SMITH WHOLESALE COMPANY, INC., Rice Wholesale Co., Inc., Andalusia Distributing Co., Inc., Dixie Tobacco & Candy Co., George Wholesale Co., Ltd., Independent Wholesale Inc., L.P. Shanks Co., McCarty-Hull Cigar Co., Inc., R.C. Taylor Distributing Co., Reidsville Grocery Co., Inc., A.B. Coker Co., Inc., Affiliated Foods, Inc., Acadia Wholesale & Tobacco Co., Caldwell Wholesale Co., Inc., Novelart Manufacturing Co., Yakima Distributing Co., Inc., Huntsville Wholesale Grocery, Pelican State Cigar & Tobacco, Inc., Plaintiffs-Appellants, State of Mississippi, and State of Tennessee, Intervenor Plaintiffs, M.K. Grocery Co., Inc., and Corso, Inc., Plaintiffs, v. R.J. REYNOLDS TOBACCO COMPANY, Defendant-Appellee.
No. 05-6053
United States Court of Appeals, Sixth Circuit
Argued: April 21, 2006. Decided and Filed: Feb. 27, 2007.
477 F.3d 854
III.
For the foregoing reasons, we REVERSE Barnwell‘s convictions and REMAND this case for a new trial.
MARTHA CRAIG DAUGHTREY, Circuit Judge, dissenting.
Writing for the majority in this case, Judge Keith has done a masterful job of analyzing the principles of law condemning ex parte communications in criminal cases. However, I conclude that we need not decide whether the unique set of facts surrounding the defendant‘s first trial resulted in a violation of his right to due process, because the remedy for such a violation would be, as the majority reasons, a new trial free of the prohibited communications. But that is exactly what the defendant received in this case, and there is no challenge whatever to the fairness of his second trial. Hence, the majority should ask itself: what is to be gained by providing the defendant with a second fair trial?
Had Barnwell been convicted at his original trial and had he found out subsequently that there was a due process violation of the kind outlined in the majority opinion, there would be an actual controversy for us to consider, on direct or collateral review. Here, however, there is none, because the first trial ended in a mistrial and the defendant was afforded a new trial, concerning the integrity of which no question has been raised. Although a discussion of the kind set out at length in the majority opinion is useful in terms of its guidance for future cases, I conclude that because no error occurred in connection with the second trial, no remedy is required, and that a third trial is, therefore, legally unjustified. For this reason, I respectfully dissent.
Before MOORE, GRIFFIN, and CUDAHY, Circuit Judges.*
GRIFFIN, Circuit Judge.
In this case alleging illegal price discrimination in violation of Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Price Discrimination Act (“the Act“),
I.
The eighteen plaintiffs-appellants in this case, lead by plaintiff Smith Wholesale Company, are full-service distributors serving grocery and convenience stores and other retail outlets in a multi-state region, primarily in the southeastern United States. Tobacco products constitute 50% or more of their revenues. All of the plaintiffs are direct distributors of defendant RJR, some having distributed RJR‘s products for more than fifty years. Plaintiffs also purchase cigarettes from all other major manufacturers, as well as fourth-tier manufacturers.
Cigarettes are divided into four price categories or tiers. The most expensive, first-tier or premium, cigarettes are manufactured by defendant RJR (Camel and Winston cigarettes), as well as Philip Morris USA, Inc., Lorillard Tobacco Company, Liggett-Vector Brands, and Commonwealth Brands. Second-tier and third-tier cigarettes are also produced by the major manufacturers, but their prices are substantially lower than first-tier cigarettes. Fourth-tier brands are produced by smaller manufacturers (including Liggett and Commonwealth) and sell at prices somewhat lower than third-tier brands. All of RJR‘s discounted, non-premium brands are collectively classified as “savings” brands. RJR‘s second-tier product is Doral; its third-tier cigarettes include Monarch, Best Choice, Citation, and Cardinal. RJR does not price any of its savings brands at the fourth-tier level.
RJR is the second largest cigarette manufacturer in the United States, with a market share of approximately 22% prior to its July 2004 merger with the United States operations of Brown & Williamson.1 The newly formed Reynolds American now has a market share of approximately 31 %. At the other end of the spectrum, the fourth-tier segment has grown from 0.89% of all cigarette sales in 1998 to around 15% in 2003, making it the fastest growing portion of the cigarette market. Competitive pressure increased following the industry‘s 1998 Master Settlement Agreement, which settled smoking and health litigation by requiring per carton payments to the settling states. That agreement led to the rapid growth of producers of fourth-tier cigarettes that did not make settlement payments. RJR‘s market share has decreased in this competitive environment.
Wholesalers that met their share targets earned the same Level 2 discounts.3 For five quarters beginning in the third quarter of 2002, wholesalers also earned additional, progressively higher quarter-end payments (so-called Levels 2A through 2H rebates), depending on the extent to which their RJR savings share exceeded the base share targets.4
First, in each state the defendant ascertained what percentage of each wholesaler‘s total sales of savings brand cigarettes consisted of RJR‘s savings brand cigarettes. Each wholesaler was then ranked in descending order, with the wholesaler having the highest percentage of RJR cigarettes listed at the top, and the wholesaler selling the smallest percentage of defendant‘s products (relative to the total sales of savings brand cigarettes) at the bottom. The defendant thereupon listed the volume of its savings brand cigarettes sold by each of the distributors. It is important to note that the distributor listed at the top, which sold the highest percentage of defendant‘s products, did not necessarily sell the highest volume of defendant‘s products; indeed, the distributor with the highest percentage of defendant sales very easily could have been the distributor that sold the lowest volume of defendant‘s products.
After determining the volume of defendant‘s cigarettes sold by each distributor in the descending order discussed in the preceding paragraph, [defendant] ascertained the total volume of RJR savings cigarettes sold in each state. Defendant then selected as its state target the RJR percentage of that wholesaler whose volume sales, when added to all those above it, equaled eighty-five percent (or as close thereto as possible) of defendant‘s total wholesale volume in the state. Defendant thereafter calculated a “share-of-savings” target for each wholesaler, using the state targets described above. The target was stated in terms of defendant‘s “savings brands” as a percentage of the total sales of cheap cigarettes sold by a distributor. For those wholesalers doing business in more than one state (and there were several), defendant had yet another formula that adjusted a multi-state wholesaler‘s target goals to reflect the different states in which that wholesaler does business. The closer a wholesaler comes to the goal established for it, the higher the incentive level applicable to it. And the higher the incentive level, the lower the price it pays for defendant‘s cigarettes.
