warehouse on an ad hoc, spot-market basis as its needs dictated. None of the goods it purchased physically crossed a state line between their shipment by Unisource and their receipt by Precision. Except for the few truckload purchases Precision made, which it neither identifies in the record nor relies upon in its price comparisons, all of Unisource's sales to Precision retained their intrastate character.
Unisource's sales to Precision's competitors stand on a somewhat different footing. Those customers commonly purchased by the truckload or through the JIT program, whether from Unisource or Rollsource. Truckload sales were shipped from outside Pennsylvania and thus directly satisfy the commerce requirement. And in order to participate in the JIT program, purchasers had to commit to certain tonnage requirements in advance. Accordingly, all of Unisource's purchases from the various paper manufacturers to supply its JIT requirements were made to meet "the anticipated needs of specific customers," Murphy, 674 F.2d at 1116. As to these sales, the stream of commerce was not broken and the commerce requirement was accordingly met. To recapitulate, all of the competitors truckload and JIT sales remained in commerce.
C. Price Discrimination
1. Legal Standard
For any claim asserted under § 2(a) of the Robinson-Patman Act to succeed, the plaintiff must adduce evidence of an actual instance of price discrimination. This requirement is straightforward: under the Act, "price discrimination means nothing more than a difference in price charged to different purchasers or customers of the discriminating seller for products of like grade or quality." Stelwagon Mfg. Co. v. Tarmac Roofing Sys., Inc., 63 F.3d 1267, 1271 (3d Cir. 1995) (citing cases); accord Texaco, Inc. v. Hasbrouck, 496 U.S. 543, 559, 110 L. Ed. 2d 492, 110 S. Ct. 2535 (1990) ("price discrimination within the meaning of § 2(a) is merely a price difference"). The different prices, however, must have been charged at reasonably contemporaneous times. See Zwicker v. J.I. Case Co., 596 F.2d 305, 309 (8th Cir. 1979); Atalanta Trading Corp. v. FTC, 258 F.2d 365, 371-72 (2d Cir. 1958) (§ 2(d) case).
2. Facially Disparate Prices
There is no question that Unisource made sales to two or more different purchasers, or that the products sold were of like grade and quality. Precision, Thornhill and BFI all purchased standard grades of roll paper from Unisource. Nor can it be seriously contended that the sales were not reasonably contemporaneous; indeed, the record indicates that at least one pair of sales took place on the same day. Dkt. no. 25, at 243-44.
The record also indicates that the same product was sold at facially different prices. On February 8, 1994, for example, Precision purchased 12 pound white forms bond and 15 pound white forms bond paper from Unisource (Copco), priced at $ 57.00 and $ 50.50 per hundredweight, respectively. That same day, BFI purchased the same two types of paper from Rollsource at $ 46.00 and $ 38.00, respectively. Id.
Precision also relies on certain invoices, see dkt. no. 25, at 220-23, which most likely document an April 1992 warehouse sale because less than a full truckload of paper was shipped, although it could have been a JIT less-than-truckload sale. If it was only a warehouse sale, then it retained its intrastate character and was not actionable. It is not clear from this record, at least as argued by the parties, whether this, or any, Unisource invoice constituted a discriminatory, "in commerce" sale to a Precision Printing competitor. If there is, then a facial instance of price discrimination exists there as well. In either event, however, Precision has adduced sufficient evidence of at least one price difference on an "in commerce" (Rollsource) transaction.
3. Sales by Rollsource
For its part, Unisource argues that any sales made by Rollsource must be excluded as a matter of law from the price discrimination analysis. It contends that Rollsource is a separate, independently managed subsidiary and therefore its sales to Precision's competitors cannot be compared to Unisource's sales to Precision (dkt. no. 21, at 17). According to Unisource, unless the parent (Unisource) actively controls the operations of the subsidiary (Rollsource), the subsidiary's separate form must be respected.
I cannot accept Unisource's argument. Rollsource is a division, not a subsidiary, of Unisource, as evidenced by Rollsource's price lists (dkt. no. 33, at UW01023), invoices (id. at UW00561) and Unisource's own admissions in its reply brief (dkt. no. 38, at 8). Thus, there is no separate corporate form to "respect."
