Which of the following price discrimination scenarios are legal under the robinson-patman act?

In the lively national debate about how the U.S. antitrust framework should be updated to address the concentration of power in digital mar­kets, the Robinson–Patman Act (RPA) is not front and center. The RPA, which bans a seller from charging competing buyers different prices for the same “commodity,” has been subject to longstanding criticism for pro­moting protectionist goals. As the Chicago School economics-based ap­proach to antitrust took hold throughout the 1970s and 1980s, an ideological consensus emerged within both academic and policy circles that the overenforcement of the RPA could reduce competition and thereby “harm” consumers. In 1977, the DOJ produced a report that found that the RPA’s prohibition on secondary-line price discrimination chilled competition and produced inefficiencies. In 2007, a congression­ally appointed, bipartisan Antitrust Modernization Committee (AMC) called for the repeal of the RPA alto­gether based on similar reasoning. The FTC and the DOJ have consequently not enforced the RPA in the last four decades. Although private plaintiffs have continued to file suit under the RPA, the likelihood of winning an RPA case in the courts has plum­meted. Courts have more readily assumed the procompetitive effects of second­ary-line price discrimination that is barred under the RPA—namely, retail­ers bargaining aggressively to extract lower prices from suppliers.

The RPA was originally conceived to protect small businesses against large chain stores’ rapid expansion of power from the 1920s to the 1940s. Chain stores transformed retailing, altering the landscape previously marked by local merchants and independent stores in grocery, variety store, apparel, and retail drug markets. Between 1920 and 1930, the top twenty chain stores more than doubled in size of operation. The Great Atlantic and Pacific Tea Company (A&P), which epitomized this revolu­tion, became the fifth-largest industrial corporation in the United States, reigning over 15,700 stores by 1930.

This explosive growth triggered backlash from a wide spectrum of op­ponents—including independent merchant associations, antimonopo­lists, agrarians, populists, and progressives—who argued that chain store expansion must be curtailed not only to protect small-scale distributors from being eliminated but also to promote greater economic decentrali­zation. These advocates called on the regulatory state to intervene and curb the forces of corporate capitalism that threatened local economic self-sufficiency and political independence. At the state level, small busi­ness lobbies effectively mobilized to introduce 1,312 anti-chain tax laws, 62 of which were successfully enacted between 1923 and 1961. At the federal level, the salience of this anti-chain-store sentiment and the localist ideol­ogy united Democrats, Republicans, and Progressives to pass the RPA in 1936.

Arguments made by today’s advocates against Amazon’s business practices—that Amazon has contributed to wage stagnation, labor abuses, the financial insecurity of suppliers and competitors, and the decline of brick-and-mortar retailers—parallel those made by the anti-chain-store advocates of the 1920s and 1930s. While the Congress enact­ing the RPA may not have anticipated the precise business model of e-com­merce platforms, Amazon’s role as a retail distributor for wholesalers for a wide variety of products puts it within the category of large retailers that Congress intended to constrain through the statute. As the COVID-19 pandemic has forced consumers to rely even more on e-retailers like Amazon to provide delivery services under social distancing rules, Amazon’s growth as a distributor of essential goods will only trigger more regulatory scrutiny going forward.

If enforcement agencies or private plaintiffs decide to mobilize the currently dormant RPA against Amazon, the giant e-retailer would not come out unscathed. The government could sue Amazon for using its mar­ket power to “extort” cheaper prices from wholesalers and thereby induce wholesaler price discrimination against equally situated distributors. If lia­bility is found, the court could order Amazon to discontinue the “discrim­inatory” wholesale pricing for its suppliers. Private plaintiffs could also recover treble damages for injuries they sustained as a result of RPA viola­tions.

This Comment revisits the principles underlying the RPA and demon­strates how federal antitrust enforcement agencies, as well as private plain­tiffs, could potentially leverage them against a modern e-retailer like Amazon. Specifically, Part I discusses the modern RPA framework under the Supreme Court’s recent RPA case, Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc., and how the Court’s decision upheld this frame­work and affirmed the RPA’s goal of protecting small businesses. Part II illustrates how the RPA could be applied to bring a second-line antitrust injury claim against Amazon.

I. The Robinson–Patman Act and the Volvo Decision

The RPA differs from other federal antitrust laws in that its primary goal is to protect small businesses from aggressive competition. To ad­dress concerns about large chain retailers exploiting their market power to undercut smaller retailers, Congress tightened the 1914 Clayton Act’s proscription against “secondary-line” discrimination—that is, discrimina­tion by a seller who favors some of its customers over others. Establishing a secondary-line injury claim requires that (1) the relevant sales were “made  in  interstate  commerce,”   (2)  the  goods  sold  were  of  “like  grade  and quality,” (3) the defendants “discriminate[d] in price” between two purchasers of the same goods,” and (4) the price discrimination injured, destroyed, or prevented competition to the discriminator’s advantage. This last prong—requiring a showing of “competitive injury”—has been the source of much controversy. Courts have interpreted this to require harm to competitors rather than harm to competition, in stark contrast to other federal antitrust laws.

