According to ASA’s Washington, D.C. representative Patrick O’Connor of Kent & O’Connor, “This case could have implications for ASA members (wholesalers and manufacturers), but it is too early to tell. The question in the case is whether a manufacturer can intentionally discriminate in price among distributors, and whether in this case discounts and backend monies are ‘functionally available’ to all wholesalers.”
O’Connor explained that the court granted a preliminary injunction because it found that the plaintiffs established a “likelihood of success” and could ultimately win the case. However, the legal issues remained to be argued before the court.
The issue in the Philip Morris case is whether a manufacturer can provide lower-priced discounts and/or rebates to one group of wholesalers than are provided to competitors. The suit alleges price discrimination in violation of the Robinson-Patman Act and an attempt to monopolize in violation of the Sherman Act.
“The facts in this case are that Philip Morris has established three separate prices for distributors that base price discounts and backend monies on a comparison of the distributor’s sales of PM brands to its sales of all brands of PM competitors,” said O’Connor. “For example, a distributor would receive the most favorable terms from PM if 48% of sales were PM brands.”
Philip Morris announced that it will terminate the program effective Dec. 27, although other elements of the plan will be phased out sooner.