89 F.4th 1126
9th Cir.2023Background
- Living Essentials sold 5-hour Energy to Costco Business Centers and seven California wholesalers; Costco received lower list prices plus rebates, allowances, reimbursements (including reimbursement of Instant Rebate Coupons).
- Wholesalers sued under the Robinson-Patman Act seeking damages under § 2(a) (secondary-line price discrimination) and injunctive relief under § 2(d) (payments/allowances to favored buyers).
- On summary judgment the district court found the first three § 2(a) elements met (interstate commerce, like grade/quality, price discrimination); the jury tried the fourth element (competitive injury) and returned a verdict for defendants.
- The district court denied § 2(d) injunctive relief, concluding (1) the jury’s § 2(a) verdict implicitly found no competition between Costco and the wholesalers and (2) Costco and the wholesalers operated at different functional levels.
- Ninth Circuit: affirmed in part and vacated/reversed/remanded in part — upheld district court’s decision to give jury instructions requiring (a) “reasonably contemporaneous” sales and (b) a “functional discount” defense; vacated the § 2(d) ruling and remanded to reassess whether Costco and the wholesalers competed (including contemporaneity of purchases).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the jury should have been instructed that challenged sales must be "reasonably contemporaneous" | Wholesalers: sales were indisputably contemporaneous across the 7-year period; instruction was unnecessary and prejudicial | Living Essentials: contemporaneity was disputed; instruction was correct and supported by evidence of changing market conditions | Court: no abuse of discretion in giving instruction; plaintiffs failed to present paired-sales evidence to remove issue from jury (concurring judge would have ordered new trial on § 2(a)) |
| Whether jury should be instructed on the "functional discount" doctrine | Wholesalers: doctrine inapplicable between purchasers at same distribution level and record lacked evidence tying discounts to supplier savings or buyer costs | Living Essentials: Costco performed marketing/promotional functions (endcaps, mailers, IRC administration, spoilage allowances) that could justify reasonable reimbursement | Court: instruction was proper; functional-discount defense is available regardless of distribution-level parity and there was some evidentiary foundation |
| Whether district court erred in denying § 2(d) injunctive relief by concluding no competition between Costco and wholesalers | Wholesalers: Costco and wholesalers purchase same product in same geographic market and operate at same functional level (both wholesalers for 5-hour Energy); district court erroneously treated jury verdict as implicit finding of no competition | Living Essentials: operational differences and evidence of distinct customer bases/support for expert showing lack of substitution undermined competition finding | Court: district court legally and factually erred in treating jury verdict as finding of no competition and incorrectly concluded different functional levels; vacated § 2(d) denial and remanded to determine contemporaneity or other proof of competition |
| Whether jury’s § 2(a) verdict necessarily implied plaintiffs were not competing with Costco | Wholesalers: jury verdict does not establish lack of competition; district court misread the general verdict | Living Essentials: verdict supports lack of competitive injury and the district court’s conclusion | Court: jury verdict did not necessarily find no competition; district court erred to rely on such an implicit finding for denying § 2(d) relief |
Key Cases Cited
- Volvo Trucks N. Am., Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164 (clarifies competition requirement and limits where customers sell to distinct buyers)
- Texaco Inc. v. Hasbrouck, 496 U.S. 543 (functional-discount doctrine — reasonable reimbursement standard)
- Tri-Valley Packing Ass'n v. FTC, 329 F.2d 694 (test for "customers in general competition": geographic proximity, same grade/quality, same functional level)
- FTC v. Simplicity Pattern Co., 360 U.S. 55 (section 2(d) does not require proof of injurious effect; focuses on competing customers)
- Texas Gulf Sulphur Co. v. J.R. Simplot Co., 418 F.2d 793 (requirement that compared sales be "within approximately the same period of time")
- Fred Meyer, Inc. v. FTC, 390 U.S. 341 (seller’s duty under § 2(d) can extend downstream; guidance on who counts as competing customers)