Competitive Injury and Damages Under the Robinson-Patman Act

Abstract

When a competitor, who sells a homogeneous product in the same market, receives a wholesale cost advantage from a manufacturer, economists should expect some competitive injury absent extraordinary circumstances. Competitive injury refers to a disruption of the competitive process, that is, a reduction in competition in the marketplace where the manufacturer’s customers compete. A plaintiff may show competitive injury directly through lost sales or profits, or competitive injury may be inferred through the “Morton Salt” presumption, from FTC v. Morton Salt Co., 334 U.S. 37 (1948). Once competitive injury is established, a plaintiff can quantify the extent of the competitive injury by measuring the impact of the price discrimination on its profits in order to compute damages. Statistical and econometric evidence often play a large role in damages calculations and, to a lesser extent, the establishment of competitive injury. We present a case study in the gasoline fuel market, where competitors engage in a high degree of price-matching and intense competition. We discuss the computational challenges and our solutions to them. In addition, we discuss the implications of this case study for future Robinson-Patman cases.