Early in RPA jurisprudence, the Supreme Court affirmed that the RPA meant to curb injury to the “competitor victimized by discrimination.” In FTC v. Morton Salt Co., the Court established a plaintiff-friendly rule that competitive injury could be inferred from evidence of prolonged price dis­crimination over time. The Court explained that this presumption, which has come to be known as the Morton Salt doctrine, was justified given that competitors would most likely be injured if they were forced to pay their suppliers higher prices than their competition over a prolonged pe­riod. Upon a review of the Act’s legislative history, the Morton Salt Court noted that the purpose of the RPA was to address the “evil” arising from the fact that “a large buyer could secure a competitive advantage over a small buyer solely because of the large buyer’s quantity-purchasing ad­vantage.”

But the Supreme Court’s subsequent cases made it difficult for plain­tiffs to prevail on an RPA claim by expanding what defendants could raise as affirmative defenses and heightening requirements to build a prima fa­cie case. This trend, driven in large part by Chicago School scholarship in the 1970s and 1980s, reflected a growing consensus  that  consumer  wel­fare  is  the  singular  economic  goal  of  U.S.  antitrust law. As an economic matter, the Chicago School scholars argued that shielding smaller, ineffi­cient competitors from aggressive competition by large retailers would lead to higher prices and market inefficiency.

The Court’s decision in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. in 1993 seemed to add further weight to the view that pro­competitive goals of the Sherman Act and the FTC Act should also con­strain the application of the RPA. The Court declared that the RPA should be “construed consistently with broader policies of the antitrust laws” and that the Act bans “price discrimination only to the extent that it threatens to injure competition.” The Court effectively imported the Sherman Act’s injury-to-competition standard to apply to RPA claims for primary-line injury or predatory pric­ing —which occurs when one manu­facturer reduces its prices in a market and causes injury to its competitors in the same market. But the question remained as to whether the Court would apply a heightened evidentiary standard to secondary-line injury cases as well.

In the latest decision involving a secondary-line case, the Supreme Court did not overturn the Morton Salt doctrine or other basic features of the RPA that fundamentally make the legislation protectionist. But it did continue to heighten the competitive injury requirement. The Court granted certiorari to the appellants in Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc., where a car dealer alleged that the car manufac­turer Volvo offered the dealer different wholesale prices than it did for other dealers in a competitive bidding process. Justice Ruth Bader Ginsburg, writing for the majority, found that the plaintiff dealer, Reeder, failed to show requisite competitive injury where Reeder and other dealers were not both “in actual competition” for the same customer under the Act. She rejected Reeder’s evidence that it received smaller concessions than other dealers from Volvo for different sales on which Reeder did not bid. On the two occasions in which Reeder did bid against another Volvo dealer, competing “head-to-head” for the same customer, the Justice held that Reeder did not show that discrimination was substantial. The loss of only one sale to another Volvo dealer, which amounted to $30,000 in gross profits, was not of such “magnitude” as to substantiate Reeder as a “disfa­vored” purchaser.

By allowing only the “head-to-head” comparison to be considered, Justice Ginsburg narrowed what type of evidence suffices to show undue price discrimination among “favored and disfavored purchasers” under the Act. Justice Ginsburg echoed Brooke Group’s language that interbrand competition is the “primary concern of antitrust law.” Her opinion did seem to narrow the range of scenarios in which a manufacturer could in­jure similarly situated resellers, expanding “procompetitive” ways in which a large buyer could legally induce price discrimination.

Justice John Paul Stevens, in his dissent in Volvo, expressed concern that Justice Ginsburg’s transaction-specific approach eliminated the RPA’s statutory protection in “all but those rare situations in which a prospective purchaser is negotiating with two . . . dealers at the same time.” He viewed Reeder and other dealers as valid competitors who dealt with the same Volvo trucks “in a single, interstate retail market.” Moreover, by dis­tinguishing other instances in which Volvo charged Reeder higher prices than those it charged to competing dealers as “wholly discrete events” based on the identity of the customers, Justice Ginsburg, in his view, “ig­nor[ed] the fact that competition among truck dealers is a continuing war waged over time.” Justice Stevens and other commentators have argued that the majority approach effectively restricts RPA liability in competitive bidding situations, shielding liability for manufacturers.

