James A. Lewis, doing business as B&H Vendors v. Philip Morris Incorporated

1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2004 FED App. 0022P (6th Cir.)
File Name: 04a0022p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
JAMES A. LEWIS, doing
business as B&H Vendors;
PENN VENDING COMPANY;
EAGLE COIN MACHINE;
BELFIORE MUSIC &
CIGARETTE COMPANY; B&G
ENTERPRISES, LTD.; ALL
BRANDS VENDING CO., INC.;
CLASS A VENDING; C.I.C.
CORPORATION; MELO-TONE
VENDING, INC.; T.D. ROWE
CORPORATION,
Plaintiffs-Appellants,
v.
PHILIP MORRIS
INCORPORATED,
Defendant-Appellee.
X
-
-
-
->
,
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
N
Nos. 01-6174/6502
Appeal from the United States District Court
for the Middle District of Tennessee at Nashville.
No. 99-00099—Thomas A. Higgins, District Judge.
Argued: April 30, 2003
2 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
*The Honorable David A. Katz, United States District Judge for the
Northern District of Ohio, sitting by designation.
Decided and Filed: January 15, 2004
Before: MOORE and ROGERS, Circuit Judges; KATZ,
District Judge.*
_________________
COUNSEL
ARGUED: John M. Shoreman, McFADDEN &
SHOREMAN, Washington, D.C., for Appellants. Jerome I.
Chapman, ARNOLD & PORTER, Washington, D.C., for
Appellee. ON BRIEF: John M. Shoreman, Douglas B.
McFadden, McFADDEN & SHOREMAN, Washington,
D.C., for Appellants. Jerome I. Chapman, ARNOLD &
PORTER, Washington, D.C., R. Dale Grimes, BASS,
BERRY & SIMS, Nashville, Tennessee, for Appellee. James
L. O’Connell, LINDHORST & DREIDAME, Cincinnati,
Ohio, for Amicus Curiae.
ROGERS, J., announced the judgment of the court and
delivered an opinion, in which MOORE and KATZ,
concurred except as to Part II.B. MOORE, J. (pp. 32-41),
delivered a separate opinion, in which KATZ, D. J.,
concurred as to the issues addressed in Parts I and II, which
constitutes the opinion of the court on these issues.
_________________
OPINION
_________________
PER CURIAM. Judge Moore would reverse on all the
claims as to which the district court granted summary

-- 1 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
3
1Philip Morris, Inc. changed its name effective on January 15, 2003,
to Philip M orris U SA, Inc.
judgment. Judge Rogers would affirm the summary judgment
against plaintiffs who have purchased indirectly from
defendant, but he would reverse summary judgment entered
against plaintiffs who purchase directly from defendant.
Judge Katz would find that all violations of the Act are
properly analyzed under §§ 2(d) and (e) and not § 2(a), and
thus would affirm summary judgment as to the § 2(a) claims
on grounds alternative to those relied on by the district court.
Summary judgment is therefore REVERSED on Count I as to
all plaintiffs and on Count II as to those plaintiffs who
purchase directly from defendant and AFFIRMED on Count
II as to those plaintiffs who do not purchase directly from
defendant, and the case is REMANDED for further
proceedings.
ROGERS, Circuit Judge. This case involves the grant of
summary judgment in favor of Philip Morris, Inc.1 in a
Robinson-Patman Act case. Cigarette vending machine
owners and operators (“vendors”) sued Philip Morris under
section 2 of the Clayton Act, as amended by the Robinson-
Patman Act, 15 U.S.C. §§ 13(a), (d), and (e) (the “Act”),
alleging that Philip Morris had violated these provisions by
failing to provide vendors with promotional fees and
programs in the same manner that it provided such fees and
programs to other retailers. The district court granted Philip
Morris summary judgment, holding that eight out of ten of the
plaintiff vendors did not have standing because they did not
purchase cigarettes directly from Philip Morris, and,
alternatively, no plaintiffs proved that they were in
competition with the other retailers. I would hold that the
vendors who did not purchase directly from Philip Morris
4 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
2Judges Mo ore and Katz concur in this opinion except as to Part II.B.
3W e must visit this statutory realm although “[n]o one, it appears,
dwells longer than necessary in the land of Robinson-Patman.” Hugh C.
Hansen, Robinson -Patma n Law: A Review and Analysis, 51 Fordham L.
Rev. 111 3, 11 18 (198 3).
lacked statutory standing, but that the remaining plaintiffs
who have standing are in competition with the other retailers.2
I. BACKGROUND
A. The Robinson-Patman Act
The Robinson-Patman Act was passed in 1936 as an
amendment to the Clayton Act.3 The Clayton Act is an
antitrust law that primarily protected against “primary line”
price discrimination, or price discrimination tending to injure
the price discriminator’s competitors. 14 Hovenkamp,
Antitrust Law: An Analysis of Antitrust Principles and Their
Application, ¶ 2302 (1999) (Hovenkamp) (“[T]he concern
with original § 2 of the Clayton Act was entirely with what
we today would call ‘primary-line’ price discrimination.”);
see also George Haug Co., Inc. v. Rolls Royce Motor Cars,
Inc., 148 F.3d 136, 141 n.2 (2d Cir. 1998) (defining primary-
line price discrimination). In response to criticism that the
Clayton Act did not protect small retail stores from the
concentrated buying power of larger chain stores, Congress
passed the Robinson-Patman Act. The reason for its
enactment was to “curb and prohibit all devices by which
large buyers gained discriminatory preferences over smaller
ones by virtue of their greater purchasing power.” FTC v.
Henry Broch & Co., 363 U.S. 166, 168 (1960). The
Robinson-Patman Act protects against primary-line
violations, see, e.g., FTC v. Anheuser Busch, Inc., 363 U.S.
536 (1960), and also, significantly for this case, against
“secondary-line” violations, those that occur “when a seller’s

