Syllabus

TEXACO INC. v. HASBROUCK, DBA RICK'S TEXACO,

ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

No. 87-2048. Argued December 5, 1989-Decided June 14, 1990 Between 1972 and 1981, petitioner Texaco sold gasoline at its retail tank wagon prices to respondent independent Texaco retailers but granted substantial discounts to distributors Gull and Dompier. Gull resold the gas under its own name; the fact that it was being supplied by Texaco was unknown to respondents. Dompier paid a higher price than Gull and supplied its gas under the Texaco brand name to retail stations. With the encouragement of Texaco, Dompier entered the retail market directly. Both distributors picked up gas at the Texaco plant and delivered it directly to their retail outlets, and neither maintained any significant storage facilities. Unlike Gull, Dompier received an additional discount from Texaco for the deliveries. Texaco executives were well aware of Dompier's dramatic growth and attributed it to the magnitude of the discounts. During the relevant period, the stations supplied by the distributors increased their sales volume dramatically, while respondents' sales suffered a corresponding decline. In 1976, respondents filed suit against Texaco under the Robinson-Patman Act amendment to the Clayton Act (Act), alleging that the distributor discounts violated § 2(a) of the Act, which, among other things, forbids any person to "discriminate in price" between different purchasers of commodities, where the effect of such discrimination is substantially to "injure tition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them." The jury awarded respondents actual damages. The District Court denied Texaco's motion for judgment notwithstanding the verdict. Texaco had claimed that, as a matter of law, its "functional discounts"-i. e., discounts that are given to a purchaser based on its role in the supplier's distributive system and reflect, at least in a generalized sense, the services performed by the purchaser for the supplier-did not adversely affect competition within the meaning of the Act. The District Court rejected Texaco's argument, reasoning that the "presumed legality of functional discounts" had been rebutted by evidence that the amount of Gull's and Dompier's discounts was not reasonably related to the cost of any function they performed. The Court of Appeals affirmed.

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Syllabus

496 U. S.

Held:

1. Respondents have satisfied their burden of proving that Texaco violated the Act. Pp. 554-571.

(a) Texaco's argument that it did not “discriminate in price" within the meaning of § 2(a) by charging different prices is rejected in light of this Court's holding in FTC v. Anheuser-Busch, Inc., 363 U. S. 536, 549, that "a price discrimination within the meaning of [§ 2(a)] is merely a price difference." Texaco's argument, which would create a blanket exemption for all functional discounts, has some support in the legislative history of the Act, but is foreclosed by the text of the Act itself, which plainly reveals a concern with competitive consequences at different levels of distribution and carefully defines two specific affirmative defenses that are unavailable. Pp. 556-559.

(b) Also rejected is Texaco's argument that, at least to the extent that Gull and Dompier acted as wholesalers, the price differentials did not "injure . . . competition" within the meaning of the Act. It is true that a legitimate functional discount that constitutes a reasonable reimbursement for the purchasers' actual marketing functions does not violate the Act. Thus, such a discount raises no inference of injury to competition under FTC v. Morton Salt Co., 334 U. S. 37, 46-47. However, the Act does not tolerate a functional discount that is completely untethered either to the supplier's savings or the wholesaler's costs. This conclusion is consistent with Federal Trade Commission (FTC) practice, with Perkins v. Standard Oil Co. of Cal., 395 U. S. 642, and with the analysis of antitrust commentators. The record here adequately supports the finding that Texaco violated the Act. There was an extraordinary absence of evidence to connect Gull's and Dompier's discounts to any savings enjoyed by Texaco. Both Gull and Dompier received the full discount on all purchases even though most of their volume was resold directly to consumers, and the extra margin on those sales obviously enabled them to price aggressively in both their retail and wholesale marketing. The Morton Salt presumption of adverse effect becomes all the more appropriate to the extent they competed with respondents in the retail market. Furthermore, the evidence indicates that Texaco was encouraging Dompier to integrate downward and was fully informed about the dramatic impact of the Dompier discount on the retail market at the same time that Texaco was inhibiting upward integration by respondents. Pp. 559-571.