It is at first difficult to understand, and even more difficult to describe in words, but it does have a mathematical logic to it, and the resulting state target is intended to capture eighty-five percent of the volume of defendant‘s savings brand in any particular state.
Because participation in the WPP did not depend on the volume of a wholesaler‘s RJR sales, small wholesalers were treated ostensibly the same as large wholesalers. From August 2000 through the first quarter of 2004, all discounts and rebates received under RJR‘s WPP were based solely on a distributor‘s RJR SOS brands. Beginning in the second quarter of 2004, RJR adopted a “share of market” approach, whereby WPP quotas, and resultant discount/rebate levels, were thereafter based on the distributor‘s total RJR sales (savings and premium) as a percentage of all cigarettes it sold.5
The WPP‘s per carton premium brand price differences between Level 1 and the best price from August 2000 to present were approximately: ($0.55) August 2000-April 2001; ($0.50) May 2001-May 2002; ($0.57) June 2002-December 2002; ($0.85) January 2003-June 2003; ($1.12) July 2003-September 2003; ($0.75) October 2003-March 2004; and ($0.74) April 2004-present.
All wholesalers entered the program at Level 2. A Level 2 wholesaler that missed Level 2 in any quarter received a three-month grace period to maintain its Level 2 status. The WPP placed no limit on the volume that wholesalers could sell to any customer and capped quarterly increases in a wholesaler‘s target at 0.5%, even if RJR‘s actual share increased by a larger percentage, while reducing a wholesaler‘s target by the full amount of any decrease in RJR‘s actual share.
Fifteen of the eighteen plaintiffs have participated at Levels 2 and 3 at some point since 2000. However, plaintiffs complain that to attain the best price on RJR products-achieved by fewer than 8% of RJR‘s direct distributors in 2002 and 2003-a distributor‘s RJR savings brand sales were required to meet ever higher percentage quotas. Plaintiffs allege that it was impossible to meet RJR‘s SOS targets because they sell to retailers in rural, low-income areas that had a uniquely high demand for the cheapest, fourth-tier cigarettes. Plaintiffs complain that because RJR‘s highest share quotas, and its most favored prices, are not practically and realistically achievable by plaintiffs, all have been classified as Level 1 distributors (some for the entire complaint period) under the WPP.
On January 31, 2003, plaintiff Smith Wholesale Company filed suit in federal court against defendant RJR alleging that, through implementation of the WPP, RJR engaged in illegal price discrimination in violation of Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act,
After discovery concluded, RJR filed a motion for summary judgment, which the district court referred to the magistrate judge who, after hearing extensive argument by the parties, issued a Report and Recommendation advising that RJR‘s motion for summary judgment should be granted and plaintiffs’ complaint dismissed. On June 3, 2005, after full briefing of plaintiffs’ objections, the district court issued a Memorandum Opinion and Order, in which it adopted and approved the magistrate judge‘s Report and Recommendation and granted summary judgment in favor of RJR.
In its decision, the district court concluded that summary judgment was appropriate because RJR‘s discounts were “functionally available” to the plaintiffs, i.e., “[t]he practice of conditioning price concessions and allowances upon the customer‘s purchase of a specific quantity of goods will not give rise to a Robinson-Patman violation if the concessions are available equally and functionally to all customers.” Bouldis v. U.S. Suzuki Motor Corp., 711 F.2d 1319, 1326 (6th Cir. 1983). The district court opined, in pertinent part:
[T]his case does not involve a quantity discount, the plaintiffs’ [sic] were told about the discount, and the plaintiffs were permitted to participate in the program. The Court FINDS that RJR‘s discount is available to all customers using a nondiscriminatory formula, even though different customers may pay different prices, and that there is no evidence that the program was not evenly administered. Therefore, this Court FINDS that RJR‘s discount was functionally available to the plaintiffs in both theory and in fact.
***
Although the plaintiffs contend that RJR‘s discounts are not functionally available to them because of the demands of their customers, applicable case law does not support the plaintiffs’ conclusion that the demands of a purchaser‘s customer can render a discount functionally unavailable. Courts have refused to find discrimination when the buyer‘s inability to take advantage of the best discount was within the control of the buyer, such as poor credit, management choices, decisions not to hold inventory, or particular marketing strategies. See Bouldis, 711 F.2d at 1327; Shreve [Equipment, Inc. v. Clay Equipment Corp.], 650 F.2d [101], 105 [(6th Cir.1981)]; Edward J. Sweeney [& Sons Co. v. Texaco, Inc.], 637 F.2d [105], 121 [(3d Cir.1980)]; Chapman v. Rudd Paint & Varnish Co., 409 F.2d 635, 643 (9th Cir.1969).
In this case, the Court also FINDS that there is no causal link between RJR‘s practices and the plaintiffs’ alleged injuries. Plaintiffs contend that they did not make a voluntary choice to emphasize fourth-tier or other non-RJR brand[s] over RJR‘[s] products, but that they have simply responded to the demands of their customers. Therefore, by their own admission, the plaintiffs’ inability to participate in WPP is attributable to an outside influence over which RJR had no control. In effect, the plaintiffs seek to reap the rewards of the WPP without furthering the purpose of that program, i.e., increasing the demand for RJR products.
The Court FINDS that, because the plaintiffs did not take advantage of a lower price or discount which was functionally available on an equal basis, no price discrimination has occurred. In the alternative, the Court FINDS that any alleged discrimination was not the proximate cause of the plaintiffs’ injuries.
Plaintiffs’ timely appeal followed.
II.
This court reviews a district court‘s decision granting summary judgment de novo. Kessler v. Visteon Corp., 448 F.3d 326, 329 (6th Cir.2006). Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
III.
A.
Plaintiffs contend that the district court erred in dismissing their claims of illegal price discrimination under § 2(a) of the Clayton Act, as amended by the Robinson-Patman Act.
It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce . . . and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, That nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered....
“Essentially, this section makes it unlawful for a seller to discriminate in price between purchasers of the same or similar goods actually sold, whether to the ultimate purchaser or for resale, if the effect of such price discrimination may be to lessen competition substantially in a line of commerce or with the competitors of the seller or its customers.” Bouldis, 711 F.2d at 1325.
Three categories of competitive injury may give rise to a Robinson-Patman claim: “primary-line” cases involve conduct that injures competition at the level of the discriminating seller and its direct competitors; “secondary-line” cases, like the instant case, implicate price discrimination that injures competition among the discriminating seller‘s customers, typically referred to as “favored” and “disfavored” purchasers; and “tertiary-line” cases entail injury to competition at the level of the purchaser‘s customers. Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc. (“Volvo Trucks“), 546 U.S. 164, 126 S.Ct. 860, 870, 163 L.Ed.2d 663 (2006).
