court's most recent pronouncement on
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Chapter 50 - The Clayton Act, the Robinson–Patman Act, and Antitrust Exemptions and Immunities
predatory pricing allegations in Robinson-Patman Act cases, Brooke Group Ltd.
v. Brown & Williamson Tobacco Corp. (to be discussed later).
Additional Example: Problem Case #7.
2) In secondary and tertiary level cases, courts tend to infer the existence of a
probable competitive injury if evidence is introduced showing substantial price
discrimination among competing purchasers over time. No injury is likely to be
inferred if the price discrimination was merely temporary or if the disfavored
buyer could have obtained the goods from another seller at the same price the
discriminating seller charged to the favored buyer.
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. (p. 1389): Although
the Supreme Court declines to hold that predatory price discrimination violative
of Robinson-Patman Act Section 2(a) cannot occur in the context of an oligopoly,
the Court notes that a successful claim of that nature would be unusual. The
Court holds that the plaintiff in this case failed to prove what was necessary to
sustain such a claim.
Points for Discussion: Note the tremendous size of the jury verdict in favor of the
plaintiff. The verdict, of course, was set aside by the trial judge, whose action
was affirmed by the Fourth Circuit and by the Supreme Court. Even though the
defendant (Brown & Williamson) ultimately prevailed here, the fact that it
initially lost underscores the importance for businesspersons of being aware that
the path to victory may be long and costly. Brown & Williamson would have
incurred substantial costs--monetary and otherwise--en route to the ultimate
determination that it was not liable.
Many of the Court's comments on predatory pricing allegations apply not only to
the Robinson-Patman Act but also to Sherman Act Section 2 because, as the
Court noted, the essence of a predatory pricing claim is essentially the same
under either statute. Discuss the Court's repeated emphasis on recoupment as the
critical element of alleged predatory pricing schemes. Note why, in the Court's
view, the general implausibility of predatory pricing--as indicated in Matsushita--
is increased in the context of an oligopoly. This case and Matsushita have the
combined effect of making predatory pricing claims exceedingly difficult for
plaintiffs to make out, regardless of whether they proceed under the Robinson-
Patman Act or under Sherman Act Section 2.
Volvo Trucks N. Am., Inc. v. Reeder-Simco GMC, Inc. (p. 1391): The Supreme
Court reversed the Eighth Circuit's decision that Volvo had engaged in
secondary-line price discrimination among its dealers by providing some Volvo
dealers higher discounts than others. The Court held that Reeder's evidence was
mostly unprobative, and that the potentially probative portion was scant and
unsystematic.
Points for Discussion: If, in fact, the "other dealer" in one of the instances cited
by Reeder did possess greater market power than Reeder and managed to extract
higher discounts from Volvo than Reeder could, why is Volvo in court rather than
the other dealer (as a supposed inducer of a discriminatory discount)? The
strongman "other dealer" seems to be the bully here. Isn't Volvo a victim? Why
should there be a cause of action against Volvo? Perhaps because Volvo is in the
best position to police against price discrimination, and because Volvo, as a
defendant, will create a clearer record for the sake of litigation than the "other
dealer." Moreover, the "other dealer" might play the strongman by winks and
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Chapter 50 - The Clayton Act, the Robinson–Patman Act, and Antitrust Exemptions and Immunities
nods rather than any clear message obtainable in discovery. The dealer might
even play the strongman without knowing it was doing so. Volvo, on the other
hand, keeps books; it knows, in hard numerical terms, what it charges to this
dealer and that dealer, and any evidence of discrimination should be parseable
relatively scientifically. But in the end, the Court concludes that Reeder doesn’t
have much to go on in this case.
Additional Examples: FTC v. Morton Salt Co., 334 U.S. 37 (1948) (secondary
level); Perkins v. Standard Oil Co., 395 U.S. 642 (1969) (tertiary level).
4. Discuss the various defenses to liability under Section 2(a).
a. Cost justification. Section 2(a) expressly provides for this defense. Difficulties
involved in proving actual cost savings limit its utility.
b. Changing conditions. Also explicitly allowed by Section 2(a), this defense is fairly
narrow in scope.
c. Meeting competition. Discuss this defense and note the type of competitive
responses that it is designed to protect. Example: Problem Case #8 (defendant held
not to be entitled to this defense, however). Point out that this defense is also
available in cases under Sections 2(d) and 2(e). You also may wish to note that
sellers who exchange price information in an attempt to verify each other's prices
may run afoul of Section 1 of the Sherman Act. See United States v. U.S. Gypsum
Co., 438 U.S. 422 (1978).
