Antitrust Law Daily Wrap Up, ANTITRUST—D. Colo.: Fuel supplier may be liable for selling to suppliers at different rates, (Sep 6, 2013)

By Jody Coultas, J.D.

The federal district court in Denver denied Suncor Energy (U.S.A.) Inc. summary judgment of Robinson-Patman Act and Colorado Consumer Protection Act (CPA) claims filed against it by Western Convenience Stores, Inc. (WSC), based on Suncor allegedly selling gasoline to WSC’s competitors at a lower rate than paid by WSC (Western Convenience Stores, Inc. v. Suncor Energy (U.S.A.) Inc., September 5, 2013, Krieger, M.).

WCS provides retailers in Colorado and Nebraska with gasoline and diesel fuel, which it purchased from suppliers like Suncor. Due to issues regarding WCS’ promptness of payment, Suncor required WCS to prepay for fuel shipments. WCS argued that this was a violation of the parties’ agreements and instructed its bank not to honor draw requests made by Suncor on a WCS account. Suncor then suspended all subsequent fuel sales to WCS. WCS also alleged that Suncor sold the same gasoline products to WCS’s competitor, The Dillon Companies, Inc., at more favorable prices in violation of the Robinson-Patman Act.

Robinson-Patman Act claims. To establish a Robinson-Patman Act claim, WCS must first show (i) two or more contemporaneous sales by the same seller to different buyers at different prices; (ii) of commodities of like grade and quality; (iii) at least one of the sales was made in interstate commerce; (iv) the discrimination had the requisite effect on competition generally; and (v) the discrimination caused injury to WCS.

There was a genuine issue of fact as to whether the foreign gasoline obtained by Suncor simply passed via the “flow of commerce” to buyers such as WCS and Dillon, according to the court. In order to meet the “in commerce” requirement, the products being sold at different prices must be sold across state lines. WCS purchased fuel from Suncor in Colorado, but alleged that Suncor obtained fuel outside of Colorado and that Suncor materially transformed the fuel it bought before selling it to WCS. Suncor operates a refinery in Colorado, and at least some of the fuel products it sells to buyers such as WCS and Dillon are produced entirely in Colorado. However, Suncor also purchased gasoline from suppliers outside of Colorado. Therefore, there was an issue of fact concerning whether the gasoline at issue was sold in interstate commerce.

WCS presented sufficient evidence of a significant price differential and a lengthy period in which such differential predominated that resulted in an injury to competition, according to the court. Suncor’s alleged price discrimination injured competition by creating “favored purchasers” and “disfavored purchasers.” Courts may infer injury to competition from evidence of a substantial price difference over time, because such a price difference may harm the competitive opportunities of individual merchants, creating a reasonable possibility that competition itself may be harmed. There was evidence that WCS paid more for fuel from Suncor than Dillon did for about 20 months.

Suncor has not shown that it is entitled to summary judgment on its “meeting competition” defense. To establish a “meeting competition” defense, Suncor must show that the granting of a lower price to Dillon met the equally low price of one of Suncor’s competitors for Dillon’s business. As the seller, Suncor needed to show it had a good-faith belief that the reduced price for Dillon was necessary to meet competition. The evidence suggested that Suncor’s quote to Dillon was to win its business, rather than to merely match a discount competitors may be offering. Although Suncor was not required to show with absolute certainty that another competitor was offering a certain price, Suncor only showed a “mere hunch” that a certain price was necessary to be competitive.

CPA claims. The court also denied Suncor’s motion for summary judgment of WCS’s CPA claim. The CPA prohibits the secret payment or allowance of rebates, refunds, commissions, or unearned discounts not extended to all purchasers, to the injury of a competitor and where such payment or allowance tends to destroy competition. The court noted that the CPA allows for private rights of action, and dismissed Suncor’s arguments to the para.

There were genuine issues of fact as to whether Suncor’s pricing arrangement with Dillon constituted a secret discount prohibited by the CPA, according to the court. Suncor stated that its standard price for all customers is the announced fixed “rack price.” It then negotiated, on a customer-by-customer basis, a “differential” or reduction off of the rack price. There was evidence that Suncor offered a certain type of discount to Dillon that it did not offer to WCS. Suncor argued that the statute did not prohibit that type of discount, but failed to cite authority for that proposition. The CPA also did not require WSC to show intent to destroy competition on the part of Suncor.

The court held that the CPA applied to secondary-line competitors. Suncor argued that the CPA only applied to primary-line competition, or situations in which Suncor’s favoritism operated to injure Suncor’s competitors. The court noted that other courts had interpreted the same language as found in the CPA and properly construed the statute’s phrase “injury to a competitor” to mean “any competitor,” not merely “competitors of the seller giving the secret discount.”

The case is No. 11-cv-01611-MSK-CBS.

Attorneys: Joseph T. VanLandingham (Polsinelli PC) for Western Convenience Stores, Inc. Anthony J. Shaheen (Holland & Hart, LLP) for Suncor Energy (U.S.A.) Inc.

Companies: Western Convenience Stores, Inc.; Suncor Energy (U.S.A.) Inc.; The Dillon Companies, Inc.

Cases: Antitrust StateUnfairTradePractices ColoradoNews