The Volvo opinion, nevertheless, left plenty of ammunition for RPA advocates to leverage. Justice Ginsburg notably did not require a showing of harm to competition to establish second-line injury, which is required under the consumer-welfare standard applied in Brooke Group. Justice Ginsburg thereby expressly reaffirmed the Morton Salt doctrine. The con­tinued existence of this powerful presumption means that plaintiffs can win an RPA claim even if the wholesaler’s discriminatory conduct has the overall effect of lowering prices for end consumers. Finally, by focusing the discussion in Volvo on whether Reeder and other Volvo dealers were “func­tional competitors” rather than whether they dealt with a “sale of goods” under the RPA, Justice Ginsburg left open the possibility that the RPA may apply to competitive bidding or other business transactions that arguably fall somewhere between a “sale” transaction and a “competitive bidding” contest. She stated that the Court’s decision to hold against Reeder does not answer the question of law about whether the RPA “reach[es] markets characterized by competitive bidding and special-order sales, as opposed to sales from inventory.” The majority opinion does not completely fore­close the possibility of finding RPA liability in other novel business contexts (i.e., in digital markets) where the occurrence of a “sale of good” may be unclear.

Furthermore, all nine Supreme Court justices who reviewed Volvo—Ginsburg, Roberts, O’Connor, Scalia, Kennedy, Souter, and Breyer in the majority; and Stevens and Thomas in the minority—were in alignment re­garding the congressional intent behind the RPA. In the Volvo dissent, Justice Stevens agreed with the majority that the RPA was primarily in­tended to “protect small retailers from vigorous competition afforded by chain stores and other large volume purchasers.” He further argued that the Court, as a “faithful agent” of Congress, should find a violation under the RPA, given that the jury had found a reasonable possibility that dis­criminatory pricing may have harmed competition between Reeder and the other dealers. He stressed that the Court’s analysis should not be al­tered by the potential soundness of Judge Robert Bork’s critique that Volvo’s strategy may have procompetitive benefits.

Although the Court has incrementally narrowed the gap between the RPA and the other federal antitrust laws by imposing heightened eviden­tiary requirements, it has maintained that the RPA was designed to tackle the inequity arising from small independent stores’ “hopeless competitive disadvantage” compared to large purchasers. As such, the RPA continues to provide a means for smaller retailers today to seek relief against aggres­sive competition by large retailers.

II. A Potential Claim of Secondary-Line Antitrust Injury Against Amazon

How would one establish that Amazon has caused second-line injury? This Part explores the types of evidence that a reviewing court may con­sider in finding a successful RPA claim against Amazon as a retailer. The aim is not to provide a comprehensive checklist but rather to offer an over­view of the key grounds on which litigating parties may win or lose based on case-specific facts. The hope is that this analysis will enable enforcers, private plaintiffs, and large retailers to better identify situations where the RPA may trigger liability to either reign in—or for Amazon to take neces­sary precautions not to engage in—problematic behavior.

Wherever a concrete example would be helpful, the analysis draws on Amazon’s position in the protein powder market to build a hypothetical case. As of 2016, Amazon was responsible for 57% of all protein powder purchases online. Amazon is a retail outlet for wholesalers like Optimum Nutrition that manufacture and sell numerous brands of protein pow­ders. Optimum Nutrition sells these same protein powders through other online retailers, including Bodybuilding.com, Vitamin Shoppe, and GNC, as well as brick-and-mortar stores. Amazon, like the other retailers, individually negotiates with suppliers to purchase its protein powder at fa­vorable wholesale prices to then resell. A situation ripe for a potential RPA claim would be where a small brick-and-mortar health and fitness products retailer sees a sustained price differential between what it pays as a wholesale price to Optimum Nutrition and what Amazon pays as a whole­sale price for the same Optimum Nutrition products. This small retailer could bring an RPA case against both Optimum Nutrition and Amazon, arguing that Amazon is wielding its strong purchasing power to extract lower prices from the wholesaler, Optimum Nutrition, to the detriment of the small retailer.

It is important to note that the appropriate grounds to make this ar­gument would be Amazon’s retail business with wholesalers or first-party sellers—not its marketplace for third-party sellers. Amazon offers two dif­ferent programs for vendors to have their products featured on www.amazon.com: Amazon Seller Central and Amazon Vendor Central. Under Amazon Seller Central, vendors can sell directly to shoppers as a third-party seller. Sellers have control over the retail process, setting retail prices, listing products, fulfilling and shipping orders (unless they pay ex­tra for Fulfillment by Amazon (FBA)), and dealing with customer support issues. For every completed sales transaction, a third-party seller takes the profit margin between its retail price and cost of the good, after paying Amazon a commission fee. Under Amazon Vendor Central, vendors (which are allowed to join on an invitation-only basis) sell directly to Amazon in set quantities at wholesale prices, taking the profit margin be­tween the wholesale price and the cost of the good. Amazon Retail then resells those products to shoppers at retail prices. In sum, Amazon Seller Central has a self-service business model in which Amazon acts as an inter­mediary between the third-party seller and the shoppers, whereas Amazon Vendor Central has a traditional wholesale-distribution model.