5. Discuss the various forms of indirect price discrimination prohibited by the Act. Note the
types of harm these provisions of the Act are designed to prevent.
a. False brokerage (Section 2(c)). Note that no proof of probable harm to competition
is required for a violation, though plaintiffs must prove that they were injured in
order to recover damages. Some courts have applied this section to commercial
bribery cases.
Example: Metrix Warehouse v. Daimler-Benz Aktiengesellschaft, 828 F.2d 1033 (4th
Cir. 1987) (although Metrix's payments of incentives to parts managers who ordered
parts from Metrix violated Section 2(c) because payments were not for any genuine
services to Metrix, Mercedes-Benz of North America (MBNA) loses Section 2(c)
counterclaim against Metrix due to failure to prove that Metrix's violation caused
MBNA to experience any losses).
b. Discriminatory payments (Section 2(d)) and services (Section 2(e)). These sections
establish per se violations, as does Section 2(c). No "cost justification" defense is
available in Section 2(d) and Section 2(e) cases. A "meeting competition" defense is
possible, albeit difficult to prove.
6. Point out that buyers who knowingly induce a seller to give them an unlawful
discriminatory price or knowingly receive such a price are liable for violating Section
2(f). The A&P case discussed in the text significantly narrowed the scope of Section 2(f)
by allowing buyers to obtain shelter under the "umbrella" of any Section 2(b) defense
their sellers would have.
F. Antitrust Exceptions and Exemptions
1. Point out that each of the exceptions or exemptions to be discussed represents a point of
tension between our antitrust policy in favor of competition and some other social policy.
A discernible trend in recent antitrust opinions has been in the direction of narrowing the
scope of antitrust immunities and thus expanding the reach of the antitrust laws.
2. Discuss the statutory and nonstatutory exemptions from antitrust scrutiny enjoyed by
labor unions.
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Chapter 50 - The Clayton Act, the Robinson–Patman Act, and Antitrust Exemptions and Immunities
3. Discuss the statutory exemptions enjoyed by agricultural cooperatives and by exporters.
4. Discuss the McCarran-Ferguson Act's exemption for those aspects of the business of
insurance that are subject to state regulation. Note also the "exception" to the business of
insurance exemption: the exemption does not protect insurance companies from antitrust
scrutiny when they have engaged in a boycott.
Example: Hartford Fire Insurance Co. v. California, 509 U.S. 764 (1993). In this
antitrust case, 19 states and private plaintiffs sued Hartford and other insurers, alleging
that the defendants conspired with foreign reinsurers to force domestic competitors to
make certain changes in their standard form commercial general liability (CGL)
insurance policies. The district court had dismissed the plaintiffs' complaint, but the
court of appeals reversed. The Supreme Court affirmed in part, reversed in part, and
remanded the case for further proceedings. The Court held (rejecting the plaintiffs'
argument) that in conspiring with foreign reinsurers, the defendant insurers did not step
outside the "business of insurance" and therefore did not lose their business of insurance
exemption under the McCarran-Ferguson Act. The Court also clarified the meaning of
"boycott," for purposes of the boycott exception to the business of insurance exemption.
The Court held that a boycott occurs when, in order to coerce a target into certain terms
in one transaction, parties refuse to engage in other, unrelated transactions with the target.
Under this definition, it is not a boycott (but rather a permissible cartelization) when
parties refuse to engage in a particular transaction until the terms of that transaction are
agreeable. Some of the plaintiffs' conspiracy allegations--those alleging refusals by the
reinsurers to engage in reinsurance transactions with domestic insurers regarding matters
unrelated to the CGL policies until the desired language change in the CGL policy form
was effected--were held sufficient to survive a motion to dismiss. Finally, the Court ruled
on an issue of foreign conduct and international comity (to be discussed in a later
subsection).
a. Note that the "business of insurance" exemption provided by the McCarran-Ferguson
Act has come under fire in recent years and may be a target for Congressional
narrowing. See, for instance, the flirted-with but abandoned effort noted at p. 1396 of
the text.
