Antitrust Law Daily Wrap Up, ANTITRUST—D. N.J.: Terminated distributor unable to pursue Robinson-Patman claims against rivals, (Nov 10, 2014)

By Linda O’Brien, J.D., LL.M.

An independent building materials distributor failed to sufficiently plead that a commercial roofing system manufacturer engaged in illegal price discrimination by providing incentives to two competing distributors that were not granted to the plaintiff distributor, the federal district court in Newark, New Jersey has ruled in an unpublished opinion. Thus, the defendants’ motions to dismiss were granted (Marjam Supply Company v. Firestone Building Projects Company, LLC, November 6, 2014, Martini, W.).

Firestone Building Products is a leading single source manufacturer of commercial roofing systems and products, providing a full line of roofing systems to contractors, building owners and specifiers. Firestone markets its products primarily through independent distributors. Marjam Supply, a building materials distributor and supplier, was one of Firestone’s distributors. After Marjam’s sales of Firestone products decreased significantly in 2010 and 2011, Firestone terminated Marjam’s distributorship.

Marjam filed suit against Firestone and competing independent distributors, ABC Supply and New Castle Building Products, alleging that the defendants engaged in price discrimination in violation of the Robinson-Patman Act. Marjam claimed that it was unable to compete with the prices that ABC and New Castle offered its customers because Firestone offered ABC and New Castle deals, incentives, and discounts that Firestone did not offer to Marjam. The defendants moved for dismissal.

Section 13(f) of the Robinson-Patman Act states it is unlawful for any person engaged in commerce to knowingly induce or receive a discrimination in price and the plaintiff has the burden of alleging that the buyer knew both that he was receiving a lower price than a competitor and the seller had little likelihood of defending the offer of that price. In this case, Marjam alleged that (1) ABC knowingly received discriminatory pricing, including incentive rebates at 8 percent while Marjam’s correlating incentive rebates were significantly less and (2) New Castle knowingly received discrimination in price in the form of rebates and extended payment terms better than were granted to Marjam.

The court determined that Marjam failed to allege that ABC and New Castle had any knowledge that Firestone charged them lower prices than were charged to Marjam and failed to explain why the two companies had reason to know that the discounts they received were unjustifiably low. Although Marjam specified the types of discounts that Firestone gave to ABC and New Castle, alleging those discounts alone did not raise a plausible inference that Marjam knew the discounts were illegal, the court noted.

The complaint must state a factual theory by which the defendants knew or should have known that they were receiving prices that were below the manufacturer’s cost, in the court’s view. The mere existence of a buyer’s sophistication and successful negotiation of better prices did not lead to the inference that ABC and New Castle did anything other than bargain for the best legally justifiable price, the court concluded.

The case is No. 11-cv-7119.

Attorneys: Brett R. Schwartz (Lebensfeld Sharon & Schwartz PC) for Marjam Supply Co. Christopher Viceconte (Gibbons PC) for Firestone Building Products Company, LLC, Firestone Diversified Products, LLC, and Genflex Roofing Systems, LLC. Gerhard P. Dietrich (Ward Greenberg Heller & Reidy, LLP) for Performance Roofing Associates, Inc., and Roofing Specialists, Inc. Jeffrey Warren Lorell (Saiber LLC) for ABC Supply Company, Inc., Bradco Supply Corp., and S & K Distribution, LLC.

Companies: Marjam Supply Co.; Firestone Building Products Company, LLC; Firestone Diversified Products, LLC; Genflex Roofing Systems, LLC; Performance Roofing Associates, Inc.; Roofing Specialists, Inc.; ABC Supply Company, Inc.; Bradco Supply Corp.; S & K Distribution, LLC

Cases: Antitrust FranchisingDistribution NewJerseyNews