Even if Rollsource were a subsidiary, it is questionable whether the Third Circuit would follow the principal case that Unisource relies upon, Acme Refrigeration, Inc. v. Whirlpool Corp., 785 F.2d 1240, 1243 (5th Cir. 1986). The Acme court held that, "in the absence of evidence that [the parent] actively controlled [the subsidiary] or the terms of the latter's sales, we must conclude that they are not the same seller." The court, however, failed to discuss a key Supreme Court case decided two years earlier, Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 81 L. Ed. 2d 628, 104 S. Ct. 2731 (1984). There, in deciding that a subsidiary could not legally be said to conspire with its parent within the meaning of § 1 of the Sherman Act, 15 U.S.C. § 1, the Court opined:
A parent and its wholly owned subsidiary have a complete unity of interest. . . . With or without formal "agreement," the subsidiary acts for the benefit of the parent, its sole shareholder. The parent may assert full control at any moment if the subsidiary fails to act in the parent's best interests. . . . Antitrust liability should not depend on whether a corporate subunit is organized as an unincorporated division or a wholly owned subsidiary. . . . The economic, legal, or other considerations that lead corporate management to choose one structure over the other are not relevant to whether the enterprise's conduct seriously threatens competition.
467 U.S. at 771-72.
This language, although technically dictum in the Robinson-Patman context, was extended to that act in another § 2(a) case, Caribe BMW, Inc. v. BMW, 19 F.3d 745 (1st Cir. 1994). There, the First Circuit faced the issue of whether "a firm's wholly owned subsidiary and the firm itself amount to a 'single seller' under the Robinson-Patman Act[.]" Then-judge Breyer, in a thoroughly reasoned opinion, concluded that they were a single entity for purposes of price discrimination analysis, relying on Copperweld to distinguish earlier contrary authority, including Acme. Id. at 749. The Caribe court also opined that "there does not seem to be any special Robinson-Patman Act purpose that a case-specific 'control' inquiry would further. To the contrary, one would not want a seller to be able to defeat the statute's clear objectives by transforming unlawful, into lawful, price discrimination through the creation of a separately incorporated 'distributor' that sells to the disfavored customers, whether or not the parent retained "control" over the pricing decisions of the subsidiary." Id. at 750.
In the face of this post-Acme caselaw, I believe that the Court of Appeals, as well as the Supreme Court, would find Caribe persuasive. I therefore decline to accept Unisource's argument that even the subsidiary form should be respected in this instance.
4. The Functional Availability Defense
Unisource contends that Precision's Robinson-Patman claim is negated by the "functional availability defense." According to Unisource, Precision had the option to take advantage of the same pricing programs offered to its competitors by participating in direct, JIT or truckload programs, but declined to do so. Thus, Unisource argues, any higher prices that may have been paid by Precision were strictly its own fault and liability cannot attach to Unisource.
The functional availability defense is a judicial graft on § 2(a) and is not explicitly embodied in the text of the statute. ABA Treatise, supra, at 464; Holmes, supra, § 3.04, at 522. Although often referred to as a defense, it really is not a defense at all and is more properly thought of as the functional availability doctrine. As one court described it:
Where a purchaser does not take advantage of a lower price or discount which is functionally available on an equal basis, it has been held that either no price discrimination has occurred, or that the discrimination is not the proximate cause of the injury.
Shreve Equipment, Inc. v. Clay Equipment Corp., 650 F.2d 101, 105 (6th Cir. 1980) (citing cases, including Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105 (3d Cir. 1980)). In Sweeney, the Third Circuit held that "a uniform pricing formula applicable to all customers is not a price discrimination under the act[,]" as long as the favored "price was available, not only in theory but in fact, to all purchasers." 637 F.2d at 120. The Sweeney court thus held that the plaintiff failed to establish that the defendant's pricing discriminated in violation of the Robinson-Patman Act.
b. Plaintiff's knowledge of the existence of defendant's special pricing plans
A discount is not "functionally available" if the plaintiff did not know about it. See Caribe, 19 F.3d at 752. Here, however, the evidence indicates otherwise. Charles Bacu of Precision and Randy Dunkle of Unisource had discussed arrangements under which Precision would commit to specific quantities of paper in exchange for more favorable pricing, although Precision did not know at that time specifically what its competitors were paying or that they had taken advantage of it. Bacu admitted that Dunkle talked to him about truckload sales and the JIT program. Dkt. no. 20, Exh. 6, at 74, 76. And while Unisource never specifically offered him that program or gave him a price list, Precision was enrolled in a similar program at Brown Paper which did result in a lower price. Id. at 76. Thus, Bacu assumed that it would result in a lower price from Unisource as well. Nevertheless, Bacu told Dunkle that Precision could not avail itself of such a program with Unisource because he was having trouble keeping his commitment under Brown's plan and Precision was unable to commit to a set tonnage of paper per month. Id. at 78. The only reasonable inference from this evidence is that Precision knew that these discounts were available, but chose for its own reasons not to take advantage of them.