-- 2 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
5
4One example of a price promotion program took place after Philip
Morris entered into a settlement with states’ attorneys general that
provided for a mand atory payment of 45 cents per pack sold into a
settlement fund. Philip Morris increased the cost of its cigarettes by 45
cents, but Philip Morris agreed to rebate the 45 cents to convenience
stores p articipating in pro motio nal pro grams.
discrimination impacts competition among the seller’s
customers; i.e., the favored purchasers and disfavored
purchasers.” George Haug Co., supra. The present case
involves an alleged secondary-line violation because it is the
competitors of the favored purchasers that are claiming
discrimination rather than the competitors of Philip Morris.
B. The Cause of the Controversy
This case involves claims that Philip Morris discriminated
against machine vendors of cigarettes in favor of another class
of cigarette seller—convenience stores, mini-marts and gas
stations (collectively referred to as “convenience stores”). On
November 1, 1998, Philip Morris terminated a program,
called Plan MV, under which it paid fees to vendors if they
followed certain guidelines regarding the placement of
advertising materials on their vending machines and the
location of Philip Morris cigarettes in certain slots of the
machines. Philip Morris thereafter instituted new programs
for convenience stores that provided for price promotions,
product promotions, and incentive promotions in exchange
for the convenience stores’ participation in the programs.
Under the new price promotion programs, Philip Morris paid
an amount of money to convenience stores for every carton or
pack of Philip Morris cigarettes sold as long as the customer
received a discount in an amount equal to the price
promotion.4 An example of a product promotion was one in
which, if the consumer bought one pack, the consumer would
get one pack free. With an incentive promotion, the stores
were given gifts to give away to cigarette purchasers. These
programs were called the Retail Masters, Retail Leaders and
6 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
5Section 2(a) pro vides in part:
(a) Price; selection of customers. It shall be unlawful for any
person engaged in commerce, in the course of such commerce,
either directly or indirectly, to discriminate in price between
different purchasers of commodities of like grade an d quality,
where either or any of the purchases involved in such
discrimination are in commerce, where such commod ities are
sold for use, consumption, or resale within the United States
. . ., and where the effect of such discrimination may b e
substantially to lessen competition or tend to crea te a mo nopoly
in any line of commerce, or to injure, d estroy, or prevent
competition with any person who either grants or knowingly
receives the benefit of such discrimination, or with customers of
either of them.
15 U.S.C. § 13(a). Although the statute refers to price discrimination, it
has been interpreted to prohibit price differences. F.T.C. v.
Anheuser-Busch, Inc., 363 U.S. 536 , 549 (1960 ) (primary line case); but
see FLM v. Collision Parts, Inc. v. Fort Motor Co., 543 F.2d 1019 (2d
Cir. 1976) (secondary line case holding that equality of treatment among
purchasers does not require a single uniform price under all
circumstances); Edw ard J. Sweeney & Sons v. Texaco, Inc., 637 F.2d 105,
120 (3d Cir. 1980) (similar).
Ranch Party ‘99 Programs. Vendors allege that after the
programs went into effect, vendors were unable to compete
with the convenience stores’ low prices, thereby incurring
substantial losses.
C. Statutory scheme
Claiming that they are “in competition” with convenience
stores, vendors alleged violations of sections 2(a), 2(d) and
2(e) of the Robinson-Patman Act. Section 2(a) prohibits a
supplier from “discriminat[ing] in price between different
purchasers of like grade and quality” where “the effect is
substantially to lessen competition.”5 15 U.S.C. § 13(a).
Section 2(a) protects against direct and indirect price
discrimination. American News Co. v. FTC, 300 F.2d 104,
109 (2d Cir. 1962). Direct discrimination occurs when a

-- 3 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
7
6Section 2(d) provides:
(d) Payment for services or facilities for processing or sale. It
shall be unlawful for any person engaged in commerce to pay or
contract for the payment of anything of value to or for the
benefit of a customer of such person in the course of such
commerce as compensation or in consideration for any services
seller charges different prices to different buyers. Robbins
Flooring, Inc. v. Fed. Floors, Inc., 445 F. Supp. 4, 8 (E.D. Pa.
1977). Indirect discrimination occurs “when one buyer
receives something of value not offered to other buyers,” such
as free goods. Id.
Section 2(a) applies only if “two or more consummated
sales of commodities of like grade and quality are made at
discriminatory prices by the same seller to two or more
different purchasers contemporaneously or within the same
approximate time period.” Hugh C. Hansen, Robinson-
Patman Law: A Review and Analysis, 51 Fordham L. Rev.
1113, 1127-28 (1983) (footnotes omitted). Therefore, to be
able to sue under section 2(a), the plaintiff must be a
“purchaser.”
In a secondary-line section 2(a) case, the plaintiff who is
the disfavored purchaser, must show that it competes with the
favored purchaser. O’Byrne v. Cheker Oil Co., 727 F.2d 159,
164 (7th Cir. 1984); National Distillers & Chem. Corp. v.
Brad’s Mach. Prods., 666 F.2d 492, 496 (11th Cir. 1982);
M.C. Mfg. Co. v. Texas Foundries, 517 F.2d 1059, 1066 (5th
Cir. 1975). To show that the disfavored purchaser is injured,
the disfavored purchaser and the favored purchaser must be
in the same geographic market. Hovenkamp ¶2333b3.
Sections 2(d) and (e) of the Act deal with discrimination in
the field of promotional services made available to purchasers
who buy for resale. Where the seller pays the buyer to
perform the service, Section 2(d) applies.6 “Where the seller
8 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
or facilities furnished by or through such customer in connection
with the processing, handling, sale, or offering for sale of any
products or commodities manufactured, sold, or offered for sale
by such person, unless such pa yment or consideration is
availab le on proportionally equal terms to all other customers
competing in the distrib ution of such products or co mmo dities.
15 U.S.C. § 13(d). Section 2(d)’s prohibition includes “paying
allowances for advertising or other sales promotion services or facilities.”
Schoenkopf v. Brow n & Williamson Tobacco Corp., 637 F.2d 205, 209
(3d Cir. 19 80); see also American News Co., 300 F.2d at 109 (“Section
2(d) was aimed explicitly at promotional allowances which have the effect
of price adjustments.”).
7Section 2(e) provid es:
(e) Furnishing services or facilities for processing, handling, etc.
It shall be unlawful for any person to discriminate in favor of
one purchaser against another purchaser or purchasers of a
com mod ity bought for resale, with or without processing, by
contracting to furnish or furnishing, or by contributing to the
furnishing of, any services or facilities connected with the
processing, handling, sale, or offering for sale of such
com mod ity so purchased up on term s not accord ed to all
purchasers on proportionally equal terms.
15 U.S.C. § 13 (e).
furnishes the service itself to the buyer, Section 2(e)
applies.”7 Kirby v. P.R. Mallory & Co., 489 F.2d 904, 909
(7th Cir. 1973) (quoting F.T.C. Guides for Advertising
Allowances and Other Merchandising Payments and Services
(1960)).
Among those “services and facilities” held to be within
Sections 2(d) and 2(e) have been any kind of advertising,
catalogs, demonstrators, display and storage cabinets,
display materials, hand bills, special packaging or
package sizes, warehouse facilities, accepting returns for
credit, prizes or merchandise for conducting promotional
contests, and “monetary awards” paid by the seller to

