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Section 2(a) of the Clayton Act, 15 U.S.C.S. § 13(a), as amended by the Robinson-Patman Act, makes it unlawful to discriminate in price between different purchasers of commodities of like grade and quality, unless certain exclusions and defenses apply, where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly. When the discrimination has primary-line effects -- that is, in the same industry as the person granting the discriminatory prices -- the claim has much in common with a contention that the defendant engaged in predatory pricing in violation of the Sherman Act, 15 U.S.C.S. § 2. In either case, the gravamen is that the aggressor sold goods for too little money, hoping to cripple or discipline rivals so that it might sell its wares for a monopoly price later, recouping the losses and adding a hefty profit, to the detriment of consumers.
Defendant Rose Acre Farms, Inc. was a large-scale egg producer who sold surplus eggs to supermarkets at prices below defendant's cost of production. Plaintiffs A.A. Poultry Farms, Inc., et al. were defendant's rivals, who claimed that defendant's surplusage pricing was predatory under the Robinson-Patman amendments to the Clayton Act, 15 U.S.C.S. § 13(a). The jury agreed, awarding plaintiffs treble damages of $28 million. The district court granted defendant's motion for judgment notwithstanding the verdict (JNOV), because the evidence was insufficient to find actual competitive injury in the egg market. Plaintiffs sought review of the district court’s decision.
Under the circumstances, did the defendant engage in predatory pricing, thereby warranting the award of treble damages to the plaintiffs?
On appeal, the court held that the correct test for determining predatory pricing was whether defendant's current low prices permitted future recoupment of defendant's losses. The court found that future recoupment was impossible. Additionally, egg customers were not injured by defendant's pricing practices. Surplus eggs were not the same product as eggs sold on long-term contract; therefore, defendant was not liable for anti-competitively under-pricing plaintiffs. The court affirmed the decision.