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Seventh Circuit Hears Argument in Clorox Appeal

Yesterday, the Seventh Circuit heard argument in the Woodman’s Food Market v. Clorox Co. appeal.  As members of our team have previously reported (click here and here to read more), this case concerns whether a plaintiff can state a claim under Section 2(e) of the Robinson Patman Act based on the size of the package offered for sale.

In Woodman’s, a retail grocery store brought suit after Clorox stopped offering the plaintiff its large-pack products, including food storage bags, kitty litter, lighter fluid, bleach, and salad dressing.  Clorox, however, continued to offer these large-pack goods to club stores such as Costco.  The plaintiff brought claims under Section 2(e) of the Robinson Patman Act, which prohibits sellers from furnishing services or facilities to promote the resale of their products, unless those services or facilities are offered to all customers on proportionally equal terms.  The lower court had denied Clorox’s motion to dismiss largely because the only cases on point—decades-old FTC administrative decisions— suggested that promotional services under Section 2(e) could include package sizes.

Things got interesting on appeal when the FTC filed an amicus brief and argued that its prior “decisions contradict modern antitrust doctrine and should no longer be followed.”  According to the FTC, Section 2(e) only prohibits discrimination in “genuinely promotional services or facilities distinct from the product itself.”  Clorox’s large-pack products did not violate this “narrow prohibition.”

Comments made by members of the panel during argument suggest that they are siding with Clorox and the FTC’s views on the scope of Section 2(e).  For example, at least one member of the panel seemed concerned as to whether package size qualifies as “furnishing services or facilities” under the plain language of Section 2(e).  If package size does qualify, wouldn’t there be a per se rule against all differences in packaging?  Other panel members noted that the plaintiff’s case, as pleaded in its complaint, is about price—which means that plaintiff’s claims should have been raised under Section 2(a) of the Robinson Patman Act.

We will report back when the Seventh Circuit issues its decision.