-- 4 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
9
clerks, salesmen, and other employees of the customer
for special sales or promotional efforts.
Cecil Corley Motor Corp., 380 F. Supp. at 850 (citation
omitted). Sections 2(d) and (e) tend to be considered
together. See Kirby, 489 F.2d at 909 (“[Section] 2(e) has long
been viewed as coterminous with § 2(d), and courts have
consistently resolved the two sections into an harmonious
whole.”).
In order to bring a private enforcement action under the
Robinson-Patman Act, the plaintiff must be a “purchaser” or
“customer.” See §§ 2(a), (d), and (e); Barnosky Oils, Inc. v.
Union Oil Co. of California, 665 F.2d 74, 84 (6th Cir. 1981)
(finding that plaintiff that did not purchase directly from
defendant was not a “purchaser” under §2(a) of the Act).
Although section 2(d) refers to “customers” and section 2(e)
deals with “purchasers,” the words in those two subsections
have been interpreted to have the same meaning. Hovenkamp
¶ 2363b. Also, as with § 2(a), a plaintiff alleging a violation
of §§ 2(d) and (e) must show that the it competes with the
favored purchaser, and the competition must be in the same
geographic area. George Haug Co., Inc., 148 F.3d at 145
(stating, in relation to section 2(d) and 2(e) claims, “[t]he
plaintiff must demonstrate that the goods or commodity apply
only to offers to customers competing in the same geographic
area”).
10 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
8This case began with over 200 vendors, but the district court entered
an order severing the claims of eleven vendors and consolidating those for
pretrial proceedings. One vendor’s claims were voluntarily dismissed,
leaving ten vendors in this appeal. Those ten vendors are James A. Lewis
d/b/a B& H V endors, B &G Enterprises, Ltd., P enn T riple S trading as
Penn Ve nding Compa ny, Eagle Coin M achine , All Brands Vending Co.,
Inc., Belfiore Music & Cigarette Co., Class A Vending, Melo-Tone
Vending, Inc., T .D. Rowe C orp., and C.I.C. Corporation. All parties
entered into a joint written stipulation that if the district court’s order is
not reversed o n app eal, the claims of the remaining plaintiffs will be
dismissed with prejudice. The parties also stipulated that if the claims of
all the plaintiffs are dism issed with prejudice in their entirety, the
counterclaims of Philip M orris will be dismissed with prejudice. The
district court accordingly made an express determination pursuant to
F.R.Civ.P. 54(b) that there was no just reason for delay in permitting an
app eal of its sum mary judgm ent ord er in this case.
D. Proceedings below
Vendors8 filed suit against Philip Morris alleging that it had
violated sections 2(a), 2(d) and 2(e) of the Robinson-Patman
Act. Vendors alleged (1) that Philip Morris did not offer the
promotional allowances and rebates to vendors on
proportionally equal terms as the convenience stores; (2) that
the prices paid by vendors were not proportional to the prices
paid by the convenience stores after taking into account the
rebates and promotional allowances; and (3) that Philip
Morris provided the convenience stores with advertising
services and materials without offering the same to vendors,
all in violation of sections 2(d) and 2(e). Vendors further
alleged that Philip Morris committed price discrimination in
violation of section 2(a) by offering the rebates and
promotional allowances to the convenience stores without
making the offers available to vendors.
Philip Morris moved for summary judgment on the grounds
that (1) eight vendors did not purchase directly from Philip
Morris and the other two only purchased some of their
cigarettes from Philip Morris and therefore vendors did not

-- 5 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
11
9Tho se vendors were B&H Vendors, B& G E nterprises, Ltd., Eagle
Coin Machine, All Brands Vending Co., Inc., Belfiore M usic & Cigarette
Co., Class A Vending, Me lo-Tone Ve nding, Inc., and T.D. Rowe Corp.
10The two vendors were Penn Triple S trading as Penn Vend ing
Comp any, and C.I.C. Corporation.
have standing, (2) vendors did not prove that cigarette sales
declined in response to the promotional programs, and (3)
vendors did not prove that the vending machines were in
competition with the convenience stores.
The district court granted summary judgment against eight
vendors for lack of standing,9 partial summary judgment
against the remaining two vendors for lack of standing,10 and
in the alternative concluded that summary judgment would be
proper against all ten plaintiff vendors for failure to show that
they compete with the convenience stores.
II. ANALYSIS
A. Standard of Review
The standard of review of a district court’s grant of
summary judgment is de novo. Williams v. General Motors
Corp., 187 F.3d 553, 560 (6th Cir. 1999). Summary
judgment will be granted where there exists no genuine issue
of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986). “We must view the evidence, all facts, and
any inferences that may be drawn from the facts in the light
most favorable to the nonmoving party.” Skousen v. Brighton
High Sch., 305 F.3d 520, 526 (6th Cir. 2002).
12 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
11Judges M oore and K atz do not concur in this subsection.
B. Statutory Standing11
1.
The district court in this case found that those vendors who
purchased cigarettes through a wholesaler did not have
statutory standing. The district court’s conclusion is correct,
but some additional steps are necessary to arrive at that
conclusion. Relying upon our decision in Barnosky Oils, Inc.
v. Union Oil Co. of California, 665 F.2d 74 (6th Cir. 1981),
the district court reasoned that Philip Morris did not so
completely control the prices by which wholesalers sold to
vendors as to meet the requirements of the so-called “indirect
purchaser” theory. The “indirect purchaser” theory considers
a plaintiff who has purchased through a middleman to be a
“purchaser” for Robinson-Patman purposes if the supplier
“sets or controls” the resale prices paid by the plaintiff.
Barnosky Oils, 665 F.2d at 84. On appeal, vendors argue that
the Supreme Court’s decision in FTC v. Fred Meyer, Inc., 390
U.S. 341 (1968), requires the conclusion that a retailer buying
through a wholesaler can state a Robinson-Patman claim
without being a direct purchaser as long as the retailer
competes with a favored retailer who is a purchaser from the
supplier. Here, however, unlike in Fred Meyer, the allegedly
favored retailers (the convenience stores) also buy through
wholesalers. Vendors argue that the indirect purchaser
theory, typically used to show that the disfavored retailer is a
purchaser, may be used to establish that the favored retailer is
a purchaser. If so, vendors argue, Fred Meyer establishes that
the fact that they compete with the convenience stores is
sufficient for the vendors to have standing, even though the
plaintiff vendors buy through wholesalers.
In order to reconcile the holdings of Fred Meyer and our
subsequent holding in Barnosky Oils, it is necessary to

