The Franchise Memorandum

The Ninth Circuit recently affirmed summary judgment in an antitrust suit involving the sale of aftermarket automotive parts. In Gorlick Distribution Centers v. Car Sound Exhaust, 2013 U.S. App. LEXIS 14635 (9th Cir. July 19, 2013), the appeals court agreed that Gorlick had failed to raise a genuine issue of fact regarding its claim that its competitor, Allied Exhaust Systems, knowingly received discriminatory pricing in violation of the RobinsonPatman Act. Although it was clear that Allied did in fact know it was receiving favorable pricing from its supplier, Car Sound Exhaust System, the court found that Gorlick had not met its burden of proving that Allied knew its favored prices did not qualify for a defense under the Act. The evidence demonstrated that Allied could have reasonably believed that the favorable prices did not result from anything other than significant differences in the way the competitors did business. The court also rejected Gorlick's theory that Allied's “trade experience” should have alerted it to the fact its prices violated the federal statute, or that Allied had a duty to inquire into the prices offered to its competitors.

A divided panel also affirmed the district court's summary judgment on Gorlick’s claim under Section 1 of the Sherman Act, although for reasons not identified by the district court. The Ninth Circuit concluded that even if Allied and Car Sound had reached an agreement to restrain trade, Gorlick's claim still failed under a rule of reason analysis because there was no evidence of actual injury to interbrand competition—as opposed to injury to Gorlick as a mere competitor for Car Sound parts. Because the relevant market was the larger aftermarket automotive exhaust products market, and not merely products sold by Car Sound, Gorlick was required to demonstrate that any purported agreement between Allied and Car Sound would have wider competitive effects. Although a dissenting judge would have remanded the case for more discovery on possible anticompetitive effects, the panel majority concluded that the issue had been sufficiently addressed and affirmed the district court's summary judgment ruling.