2. There is no merit to Texaco's contention that the damages award must be judged excessive as a matter of law. Texaco's theory improperly blurs the distinction between the liability and damages issues. There is no doubt that respondents' proof of a continuing violation as to the discounts to both distributors throughout the 9-year damages period

was sufficient. Proof of the specific amount of their damages necessarily was less precise, but the expert testimony provided a sufficient basis for an acceptable estimate of the amount of damages. Cf., e. g., J. Truett Payne Co. v. Chrysler Motors Corp., 451 U. S. 557, 565–566. Pp. 571-573.

842 F. 2d 1034, affirmed.

STEVENS, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and BRENNAN, MARSHALL, BLACKMUN, and O'CONNOR, JJ., joined. WHITE, J., filed an opinion concurring in the result, post, p. 573. SCALIA, J., filed an opinion concurring in the judgment, in which KENNEDY, J., joined, post, p. 576.

Peter M. Fishbein argued the cause for petitioner. On the briefs were Milton J. Schubin, Joshua F. Greenberg, Michael Malina, Joseph P. Foley, and Wm. Fremming Nielsen.

Michael R. Dreeben argued the cause for the United States et al. as amici curiae urging reversal. With him on the briefs were Solicitor General Starr, Acting Assistant Attorney General Whalley, Deputy Solicitor General Merrill, Catherine G. O'Sullivan, and Kevin J. Arquit.

Robert H. Whaley argued the cause for respondents. With him on the brief were John S. Ebel and Lucinda S. Whaley.*

*Briefs of amici curiae urging reversal were filed for the American Petroleum Institute et al. by Edwin M. Zimmerman, G. William Frick, Jan S. Amundson, and Quentin Riegel; for the Motor and Equipment Manufacturers Association by Lawrence F. Henneberger and Marc L. Fleischaker; for the Motor Vehicle Manufacturers Association of the United States, Inc., by Irving Scher and William H. Crabtree; for the National Association of Texaco Wholesalers by Gregg R. Potvin and William L. Taylor; for the National Association of Wholesaler-Distributors by Louis R. Marchese and Neil J. Kuenn; and for the Petroleum Marketers Association of America by Robert S. Bassman, Douglas B. Mitchell, and Alphonse M. Alfano. Briefs of amici curiae urging affirmance were filed for the State of Connecticut et al. by Clarine Nardi Riddle, Acting Attorney General of Connecticut, and Robert M. Langer and William M. Rubenstein, Assistant Attorneys General, Don Siegelman, Attorney General of Alabama, Douglas B. Baily, Attorney General of Alaska, and Richard D. Monkman, Assistant Attorney General, John Steven Clark, Attorney General of Ar

JUSTICE STEVENS delivered the opinion of the Court. Petitioner (Texaco) sold gasoline directly to respondents and several other retailers in Spokane, Washington, at its re