-- 6 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
13
12My analysis does not req uire that plaintiffs’ § 2(a) claims be
analyzed as § 2(d) and (e) claims. Such a recategorization was not argued
by the p arties in this case.
distinguish between claims brought under section 2(a) and
claims brought under sections 2(d) and (e). Barnosky Oils
was a section 2(a) case, while Fred Meyer was a section 2(d)
case. The parties appear to talk past each other on appeal, in
part because they—like the district court—treat section 2(a)
and sections 2(d) and (e) as if, for the purposes of this case,
they should be analyzed the same way. It is easier, however,
to reconcile the controlling case law by treating section 2(a)
separately from sections 2(d) and (e). When separately
considered, it becomes clear that the district court was correct
in granting summary judgment against the plaintiff vendors
who purchase through wholesalers.12
2.
Section 2(a) deals with price discrimination in the original
sale to the purchaser, whereas sections 2(d) and (e) address
the purchaser’s subsequent resale of the product. Sections
2(d) and (e) prohibit discrimination in giving, or reimbursing
for, promotional services to purchasers who buy for resale.
Rickles, Inc. v. Frances Denney Corp., 508 F. Supp. 4, 6
(D.C. Mass. 1980) (“‘(A) seller’s payments as well as
services in connection with the original sale to the purchaser
rather than with regard to the purchaser’s subsequent resale
were not cognizable under §§ 2(d) or 2(e) but were
challengeable only under § 2(a) as indirect price
discrimination.’” (quoting Kirby v. P. R. Mallory & Co., Inc.,
489 F.2d 904, 909 (7th Cir. 1973)) (alternation in original)).
Economists might observe that the ultimate economic effect
of the different types of discrimination (i.e., price
discrimination and discrimination in providing services that
increase resales) is the same, since in either case one
purchaser for resale is getting an economic benefit from the
14 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
13In private suits, however, courts have required injury-in-fact and
causation. Rutman Wine Co. v. E. & J. Gallo W inery, 829 F.2d 729, 734
(9th Cir. 1987) (noting that a plaintiff must allege an “actual injury
attributable to something the antitrust laws were designed to prevent” and
that its “failing to receive a promotional allowance . . . adversely affected
its ability to co mpe te with favo red comp etitors”); Hovenkamp ¶ 236 3.
supplier that another is not getting. But Congress saw fit to
distinguish between the two, apparently on the basis of how
indirect the benefit was. Unlike section 2(a), violations of
sections 2(d) and 2(e) do not explicitly require an injury to
competition.13 In addition, with respect to sections 2(d) and
2(e) the defendant does not have the same defenses that a
defendant has under section 2(a). Under section 2(a) a
defendant has two defenses: cost justification and meeting
competition. Under sections 2(d) and (e), the defendant only
has the meeting competition defense. Hovenkamp ¶ 2322; see
also Note, The Distinction Between the Scope of Section 2(a)
and Sections 2(d) and 2(e) of the Robinson-Patman Act, 83
MICH. L. REV. 1584, 1585-86 (1985). Given that Congress
distinguished between section 2(a) claims on the one hand,
and section 2(d) and (e) claims on the other, roughly on the
basis of the indirectness of the discrimination, it makes sense
that holdings regarding the closeness of the competing
purchasers to the suppliers be limited to the particular
statutory context in which they arose, at least where that
permits us to reconcile controlling precedents.
The Supreme Court’s holding in Fred Meyer dealt with
section 2(d), and therefore does not support plaintiff vendors’
arguments regarding their claims under section 2(a). In Fred
Meyer, Fred Meyer, a large retail supermarket, annually
conducted a sale campaign by selling coupon booklets to
customers for ten cents. The booklet contained coupons for
products sold by Fred Meyer, some amounting to a one-third
reduction in cost. Id. at 344-45. Each coupon related to a
specific product and the suppliers of the products paid Fred

-- 7 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
15
Meyer $350 for each page advertising the product in the
booklet. Also, some suppliers would give Fred Meyer “price
reductions on its purchases of featured items, by replacing at
no cost a percentage of the goods sold by [Fred] Meyer during
the campaign, or by redeeming coupons in cash at an agreed
rate.” Id. at 345. Fred Meyer’s sale campaign was very
successful, and the $350 paid by suppliers more than paid for
the costs of publishing and distributing the booklets. Id. at
345 n.4. The promotional benefits provided by the suppliers
to Fred Meyer were not bestowed upon other retailers that
purchased from wholesalers. The Federal Trade Commission
found that
this promotional scheme . . . violated §§ 2(d) and 2(a) in
the following respects: First, the $350 paid to Meyer by
each of four suppliers participating in the campaigns
represented promotional allowances paid in violation of
§ 2(d) because similar allowances were not made
available on proportionally equal terms to competing
customers. Second, the additional value given Meyer by
these suppliers in the form of discounts, free
replacements of goods sold and coupon redemptions
amounted to price discrimination prohibited by § 2(a).
Id. at 345.
The Supreme Court, focusing its decision solely on § 2(d),
found that the “discriminatory promotional allowances” given
to Fred Meyer by two suppliers were covered under § 2(d).
Id. at 348. Those allowances were given when two suppliers,
Tri-Valley Packing Association and Idaho Canning Company,
(1) replaced without charge every third can of product sold
under a three-for-the-price-of-two coupon campaign and
(2) paid Fred Meyer $350 for a page in the coupon book. Id.
at 346. These allowances were not “made available to
wholesalers who purchase from the supplier and resell to the
direct-buying retailer’s [Fred Meyer’s] competitors.” Id. at
347. The Court held that “[Fred] Meyer’s retail competitors,
16 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
rather than the two wholesalers, were competing customers
under the statute.” Id. at 348.
The Supreme Court reached its holding by starting with the
premise that “on the facts of this case, § 2(d) reaches only
discrimination between customers competing for resales at the
same functional level and, therefore, does not mandate
proportional equality between [Fred] Meyer and the two
wholesalers.” Id. at 348-49. After reviewing the legislative
history of § 2(d), the Court found that the promotional
allowances were forms of indirect price discrimination
because smaller retailers could not shift their advertising costs
as the larger retailers could by inducing the suppliers to
provide allowances. “Congress chose to deter such indirect
price discrimination by prohibiting the granting of sales
promotional allowances to one customer unless accorded on
proportionally equal terms to all competing customers.” Id.
at 352.
The Court defined “customers” to include those “retailers
who buy through wholesalers and compete with a direct buyer
in the resale of the supplier’s product.” Id. at 354. The Court
analyzed the meaning of “competition” as found in § 2(d) and
concluded that Congress intended the term to cover
competition “between buyers who competed in resales of the
supplier’s products.” Id. at 356. Therefore, the Court
concluded that “the most reasonable construction of § 2(d) is
one which places on the supplier the responsibility for making
promotional allowances available to those [retailers] who
compete directly with the favored buyer.” Id. at 357. In light
of the Commission’s argument that it would create a huge
burden on manufacturers to have to bypass wholesalers and
provide allowances to all of their retailers, the Court seemed
to narrow its holding: “We hold only that, when a supplier
gives allowances to a direct-buying retailer, he must also
make them available on comparable terms to those who buy
his products through wholesalers and compete with the direct
buyer in resales.” Id. at 358.