A viable secondary-line price discrimination claim brought pursuant to this Act requires proof that “(1) the relevant sales were made in interstate commerce; (2) the [commodities at issue] were of ‘like grade and quality‘; (3) [the defendant] ‘discriminate[d] in price between’ [different purchasers of the like commodities]; and (4) ‘the effect of such discrimination may be . . . to injure, destroy, or prevent competition’ to the advantage of the favored purchaser, i.e., one who ‘receive[d] the benefit of such discrimination.‘” Volvo Trucks, 126 S.Ct. at 870 (quoting 15 U.S.C. § 13(a)).
Section 2, “when originally enacted as part of the Clayton Act in 1914, was born of a desire by Congress to curb the use by financially powerful corporations of localized price-cutting tactics which had gravely impaired the competitive position of other sellers.” FTC v. Anheuser-Busch, Inc., 363 U.S. 536, 543, and n. 6, 80 S.Ct. 1267, 4 L.Ed.2d 1385 (1960).... Augmenting that provision in 1936 with the Robinson-Patman Act, Congress sought to target the perceived harm to competition occasioned by powerful buyers, rather than sellers; specifically, Congress responded to the advent of large chain stores, enterprises with the clout to obtain lower prices for goods than smaller buyers could demand.
***
Mindful of the purposes of the Act and of the antitrust laws generally, we have explained that Robinson-Patman does not “ban all price differences charged to different purchasers of commodities of like grade and quality,” Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 220, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993) (internal quotation marks omitted); rather, the Act proscribes “price discrimination only to the extent that it threatens to injure competition,” ibid.
***
The Volvo Trucks Court further explained:
Interbrand competition, our opinions affirm, is the “primary concern of antitrust law.” Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 51-52, n. 19, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977). The Robinson-Patman Act signals no large departure from that main concern. Even if the Act‘s text could be construed in the manner urged by Reeder and embraced by the Court of Appeals, we would resist interpretation geared more to the protection of existing competitors than to the stimulation of competition. In the case before us, there is no evidence that any favored purchaser possesses market power, the allegedly favored purchasers are dealers with little resemblance to large independent department stores or chain operations, and the supplier‘s selective price discounting fosters competition among suppliers of different brands.... By declining to extend Robinson-Patman‘s governance to such cases, we continue to construe the Act “consistently with broader policies of the antitrust laws.” Brooke Group, 509 U.S. at 220, 113 S.Ct. 2578, 125 L.Ed.2d 168 (quoting Great Atlantic & Pacific Tea Co. v. FTC, 440 U.S. 69, 80, n. 13, 99 S.Ct. 925, 59 L.Ed.2d 153 (1979))....
Id. at 872-73 (footnote omitted).
The Supreme Court‘s discussion in Volvo Trucks regarding the underpinnings of the Robinson-Patman Act serves as a backdrop for our evaluation of plaintiffs’ secondary-line price discrimination claim. As the Volvo Trucks Court explained and this court has noted, the Robinson-Patman Act was originally enacted in part to “prohibit all devices by which large buyers gained discriminatory preferences over smaller ones by virtue of their greater purchasing power,” Lewis v. Philip Morris, Inc., 355 F.3d 515, 520 (6th Cir.2004), and, hence, it is well established, in the context of quantity discounts, that an inference of competitive injury arises from “evidence that some purchasers had to pay their supplier ‘substantially more for their goods than their competitors had to pay.‘” Texaco, Inc. v. Hasbrouck, 496 U.S. 543, 559, 110 S.Ct. 2535, 110 L.Ed.2d 492 (1990) (quoting Morton Salt, 334 U.S. at 46-47, 68 S.Ct. 822).
The WPP, however, is not a quantity discount program; rather, its market-share targets are calculated using a percentage of its savings brand sales rather than a designated quantity, thus distinguishing it from volume discount programs. Such market-share discount pricing structures present different concerns than volume-based discounts. Market-share discounts theoretically level the playing field by allowing competing purchasers of like commodities to participate on equal terms, regardless of size, because such discounts depend not on volume purchases, but on the percentage of purchases of a particular category of products.
While, as noted, the immediate and generating cause of the Robinson-Patman amendments [to the Clayton Act] may have been a congressional reaction to what were believed to be predatory uses of mass purchasing power by chain stores, neither the scope nor the intent of the statute was limited to that precise situation or set of circumstances. Congress sought generally to obviate price discrimination practices threatening independent merchants and businessmen, presumably from whatever source.
FTC v. Sun Oil Co., 371 U.S. 505, 520, 83 S.Ct. 358, 9 L.Ed.2d 466 (1963). See also Alan‘s of Atlanta, Inc. v. Minolta Corp., 903 F.2d 1414, 1422 n. 16 (11 th Cir.1990) (“Though the birth of the RPA was motivated by a desire to place ‘big’ purchasers on par with ‘small’ ones, the Act‘s applicability is not limited to big buyer/small buyer cases.... It is one of general applicability and prohibits discriminations generally.” (internal citations and quotation marks omitted)).
Consequently, the Supreme Court has prescribed a case-by-case evaluation of antitrust claims: “Legal presumptions that rest on formalistic distinctions rather than actual market realities are generally disfavored in antitrust law. This Court has preferred to resolve antitrust claims on a case-by-case basis, focusing on the particular facts disclosed by the record.” Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 466-67, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992) (internal quotation omitted). In sum, regardless of the mechanics of a pricing structure, if there is evidence of discrimination in price between different purchasers of the same commodities, and if the effect of that discrimination may be to substantially lessen competition, then there is a prima facie violation of the Robinson-Patman Act.
B.
“[A] price discrimination within the meaning of [§ 13(a)] is merely a difference in price.” Texaco, Inc., 496 U.S. at 558 (quoting Anheuser-Busch, Inc., 363 U.S. at 549, 80 S.Ct. 1267). This fundamental, understated principle is by no means simplistic. Although the Robinson-Patman Act “proscribes unequal treatment of different customers in comparable transactions,” FTC v. Borden Co., 383 U.S. 637, 643, 86 S.Ct. 1092, 16 L.Ed.2d 153 (1966), “Congress did not intend to outlaw price differences that result from or further the forces of competition[,]” and the Act “should be construed consistently with broader policies of the antitrust laws.” Brooke Group, 509 U.S. at 220, 113 S.Ct. 2578 (quotation omitted).
C.