kansas, John K. Van de Kamp, Attorney General of California, Andrea Sheridan Ordin, Chief Assistant Attorney General, Sanford N. Gruskin, Assistant Attorney General, and Lawrence R. Tapper, Deputy Attorney General, Robert A. Butterworth, Attorney General of Florida, Warren Price III, Attorney General of Hawaii, Jim Jones, Attorney General of Idaho, and Catherine K. Broad, Deputy Attorney General, Neil F. Hartigan, Attorney General of Illinois, Robert Ruiz, Solicitor General, and John W. McCaffrey, Senior Assistant Attorney General, Linley E. Pearson, Attorney General of Indiana, and Frank A. Baldwin, Deputy Attorney General, Thomas J. Miller, Attorney General of Iowa, and John R. Perkins, Deputy Attorney General, Robert T. Stephan, Attorney General of Kansas, Frederic J. Cowan, Attorney General of Kentucky, and James M. Ringo, Assistant Attorney General, William J. Guste, Jr., Attorney General of Louisiana, and Anne F. Benoit, Assistant Attorney General, James E. Tierney, Attorney General of Maine, and Stephen L. Wessler, Deputy Attorney General, J. Joseph Curran, Jr., Attorney General of Maryland, and Michael F. Brockmeyer and R. Hartman Roemer, Assistant Attorneys General, James M. Shannon, Attorney General of Massachusetts, and George K. Weber, Malcolm L. Russell-Einhorn, and Thomas M. Alpert, Assistant Attorneys General, Frank J. Kelley, Attorney General of Michigan, William L. Webster, Attorney General of Missouri, and Clayton S. Friedman, Assistant Attorney General, Marc Racicot, Attorney General of Montana, Brian McKay, Attorney General of Nevada, and J. Kenneth Creighton, Deputy Attorney General, John P. Arnold, Attorney General of New Hampshire, and Terry Robertson, Senior Assistant Attorney General, Lacy H. Thornburg, Attorney General of North Carolina, James C. Gulick, Special Deputy Attorney General, and K. D. Sturgis, Assistant Attorney General, Nicholas J. Spaeth, Attorney General of North Dakota, and David W. Huey, Assistant Attorney General, Anthony J. Celebrezze, Jr., Attorney General of Ohio, Dave Frohnmayer, Attorney General of Oregon, Ernest D. Preate, Jr., Attorney General of Pennsylvania, Eugene F. Waye, Chief Deputy Attorney General, and Carl S. Hisiro, Senior Deputy Attorney General, James E. O'Neil, Attorney General of Rhode Island, and Robyn Y. Davis, Assistant Attorney General, Roger A. Tellinghuisen, Attorney General of South Dakota, and Jeffrey P. Hallem, Assistant Attorney General, Charles W. Burson, Attorney General of Tennessee, and Perry Allan Craft, Deputy Attorney General, Jim Mattox, Attorney General of Texas, Mary F. Keller, First Assistant Attorney Gen

tail tank wagon (RTW) prices while it granted substantial discounts to two distributors. During the period between 1972 and 1981, the stations supplied by the two distributors increased their sales volume dramatically, while respondents' sales suffered a corresponding decline. Respondents filed an action against Texaco under the Robinson-Patman Act amendment to the Clayton Act (Act), 38 Stat. 730, as amended, 49 Stat. 1526, 15 U. S. C. § 13, alleging that the distributor discounts violated §2(a) of the Act, 15 U. S. C. § 13(a). Respondents recovered treble damages, and the Court of Appeals for the Ninth Circuit affirmed the judgment. 842 F. 2d 1034 (1988). We granted certiorari, 490 U. S. 1105 (1989), to consider Texaco's contention that legitimate functional discounts do not violate the Act because a seller is not responsible for its customers' independent resale pricing decisions. While we agree with the basic thrust of Texaco's argument, we conclude that in this case it is foreclosed by the facts of record.

I

Given the jury's general verdict in favor of respondents, disputed questions of fact have been resolved in their favor. There seems, moreover, to be no serious doubt about the character of the market, Texaco's pricing practices, or the relative importance of Texaco's direct sales to retailers eral, Lou McCreary, Executive Assistant Attorney General, and Allene D. Evans and Donna L. Nelson, Assistant Attorneys General, Paul Van Dam, Attorney General of Utah, and Arthur M. Strong, Assistant Attorney General, Jeffrey L. Amestoy, Attorney General of Vermont, Kenneth O. Eikenberry, Attorney General of Washington, and James M. Beaulaurier, Assistant Attorney General, and Joseph B. Meyer, Attorney General of Wyoming, and Hugh Kenny, Assistant Attorney General; for the National Coalition of Petroleum Retailers by Jerry S. Cohen; and for the Service Station Dealers of America by Dimitri G. Daskalopoulos.

Briefs of amici curiae were filed for Boise Cascade Corp. by Victor E. Grimm and Scott M. Mendel; and for the Society of Independent Gasoline Marketers of America et al. by William W. Scott and Christopher J. MacAvoy.