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From Antitrust Law Daily, April 28, 2015

Grocer denied “large pack” products may pursue price discrimination claims against Clorox

By Greg Hammond, J.D.

Woodman’s Food Market, Inc. was entitled to proceed with claims that The Clorox Co. engaged in price discrimination by selling “large pack” products exclusively to “club” retailers like Costco and Sam’s Club, not to “general market” stores like Woodman’s. The federal district court in Madison found that, despite Clorox terminating its relationship with Woodman’s, the grocery chain could still be considered a “customer” and “purchaser” with standing under the Robinson Patman Act, since it still purchases Clorox products from wholesalers (Woodman’s Food Market, Inc. v. The Clorox Co., April 27, 2015, Crocker, S.).

Background. Woodman’s is an employee-owned corporation that operates 15 retail grocery stores in Wisconsin and Illinois. Clorox manufactures and sells a number of consumer and professional products, such as bleach, cat litter, charcoal, cleaning supplies, containers, personal care products, sandwich bags, water filtration products, and wraps.

Although Woodman’s had been a customer of Clorox for many years, Clorox announced in October 2014 that the grocery chain would be reclassified as a “general market retailer” and would be placed in a different “channel” than Sam’s Club and Costco. As a result, Woodman’s no longer could purchase large packs of any Clorox product, which are typically bought and sold at a lower unit cost than smaller packs of the same products. Woodman’s filed suit against Clorox, alleging price discrimination in violation of the Robinson Patman Act.

Following the court’s denial of Clorox’s motion to dismiss in February 2015, Clorox unilaterally ended all business dealings with Woodman’s. Clorox subsequently moved to dismiss again, arguing that Woodman’s complaint was moot, since it was no longer a purchaser of Clorox’s products and could therefore not suffer further alleged discrimination under the Robinson Patman Act.

Robinson Patman Act. Woodman’s opposed the motion to dismiss, arguing that it is still a “purchaser” within the meaning of the Robinson Patman Act because it continues to purchase Clorox products through wholesalers. The court noted the Supreme Court’s decision in FTC v. Fred Meyer, Inc., 390 U.S. 341(1968). In that case, the Supreme Court determined that reading the term “customer” as excluding retailers who buy through wholesalers and compete with direct buyers would frustrate the purpose of Section 2(d) of the Robinson Patman Act.

The court determined that if wholesalers from which Woodman’s now purchases Clorox products are constrained by Clorox’s decision to sell large-size products only to club stores, then the rule announced in Fred Meyer would apply to Woodman’s. Because it is possible that Woodman’s can be considered a “customer” and “purchaser” with standing under the Robinson Patman Act, Clorox’s motion to dismiss was denied. Woodman’s was further granted leave to amend its complaint to add a claim under the Sherman Act.

The case number is 14-cv-734-slc.

Attorneys: John Alan Kassner, III (Von Briesen & Roper, SC) for Woodman's Food Market, Inc. Joshua H. Soven (Gibson Dunn & Crutcher LLP) for The Clorox Co., and The Clorox Sales Co.

Companies: Woodman’s Food Market, Inc.; The Clorox Co.; The Clorox Sales Co.

MainStory: TopStory Antitrust WisconsinNews

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