Antitrust Law Daily Wrap Up, TOP STORY—N.D. Cal.: Chrysler defeats dealer’s price discrimination claims for third and final time, (Oct 28, 2015)

By Greg Hammond, J.D.

An automobile dealer’s price discrimination claims against Chrysler Group LLC were dismissed for a third time, but with prejudice. The federal district court in San Jose determined that the dealer failed to meet the contemporaneous customer requirement of a Robinson-Patman Act price discrimination claim (Mathew Enterprise, Inc. v. Chrysler Group LLC, October 27, 2015, Freeman, B.).

Mathew Enterprise, Inc. is a franchise automobile dealer that sells vehicles manufactured by Chrysler, Jeep, Dodge, and Ram brands. After Chrysler established a second dealership, San Leandro, in the same geographic area, Mathew filed suit, alleging—in part—that the rent assistance paid by Chrysler to San Leandro was actually payment for promotional services in connection with vehicle sales. The district court dismissed this price discrimination claim in July 2014, and again with prejudice in January 2015, finding Mathew failed to identify any “services or facilities” for which compensation was provided to San Leandro and not proportionally provided to Mathew. The court, however, amended its dismissal in May 2015 to allow the dealership leave to amend after new evidence was discovered in a related state court action.

In support of its Robinson-Patman Act price discrimination claim, Mathew now alleges: (1) in at least one instance, Chrysler made “rental incentive payments” to a dealership in Valencia, California, which did not even lease real estate from Chrysler; (2) bookkeeping practices suggested that neither San Leandro nor Chrysler considered the payments to San Leandro rent-related; and (3) Chrysler did not restrict how San Leandro could use the payments.

Dominant nature of payments. Given Mathew’s new allegations, the dealership claimed that the “dominant nature” of the payments was to reduce the price that San Leandro and other dealerships paid Chrysler for purchased vehicles. The court noted that Mathew was only required to allege facts that make it plausible that the dominant purpose of the alleged agreement was to discount vehicles (a good) rather than rent (a service). The court could no longer find that Chrysler’s plausible alternative explanation—that the payments at issue bore a reasonable relationship to a service—was so convincing as to make Mathew’s allegations implausible. Rather, further development of the factual record would be necessary, according to the court, to determine the nature of the payments. The motion to dismiss could therefore not be granted on dominant nature of the payments grounds.

Contemporaneous customer requirement. The court, however, granted dismissal with prejudice based on the contemporaneous customer requirement, finding in favor of Chrysler’s argument that the price discrimination claim must be dismissed because Mathew failed to allege that it and San Leandro were contemporaneous customers of Chrysler. Specifically, the court found that instead of alleging that Mathew and San Leandro commenced business at a reasonably contemporaneous time, Mathew identified itself as a long-time, established dealership whose business was disrupted by the entry of new dealerships. Nothing in the Robinson-Patman Act or case law, however, requires that later-offered commencement of business-related allowances be offered to incumbent competitors, the court concluded.

The case is No. 13-cv-04236-BLF.

Attorneys: Ali Kamarei (InHouse Co. Law Firm), Eric A. Baker (Boardman & Clark LLP), and Gavin Michael Hughes (Law Office of Michael J. Flanagan) for Mathew Enterprise, Inc. Colin Kass (Proskauer Rose LLP) and Robert Edmund Davies (Donahue Davies LLP) for Chrysler Group LLC.

Companies: Mathew Enterprise, Inc.; Chrysler Group, LLC

MainStory: TopStory Antitrust FranchisingDistribution CaliforniaNews