While Amazon’s third-party sales account for a greater share of the physical gross merchandise sold on the Amazon marketplace (58% in 2018 ), Amazon’s first-party sales continue to be the driving force behind its colossal revenue. In the third quarter of 2020, during the COVID-19 pandemic, Amazon’s merchandise of its own goods reached $52.77 billion, and its commission fees from third-party sales reached $43.27 billion. Given that the paradigm RPA case is one in which the plaintiff and the defendant are in a wholesaler–distributor relationship, the following anal­ysis focuses on Amazon’s role as a distributor for its first-party sellers. All references to “Amazon,” unless specified otherwise, indicates Amazon Re­tail as a reseller for its first-party sellers.

The following sections examine specific elements to a substantive RPA claim: A plaintiff must show that (1) a seller is charging competing buyers different prices for “commodities of like grade and quality” and (2) that there is “competitive injury.” Defendants may assert a number of affirma­tive defenses in response.

A. “Commodities of Like Grade and Quality”

First, the RPA bars price discrimination between different purchasers of “commodities of like grade and quality.” The RPA has been generally interpreted to apply to purchases of commodities but not to services, leases, real estate, intellectual property, or other intangibles. If a sale in­volves a mixture of goods and services, some circuits require that the “dominant nature” of the business be in the resale of products for the RPA to apply.

A plaintiff would want to stress that Amazon is functionally like any other chain store: It acts as a reseller of “commodities” purchased from its first-party sellers. Amazon may oppose this characterization and argue in­stead that it sells a bundle of services—including app-based means of search, Alexa-enabled search, guarantee of quick delivery services, and re­liable customer service, among others. A plaintiff would want to argue that, under the dominant nature test, (1) a sale transaction in the Amazon marketplace predominantly involves the transfer of a product and (2) that any intangible services offered are incidental to the transfer of the prod­uct.

Even if Amazon does sell “commodities” like other retailers, Amazon may argue that its host of services alter the “grade and quality” of its prod­ucts. For instance, additional services that Amazon Prime shoppers could take advantage of by purchasing on the Amazon Marketplace could argu­ably alter the demand for the same commodity. Amazon Prime, Amazon’s paid subscription program, gives users access to same-day, one-day, or two-day delivery; exclusive video content; and discounts at Whole Foods Market, among other services otherwise unavailable or available at a pre­mium to regular Amazon customers. If the products sold by the two par­ties are physically identical, the Supreme Court has held that the difference in “economic factors,” like labeling, packaging, and branding, cannot defeat the “like grade and quality” element.

Would the speed of delivery that Amazon offers count as such an “eco­nomic factor” that makes no difference? Whereas branding and advertis­ing may not change the underlying functionality of the physical product, significant difference in timing of delivery—a consumer’s ability to con­sume the good at a particular time window—could arguably alter its un­derlying value (e.g., seasonal goods like Halloween costumes). The strength of this argument could depend on the degree to which the deliv­ery service provided by the plaintiff dealer differs from that offered by Amazon. A marginal increase in convenience due to hastened delivery may not show a difference in “grade and quality,” whereas considerable differ­ence in delivery, based on industry-specific standards, may provide grounds for Amazon to argue that the sales are not comparable transac­tions.

A court might consider this element a nonissue altogether. In one re­cent RPA case involving the sale of furniture through a brick-and-mortar retailer and Wayfair.com, the District Court of Nevada did not question whether the furniture sold at the two venues manufactured by the same company were commodities of “like grade and quality.” The court took as a given that Wayfair, a national online furniture retailer, and a small local brick-and-mortar store were selling the same “commodity.” The court focused its attention on whether the two establishments were com­peting purchasers. While Wayfair is not as diversified in its offering of products and services as Amazon is, the fact that an e-commerce retailer and a brick-and-mortar retailer were considered to be providing the same commodity in this district court case bodes well for potential plaintiffs. Considering this element, a plaintiff would reduce the risk of dismissal for a failure to state a claim by identifying a tangible product that is supplied by the same wholesaler on both its platform and Amazon.

B. Competitive Injury

To establish a prima facie violation of the RPA, the plaintiff must show a reasonable possibility that a price difference may harm competition. Unlike the Sherman Act, which requires proof of actual harm to competi­tion, the RPA only requires that a plaintiff establish a “reasonable infer­ence” that the discrimination caused “competitive injury.” Direct evidence of sales or profits diverted from a disfavored purchaser to a fa­vored purchaser could show competitive injury. Indirect evidence of a prolonged and substantial difference in price between competing pur­chasers could also establish a rebuttable presumption that competition has been injured. As Part I discusses, Justice Ginsburg in Volvo reaffirmed the validity of this presumption under the Morton Salt doctrine. Unless the defendant successfully raises one of the RPA affirmative defenses, a show­ing of “competitive injury” suffices to support injunctive relief or tre­ble damages for a private plaintiff under section 4 of the Clayton Act.