The same result obtains for truckload sales. Although Precision did occasionally buy a truckload on occasion in the past, its general policy was to buy paper as needed, not to fill up the warehouse. Id. at 60. That simply was not the fault of Unisource, but was a management decision by Precision.
That leaves only the Rollsource sales, as to which the record does indicate the existence of "in commerce" price differences. There, however, Rollsource declined to take Precision as a customer because of its past due credit history, just as it refused to take any customer with substantial past due balances. See dkt. no 33, exh. F at 24. "Section 2(a) is not violated when the credit decisions are based upon legitimate business reasons." Bouldis v. U.S. Suzuki Motor Corp., 711 F.2d 1319, 1325 (6th Cir. 1983) (holding no Robinson-Patman violation when manufacturer refused to extend favorable credit provisions to financially struggling dealer). Here, it was simply not an act of price discrimination to disfavor a buyer with a greater propensity for slow payment and doubtful accounts.
c. Were the favorable prices functionally available to all customers?
The availability doctrine is also limited by the requirement that the favorable prices must be functionally available to all customers. For example, if a manufacturer offers a bargain price on VCRs if the retailer purchases in lots of 100,000 units, that discount is functionally available only to the largest, national chain retailers, not the local, independently owned appliance store. Hence, the discount does not satisfy the requirements of the availability defense. See Federal Trade Comm'n v. Morton Salt Co., 334 U.S. 37, 42-43, 92 L. Ed. 1196, 68 S. Ct. 822 (1948) (availability defense denied where no individual retail grocers ever purchased sufficient quantities of salt to obtain discount pricing). Here, however, by Precision's own admission in its brief, "during the time period of 1990 through 1995, the three companies [Precision, Thornhill and BFI] were of comparable size. All three [were] short to medium run business forms printing companies." Dkt. no. 24, at 5. Thus, Precision was not denied more favorable pricing because of its comparatively smaller size vis-a-vis its competitors, but because of reasons peculiar to Precision Printing itself, specifically its bad credit and inability to commit to purchases in advance.
d. Did a generally available special pricing program exist?
Precision nevertheless argues that the functional availability doctrine cannot be applied on summary judgment because the evidence is controverted as to whether these special pricing programs even existed or their terms were met by those companies receiving the favorable prices. It relies for this contention on the testimony of its competitors personnel, through which it purports to show that the competitors were not aware that they received any special prices, and on the testimony of one of its own employees through which it seeks to establish that BFI and Thornhill were ineligible for JIT pricing.
On Precision's first point, Mr. Drechsler of Thornhill Printing testified that he had no idea what the JIT discount was or meant. Dkt. no. 33, exh. D at 54-55. He also testified that he participated in no special pricing programs with Unisource. Id. at 38. Drechsler also testified that, although he provided lists of paper quantities that Thornhill was committing to purchase in the future, no one at Unisource asked him to do so. See dkt. no. 37, exh. 15, at 38. Nevertheless, while this witness may have suffered a lapse of memory or been ignorant of the pricing program's terms, the price lists on which he was examined during that phase of his testimony clearly referred to "JIT Warehouse Pricing." Dkt. no. 33, exh. J, UW9320-27. No contention is made that the documents were forged or fraudulent. Accordingly, Precision's reliance on Drechsler's ignorance of the program is unavailing.
Moreover, Thornhill normally purchased paper by the truckload, which Precision did not. Id. at 65-66. That in itself, would justify charging Thornhill a lower price, whether the truckloads were part of a JIT plan or not. If those truckloads came out of Unisource's general inventory, then they were not "in commerce," as already discussed. On the other hand, if they were not warehouse sales, they must have been part of a JIT or similar plan. So, either the lower price was not actionable, or it proves the existence of the very plan Precision denies.
The best argument Precision has against applying the functional availability doctrine is that David Howell, a current Rollsource and former Unisource executive, did not name Thornhill and BFI as JIT customers, as evidenced in the following exchange:
Q. So to your knowledge neither BFI nor Thornhill were participating in a JIT prior to Rollsource?