-- 8 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
17
14It is true that in Perkins v. Standa rd Oil Co. of C aliforn ia, 395 U.S.
642 (1969), the Sup reme Court, in dealing with an issue involving section
2(a), relied on Fred Mey er for the general proposition that the word
“customer” in § 2(a) as well as § 2(d) should not be read to allow
avoidance of the Act’s purposes “by the simple expedient of adding an
additional link to the distribution chain.” 395 U.S. at 647-48 . However,
the issue in Perkins was the extent of da mages where the supplier
discriminated among direct purchasers, and the Supreme Court held that
damages could include those suffered as a result of the favored purchaser
passing on its savings d own the line to third and fourth level purchasers.
The holding, dealing as it did with the scope of relief, did not extend the
Fred Mey er analysis to find a violation of section 2(a) in the first place on
the basis of price d iscrimina tions against truly indirect purchasers who
merely can be said to com pete with favored direct purchasers.
15It is true that some cases state that “purchaser” in section 2(a)
should be interpreted the same as “customer” in section 2(d ). American
News Co. v. FTC, 300 F.2d 104, 10 9 (2d Cir. 1962); Brewer v. Uniroyal,
Inc., 498 F.2d 973, 977 (6th Cir. 1974) (dictum). However, these cases
did not hold that a Fred Mey er analysis should be extended to section 2(a)
claims. American News held in effect that “customer” in section 2(d)
should be interpreted at least as broadly as “purchaser” in section 2(a).
For the reasons sta ted in the text, the reverse is not true, and American
News did not reach that issue. See the Second Circuit’s later o pinion in
FLM Collision Parts, Inc. v. Ford Motor Co., 543 F.2d 101 9, 10 26 n. 8
(2d Cir. 1976) (“It is true that in some instances the word ‘customer’ in
§ 2(d) and the word ‘purchaser’ in § 2(a), are to be given the same
meaning, see, e.g., Am erican N ews . . ., but the Supreme Court limited its
holding in Fred M eyer, In c. . . . to § 2(d) cases” ). This court’s dictum in
Brewer also dealt with a very distinct issue from the one resolved in Fred
Meyer: whether a subsidiary could be considered a purchaser or customer
unde r either p rovision of the A ct.
The Supreme Court in Fred Meyer carefully limited its
decision to the section 2(d) context, and the Court has not
subsequently extended it to the section 2(a) context.14 It
makes sense not to extend the Fred Meyer analysis to section
2(a), since the focus of 2(a) is the discrimination in the price
to the purchasers, not a discrimination in helping purchasers
sell to others.15 Some courts have explicitly refused to extend
the Fred Meyer analysis to section 2(a) cases, because to do
18 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
so would arguably require vertical price maintenance in
violation of the Sherman Antitrust Act. FLM Collision Parts,
Inc. v. Ford Motor Co., 543 F.2d 1019, 1026 & n.8 (2d Cir.
1976); see also The Iams Co. v. Falduti, 974 F.Supp. 1263,
1271-72 (E.D. Mo. 1997). But see Diehl & Sons v. Truck
Rent-a-Center, 445 F.Supp. 282, 286-87 (E.D. N.Y. 1978)
(distinguishing FLM Collision Parts); Julius Nasso Concrete
Corp. v. DIC Concrete Corp., 467 F.Supp. 1016, 1019-20
(holding Fred Meyer rationale applies equally to sections 2(a)
and 2(d)).
Moreover, this court’s decision in Barnosky Oils implicitly
rejected the applicability of the Fred Meyer approach to
section 2(a) claims. In Barnosky Oils, a supplier (Union) was
alleged to have price discriminated in favor of direct
purchasing dealers over dealers who purchased through
wholesalers (“Union jobbers” such as Barnosky). This court
rejected the Robinson-Patman § 2(a) claim because a party
alleging price discrimination under Robinson-Patman “must
prove that the same seller charged different prices to different
purchasers.” 665 F.2d at 83. Because the dealers who
purchased through Barnosky did not purchase directly from
Union, and Union did not control the sale between Barnosky
and its purchasers, there was no § 2(a) violation by Union. If
the Fred Meyer analysis had been applied, Barnosky would
not have had to show that Union controlled the sale between
Barnosky and its purchasers, but only that Barnosky’s
purchasers were in competition with the dealers who bought
directly from Union. The absence of such an analysis in
Barnosky Oils strongly suggests that the Fred Meyer analysis
is not applicable to § 2(a) claims.
The vendors’ § 2(a) claims should therefore be analyzed
under Barnosky Oils. Under this court’s holding in that case,
vendors can only bring §2(a) claims if vendors can show that
Philip Morris controlled the sale by wholesalers to the
vendors. While vendors argue on appeal that Philip Morris
controlled the prices charged by wholesalers to convenience

-- 9 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
19
16The doctrine ha s been explained by the Seventh Circuit:
If a seller can control the terms upon which a buyer once
removed may purchase the seller's prod uct from the seller's
imme diate buyer, the buyer once removed is for all practical,
econom ic purp oses d ealing directly with the seller. If the seller
controls the sale, he is responsible for the discrimination in the
sale price, if there is such discrimination. If the seller cannot in
some manner control the sale between his immediate buyer and
a buyer once removed, then he has no power by his own action
to prevent an injury to competition.
Purolator Products, Inc. v. FTC, 352 F.2d 87 4, 883 (7th Cir. 1968).
stores (an issue dealt with below), they make no such
argument with respect to their own purchases from
wholesalers, and the record does not support such control. In
the present case, there is no evidence cited by either party or
the district court that the convenience stores buy directly from
Philip Morris. The indirect purchaser doctrine, recognized by
many courts to permit § 2(a) claims to go forward where there
is such control, accordingly does not apply in this case.16 As
we said in Barnosky Oils, “[t]he purpose of the indirect
[purchaser] doctrine is to prevent a manufacturer from
insulating itself from Robinson-Patman liability by using a
‘dummy’ wholesaler to make sales at terms actually
controlled by the manufacturer.” 665 F.2d at 84. Absent any
indication in the record that Philip Morris “actually
controlled” the terms of sale by wholesalers to vendors,
Barnosky Oils requires us to affirm the district court’s
summary judgment regarding section 2(a) claims brought by
vendors who purchase through wholesalers. See also Pierce
v. Commercial Warehouse, 876 F.2d 86, 87 (11th Cir. 1989);
Hiram Walker, Inc. v. A & S Tropical, Inc., 407 F.2d 4, 7-8
(5th Cir. 1969).
20 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
17Fred Meyer was an FTC enforcement action, as opposed to a
private party case. Philip Morris argues that Fred Mey er thus did not
address statutory standing to bring a private suit. Regardless, the Court
did define “custom er” and there is no reason why this definition could not
also ap ply to a p rivate party action under the A ct.
18In other words, a supplier could not discriminate against the
competitor of a favored indirect purchaser in the provision of services if
the supplier so controlled the terms of the sale by the wholesaler to the
favored indirect purchaser, that the favored indirect purchaser should be
considered a favored direct purchaser.
3.
With respect to vendors’ section 2(d) and (e) claims, on the
other hand, the Barnosky Oils requirement (that plaintiffs
either purchase directly from the supplier or have the terms of
plaintiffs’ purchase from wholesalers be controlled by the
supplier) is arguably not applicable because of the Supreme
Court’s analysis in Fred Meyer.17 Fred Meyer held that a
supplier could violate § 2(d) by discriminating against
indirect buyers as long as the indirect buyers were
competitors of its direct buyers. To apply the Fred Meyer
analysis in this case, however, would require us to extend the
holding of that case to situations where there is alleged
discrimination against indirect buying competitors of the
supplier’s indirect buyers. In Fred Meyer, the favored
purchasers (buyers) were direct purchasers. As Philip Morris
points out on appeal, vendors have cited no cases in which
neither the favored nor the disfavored buyers were direct
purchasers from the allegedly discriminating supplier. It can
be assumed, as vendors argue, however, that if the favored
buyer met the requirements of the indirect purchaser doctrine,
the Fred Meyer analysis would permit a section 2(d) or (e)
claim.18 On this assumption, it is necessary for us to examine
whether there was such control by Philip Morris of the sales
by wholesalers to the convenience stores.