The following sections examine the subelements of competitive injury in turn: (1) that the seller charged different prices to “competing purchas­ers,” (2) that the price differential was “prolonged and substantial,” and (3) that this price discrimination caused actual injury (lost profits) to the plaintiff.

1. Competing Purchaser Requirement. — “Competitive injury” under the RPA is established by proof of “substantial price discrimination between competing purchasers over time.” The pur­chasers must have been compet­ing head-to-head for sales to the same customer. In a case against Amazon, a plaintiff would need to show that it competed with Amazon as purchasers—that the two companies were at the “same functional level of distribution.” Figure 1 below illustrates the relationship between com­peting purchasers to establish secondary-line injury.

Figure 1: “Competing Purchasers” in Secondary-Line Injury Case

Any evidence that the plaintiff dealer competes with Amazon to resell to the same customers would help satisfy this element. For an online fitness products e-retailer, for example, testimony from its customers that they compare the prices of protein powder products on its platform and Amazon would help. An e-retailer could leverage its web analytics to show that customers who browse and purchase protein powder products on its platform share similar demographic features as shoppers of those prod­ucts on Amazon. Such proxy measures could show that the e-retailer shares a significant overlapping customer base with Amazon to satisfy this ele­ment.

A brick-and-mortar retailer could similarly offer evidence that custom­ers who visit the establishment in-person also routinely browse the Amazon app or website on their mobile devices to compare prices. Even if a phys­ical store is constrained to operating in a specific geographic market, plain­tiffs should have little difficulty in arguing that Amazon, with its national presence, is also accessible to local customers. In Furniture Royal, Inc. v. Schnadig Int’l Corp., the district court case in Nevada, a brick-and-mortar furniture store called Furniture Royal sued the furniture manufacturer Schnadig under the RPA, arguing that Schnadig engaged in discrimina­tory pricing. Furniture Royal had been selling Schnadig’s furniture since 2010. Then, in 2016, Schnadig entered into an agreement with Wayfair to sell its furniture directly to consumers on Wayfair’s customers. Schnadig sold its furniture on Wayfair.com at below retail prices—up to 40% off in some cases. Furniture Royal argued that the below-retail prices on Wayfair rendered the brick-and-mortar store an “Exhibit Room” where consumers could see the furniture in-person and then purchase off of Wayfair. The district court held against the plaintiff in this case where the manufacturer was selling directly to an “end-use consumer” rather than a “competing purchaser.” The court observed that, “[a]lthough consumers use these websites to purchase furniture, Wayfair does not maintain any tangible inventory . . . . Instead, Schnadig sends its products directly to the consumers, which renders the websites as advertising plat­forms.” The court thus refused to accept Wayfair as a retailer of Schnadig’s furniture in this context, where Schnadig, as a third-party seller on Wayfair’s platform, controlled the retail price of the furniture. In other words, the steep discount for the furniture on Wayfair’s website was not attributed to Wayfair’s purchasing power but rather to Schnadig’s abil­ity to disintermediate middlemen and thereby charge below retail prices without sacrificing its margins.

The court’s discussion here highlights the importance of challenging a powerful e-commerce platform’s conduct via its pricing strategy as a first-party seller, rather than through the pricing strategy of its third-party sellers. In the latter scenario, the court would likely find that the RPA is inapplicable because the wholesaler price discriminates between retailers and ultimate consumers, and “retailers are not in competition with end-use consumers.” Similar to Wayfair, Amazon may not qualify as a small retailer’s “competing purchaser” in the context of a third-party seller transaction.

On the flip side, a small retailer would have a credible claim that Amazon Retail is a competing purchaser where Amazon is not merely an “advertising platform” but a purchaser of a supplier’s goods that resells the good at retail prices of its choice. This argument is supported by the fact that Amazon, as part of Amazon Vendor Central, does maintain a tangible inventory and pay negotiated wholesale prices. By showing that Amazon is a reseller targeting the same end consumers as a smaller dealer (which is not in dispute in Furniture Local), a plaintiff may have a much higher probability of meeting the “competing purchaser” requirement.

2. “Prolonged and Substantial” Price Differential. — Under the Morton Salt doctrine, “injury to competition” may be presumed if a favored competitor received “prolonged and substantially better” pricing. Fleeting or de minimis price discrimination, by contrast, is insufficient to show injury. A plaintiff should try first to establish competitive injury under the plain­tiff-friendly Morton Salt inference, given that the plaintiff would otherwise have to engage in a detailed market analysis proving how a seller’s price discrimination injured competition.

