The Franchise Memorandum

A federal district court in New York has denied a plaintiff’s motion to dismiss antitrust counterclaims for discriminatory pricing by a seller to competing buyers. In Dayton Superior Corp. v. Spa Steel Products, Inc., 2012 U.S. Dist. LEXIS 4283 (N.D. N.Y. Jan. 13, 2012), the plaintiff originally sued the defendant for breach of contract to recover $1.2 million that the defendant allegedly owed the plaintiff for goods sold and delivered. The defendant brought counterclaims with its amended answer, including a counterclaim under the Robinson-Patman Act based on the allegation that the plaintiff was offering its goods to the defendant’s competitors at a lower price than the plaintiff offered to the defendant. The defendant claimed secondary-line price discrimination, which occurs where the allegedly injured party is in competition with a favored customer of the seller. To state a valid claim for this type of price discrimination, the plaintiff must show that the seller discriminated in price between the two purchasers and that the price discrimination had an unlawful effect on competition.

The defendant supported its claim that the plaintiff was offering its product (a component of the defendant’s product) to the defendant’s competitors at substantially lower prices by alleging that the defendant’s potential customers purchased from these competitors, rather than from the defendant, because the defendant’s prices were 10% to 15% higher. The court determined that an issue of fact existed as to the cause of the pricing difference, and thus denied the plaintiff’s motion to dismiss. Moreover, the defendant adequately pled each element of price discrimination in its counterclaim by submitting an affidavit from one customer stating that it purchased product from defendant’s competitor rather than from defendant because the defendant’s prices were significantly higher.