5. Discuss the antitrust immunity enjoyed by regulated industries and note the impact that
the current trend in favor of deregulation is having on the scope of such immunity. The
basic idea here stems from the "implied immunity" doctrine, which held that actions
authorized under regulatory statutes enacted subsequent to the antitrust laws were
impliedly immune from antitrust scrutiny.
6. Discuss the "state action" exemption and the Supreme Court's tendency in recent decades
to narrow the scope of this important exemption. Here, the Court's deference to
principles of federalism (often expressed in other contexts) runs head-on into the Court's
hostility toward anticompetitive activities. The Armstrong case (discussed shortly as part
of the section on the Noerr-Pennington doctrine) illustrates the application of the state
action exemption and shows how it sometimes relates to Noerr-Pennington.
Additional Examples: Federal Trade Commission v. Ticor Title Insurance Co. (Problem
Case #5); Patrick v. Burget, 486 U.S. 94 (1988); Southern Motor Carriers Rate
Conference, Inc. v. United States, 471 U.S. 548 (1985). In Patrick, the Court held that an
Oregon hospital peer-review committee's decision to terminate a physician's hospital
privileges was not shielded from antitrust scrutiny by the state action doctrine. The Court
emphasized that a challenged activity cannot qualify for immunity under the state action
doctrine unless it is "clearly articulated and affirmatively expressed as state policy" and
"actively supervised by the state." The peer-review process at issue in Patrick, although
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 50 - The Clayton Act, the Robinson–Patman Act, and Antitrust Exemptions and Immunities
mandated by state law, failed to meet the second part of the test because no state entity
actively reviewed peer review decisions to ensure their compliance with state policy. In
Southern Motor Carriers, the Court held that the state action exemption shielded the
activities of two privately operated motor carrier rate bureaus whose collective rate-
making activities were authorized, but not compelled, by state law. The Court rejected
the government's argument that the challenged activity must be affirmatively compelled
by the state.
a. Note the antitrust problems that confronted municipalities in the wake of the City of
Boulder decision (referred to, though not by name, in the text). These problems
caused Congress to pass the Local Government Antitrust Act of 1984. A later
decision by the Supreme Court has further narrowed the potential antitrust exposure
of municipalities. In Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985) a
Wisconsin statute empowered cities to establish sewage treatment facilities and to
refuse service to areas outside their boundaries. Eau Claire, Wisconsin created such a
facility and allegedly used its monopoly to force neighboring towns to agree to
annexation. Because such actions were a foreseeable consequence of the statute in
question, the Court held that this was sufficiently akin to a "clearly articulated" state
policy to satisfy the state action requirement. The Court also exempted cities from
the "active state supervision" requirement. Town of Hallie still leaves home-rule
cities with some antitrust exposure, however, because some actions taken by
home-rule cities will not be shielded by a state statute of the sort at issue in Town of
Hallie. Also, it is worth noting that the Local Government Antitrust Act does not
shield, from treble damages liability, municipal officials who acted outside the scope
of their official powers.
7. Discuss the Noerr-Pennington doctrine's application to attempts to persuade the
legislative or executive branch to take certain action. Also note its application to the
filing and pursuit of a lawsuit. The scope of Noerr-Pennington became a matter of debate
in Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492 (1988). There, the
Supreme Court held that a manufacturer's attempts to lobby a private standard-setting
association were not immune from antitrust scrutiny under Noerr-Pennington even
though the private association's standards were often adopted by state and local
governments.
Armstrong Surgical Center, Inc. v. Armstrong County Memorial Hospital (p. 1397): The
Third Circuit Court of Appeals holds that the state action exemption and the Noerr-
Pennington doctrine protect the Hospital Defendants against liability on the Surgical
Center's Sherman Act claims, and that the district court therefore properly dismissed the
Surgical Center's complaint.
Points for Discussion: This case illustrates the interaction that sometimes exists between
the state action exemption (the Parker doctrine) and the Noerr-Pennington doctrine. Note
the court's use of the quotation from the Supreme Court's Omni decision about the two
exemptions being "complementary expressions of the principle that the antitrust laws
regulate business, not politics."