Here, a smaller retailer plaintiff could establish the Morton Salt infer­ence with proof that that Amazon persistently receives a steeper discount from the wholesaler. Given that there are no clear guidelines as to what magnitude qualifies as “substantial” and what length of time qualifies as sufficiently “prolonged,” the best way to establish the inference would be to amass sales transactions where the retailer and Amazon were com­peting head-to-head. As illustrated in Figure 2, proving a price differential at the wholesale level—showing, for instance, that the plaintiff was charged $2.00 per unit for the same protein powder for which Amazon was charged $1.50 per unit (25% discount)—is key. The RPA theoretically applies whether or not that differential was passed on to end-use consumers at the retail level.

Figure 2: Differential Pricing Among Competing Purchasers

For the purpose of comparing prices to show discrimination, there must have been actual sales, not prospective bids or terminated sales that were reasonably contemporaneous based on the time of contracting (sim­ilar to the “commodities of same grade and quality” requirement). This is to account for the fact that prices of a good are subject to change over time. Here, the plaintiff could monitor retail prices and, to the extent pos­sible, wholesale prices for reasonably contemporaneous sales of that prod­uct to show a prolonged and substantial price differential.

Given that the wholesale prices that Amazon negotiates with vendors are not public information, and discovery is unavailable at early stages of litigation, a potential plaintiff may have to rely on the magnitude of the retail price differential and insider testimony from the wholesaler. Plaintiffs would also need to engage economic experts at early stages of the litigation to establish the Morton Salt presumption. Estimating the price differential between the wholesaler’s price charged to favored versus disfavored buyers requires significant statistical analysis beyond the exper­tise of lawyers. While expert testimony costs are generally unavoidable, es­tablishing the Morton Salt presumption would incur lower expert witness costs for the plaintiff than undertaking a thorough detailed market analy­sis of injury to competition or consumer harm.

3. Diversion of Sales or Profits From a Disfavored Purchaser to a Favored Purchaser. — A plaintiff seeking damages for an RPA violation has a higher burden of showing “antitrust injury” under section 4 of the Clayton Act, which the Supreme Court has defined as lost profits or sales to the plaintiff caused by price discrimination. To show lost profits from price discrimi­nation, the plaintiff has to (1) establish the price it would have paid but for the price discrimination, then (2) show that, as a disfavored buyer that was charged a higher price, it lost business to the defendant. The de­fendant, meanwhile, would try to break the causal connection between the price differential and the plaintiff’s lost sales or profits.

Estimating a “but-for” price under hypothetical circumstances neces­sarily requires fact-intensive economic analysis. Here, a plaintiff would ar­gue that the plaintiff and Amazon are close competitors that have a high cross-elasticity of demand. The higher the cross-elasticity, the more the retail prices of the favored buyer (Amazon) would impact the sales or prof­its of the disfavored buyer (small retailer). A plaintiff would stress that because consumers can access Amazon from any smartphone, they incur low costs switching between Amazon and a competing physical or online store.

A plaintiff need not produce one single price estimate to establish a reasonable “but-for price.” The Ninth Circuit’s decision in Hasbrouck v. Texaco, Inc., suggests that presenting several possible “but-for” price esti­mates is sufficient. The plaintiffs in Hasbrouck commissioned an expert witness who made six economic projections of possible but-for prices. The Ninth Circuit held that, where the “various projections . . . permit[] the jury to compare estimates of damages in different market situations, allow­ing them to determine what [the plaintiff’s] sales and profits would have been in the absence of price discrimination,” the projections can properly be included in evidence. In response, Amazon might try to ar­gue that the plaintiff has the burden to establish the “but-for” price with a high degree of certainty, especially where the plaintiff may have reasons for its underperformance even in the absence of price discounts to Amazon. But to raise the likelihood of success, the plaintiffs could put forth through multiple economic projections that they suffered lost profits due to the Amazon-induced seller price discrimination.

4. Seller or Favored Buyer’s Market Power. — Courts have started limiting the Morton Salt inference to situations in which either the buyer or the seller has market power. As Judge Posner noted in his opinion in In re Brand Name Prescription Drugs, the ability of a company to price discrimi­nate between its dealers implies some market power. A showing of the favored dealer’s buying power is not required, but Justice Ginsburg in Volvo made clear that Congress was most concerned with buyer-induced price discrimination by large chain stores.