-- 10 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
21
Vendors argue that Philip Morris controls the resale of its
products by convenience stores. According to vendors, Philip
Morris does this by: 1) controlling the price of cigarettes by
requiring stores that participate in the promotional programs
to pass the discounts along to customers, 2) having its field
representatives solicit stores to participate in the promotional
programs, 3) other interactions between Philip Morris’s field
representatives and the convenience stores such as oversight
of the programs, 4) reserving the right to cancel the program
if a particular store does not comply with the contract, and
5) requiring the convenience stores to provide Philip Morris
with reports of sales.
Darrell Moody, Territory Sales Manager at Philip Morris,
testified that he provides the stores with a Retailer
Understanding Form that the stores fill out. The form
contains the store’s name, the brands on sale, and “the amount
for Philip Morris per each price off, the specific pieces of
point of sale and the specific placement thereof.” When the
stores return the forms to Moody, he verifies the amount sold
by the stores with the wholesaler invoices. The wholesaler
invoices are attached to the form before it is sent to Philip
Morris’s office. There is a separate form for noncompliance
with the promotional program contract. Moody testified that
he visits the stores and may prepare a noncompliance form at
the time he observes noncompliance. If a noncompliance
form is filled out, it results in nonpayment by Philip Morris
to the store for that month and could even lead to termination
of the contract.
Craig Johnson, Senior Vice President of Sales at Philip
Morris, testified that Philip Morris pays the convenience
stores for promotional expenses and that the promotions are
passed to the consumer. Roy Anise, Vice President for Market
Information and Planning at Philip Morris, testified that some
of the larger convenience stores provide Philip Morris with
monthly reports, detailing the amount of sales of Philip
Morris’s products and the stores’ overall sales.
22 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
It appears from this evidence that Philip Morris has some
control over the resale of its products by the convenience
stores. Such control is, however, not sufficient to bring this
case within the Fred Meyer analysis. While Philip Morris
may have required the amount of discounts, it did not set the
underlying prices for sale by the wholesalers, nor could the
wholesalers be considered “dummy” companies. It would
therefore be too great an extension of Fred Meyer to find that
the competitors (vendors) of indirect purchasers like
convenience stores are competing “customers” or
“purchasers” for purposes of sections 2(d) and (e). In Fred
Meyer the Supreme Court reasoned that “customer” should be
defined “to include retailers who purchase through
wholesalers and compete with direct buyers in resales”
because
a narrower reading of §2(d) would lead to the following
anomalous result. On the one hand, direct-buying
retailers like Meyer, who resell large quantities of their
supplier’s products and therefore find it feasible to
undertake the traditional wholesaling functions for
themselves, would be protected by the provision from the
granting of discriminatory promotional allowances to
their direct-buying competitors. On the other hand,
smaller retailers whose only access to suppliers is
through independent wholesalers would not be entitled to
this protection. Such a result would be diametrically
opposed to Congress’ clearly stated intent to improve the
competitive position of small retailers by eliminating
what was regarded as an abusive form of discrimination.
If we were to read “customer” as excluding retailers who
buy through wholesalers and compete with direct buyers,
we would frustrate the purpose of §2(d).
390 U.S. at 352 (emphasis added). This policy does not apply
where the favored purchaser buys indirectly from a
wholesaler on terms that are not controlled by the allegedly
discriminating supplier. Such buyers are inherently not the

-- 11 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
23
19As the Supreme Court explained in FTC v. Morton Salt Co., 334
U.S. 37 (194 8):
The legislative history of the Robinson-Patman Act makes it
abund antly clear that Congress considered it to be an evil that a
large buyer could secure a competitive adva ntage over a small
buyer solely because of the large buyer's quantity purchasing
ability. The Robinson-Patman Act was passed to dep rive a large
buyer of such advantages except to the extent that a lower price
could be justified by reason of a seller's diminished costs due to
quantity manufacture, delivery or sale, or by reason of the
seller's good faith effort to meet a competitor's equally low price.
Id. at 43.
customers who “undertake the wholesaling function for
themselves.”
A determination that the Fred Meyer analysis should not be
extended to competitors of truly indirect purchasers is
supported, moreover, by a recognition that, unlike in Fred
Meyer, the circumstances of this case do not reflect the
underlying concern that motivated the passage of the
Robinson-Patman Act in the first place.19 Fred Meyer was
the large retailer who was taking advantage of smaller
retailers who bought through wholesalers. The instant case,
in contrast, involves alleged discrimination among different
classes of indirect purchasers, not discrimination in favor of
large direct-buying chain stores against small local stores.
There is thus no reason to expand the Fred Meyer analysis in
this case to permit statutory standing on behalf of competitors
of indirect purchasers, at least where the supplier, Philip
Morris in this case, does not control the sales of the
wholesalers so extensively as to imply a circumvention of the
policies of the Act.
24 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
20These two vendors are Penn Triple S trading as Penn Vending
Comp any, and C.I.C. Corporation.
21In addition, vendors and convenience stores must operate at the
“same functional level.” Abb ott Labs. v. Portla nd Retail D rug gists Ass'n,
425 U.S. 1, 12 (1976 ) (quoting FTC v. Sun Oil Co., 371 U.S. 505, 520
(1963) (internal quotation marks omitted )). Neither party addresses this
requirement, but we find that vendors and convenienc e stores do o perate
at the sam e functional level— resale o f the pro ducts.
4.
The district court’s dismissal of plaintiff vendors who are
not themselves purchasers from Philip Morris should
therefore be affirmed because (1) they do not themselves buy
directly from Philip Morris and their own purchases from
wholesalers are not controlled by Philip Morris, and (2) with
respect to section 2(d) and (e) claims, they cannot be
considered customers under a Fred Meyer analysis because,
although they compete with allegedly favored purchasers, the
favored purchasers are not direct buying purchasers
sufficiently analogous to the large retail chains that Congress
was concerned about in passing the Robinson-Patman Act.
The district court accepted that the remaining two vendors
that purchase part of their inventory directly from Philip
Morris do have standing under the Act, and this is not
challenged on appeal.20 Therefore, it is still necessary to
determine whether these vendors were in competition with the
convenience stores.
C. Competition
The district court granted summary judgment in the
alternative due to vendors’ failure to prove that their vending
machines were in competition with the convenience stores.
Under sections 2(a), 2(d) and 2(e), the complaining party
must be in competition with the favored party.21 FTC