Ask the class why the state action exemption applies here. (The certificate of need
process was well-established under state law and was actively supervised by the state.)
Ask why Noerr-Pennington protects the defendants. (They were petitioning the
government in an effort to obtain a certain result from a government process.) Ask why
the "sham" exception to Noerr-Pennington doesn't apply. (The defendants weren't trying
to use the governmental process an anticompetitive weapon. Rather, they were trying to
influence the outcome of the process and use the outcome to their advantage.) Note how
the court distinguishes and explains the Trial Lawyers case.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 50 - The Clayton Act, the Robinson–Patman Act, and Antitrust Exemptions and Immunities
Are your students troubled by the court's conclusion that the Hospital Defendants'
supposed use of false statements would not deprive them of Parker and Noerr-
Pennington immunity? Note the court's reasoning on this point and its assertion that
parties such as then Surgical Center have recourses other than antitrust lawsuits at their
disposal when they think that other parties have used false and fraudulent statements in
an effort to influence government action.
You may also wish to have the class consider the Ethics in Action box that appears near
the end of the chapter (at p. 1399). It deals with this case.
a. Discuss the "sham" exception to the Noerr-Pennington doctrine. Note Armstrong's
discussion of the sham exception. In Professional Real Estate Investors, Inc. v.
Columbia Pictures Industries, Inc. (Problem Case #11), the Supreme Court held that
when the filing and prosecution of a lawsuit is the activity challenged on antitrust
grounds, the party who brought the lawsuit is not deprived of Noerr-Pennington
immunity on the basis of the sham exception unless the lawsuit was "objectively
baseless." If the lawsuit was not objectively baseless, the filing party's subjective
intent--even subjective intent that he, she, or it could not win the case--does not make
the lawsuit a sham.
8. Discuss the patent licensing doctrine and the competing social policies that it seeks to
reconcile.
9. Discuss the various doctrines that shield some foreign commercial activities from
antitrust scrutiny.
a. Sovereign immunity.
b. Act of state doctrine.
Example: Problem Case #9.
c. Sovereign compulsion.
Examples: See Continental Ore Co. v. Union Carbide & Carbon Co., 370 U.S. 690
(1962); Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287 (1979); Hartford
Fire Insurance Co. v. California, 509 U.S. 764 (1993). Hartford's major facts and
holdings on other issues were discussed previously in the subsection dealing with the
"business of insurance" exemption. In holdings not summarized there but relevant
here, the Court ruled that the Sherman Act applies to foreign conduct that was meant
to produce and did in fact produce some substantial effect in the United States (such
conduct being present here), and that principles of international comity did not
counsel against obtaining antitrust jurisdiction over the foreign defendants. The Court
reached this conclusion on the international comity issue because foreign law neither
required nor approved the foreign defendants' conduct (meaning that there was no
conflict between U.S. law and foreign law). Given its disposition of the international
comity issue, the Court presumably would have ruled the same way regarding the
sovereign compulsion doctrine: that it would not protect the defendants from antitrust
scrutiny.
IV. RECOMMENDED REFERENCES:
A. PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW.
B. PHILLIP E. AREEDA & LOUIS KAPLOW, ANTITRUST ANALYSIS: PROBLEMS, TEXT, CASES.
C. HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY.
D. ROBERT BORK, THE ANTITRUST PARADOX.
E. PERRY GOLDBERG, MERGERS AND THE FEDERAL ANTITRUST LAWS.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 50 - The Clayton Act, the Robinson–Patman Act, and Antitrust Exemptions and Immunities
F. Robert Pitofsky, New Definitions of Relevant Market and the Assault on Antitrust, 90 COLUM.
L. REV. 1805 (1991).
G. William J. Baer & David A. Balto, New Myths and Old Realities: Recent Developments in
Antitrust Enforcement, 2 COLUM. BUS. L. REV. 207 (1999).
H. Andrew I. Gavil, Secondary Line Price Discrimination and the Fate of Morton Salt: To Save
It, Let It Go, 48 EMORY L.J. 1057 (1999).
I. Thomas M. Jorde, Antitrust and the New State Action Doctrine: A Return to Deferential
Economic Federalism, 75 CALIF. L. REV. 227 (1987). A broad overview of the development
of the state action doctrine, emphasizing the competing social policies at the heart of the
doctrine.
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