Here, a small retailer plaintiff would have a convincing claim that Amazon has great buying power and that the wholesaler also has selling power, albeit to a lesser extent. During June 2021, Amazon.com had over 2.7 billion desktop and mobile visits, making it the most visited e-com­merce platform in the United States by a huge margin. Amazon now has more than 200 million Amazon Prime members worldwide. Amazon could easily leverage the incentive (or threat) of gaining (or losing) access to its massive traffic to negotiate lower wholesale prices for Amazon. Be­cause Amazon allows vendors to join Amazon Vendor Central by invite only, the wholesalers on Vendor  Central  likely  have  a  reputable  brand  or  prior  history  of  success  on Amazon. Amazon could hone in on this factor to argue that its wholesalers often do have negotiating power at the table. But the loss of Amazon as a retailer would arguably injure a wholesaler more than the loss of any given wholesaler would injure Amazon. Once a plaintiff establishes Amazon’s market power, it could more easily claim that Amazon had the ability to extract lower prices from wholesalers—that is, prices below what wholesalers would usually be willing to charge or could afford to charge other retailers.

5. Consumer Harm. — As Part I notes, the Volvo Court did not adopt a consumer harm requirement to find RPA liability. In theory, a plaintiff need not show that a price discrimination scheme increased prices to the end-use consumer. But Justice Ginsburg’s dictum that “interbrand com­petition” is still the primary goal of antitrust laws will likely animate de­fendants to argue that the defendant’s conduct enhances interbrand competition. A plaintiff should therefore still be prepared to counter ques­tions about the price discrimination’s effect on consumer welfare to bol­ster its RPA claim.

Here, while Amazon could provide consumers with lower prices in the short run, the plaintiff will argue that Amazon-induced wholesaler price discrimination takes business and profits from independent sellers, reduc­ing their number and vigor. Eliminating smaller establishments would eventually deprive consumers of the convenient locations, distinctive ser­vices, superior selection, and other attractive features that the independ­ent dealers would have offered. If consumers who value those features lose more than other consumers gain from the lower prices (or other en­hanced offerings) offered by Amazon, the non-cost-justified discrimina­tion would reduce consumer welfare. For a greater chance of success, a plaintiff or enforcement agency could argue on both legal and economic grounds that applying the RPA to Amazon’s pricing practices would not only comport with the Act’s legislative intent, but also further the goals of competition.

C. Defenses

In reality, plaintiffs often fail on the competitive injury element, given that a defendant can overcome the Morton Salt inference by raising two powerful affirmative defenses: (1) that the price difference was justified by different costs in manufacture, sale, or delivery (the “cost-justification” de­fense); or (2) that the price difference was a concession given in good faith to meet a competitor’s price (the “meeting-competition” defense).

1. Cost-Justification Defense. — To make the cost-justification defense, the defendants must prove that the price differential is justified by cost differences arising from differing methods or quantities in which the com­modities are sold or delivered. Cost differences may arise from differ­ences in manufacturing, freight and delivery, methods of sale, and legal compliance. This defense, embedded in the text of the RPA, was Congress’s attempt to promote legitimate cost efficiencies attributable to scale, while taking the antimonopolist stance that larger buyers should not receive more favorable pricing merely because of their market power.

Here, the wholesaler defendant must show that its price concessions to Amazon match the actual cost differences between the method of deliv­ery or sale offered by Amazon and the methods offered by other retailers. That is, the wholesaler (e.g., Optimum Nutrition) would have to show that its cost savings by going with Amazon explains the difference between what it charges Amazon for its protein powder and what it charges a smaller retailer. Such savings would be calculated on the basis of the costs avoided by the wholesaler in shipping and selling to Amazon, not the costs in­curred by Amazon in providing delivery and other additional services. The wholesaler may argue that it avoids higher delivery costs by delivering through Amazon’s unparalleled distribution network.

Merely asserting saved costs without supporting evidence, however, would not suffice. For instance, the Seventh Circuit in Mueller Co. v. FTC rejected the seller’s argument that the favored buyer reduced inventory costs by warehousing the seller’s products, as the favored buyer also re­ceived the discount on transactions when not performing the warehousing function for the seller. This means that the seller and Amazon would have to substantiate the asserted link between the seller’s cost savings and the discounts awarded to Amazon. The court would query which group of consumers the seller (like Optimum Nutrition) meant to target and what expenses the seller ended up saving to target those customers by go­ing with Amazon. Connecting the associated cost savings to the discounts is an undertaking that would require economic experts. The success of this defense would ultimately hinge on how the wholesaler categorizes its cus­tomers and attributes cost savings to those particular groups. The plaintiffs would want to critically examine and identify any issues with the method­ology used by Amazon to draw the connection between cost savings to tar­geted groups of consumers. For instance, if Amazon uses a method that does not fully disaggregate its profits from cloud computing division Amazon Web Services (AWS) or other services that do not directly provide a cost saving to retail wholesalers, the courts may find the link insuffi­cient to establish Amazon’s RPA cost-justification defense.

