Blog Banner Image

The Franchise Memorandum

Manufacturer May Limit Sales of Large-Pack Goods to Discount Chains Without Committing Price Discrimination
Posted in Antitrust

A manufacturer can sell its largest packs of products only to discount club chains without engaging in illegal price discrimination, according to the United States Court of Appeals for the Seventh Circuit in Woodman’s Food Market, Inc. v. Clorox Co., 833 F.3d 743 (7th Cir. 2016). The case concerned Clorox’s practice of selling its largest-sized containers of products only to discount warehouses such as Sam’s Club or Costco. Woodman’s, a small grocery chain based in Wisconsin and Illinois, sued Clorox seeking injunctive relief for unlawful price discrimination under Section 13(e) of the RPA, which forbids any manufacturer from “discriminat[ing] in favor of one purchaser against another purchaser,” by furnishing “services or facilities” not available to all purchasers.

Woodman’s argued that packaging size is a type of promotional service because (1) large packs tend to have a lower per-unit cost than smaller packs, and (2) large packs provide the customer with the added convenience of having to shop less frequently. The Seventh Circuit found the first argument unpersuasive, holding that the subsection of the RPA at issue only prohibited the provision of advertising perks to purchasers as a way around the statute’s prohibition on price discrimination. The court also rejected the second argument, finding that the RPA only addresses “promotional” services or facilities, rather than any product attribute a customer might find appealing, such as fewer trips to the store. The court also noted that according to the Federal Trade Commission’s current guidance, the RPA prohibits only “promotional” services or facilities used primarily to promote the resale of the manufacturer’s product to the consumer, as opposed to the original sale from the manufacturer to the purchaser.

Email LinkedIn Twitter Facebook

The information contained in this post is provided to alert you to legal developments and should not be considered legal advice. It is not intended to and does not create an attorney-client relationship. Specific questions about how this information affects your particular situation should be addressed to one of the individuals listed. No representations or warranties are made with respect to this information, including, without limitation, as to its completeness, timeliness, or accuracy, and Lathrop GPM shall not be liable for any decision made in connection with the information. The choice of a lawyer is an important decision and should not be based solely on advertisements.

About this Publication

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. 

To subscribe to monthly emails for The Franchise Memorandum, please click here


















Blog Authors