Case Information
*1 Before W OOD , Chief Judge , R OVNER , Circuit Judge , and B LAKEY , District Judge . [*]
W OOD , Chief Judge . Does size matter? Not always, as this case illustrates. The dispute before us arose when Clorox de- cided to sell the largest-sized containers of its products only to discount warehouses such as Costco and Sam’s Club. Ordi- nary grocery stores, including plaintiff Woodman’s Food Mar- ket, had to content themselves with smaller packages. Taking the position that package size is a promotional service, Wood- man’s sued Clorox for unlawful price discrimination under subsection 2(e) of the Robinson-Patman Act, 15 U.S.C. § 13(e). The district court denied Clorox’s motion to dismiss for fail- ure to state a claim. Later it rejected Clorox’s motion to dismiss the case on mootness grounds. After that, the district court certified both rulings for interlocutory appeal under 28 U.S.C. § 1292(b). We aсcepted the appeal, and we now reverse.
I
The facts are simple and undisputed. The defendants, The Clorox Sales Company and The Clorox Company (collectively “Clorox”) produce and sell a range of consumer goods. The plaintiff, Woodman’s Food Market, Inc., is a local grocery store with 15 locations in Wisconsin and Illinois; it purchases gоods from Clorox and sells them to its customers. Clorox sells some of its products in “large packs,” such as 40-ounce salad dressing bottles, 460-count plastic food-storage bags, and 42-pound cat litter containers. The large packs tend to have a lower unit price than smaller versions of the same product. They also provide consumers with the convenience of needing to shop less frequently.
For a time, Clorox sold large packs to many grocery stores, including Woodman’s. But in 2014 Clorox announced that ef- fective October 1 it would sell large packs only to wholesale discount clubs. Clorox believed that “simplify[ing] its go to market strategy” would let it “streamline operations” and maximize sales. What was good for Clorox, however, wаs not necessarily good for Woodman’s and its ilk, who were forced to offer their customers only the less convenient and more ex- pensive (measured by unit price) items.
Woodman’s responded with this lawsuit, in which it al- leged that Clorox’s refusal to sell it large packs amounts to un- lawful price discrimination under the Robinson-Patman Act, 15 U.S.C. §§ 13(a), (d), (e). Subsection 13(a) prohibits price dis- criminаtion where the effect of that discrimination “may be substantially to lessen competition or tend to create a monop- oly in any line of commerce, or to injure, destroy, or prevent competition with any person” who itself or whose customers benefit from the discrimination. Any price discrimination that is concealed as promotional “services оr facilities” (provided directly or reimbursed) is also prohibited, see id. § 13(d), (e), whether or not it interferes with competition, unless the pay- ments or the actual services are available on proportionally equal terms to all. Woodman’s alleges that the size of Clorox’s large packs is a promotional “service,” and therefore that Clorox’s refusal to sеll large packs to Woodman’s is prohibited by subsections 13(d) and (e). It seeks only injunctive relief.
Woodman’s claims were sharpened as the litigation pro- gressed. First it abandoned its straightforward price-discrim- ination claim under subsection 13(a). The district court then ruled that its promotional-service claim arose under subsec- tion 13(e), which covers the direct provision of sеrvices or fa- cilities, rather than under subsection 13(d), which covers pay- ments for services or facilities. The difference was immaterial, the court thought, because the two subsections traditionally have been analyzed identically. Woodman’s claims, it thought, fit better under subsection (e). Woodman’s accepted that interpretation, and so on appeal it rеlies exclusively on subsection 13(e).
Clorox moved to dismiss Woodman’s complaint for failure to state a claim, arguing that product size is not a “service” or “facility” for purposes of subsection 13(e). See F ED . R. C IV . P. 12(b)(6). The district court denied the motion, relying on ad- ministrative materials from the Federal Trade Commission (FTC, or Commission) and two old FTC decisions—one from 1940 and one from 1956—holding thаt product size can be a promotional service under subsections 13(d) and (e). The court noted that the FTC has never renounced these decisions.