-- 12 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
25
22The FTC has published guidelines for compliance with sections
2(d) and 2 (e). 16 C.F.R . § 24 0.1 et seq. Although, these guidelines do
not have the force of law, see 16 C .F.R. § 240 .1, they are he lpful in
applying the Act. The FTC is “charged with the day-to-day administration
of the Act” and its rulings sho uld be given deference. Fred Meyer, 390
U.S. at 355; see also 15 U .S.C. § 45 (F TC given p ower to prevent unfair
com petition).
23Cross-elasticity of demand “measures the sensitivity of purchase
of one good to change in the price of another good.” David N. Hyman,
Mic roeconomics 144 (4th ed. 19 97). M r. Hyman writes that “[c]ross-
elasticity of demand may be positive or negative. A positive cross-
elasticity of demand implies that the two goods are substitutes. Whenever
the price of one good changes, other things being equa l, the demand for
the other moves in the same direction.” Id. The higher the value of cross-
elasticities, the greater the substitutability of the p roducts. Id. at 145. If
the value is zero then the products are unrelated to one another, such as
typewriters and ice cream. Id.
Guidelines, 16 C.F.R. § 240.2(a), (b);22 Hovenkamp ¶2333a.
16 C.F.R. § 240.5 defines “competing customers” as “all
businesses that compete in the resale of the seller's products
of like grade and quality at the same functional level of
distribution regardless of whether they purchase directly from
the seller or through some intermediary.” Despite Philip
Morris’s argument that vendors failed to present sufficient
evidence of competition, we conclude that vendors did
produce sufficient evidence to create a genuine issue of fact
as to whether competition exists between the convenience
stores and the vending machines.
Vendors argue that the district court erred by requiring
them to provide a cross-price elasticity study to show
competition.23 A Robinson-Patman plaintiff does not have to
present, however, a cross-elasticity study to show that
competition exists between it and the favored purchaser.
Although such a study would be helpful, competition can be
shown in other ways, and in the present case, vendors
presented evidence that created a genuine issue of material
26 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
fact as to whether they were in competition with the
convenience stores.
Vendors presented the testimony of Dr. Newbern and
Professor Fanara. Dr. Newbern conducted a study of adult
smokers (“Newbern study”) and Professor Fanara analyzed
that study. Dr. Newbern surveyed, in three cities, 315 adult
smokers who patronize bars that have vending machines. The
Newbern study showed that, of the factors that influence the
purchase of cigarettes from convenience-type stores, easy
access was the most given response at 40.2% overall. The
second most favored reason was that the price is lower than
vending machines, 26.4%. As for purchases from
convenience stores, 90.7% said they had recently purchased
from a convenience store. The next question asked, “Where
was the location of the store in relation to this establishment?”
Fifty-seven percent said that the convenience store was more
than three blocks from the bar. Overall, 55.4% of participants
were aware of price promotions for Philip Morris cigarettes,
and 59.1% had at some point purchased cigarettes because of
a special price or quantity promotion. More than half (50.5%)
of the participants stated that price influenced where they
purchased cigarettes. The price difference between vending
machines and stores that would most influence the
participants (44.4%) to buy from a store instead of a vending
machine was between fifty cents and one dollar. Thirty-five
percent said that they would be influenced by a difference of
more than one dollar. Finally, the survey asked about
vending machine use. Almost all participants (91.9%) had at
some time purchased from a vending machine: 71.2% within
the past six months, 10.9% between six months and a year,
and 17.9% over a year ago.
Professor Fanara analyzed this data and also reviewed the
testimony of several expert witnesses. He found:
Among the individuals surveyed 91.9% stated that they
had purchased cigarettes from a vending machine, and

-- 13 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
27
24Those questions and responses were:
Question 5: Have you recently purchased cigarettes from a
convenience store? O verall affirmative respo nse: 90 .7% .
Question 6: Where was the location of the store in relation to this
establishment? W ithin one block: 23.9% ; within three blocks:
18.7 %; m ore tha n three blocks: 57.4% .
Question 7: At which store did you make your purchase? Gas
station/M ini-Mart: 41.8% ; 7-11 Convenience Store: 20.6% ; drug
store: 3.9% ; tobacco store: 2.5%; grocery store: 11.3%; other:
19.9 %.
25The district court reached this conclusion and then found that there
was no factual basis for vendors’ expert testimony, apparently referring
to Dr. Fanara. The court did no t appear to make a similar find ing with
respect to Dr. Newbern’s study and, in fact, concluded that the mo tion to
strike D r. Newbern’s testimo ny was m oot.
71.2% stated that they had purchased cigarettes from a
vending machine within less than six months. The results
of questions five, six, and seven in Table 4 of the survey
taken in light of economic theory, provide substantial
support for competition at the same functional level, or
for the same consumer dollar.24
The district court held that “[t]he data collected by Dr.
Newbern, which Professor Fanara relies on in formulating his
opinion, does not reflect whether smokers switched from
using vending machines to purchasing their cigarettes solely
at convenience stores in response to the defendant’s
promotional programs.”25 J.A. 121. But vendors do not need
to show that smokers switched from vending machines to
convenience store purchases on the basis of the promotional
programs. Such a requirement goes to injury, and the element
at issue on this appeal is the existence, not the amount of
damage to, competition. Nor must vendors show, as the
district court appeared to require, “at what point an increase
28 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
26Philip Morris asserts that the district co urt may not rely on the
hearsay statements related by vendors about customers leaving
establishments to buy cigarettes elsewhere to prove causation. See e.g.,
Stelwagon Mfg. C o. v. Tarm ac Ro ofing Sy s., 63 F.3d 1267 (district court
imprope rly considered anecdotal testimony that customers did not deal
with manufacturers b ecause the evidence was admitted under Rule 803(3)
but was used to prove the truth of the facts asserted). On remand, the
district court may decide whether vendors’ anecdotal testimony is
adm issible as a ba sis to show that vendors com pete w ith convenience
stores.
in the price of [vending machine] cigarettes will compel
patrons of an establishment to forego the convenience of
purchasing cigarettes from a vending machine on site and
cause them to leave this site in order to purchase their
cigarettes elsewhere.”
The Newbern study survey showed that smokers purchase
cigarettes both from convenience stores and vending
machines. Even the district court found that the survey
results showed that “some people purchase cigarettes from
both” convenience stores and vending machines. J.A. 121.
Also, since price is a consideration, the inference may be
drawn that if the price of vending machines goes beyond a
certain point (for example a difference of 50 cents to over
$1.00 would cause 79.4% to buy at a store rather than a
machine), then vending machines will lose business to
convenience stores selling for less.
In addition to the expert testimony, several vendors testified
that they were forced to remove their vending machines due
to lost sales after customers kept leaving the premises to buy
cigarettes at nearby convenience stores.26 Mike Savar,
principal of Penn Vending Company, a remaining plaintiff,
testified that he received numerous phone calls from location
owners complaining about customers leaving to buy
cigarettes elsewhere. At one location, he lost the account
after receiving such a complaint.

