a. Did Chrysler treat Payne differently from other dealers?
b. Is it illegal for Chrysler to charge customers different prices?
c. What does that mean?
d. How do you show lower costs and lost profits?
e. What did Payne propose as an alternative calculation?
f. What is the difference between the Supreme Court's definition and Payne's?
Under the Robinson-Patman Act, it is illegal to charge different prices to different purchasers if:
• The items are the same, and
• The price discrimination lessens competition.
However, it is legal to charge a lower price to a particular buyer if:
• The costs of serving this buyer are lower, or
• The seller is simply meeting competition.
In the J. Truett Payne case, Chrysler Motors charged Payne more than other dealers in the Birmingham, Alabama area. Unable to compete, Payne went out of business. The accepted formula for determining damages in a Robinson-Patman Act case had been the difference between the two prices times the number of units purchased. These numbers were easy to calculate. However, in Payne, the Supreme Court held that it is not enough to prove that competitors are able to buy at a lower cost. The plaintiff must also show that these competitors passed their savings on to customers and, as a result, plaintiff lost profits. These are difficult facts to prove and have raised the bar for price discrimination cases.