In an effort to better define the parameters of “a difference in price” in secondary-line price discrimination claims under § 13(a), numerous courts, including this court and the district court herein, have utilized the doctrine of “functional availability,” a theory that “is a judicial graft on § 2(a) and is not explicitly embodied in the text of the statute.”9 Metro Ford Truck Sales, Inc. v. Ford Motor Co., 145 F.3d 320, 326 (5th Cir.1998) (quoting Precision Printing Co., 993 F.Supp. at 350). “According to this court-created rule, the plaintiff in a Robinson-Patman Act suit cannot recover damages for lower prices paid by its competitors to the defendant if those same prices were available to the plaintiff from a practical standpoint and on equal terms with its competitors.” Amer. Tara Corp. v. Int‘l Paper Co., No. 79C1470, 1981 WL 375752, at *1 (N.D.Ill. July 30, 1981) (unpublished).10 The rationale underlying the doctrine is that functional availability negates two essential elements of a § 13(a) claim: “Where a purchaser does not take advantage of a lower price or discount which is functionally available on an equal basis, it has been held that either no price discrimination has occurred, or that the discrimination is not the proximate cause of the injury.” Shreve Equipment, Inc. v. Clay Equip. Corp. [“Shreve“], 650 F.2d 101, 105 (6th Cir.1981). See also Amer. Tara Corp., 1981 WL 375752 at *2 (“If the lower prices afforded its competitor were equally available to the plaintiff, any discrimination and competitive advantage suffered by the plaintiff is attributed not to the defendant‘s program but to the plaintiff‘s failure to take advantage of its opportunity to receive those prices.“).
Plaintiffs maintain that functional availability is an affirmative defense, with the burden of proof placed squarely on defen-
From a practical standpoint, the doctrine of functional availability “is, where quantity discounts are concerned, nothing more than judicial recognition that ‘cheaper by the dozen’ is a too well-accepted practice of commerce to be anti-competitive in every instance.” Calumet Breweries, Inc., 951 F.Supp. at 753.
The doctrine of “functional availability” stems from Morton Salt, in which the Supreme Court deemed a volume discount program to be illegal under the circumstances because the manufacturer set the minimum purchase requirement so high that it was impossible for small buyers to obtain the discounts received by large buyers. In so holding, the Court noted that “[t]heoretically, these discounts are equally available to all, but functionally they are not.” Morton Salt, 334 U.S. at 42, 68 S.Ct. 822.
This court has applied the functional availability doctrine in two cases in which the plaintiffs challenged volume discounts under § 13(a). In Shreve, 650 F.2d at 102, the plaintiff, a farm equipment retailer, brought suit against the defendant manufacturer, alleging price discrimination due to its preclusion from the defendant‘s volume discount plan. The defendant offered the volume discount to all of its dealers on a sliding scale--the more equipment a dealer purchased during the year, the higher the percentage of discount it received at the end of that year. The plaintiff‘s president, who was also its primary stockholder, voluntarily signed a contract to act as the territorial manager for the defendant and thereby received special advantages which were unavailable to other dealers. The contract also contained a condition that the acceptance of such employment would prevent the plaintiff from receiving the volume discount given to other dealers. The Shreve Court held that, under the circumstances, the plaintiff‘s president clearly understood that the plaintiff would not receive the discount.
In Bouldis, the plaintiff, Bold-Morr, Inc., a former Suzuki motorcycle dealership, appealed a summary judgment dismissing its claims that the defendant manufacturer Suzuki‘s promotional programs and business policies constituted forms of price discrimination in violation of the Robinson-Patman Act. Suzuki maintained that participation in its programs was contingent upon a dealer‘s overall credit worthiness and presented evidence that its adverse credit decisions with respect to the plaintiff were based upon Bold-Morr‘s poor financial condition. The testimony of the plaintiff‘s officer indeed indicated that he experienced cash flow and inventory problems which, at various times, prevented him from participating in the promotional sales. In affirming the district court‘s order granting summary judgment, this court stated:
The practice of conditioning price concessions and allowances upon the customer‘s purchase of a specific quantity of goods will not give rise to a Robinson-Patman violation if the concessions are available equally and functionally to all customers.... Further, a claim of price discrimination will not lie if the buyer failed to take advantage of a price concession which was realistically and functionally available. See Shreve Equipment, Inc., supra, 650 F.2d at 105. The legislative history reveals that the aim of the Act is to prevent a large buyer from gaining discriminatory preferences over the small buyer solely because of the large buyer‘s greater purchasing power. See Federal Trade Comm. v. Henry Broch & Co., 363 U.S. 166, 168-69, 80 S.Ct. 1158, 4 L.Ed.2d 1124 (1960); Morton Salt Co., supra, 334 U.S. at 43, 68 S.Ct. 822[.]
In granting summary judgment on this claim, the district court found that the various concessions and allowances made available by Suzuki‘s promotional programs were practically and realistically available to Bold-Morr. We agree. A review of the record demonstrates that the purchasing conditions imposed were well within the means of the average Suzuki dealer.
***
It is also important to note that the promotional packages were intended to enhance the sale of products to dealers by providing economic incentives to purchase the promoted models. Moreover, Suzuki did not expect a dealer to participate in every promotional program. It was a matter of discretion with each dealer, in the exercise of its business judgment, whether to take advantage of the promotion. Appellant Pete Bouldis testified that on some occasions he participated in the promotional programs and at other times he did not, despite the fact that he had the financial ability to do so. Bouldis testified that he had cash flow and inventory problems which prevented him, at times, from participating in the promotional sales. Accordingly, by appellant‘s own admission, there is no causal link between Suzuki‘s practices and appellant‘s alleged injuries. See generally, 16C Von Kalinkowski, [Business Organizations], supra, at § 31.01[5][c] [ (1982) ].
The courts of other circuits have likewise determined the viability of § 13(a) secondary-line price discrimination claims by using the functional availability doctrine. For instance, in Sweeney, the defendant oil company, Texaco, sold its gasoline to various wholesale distributors, including the plaintiff. When Texaco unilaterally altered the location where the plaintiff could load his delivery trucks with defendant‘s gasoline, causing the plaintiff to incur higher distribution costs and eliminate its locational advantage, the plaintiff filed suit, claiming that this action was tantamount to discriminatory pricing in violation of the Robinson-Patman Act. The Third Circuit Court of Appeals, citing Morton Salt and noting that price discounts must be available not only in theory, but in fact, to all purchasers, held that the plaintiff had failed to establish that the hauling allowance formula constituted unlawful price discrimination under § 13(a):
In the case before us, it is the distributors, not Texaco, who determine where to place their bulk storage plants, and it is the distributors, not Texaco, who decide which retail stations they will supply. Texaco has no control over those decisions; it calculates the hauling allowance solely on the bulk plant‘s location in relation to the nearest pickup point. On this record, we cannot conclude that Texaco‘s formula forecloses any distributor from an advantageous hauling allowance. The record also fails to show that small buyers, whom the act was primarily intended to protect, are disadvantaged by the formula.
