Background
Nine wholesale distributors sued Prestige Brands Holdings, Inc. and Medtech Products, Inc., alleging that discounts and promotional benefits offered to Costco on Clear Eyes Redness Relief eye drops violated Section 2(a) of the Robinson-Patman Act. A jury found Prestige liable and awarded the distributors a combined $350,000 in damages, which was trebled; the district court also awarded more than $3 million in attorney’s fees and costs.
A Ninth Circuit panel affirmed the liability judgment but vacated the attorney’s-fee award and remanded for a new fee award. Prestige sought rehearing en banc, challenging the panel’s approval of jury instructions that permitted a finding of competitive injury based on displaced sales without requiring proof that each distributor’s ability to compete was substantially impaired.
The Court’s Holding
The Ninth Circuit denied rehearing en banc. After a judge requested a vote, the case failed to receive the required majority of votes from the court’s nonrecused active judges. The panel decision therefore remains in place.
Judge Forrest, joined by Judge VanDyke, dissented from the denial. The dissent argued that Section 2(a), Supreme Court precedent, and decisions from other circuits require proof that discriminatory pricing substantially impaired a disfavored purchaser’s ability to compete. In the dissent’s view, allowing liability upon proof that only “some sales” were displaced eliminated that substantiality requirement and created a circuit split.
Key Takeaways
- The Ninth Circuit declined to reconsider en banc its panel decision affirming Robinson-Patman Act liability against Prestige.
- The panel decision permits secondary-line competitive injury to be established without a separate finding that the discrimination substantially impaired each plaintiff’s ability to compete.
- The dissent warned that the rule could expose manufacturers to treble damages and attorney’s fees for comparatively minor price differences and displaced sales.
Why It Matters
The denial leaves the panel’s interpretation of Section 2(a) binding in the Ninth Circuit. Robinson-Patman Act plaintiffs within the circuit may rely on evidence of displaced sales without proving the additional substantial competitive impairment that the dissent maintained other courts require.
For manufacturers and distributors, the decision heightens the potential consequences of customer-specific discounts and promotional programs, even where the resulting effect on an unfavored purchaser’s overall competitive position may be limited.