After the motion to dismiss was denied, Clorox stopped
selling any products to Woodman’s. It then filed a motion to
dismiss Woodman’s complaint as moot; the court construed
this as a motion to dismiss for lack of subject-matter jurisdic-
tion. See F ED . R. C IV . P. 12(b)(1). Clorox argued that because
Woodman’s no longer purchased
any
products from Clorox, it
was no longer a “purchaser” within the meaning of subsec-
tion 13(e). The court, citing
FTC v. Fred Meyer, Inc.
,
II
“Interbrand competition … is the ‘primary concern of an-
titrust law.’”
Volvo Trucks N. Am., Inc. v. Reeder-Simco GMC,
Inc.
,
The Robinson-Patman Act was passed in 1936 as an
amendment to the Clayton Act of 1914. The Clayton Act ini-
tially banned price discrimination—by which it meant the
practice of selling the same product at a different price to dif-
ferent purchasers—when such discrimination harmed com-
petition or was based on a different quantity sold.
FTC v. Sim-
plicity Pattern Co.
,
Second, the Robinson-Patman Act introduced a
per se
ban
on one method that manufacturers had used to circumvent
subsection 13(a): concealing рrice discrimination as a promo-
tional service provided to the purchaser. Congress found that
manufacturers had been providing valuable services, such as
paying for the purchaser’s advertisements, to preferred pur-
chasers (usually large chain stores) as a way to provide a dis-
count without running afoul of subsection 13(a).
Simplicity
Pattern Co.
,
Woodman’s advances two arguments for why Clorox’s large packs are “services or facilities” covered by subsection 13(e): first, because of the unit discount that goes along with the larger package size, and second, because of the conven- ience to shoppers of purchasing a larger product. We consider these in turn.
A
The Supreme Court regularly reminds us that the antitrust
laws protect cоmpetition, not competitors.
E.g.
,
Atlantic Rich-
field Co. v. USA Petroleum Co.
, 495 U.S. 328, 338 (1990). We
must therefore interpret subsections 13(d) and (e) in that light.
The relation between these two subsections and subsection
13(a) also informs our understanding of the latter two subsec-
tions. Subsections 13(d) and (e) exclude claims that could fall
within subsection 13(a). See
Kirby v. P.R. Mallory & Co.
, 489
F.2d 904, 910 (7th Cir. 1973) (rejecting the “theory that
§§ [13(d)] and [13(e)] proscribe acts which are themselves pro-
hibited by § [13(а)]”);
Chicago Spring Prods. Co. v. U.S. Steel
Corp
., 371 F.2d 428, 429 (7th Cir. 1966). If that were not the
case, the requirement of a substantial lessening of competition
in subsection 13(a) could be avoided in every case that also
fits the criteria of subsections 13(d) and (e). And that require-
ment is essential to the overall operation of the statute: with-
out it, the Act could “give rise to a price uniformity and rigid-
ity in open conflict with the purposes of other antitrust legis-
lation.”
Automatic Canteen Co. of Am. v. FTC
,
To the extent that Clorox’s bulk paсkaging is viewed as a
quantity discount, it must be analyzed under subsection 13(a),
not 13(e) as Woodman’s urges. See
Centex-Winston Corp. v. Ed-
ward Hines Lumber Co.
,
B
Woodman’s second argument—that the convenience of large packs is a “service or facility”—fails as well, but for dif- ferent reasons. The history of the Act and the reasoning of our sister circuits and the Commission demonstrate that only pro- motional “services or facilities” fall within subsection 13(e). And the logic of the Act as a whole convince us that package size alone is not a promotional “service or facility.”
As we have already noted, Congress’s purpose in enacting
subsection 13(e) was to close off the possibility of circumvent-
ing subsection 13(a) by concealing price discrimination as ad-
vertising benefits. See
Fred Meyer, Inc.