In Krist Oil Co., the defendant supplied the plaintiff‘s retail outlets with Pepsi products. The plaintiff claimed that the defendant engaged in price discrimination because it linked its price to the retailer to the retailer‘s price to its customers. The plaintiff had chosen to increase its retail price on Pepsi to pay for certain capital investments, which then led the defendant to charge the retailer a higher price. In granting the defendant‘s motion to dismiss the Robinson-Patman allegations for failure to state a claim, the court rejected the plaintiff‘s argument that the pricing structure was functionally unavailable to it, finding instead that “the lowest case price is unavailable to plaintiff not because of its disproportionately small purchasing power but because of other unrelated investments plaintiff made.” Krist Oil Co., 354 F.Supp.2d at 857. The court noted that the plaintiff faced a choice that was “not an inequity imposed by the pricing structure but a fundamental economic conundrum faced by all sellers,” i.e., “purchasers are left with a choice between selling more bottles at a lower per bottle profit or selling fewer bottles at a higher profit for each.” Id. The district court added, “It is curious that plaintiff has instituted a lawsuit seeking to free itself from the shackles of lower profits.” Id.
In Capital Ford Truck Sales, Inc. v. Ford Motor Co., 819 F.Supp. 1555 (N.D.Ga.1992), the court held that there was no violation of § 13(a) of the Robinson-Patman Act when the defendant manufacturer offered special discount incentives for trucks remaining in inventory at its plant, without applying the discount to vehicles that were in dealer stock at the time the incentives were announced, where the discounts on the manufacturer‘s inven-
Ford Motor avers in its motion for summary judgment that the maximum purchase quantity discounts . . . were realistically available to all dealers. Plaintiffs respond by adducing evidence which indicates that, because Capital Ford was not selling to large quantity purchasers, it did not qualify for the maximum price assistance under the [discount] program. This appears, however, to be the result of a marketing decision by Capital Ford to concentrate on sales to smaller volume customers as opposed to large fleet purchasers. Plaintiffs do not allege that Defendant in any way restricted the customers to whom Capital Ford could sell, and Plaintiffs have adduced absolutely no evidence that the purchase quantity discounts offered under the [discount] program were not realistically available to all dealers if they chose to bid larger volume buyers. See Bouldis, 711 F.2d at 1326; Shreve Equipment, 650 F.2d at 105.
Finally, in American Tara Corp., the defendant paper company, which produced a type of tissue paper used for one-time carbon paper, initiated a discount program based upon a percentage of past purchases of its product rather than a specific quantity. 1981 WL 375752 at * 1. If, in 1978 or 1979, a manufacturer purchased from defendant an amount of tissue equal to 25% of the total tissue it purchased from all suppliers in 1977, that manufacturer would receive a 2.5% rebate on all of its one-time carbonizing tissue purchases from defendant during 1978 or 1979; a purchase of 26-40% of its 1977 purchase total from defendant in 1978 or 1979 would result in a percentage rebate based on a sliding scale. 1981 WL 375752 at * 1. The program further provided that a manufacturer who expressed an intention to participate in the program would not be affected by price increases during the program. The plaintiff manufacturer did not qualify for the rebate and brought suit alleging price discrimination against the defendant pursuant to § 2(a), arguing that the defendant‘s rebate program was not functionally available to it “not because, as in Morton Salt, plaintiff was too small to buy the amount necessary to qualify for a rebate but because plaintiff could not buy that amount from defendant without placing itself in extreme jeopardy.” Id. at *2. Citing Sweeney and Shreve, the district court nonetheless upheld the pricing formula and granted summary judgment in favor of the defendant, stating:
Although this dispute over the repercussions of choosing to participate in the program creates an issue of fact, the issue is not material and does not preclude granting summary judgment. Even if the facts were as plaintiff states, defendant did not discriminate against plaintiff. The factors which plaintiff claims made the program disadvantageous to plaintiff are not unique to plaintiff. If in 1978 plaintiff could not have bought from defendant 25% of the amount it bought from all suppliers in 1977 “without placing itself in extreme jeopardy,” plaintiff‘s competitors could not have bought that percentage from defendant without taking the same risk. Defendant‘s program may have been, as
plaintiff argues, a bad bargain. As long as defendant offered the same bad bargain to plaintiff as to its competitors, however, defendant did not violate the Robinson-Patman Act.
Id. at *3.11
***
The holdings in Shreve and Sweeney reflect the rationale for the functional availability defense and control our holding in this case. The plaintiffs in those cases and in this case could have qualified to receive the lower prices but chose based on their business judgment, to suffer competitive injury if their competitor‘s purchased at the lower price rather than assume the disabilities or risks in the commitment necessary to purchase at the lower price.
Since plaintiff‘s competitors had to make the same decision, Tara‘s choice, not defendant‘s program, was responsible for the price discrimination. Therefore, the rebates which defendant gave plaintiff‘s competitors were functionally available to plaintiff and did not violate the Robinson-Patman Act.
Conversely, other courts have held that, under certain circumstances, pricing mechanisms may render a quantity discount practically unavailable to the plaintiff. See DeLong Equipment Co., 887 F.2d at 1516-17 (citing Shreve and acknowledging the functional availability doctrine, but reversing district court order granting summary judgment to defendant manufacturer where the plaintiff distributor presented substantial evidence that it was not given an opportunity to buy the “special” lower-priced item); Allied Sales and Serv. Co., 2000 WL 726216 at * 18 (denying summary judgment to the defendant where issues of fact existed as to whether the challenged repair discount was functionally available to the plaintiff, i.e., what the criteria for discount actually were and whether the plaintiff knew about the discount); Caribe BMW, Inc. v. Bayerische Motoren Werke Aktiengesellschaft, 19 F.3d 745, 752 (1st Cir.1994) (reversing district court‘s order dismissing complaint for failure to state a
As reflected in the above cases, the functional availability doctrine has been applied historically in the context of quantity discounts, yet its underlying rationale-that a discount equally and realistically available to all purchasers of a like commodity does not constitute discrimination in price within the meaning of § 13(a)-is no less relevant in judging the legality of market-share discount formulas such as the WPP.
