Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Supreme Court Denies Request to Review Legality of Truck Transmission Maker’s Sales Agreements , (Apr 29, 2013)

By Jeffrey May, J.D.

The U.S. Supreme Court will not be weighing in on the appropriate use of the "price-cost" test for evaluating antitrust claims challenging long-term contracts any time soon. The Court today denied a request by Eaton Corporation, the leading supplier of heavy-duty truck transmissions in North America, to review a decision of the U.S. Court of Appeals in Philadelphia, upholding a jury’s finding that its multi-year contracts with truck manufacturers violated federal antitrust law. Eaton argued that the Third Circuit's refusal to apply the price-cost test to uphold its agreements was irreconcilable with Supreme Court price-cost precedents and conflicted with the decisions of other federal circuit courts (Eaton Corp. v. ZF Meritor, LLC, Dkt. 12-1045).

In its petition for certiorari, filed on February 25, 2013, Eaton asked whether the court of appeals erred in holding that its conditional-rebate agreements—sales agreements that incentivized additional sales by giving customers above-cost rebates if they purchased specific percentages of their requirements from Eaton—can give rise to antitrust liability in the absence of any showing of below-cost pricing.

Citing the Supreme Court's 1993 decision in Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 1993-1 Trade Cases ¶70,277, Eaton contended that the Supreme Court had consistently held that antitrust liability may not be predicated on a defendant's pricing practices so long as the defendants' prices remain above its costs. According to Eaton, the price-cost test is based on sound economic and judicial principles and provides a necessary "safe harbor" within which businesses may know they will not incur liability for their pricing practices.

Left standing was a decision of a divided Third Circuit panel (696 F.3d 254, 2012-2 Trade Cases ¶78,078) holding that the claims were subject to a rule of reason standard of analysis, rather than to a price-cost test. The dissent had questioned the majority’s conclusion that the price-cost test was irrelevant. It suggested that courts should exercise caution before condemning above-cost pricing practices. The price-cost test should have applied and been given persuasive effect regardless of whether Eaton identified non-price elements of the defendant’s conduct that they alleged were anticompetitive, according to the dissent.

Attorneys: Theodore B. Olson (Gibson, Dunn & Crutcher LLP) for Eaton Corp.

Companies: Eaton Corp.; ZF Meritor LLC

News: Antitrust