Industry Issues - Pay-on-Scan Robinson-Patman Act analysis (Feb. 27, 2003 )

Dear Members:

First, we would like to thank you for all your input regarding the AutoZone "Pay-on-Scan" proposal. The Automotive Aftermarket Suppliers Association (AASA), the aftermarket market segment association of MEMA, will continue to stay on top of the situation and bring you updated, valuable information on the proposal as it becomes available. We strongly encourage you to continue communicating with us and letting your thoughts and ideas be known.

Following one of our previous e-mails, we did receive numerous inquiries regarding the "Robinson-Patman Act" and how that comes into play with POS. Below is a description of the act prepared by our legal counsel, Marc Fleischaker of Arent Fox. We hope it helps clear up this issue.

What is the Robinson-Patman Act?

The Robinson-Patman Act covers sales of like commodities in interstate commerce, and prohibits price discrimination (differences) where the difference is not reflective of differences in costs of serving the two customers, and where the difference may have an impact on competition.

How Does the Act Come Into Play with POS?

In the AutoZone situation, there are several prerequisites to concluding that the Robinson-Patman Act would be implicated by the proposed POS system.

First, the transaction with AutoZone would have to be considered a sale, and not simply a consignment. While it appears to be a consignment, that will not be dispositive. Issues such as the risk of loss, warranty, freight, etc. will have to be evaluated to determine if it would be considered a sale.

Second, if the POS activity is considered to be a sale, the question of whether it results in a price difference would have to be evaluated. If it did not, the issue could be considered under different sections of the Robinson-Patman Act involving "promotional allowances." There could still be a violation (even without a competitive impact in this case), but the remedies would be very different, and the manufacturer could avoid a problem by making the POS alternative available to others, assuming they have the ability to use it. If they did not, then alternatives would be mandatory.

Third, the extent of the discrimination would have to be significant enough to give AutoZone a significant marketplace advantage, so that there could be postulated a competitive impact. Whether this would occur is not yet clear.

In other words, there are potential Robinson-Patman Act questions, but they require analysis in the context of the specific company, and the specific deal. The Robinson-Patman Act is complicated. AutoZone competitors who felt that they were being disadvantaged by the new system, and not receiving comparable treatment, would have the right to bring suit and recover treble damages if successful.

We hope this explanation helps. If you would like to comment on this e-mail or any POS topic, please send an e-mail to pfoley@mema.org.