The doctrine seemingly defies the logic that a rational purchaser of goods will always seek to obtain the best discount or concession that is available to it; if a higher discount is realistically and practically available, why would a reasonable purchaser not take advantage of the best possible price? However, the functional availability doctrine reflects the realities of the marketplace and recognizes that purchasers in competitive markets, particularly multi-brand distributors or wholesalers, must make difficult economic choices, prioritize brand sales and often decline conditional discounts for reasons unrelated to their actual ability to obtain them. Thus, as reflected in the above cases, the courts have refused to find price discrimination under § 13(a) when the purchaser‘s decision or capacity to take advantage of the best discount made “available on a reason-ably equivalent basis to all dealers who made the commitment to obtain them,” Rod Baxter Imports, Inc., 489 F.Supp. at 249, was determined by elements within its control-i.e., unrelated investments (Krist); poor credit ratings (Bouldis); management issues, inventory decisions, or marketing strategies (i.e., Shreve, Capital Ford and Sweeney); or a decision to promote the competitor‘s product (Amer. Tara Corp.) —and not by disproportionately small purchasing power or the pricing structure itself.
The doctrine also underscores the fact that the Robinson-Patman Act neither ensures success nor excuses purchasers from making difficult decisions about which competing brands to carry, market, or promote:
In any competitive economy we cannot avoid injury to some of the competitors. The law does not, and under the free enterprise system it cannot, guarantee businessmen against loss. That businessmen lose money or even go bankrupt does not necessarily mean that
competition has been injured. H.R.Rep. No. 1422, 81st Cong., 1st Sess. 5-6.
Sun Oil Co., 371 U.S. at 519, 83 S.Ct. 358.12
Here, the district court, acknowledging this court‘s Bouldis and Shreve decisions, applied the functional availability doctrine to the present circumstances, concluding that summary judgment in favor of RJR was warranted because the undisputed evidence demonstrated that the WPP program was nondiscriminatory, evenly administered, and therefore functionally available on an equal basis to all of RJR‘s direct distributors. Plaintiffs dispute this conclusion.13
A.
Despite the fact that the SOS formula of the WPP is uniformly applied to all of RJR‘s wholesale distributors, plaintiffs nonetheless maintain that the WPP results in price discrimination because the share targets are grossly inflated, arbitrary, unrealistic, and impossible for plaintiffs to meet. Plaintiffs broadly claim that they are pawns in RJR‘s battle against fourth-tier cigarette manufacturers and that RJR, rather than compete lawfully against its fourth-tier competition by lowering prices on certain of its cigarette brands, adopted the WPP in 2000 to foreclose distributors from selling fourth-tier brands altogether to their retail customers. Such sweeping complaints about the cigarette industry are, however, not the appropriate focus of this secondary-line price discrimination suit.
More to the point, plaintiffs allege that the WPP disfavors them because, unlike RJR‘s other distributors, they operate largely in rural “low-end” segments of the market where their retail customers demand fourth-tier brands, and RJR does not price any of its brands at the fourth-tier price level. The gravamen of plaintiffs’ price discrimination claim is set forth in ¶¶ 26-28 of their Fifth Amended Complaint, in which plaintiffs aver:
26. In August 2000, in response to competition from lower-priced 4th tier cigarette manufacturers, RJR dramatically changed the discount pricing structure of its products for its distributors by implementing the WPP. The WPP set up three separate price tiers for distributors, Levels 1, 2, and 3. Under the WPP, if a distributor‘s sales of RJR “value priced” brands, as compared with its sales of 4th tier brands and the value priced brands of other manufacturers, do not meet a predetermined goal in terms of RJR market share of sales, the pricing structure penalizes such distributors on their net (discounted) price. RJR does not price any of its cigarettes at the 4th tier level. This scheme by RJR is aimed at coercing distributors to limit sales of 4th tier brands and other competitors’ brands, and designed to force sales of RJR products at higher prices. In implementing the WPP, RJR set the standard for the best discount and back-end monies at such an extreme level that for an overwhelming majority of distributors, including Plaintiffs, the WPP‘s best price could never be achieved.
27. RJR‘s products are indispensable to Plaintiffs’ wholesaler business because their customers (i.e., retail stores) demand that the wholesaler carry a full range of tobacco products so that they can buy all manufacturers’ cigarettes from one wholesaler. However, because Plaintiffs service retailers who sell to poorer consumers, they must offer cheaper 4th tier cigarettes to compete as a distributor. This has resulted in [the] inability to obtain the WPP‘s best price from RJR. Plaintiffs are forced to compete directly against distributors receiving substantially better prices and whose markets overlap with various portions of Plaintiffs’ markets. Critically, Plaintiffs have no significant control
cause it is inconsistent with the court‘s earlier preliminary injunction ruling, this argument is without merit. It is well established that “[t]he purpose of a preliminary injunction is simply to preserve the status quo; thus, findings of fact and conclusions of law made by a district court in granting a preliminary injunction are not binding at a trial on the merits.” United States v. Edward Rose & Sons, 384 F.3d 258, 261 (6th Cir.2004).
over consumer demand, and cannot reduce their sales of 4th tier cigarettes, or other RJR competitors’ products, without losing retailer customers. Given Plaintiffs’ customers and market for sales, the best price under RJR‘s WPP is impossible for them to achieve.
28. Through the WPP, RJR penalizes distributors, including Plaintiffs, who sell 4th tier and other RJR competitors’ cigarettes, by reducing allowed discounts and back-end monies as a means of preventing them from distributing cigarettes of RJR‘s competitors. As a result, Plaintiffs must pay substantially more than their own competitors for the same RJR products, which places Plaintiffs at a severe competitive disadvantage and has resulted in substantial competitive injury.
The WPP‘s pricing formula thus purportedly places plaintiffs in a no-win situation-either accede to RJR and destroy their business or meet customer demands and attempt to absorb RJR‘s discriminatory price differences while suffering debilitating lost profits. Plaintiffs contend that the alleged price disadvantage instigated by the WPP “has caused Plaintiffs to experience millions of dollars in lost profits,” and has “caused a loss of customers and threatened the viability of Plaintiffs’ businesses.” (Complaint, ¶ 29). According to plaintiffs, the “very existence” of the allegedly favored competitors is not similarly threatened because these competitors have a pre-existing “higher-end” customer base that does not demand fourth-tier cigarettes, thus allowing the competitors to qualify for the WPP‘s best prices.
In response, defendant contends that its best price is as functionally available to each plaintiff as it is to any of that plaintiff‘s competitors and the relative size of the competitors is irrelevant because all are treated the same in a market-share-based program. Defendant posits that plaintiffs have a choice, albeit difficult: either they can attempt to attain defendant‘s marketing goals by curtailing their sales of fourth-tier cigarettes or they can continue to promote fourth-tier cigarettes and receive a lower discount on defendant‘s products.