2. Meeting Competition Defense. The wholesaler defendant could also raise the “meeting-competition” defense by showing that the wholesaler lowered prices in “good faith” to meet—but not beat—the lower price of a competitor offered to the same customer. Notably, it is insufficient to merely have vague claims to lower prices to prevent “lost sales.” A whole­saler discriminating in favor of one customer must show that it is offering this lower price to prevent losing that sale to a specifically identified com­petitor. The wholesaler like Optimum Nutrition may argue that identi­fied protein powder sellers began to sell at lower prices on the Amazon marketplace and, as a result, it had to take Amazon’s request for reduced wholesale prices in order to stay competitive. (Note that this is logically consistent with the reasoning under the “competing purchaser” require­ment, in which Amazon Retail is a competitor of the plaintiff retailer.) To determine whether Optimum Nutrition’s conduct was indeed in “good faith,” a reviewing court would consider whether it (1) received reports of similar discounts from customers; (2) was threatened with termination of purchases if the discount was not met; (3) made efforts to corroborate the reported discount; and (4) had past experiences with the buyer. In this instance, third-party sellers of protein products on Amazon would indeed be “competitors” of Optimum Nutrition. Given the aggressive price cut­ting by foreign suppliers and arbitragers on the Amazon Marketplace and the transparency of those prices, wholesalers like Optimum Nutrition may have a high chance of establishing this defense. Amazon could also piggy­back off of the wholesaler defendant’s “meeting competition” defense and argue that the wholesaler was responding to its competitors rather than Amazon’s heavy-handed demand for a discount. Thus, both the wholesaler defendant and Amazon could rely on this argument.

In response to this defense, a plaintiff could stress the fact that the other wholesalers selling on Amazon (i.e., competitors of Optimum Nutri­tion) are similarly being squeezed to give lower wholesale prices. While this reasoning would not wholly negate the meeting competition defense, it would shift the focus from the competition among protein powder sellers to Amazon’s overwhelming market power as a distribution channel for protein powders. The plaintiff would argue that the latter is the bigger driver of the price differential between protein powder wholesale prices charged to Amazon versus the small retailer plaintiff.

In sum, the meeting competition defense would likely be the toughest hurdle for the plaintiff to overcome. The fact that many wholesalers com­pete on the Amazon marketplace platform would work to Amazon’s ad­vantage. But this fact could be leveraged to highlight the monopoly power that Amazon possesses, which enables it to induce price discrimination by wholesalers that is barred under the RPA.

Conclusion

This exercise of applying the RPA to Amazon attempts to show how plaintiffs and government agencies could bring a secondary-line case against the giant e-retailer. Given that the e‑retailer still retains the tradi­tional wholesaler-distributor model as a part of its business, building a prima facie RPA case would not be difficult. A seller on Amazon, however, would have strong affirmative defenses, given its legitimate size-based effi­ciencies and competitive pressures from third-party sellers on its own mar­ketplace platform. This exercise thus demonstrates that the RPA is an available tool for antitrust enforcers, albeit blunted with the heightened evidentiary standards for finding competitive injury and strong affirmative defenses available.

Today, public recognition of Big Tech’s dominance in various markets has fueled momentum for stronger antitrust enforcement, even beyond the RPA and other existing antitrust laws. By the end of 2020, various U.S. federal agencies and state attorneys general had launched antitrust inves­tigations against Apple, Amazon, Facebook, and Google. The Biden Administration signaled willingness to prosecute antitrust violations more aggressively by appointing Lina Khan, a progressive antitrust scholar, as FTC chair. By July 2021, six bills related to antitrust reform were intro­duced on the floor of House of Representatives, aimed at restraining Big Tech. The proposals could make it much harder for companies like Amazon to use their dominance in one market to promote their products in another market or acquire nascent rivals. The proposals would also empower enforcers to more easily break up businesses that engage in an­ticompetitive behavior.

If this momentum does bring about any reform in the coming years, the history of the rise and fall of the RPA imparts important lessons. First, the RPA provides an example of existing antitrust law that does not neces­sarily conform to the consumer-welfare standard. Promoting efficiency and lower prices for consumers is not the focal point of the RPA, which has made economists and Chicago School antitrust lawyers wary of its ap­propriateness. But if Congress is intentional and vocal about the new antitrust laws considering factors other than price efficiency, nothing stops Congress from doing so. It has done it before.

Second, even if Congress passes new antitrust laws, courts may be slow to adopt change without simplified guiding principles to complement the legislative reform. What diluted the RPA’s potency was not only enforcers’ lack of willingness to enforce the Act but also the broad trend in the field of antitrust toward economics-driven calculations to prove injury. Statis­ti­cal analyses that rely on a myriad of economic assumptions inherently bear the risk of error. The task for judges in RPA and other antitrust cases has become more difficult as the analyses employed have become more tech­nical to meet the evidentiary burden. Parties have become more reli­ant on economic expert witnesses to prove or deny antitrust injury. Unless enforc­ers find ways to simplify the antitrust analysis, courts with lay judges could be mired in painstaking economic analysis that could delay real reform.