,
Our cases point in the same direction. In
Kirby v. P.R. Mal-
lory & Co
., we said that subsections 13(d) and (e) govern “pro-
motional allowances,” while subsection 13(a) addresses direct
price discrimination.
Centex-Winston
also supports interpreting “services or fa-
cilities” to refer only to promotional services or facilities, alt-
hough some dicta in that opinion could be interpreted other-
wise. We held there that a plаintiff stated a claim under sub-
section 13(e) when he alleged that a manufacturer routinely
delivered products to his competitors on time, while its deliv-
eries to him were late.
The Commission now takes the view that subsections
13(d) and (e) pertain only to promotional services or facilities.
Package size alone, it urges in an
amicus curiae
brief in this
case, “is not a promotional service or facility.” Its reasoned
opinions deserve our respectful consideration. See
United
States v. Mead Corp.
,
Beginning in 1960, the Commission has released nonbind-
ing guidelines to help businesses comply with subseсtions
13(d) and (e). See 16 C.F.R. §§ 240.1–240.15. These became
known as
Fred Meyer
Guides following the Supreme Court’s
decision in
Fred Meyer, Inc.
,
supra
,
The Commission’s position is a logical one: if the conven-
ience of a large pack were a promotional “service or facility”
simply because the size made it more attractive to customers,
then nearly
all
product attributes would be “serviсes or facil-
ities” covered by subsection 13(e). It is hard to think of an as-
pect of a product that is not designed to appeal to consum-
ers—the point of a consumer product, after all, is to be bought
and sold. If
any
product attribute that made the product more
desirable automatically became a promotional “service or fa-
cility” by virtue of that fact, then subsection 13(e) would cover
all products. This would undermine the balance that Con-
gress has struck between subsection 13(a)’s broad prohibition
(which is limited by the need to show harm to competition)
and subsection 13(e)’s narrow but categorical prohibition.
Moreover, such an interpretation of section 13(e) would wipe
out the seller’s discretion to choоse which products to sell to
whom. See
United States v. Colgate & Co.
,
Woodman’s relies on two opinions from the Commission
that express a view contrary to the one the Commission ad-
vances today:
Luxor, Ltd.
,
This leaves Woodman’s without a leg to stand on. Size alone is not enough to constitute a promotional service or fa- cility for purposes of subsection 13(e); any discount that goes alone with size must be analyzed under subsection 13(a); аnd the 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 promotional content. For example, the Commission distinguishes football shaped packages offered just before the Superbowl, or Hal- loween-branded “fun-size” individually wrapped candies near Halloween, from Clorox’s large packs. These examples could fall within subsection 13(e), but they are not before us today. Only Clorox’s refusal to sell large packs to Woodman’s is before us, and that, we decide, is not forbidden by subsec- tion 13(e).
III
Clorox also argues that Woodman’s complaint must be dismissed because Woodman’s no longer buys any products from Clorox and therefore is not a “purchaser” under subsec- tion 13(e). Woodman’s responds that it is an indirect pur- chaser under Fred Meyers. Although Clorox raised this claim as a jurisdictional argument below, it does not do so here. That was a wise choice: as the Supreme Court has recently held, the question of who is authorized to bring an action under a stat- ute is one of statutory interpretation; it does not implicate Ar- ticle III standing or jurisdiction. See Lexmark Int’l, Inc. v. Static Control Components, Inc. , 134 S. Ct. 1377 (2014). The district court rejected Clorox’s motion to dismiss on mootness grounds. Understood as a ruling under Rule 12(b)(6), this too must be reconsidered on remand.
We R EVERSE the district court’s denial of Clorox’s motion to dismiss for failure to state a claim and its order rejecting Clorox’s argument that Woodman’s no longer has any rights under the statute and R EMAND for further proceedings con- sistent with this opinion.
Notes
[*] Of the Northern District of Illinois, sitting by designation.