Plaintiffs counter that this purported “choice” is unpalatable because most retailers prefer to buy their stock from a single distributor, if plaintiffs curtail the sale of fourth-tier cigarettes, their customers will take their entire business elsewhere. Thus, dropping competitor products from inventory would result in an immediate loss of customers because they operate as full-line, full-service distributors. Plaintiffs maintain that ” § 2(a) does not require buyers to attempt . . . to drastically change their business structure and radically reconfigure their customer base in order to avoid price discrimination, particularly when such an expensive and risky business plan would lead at best to massive losses.”
Plaintiffs further assert that genuine issues of material fact exist regarding whether the WPP‘s best discounts were functionally available to them, first arguing that in granting summary judgment, the district court erroneously concluded that plaintiffs’ “inability to take advantage of the best discount” was because of “an outside influence, not in the control of RJR....” Plaintiffs maintain that in so holding, the district court failed to recognize that the WPP‘s principal mechanism of discrimination-grossly inflated share targets-is solely within RJR‘s control.14
Plaintiffs’ economic expert opined that RJR‘s best prices were not practically available to most distributors, including all plaintiffs. Nine of the original plaintiffs competed against Level 2H distributors, ten plaintiffs competed against Level 2G distributors, and one plaintiff competed against Level 2F distributors. From the second quarter 2002 through the third quarter 2003, only 7-8% of RJR‘s 700 direct distributors reached their Level 2H targets under the WPP. During this same time period, only an additional 4% of RJR distributors achieved Level 2G or higher, and only an additional 6.5% of RJR distributors reached Level 2F or higher. Most distributors failed to reach even Level 2C or higher. Plaintiffs claim that this inability of over 90% of RJR wholesalers to achieve the WPP‘s best price applies throughout the complaint period. Consequently, plaintiffs maintain that a share target set well in excess of RJR‘s actual market share is not “well within the means of the average” distributor, Bouldis, 711 F.2d at 1326, and also favors those competitor distributors with a pre-existing customer base that already purchase a greater share of RJR products.
Plaintiffs’ further allege that there are serious flaws in the methodology used by RJR to compute its share targets. Plaintiffs complain that the data does not accurately capture non-reporting members, cash and carry purchases, or sales volume in certain counties within a state.15 The mean per capita income provided by RJR is allegedly of little probative value because it masks relevant information about variations in income between different areas of a given county and does not account for the presence of nationwide convenience store chains in those areas (selling a higher percentage of RJR‘s second-tier Doral brand and other expensive products) and smaller, independent and rural retailers (selling a higher percentage of discount cigarettes to primarily local consumers).
In sum, according to plaintiffs, the record evidence indicates that: (1) distributors cannot measurably increase the demand for RJR products; (2) plaintiffs do everything they can to sell as many RJR products as possible; (3) RJR‘s own data shows that the WPP‘s best price is practically achievable by only 8% of all distributors; and (4) plaintiffs and their most favored competitors did not face the same bad business choice in attempting to qualify for the WPP‘s best price. Plaintiffs argue that each of these genuine issues of material fact on the functional availability issue warrants reversal of the district court‘s order granting summary judgment to defendant.
B.
As previously noted, a secondary-line price discrimination claim brought under § 13(a) of the Robinson-Patman Act requires proof that the defendant discriminated in price between different purchasers of commodities of like grade and quality, in interstate sales, and the effect of that discrimination was to substantially lessen competition or tend to create a monopoly in any line of commerce. Volvo Trucks, 126 S.Ct. at 870, 126 S.Ct. 860. The parties do not dispute that the relevant sales were made in interstate commerce and that the commodities were of like grade and quality.
Accepting as true plaintiffs’ allegations in the context of this summary judgment review, we nonetheless conclude that summary judgment is warranted because the undisputed material facts demonstrate that RJR‘s best discount under the WPP was functionally available to plaintiffs on an equal basis, thus affirmatively disproving the element of discrimination in price.
We initially note that the WPP does not bear any of the obvious hallmarks of a discriminatory pricing program. RJR developed a share-based program, not a quantity-based program of the sort condemned by the Supreme Court in Morton Salt. Plaintiffs do not claim that they are too small to take advantage of the discount16 or allege that they, unlike other wholesalers, were ignorant of its terms or deprived of access to the WPP. Further, there is no evidence that RJR manipulated the WPP to favor certain wholesalers. To the contrary, the evidence shows that RJR has evenhandedly applied the WPP, treating all of its wholesalers equally and offering all of them the same qualification terms. Each wholesaler performed equivalent functions to obtain the discounts.
To determine the share-of-savings targets, RJR first calculated an overall state target by ranking all of its wholesalers in the state, starting with the wholesaler with the highest RJR savings share (which, as RJR points out, was not necessarily the wholesaler with the highest volume) and ending with the wholesaler with the lowest RJR savings share. RJR then selected as the state target the RJR savings percentage of the wholesaler whose volume, when added to the volume of the wholesalers
Reiterating plaintiffs’ core argument that RJR‘s best share-of-savings targets were unattainable (1) because they serviced retailers who sold to poorer customers, (2) resulting in a uniquely high demand for fourth-tier cigarettes, plaintiffs have proffered neither statistical evidence nor expert testimony to support these allegations. No plaintiff presented evidence both (1) that it sold only in lower-income areas in the states within its service area and (2) that the demand for fourth-tier cigarettes was higher in its sales area than in other areas of the state.
RJR, on the other hand, presented comparisons of the average per capita income in the counties served by each plaintiff to the average per capita income in the remaining counties in the states in which the plaintiff sold. This evidence, in the form of U.S. Department of Commerce data on county income levels, showed that the average per capita income in the served counties exceeded that of the counties not served for most plaintiffs. Only three of the original plaintiffs (Smith, Rice, and Pelican) sold in counties that had statistically lower average income levels than the remaining counties in the states in which they sold. Two of the plaintiffs (Rice and Smith) sold in virtually the same areas as another allegedly favored wholesaler, Virginia Wholesale, that earned discounts at an upper level of the WPP. Another plaintiff, Pelican, admitted that higher-income areas existed within its own sales area. In sum, the data showed that plaintiffs sell in a range of counties, from some that have relatively low incomes to others that have relatively high incomes.
