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The Franchise Memorandum

Federal Appeals Court Affirms Summary Judgment on Price Discrimination Claim But Allows Restraint of Trade Claim to Proceed
Posted in Antitrust

In Toledo Mack Sales & Service, Inc. v. Mack Trucks, Inc., 2008 WL 2420729 (3rd Cir. June 17, 2008), the United States Court of Appeals for the Third Circuit affirmed a district court’s grant of summary judgment in favor of a truck manufacturer on a dealer’s Robinson-Patman claim but reversed an award in favor of the manufacturer on the dealer’s Sherman Act claim. Mack manufactures a variety of heavy-duty trucks that it distributes and services primarily through a nationwide network of authorized dealers. Until its termination, Toledo was an authorized Mack dealer in the Toledo, Ohio area. An important part of each Mack dealer’s price offering to customers is a transaction-specific discount known as “sales assistance” from the manufacturer. The amount of sales assistance Mack offers a dealer on a particular transaction varies. Until Mack terminated Toledo’s status as an authorized dealer, Toledo aggressively pursued a low-price sales strategy throughout the country, competing on prices against other Mack dealers for sales in other dealers’ areas.

After its termination, Toledo sued Mack alleging that (1) Mack dealers entered into “gentlemen’s agreements” not to compete with each other on price and that Mack entered into agreements with the dealers that it would delay or deny sales assistance to any dealer who sought to make an out-of-area sale – thus violating the Sherman Act by preventing Mack dealers from competing with one another; and (2) Mack’s decision to deny Toledo sales assistance on out-of-area sales violated the prohibition on discriminatory pricing in violation of the Robinson-Patman Act. The trial court had granted summary judgment in favor of Mack on Toledo’s price discrimination claim. At the close of evidence at trial, the district court then granted judgment as a matter of law to Mack on Toledo’s Sherman Act claim, finding that Toledo’s claim was barred by the applicable statute of limitations because Toledo knew or had reason to know of the alleged conspiracy as early as 1989, and that the evidence provided by Toledo within the limitations period was insufficient to go to the jury.

On appeal, Toledo contended that the district court erred by requiring it to show exclusivity with post-1998 evidence that a conspiracy existed. Instead Toledo argued that the court should have considered whether all of the evidence it presented, including evidence of events prior to 1998, was sufficient to allow a jury to conclude that Mack and its dealers engaged in an unlawful conspiracy in restraint of trade within the period allowed under the statute of limitations. The Third Circuit agreed and reversed the district court, finding that Toledo had presented sufficient evidence to present to a jury on its conspiracy claim. The court did, however, affirm the trial court’s grant of summary judgment on Toledo’s Robinson-Patman claim because, regardless of any competition between dealers during the bidding process, only a dealer whose bid is accepted by a customer will actually buy a truck from Mack and therefore, only one sale, not the requisite two for Robinson-Patman purposes, actually results.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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