Plaintiffs’ expert conducted no analysis of this issue and admitted that he did not plan to offer an opinion on whether plaintiffs sold in lower-income areas. He did not factor income levels into a computation of lost profits. Two plaintiffs (A.B. Coker and Yakima) conceded that their sales areas included entire states, not merely low-income pockets in those states. Other plaintiffs17 conceded that they served higher-income portions of their sales areas or that higher-income areas existed in their sales areas. Some plaintiffs conceded that they had no evidence that they served lower-income areas or that their perception that they served lower-income areas was simply conjecture.18
Further, because plaintiffs failed to substantiate, with comparative data, differences in fourth-tier demand between the areas of states where they sell and those states as a whole, plaintiffs have thus failed to show that actual demand for fourth-tier cigarettes was, in fact, higher in their sales areas. Again, plaintiffs’ expert did not address this issue. Moreover, plaintiffs presented no evidence that RJR‘s share in areas where plaintiffs sold was any different than RJR‘s statewide shares in the states where the allegedly less-affluent areas were located. In sum, plaintiffs are unable to verify the grounds for their price discrimination claim-that they pre-
In any event, there is no evidence that anything other than plaintiffs’ marketing decisions impacted their ability to obtain the WPP‘s best prices. The undisputed evidence demonstrates that plaintiffs faced a choice that was “not an inequity imposed by the pricing structure but a fundamental economic conundrum faced by all sellers.” Krist Oil Co., 354 F.Supp.2d at 857. Plaintiffs could alter their sales mix at any time so as to qualify for the varying discount levels.
Plaintiffs complain that only a small percentage of wholesalers actually reached Level 2H. However, this is a neutral fact, not a material issue, which simply reflects the outcome of different choices made by different wholesalers. The legality of RJR‘s incentive program does not turn on whether, in fact, each wholesaler actually achieved the highest level in the WPP program. The very nature of an incentive program necessarily leads to different outcomes based on performance. See, e.g. Comcoa, 931 F.2d at 664; Sweeney, 637 F.2d at 121-22. As long as defendant offered the same best price to plaintiffs as to their competitors, using a nondiscriminatory pricing formula, defendant did not violate the Robinson-Patman Act.
Finally, with regard to plaintiffs’ allegations of inflated shares, plaintiffs’ proofs are lacking in a demonstration or appropriate comparison regarding how any discrepancy between actual and reported market share affected plaintiffs more than other supposedly favored wholesalers. Moreover, importantly, plaintiffs have failed to demonstrate how this allegedly improper calculation detrimentally affected competition. In essence, plaintiffs suggest that RJR did not have to set its discount levels in the particular manner set in the WPP: “RJR could set share targets that are reasonably related to each distributor‘s past sales and market share. This design, contrary to RJR‘s WPP, would treat all distributors equally at the outset because targets would be set according to the cigarette demands of each distributor‘s actual market and available customer base.” However, we will not entertain plaintiffs’ invitation to re-engineer the uniformly applied WPP incentive program to make it more reasonable for some participants. See Sweeney, 637 F.2d at 121-22 (declining to impose a “station by station” formula “[g]iven the evenhanded application of the formula” and the “substantial administrative burden” on the defendant); Rod Baxter Imports, Inc., 489 F.Supp. at 249 (“The evidence presented by plaintiff tending to indicate that some dealers would have been better or worse off if a longer base period was used, does not in the court‘s view establish that the program was unfair or that it may have had the effect of substantially limiting competition.“). As the magistrate judge noted in his Report and Recommendation in the instant case:
[T]he Court disagrees with the plaintiffs that defendant‘s decision to set the target goals on a statewide basis was arbitrary and improper. To be sure, there are two “arbitrary” factors in defendant‘s calculation. Using a state to set its targets, as opposed to some other geographical or demographical area, was arbitrary, but no other geographical area would have been any less arbitrary. And using eight-five percent as the baseline target also could be said to be arbitrary, since defendant could have chosen ninety percent, or seventy-five percent, or any other percentage. But picking a number fifteen percent below defendant‘s market share in a given state was not unreasonable. Plaintiffs
essentially argue that defendant should have set the targets on a per-distributor basis which, of course, would be tantamount to having no market-share-based incentive program at all. These targets treat all distributors equally; each has the same opportunity to achieve higher discount levels. From the fact that unpleasant, even draconian, business decisions might be required, it does not follow that the discount scheme is discriminatory.
Admittedly, the “reasonableness of choice” issue is troublesome.... But if the reasonableness or unreasonableness of business decisions is a factor that must be considered with respect to functional availability of a market-share-based discount program, then such a discount program always will be as inherently suspect as a volume-based discount program. Any given distributor could claim that it could not meet a market-share goal because it would be required to alter its business in some fashion which the distributor subjectively determines to be unreasonable. No seller could ever know if its program was lawful under Robinson-Patman; the legality of any market-share-based discount program only could be ascertained with respect to each and every buyer after a jury decides whether the business decisions forced upon that buyer were reasonable or not. Although plaintiffs argue they are not challenging market-share-based discount programs per se, in reality they are, simply because any distributor could challenge the target goal as unreasonable as to it; and if that distributor prevails, the entire discount program would collapse as unworkable. The result would be “tailor-made” discounts which themselves presumptively violate the Robinson-Patman Act.
***
Defendant‘s program is designed to promote its financial welfare at the expense of that of the wholesalers. Perhaps it is unfair, but it is not illegal.
The Robinson-Patman Act proscribes price discrimination only to the extent that it threatens to injure competition, and, in the absence of such a showing, we will not intercede so as to micromanage the distribution system of defendant. As the Supreme Court noted in Volvo Trucks, the Robinson-Patman Act does not bar a manufacturer from restructuring its distribution system to refine productivity:
The dissent assails Volvo‘s decision to reduce the number of its dealers.... But Robinson-Patman does not bar a manufacturer from restructuring its distribution networks to improve the efficiency of its operations. If Volvo did not honor its obligations to Reeder as its franchisee, “any remedy . . . lies in state laws addressing unfair competition and the rights of franchisees, not in the Robinson-Patman Act.” Brief for United States as Amicus Curiae 28.
Volvo Trucks, 126 S.Ct. at 873 n. 4, 126 S.Ct. 860.
C.
Under the circumstances, we affirm the district court‘s order granting summary judgment in favor of defendant. As the district court properly found, the WPP‘s market-share discount was offered to all wholesalers using a non-discriminatory formula. It was therefore functionally available to plaintiffs not only in theory, but in fact. The capacity of plaintiffs to qualify for the WPP‘s best discount was a matter of marketing strategy and brand prioritization, a choice inherent and unavoidable in multi-brand incentive programs. Because the WPP discount was functionally available to plaintiffs, a requi-
Application of the WPP program may ultimately cull the number of RJR‘s distributors. However, the functional availability doctrine does not require a supplier to ensure the success of its customers. Whether this potential loss of participating wholesalers will ultimately benefit defendant remains to be seen.
Affirmed.
GRIFFIN
CIRCUIT JUDGE