-- 14 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
29
Assuming that vendors’ testimony is admissible, this
evidence in addition to the Newbern study presents a question
of material fact on the issue of whether competition exists.
As Thurman Industries v. Pay 'N Pak Stores, Inc. noted,
For antitrust purposes, defining the product market
involves identification of the field of competition: the
group or groups of sellers or producers who have actual
or potential ability to deprive each other of significant
levels of business. This definitional process is a factual
inquiry for the jury; the court may not weigh evidence or
judge witness credibility.
875 F.2d 1369, 1374 (9th Cir. 1989) (citations omitted). In
contrast to the instant case, in Godfrey v. Pulitzer Publishing
Co., the Eighth Circuit held that summary judgment was
proper because the disfavored dealers did nothing more than
cite one instance of losing business to support the required
showing of competition. Furthermore, the expert did “not
provide[] any tangible evidence, numerical or anecdotal, to
show that the branch dealers in fact compete[d].” 276 F.3d
405, 412 (8th Cir. 2002). The disfavored dealers’ conclusory
statements that competition existed was insufficient. Id. “In
order to survive a motion for summary judgment, the
non-moving party must be able to show ‘sufficient probative
evidence [that] would permit a finding in [his] favor on more
than mere speculation, conjecture, or fantasy.’” Id. (quoting
Moody v. St. Charles County, 23 F.3d 1410, 1412 (8th Cir.
1994)). Here vendors presented more than a mere basis for
speculation or conjecture.
Vendors also submitted, in response to an interrogatory, a
list of machines by zip code that assertedly compete with
convenience stores listed by Philip Morris for the same zip
code areas.
In the present case, viewing vendors’ proffers in
combination, there was a sufficient showing to avoid
30 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
27In addition to Philip Morris’s motion for summary judgment, the
district court also had before it Philip Morris’s motion to strike the expert
testimony of Dr. Newbern and Professor Fanara. Philip Morris argues
that vendors’ expert testimony did not meet the requirements of Federal
Rule of Evidence 702, Daubert v. Merrell Dow Pharma ceuticals, Inc.,
509 U.S. 579 (1993), Kumho Tire Co. v. Carmichael, 526 U.S. 137
(1999), and their progeny. The district court found insufficient evidence
to show competition without having to reach the question whether
Professor Fanara and Dr. N ewbern’s testimony sho uld have been stricken.
On appeal, Philip Morris argues that this court may address this issue
because it is an alternative ground fo r summ ary judgment.
Rule 702 provides that an expert may testify to his/her opinion if
(1) it is based upon “su fficient facts or data,” (2) it is “the product of
reliable principles and method s, and (3) the witness has ap plied the
principles and methods reliably to the facts of the case.” Fed. R. Evid.
702. A trial jud ge must determine whether the exp ert testimon y is
relevant and reliable. Daubert, 509 U.S. at 589 . Given the gatekeeping
function of the district court to determine the reliability and relevance of
expert testimony, Kumho Tire Co., 526 U.S. at 142-43, the district court
should decide on remand whether to grant this motion.
summary judgment that Philip Morris products sold in
convenience stores competed with the same products sold in
vending machines. We therefore reverse the grant of
summary judgment as to the remaining plaintiffs.27
D. Other arguments
Philip Morris argues that we may affirm on the alternative
ground that vendors have not shown causation of competitive
injury. This is a different ground from that relied upon by the
district court. Competition may exist, of course, even though
there has been no injury to that competition. In view of the
fact-intensive nature of the injury issue, we decline to resolve
it for the first time on appeal. The issue is more properly
considered by the district court upon remand.
Vendors also challenge on appeal the district court’s denial
on mootness grounds of a motion by vendors for production
of documents. In view of our present holding, the district

-- 15 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
31
court may consider a renewed motion to that effect on
remand. We express no view on whether the motion should
be granted.
32 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
_____________
OPINION
_____________
KAREN NELSON MOORE, Circuit Judge, majority in
part and concurring in part. While I agree with Judge
Rogers’s reasoning in Part II.C. of his opinion, with respect
to the question of whether the convenience stores (“stores”)
are genuinely in competition with the vending-machine
vendors (“vendors”), I do not agree that any of the plaintiff-
vendors lack statutory standing. I therefore disagree with Part
II.B., and write separately to express my conclusion that all
plaintiffs have standing to challenge what are best considered
violations of § 2(d) and (e) of the Act.
Plaintiff-vendors in this case allege violations of the
Robinson-Patman Act, 15 U.S.C. § 13(a), (d), and (e) (“Act”).
The district court granted Philip Morris’s motion for summary
judgment partially on the basis that the majority of the
plaintiffs did not have statutory standing, as they did not
purchase directly from Philip Morris. I believe that this
determination was in error, and I would therefore reverse the
district court’s judgment in its entirety.
I agree with Judge Rogers that it is best to consider
separately standing under § 2(a), prohibiting discriminatory
pricing, and under § 2(d) and (e), prohibiting discriminatory
provision of or reimbursement for promotional services.
Under either statutory provision, however, I believe plaintiffs
have standing. I would therefore allow all of the plaintiffs to
proceed on all of their claims.

-- 16 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
33
1In addition, plaintiff-vendors complain of additional promotional
fees, racks, fixtures, and signage made availab le by Philip M orris to their
store competitors. Plaintiffs’ Brief at 31. To the extent these programs
reflect a Ro binson-Patman violation, they are violative of § 2(d) and (e)
I. The Vendors’ Claims are Best Analyzed as § 2(d)
Claims
Section 2(a) of the Act makes price discrimination, or the
contemporaneous sale of goods of like quality to two different
purchasers for two different prices, illegal. In addition to
“direct” price discrimination, courts have held that § 2(a) also
extends to “indirect” price discrimination, where identical
price structures are made disparate through, for example, the
granting of rebates, the payment of shipping costs, or the
provision of free goods. See Corn Prods. Refining Co. v.
FTC, 324 U.S. 726, 732 (1945); National Dairy Prods. Corp.
v. FTC, 412 F.2d 605, 608, 611-12 (7th Cir. 1969); see also
14 HERBERT HOVENKAMP, ANTITRUST LAW ¶ 2322 (1999).
Subsections 2(d) and (e), prohibiting the payment of
“anything of value” in consideration for services rendered or
facilities furnished in the resale of goods or the provision of
those services or facilities themselves, also cover the
provision of free goods to a reseller. 15 U.S.C. § 13(d), (e);
see HOVENKAMP, supra, ¶ 2322b. There is therefore some
overlap between § 2(a) and § 2(d) and (e), where a supplier
provides free goods or provides rebates or other payment for
particular services. Here, three of Philip Morris’s
promotional programs are under attack as Robinson-Patman
violations: its price promotions, where the stores sell
cigarette packs at a discount and are refunded the amount of
the discount by Philip Morris; its product promotions, where
the stores sell a certain number of packs for the price of a
lesser number of packs, and are provided the extra pack or
packs by Philip Morris (through product rebates); and its
incentive promotions, where gifts are supplied to the stores to
give to the ultimate retail consumer.1 The product and price
34 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
as the provision of or payment for promo tional and advertising program s.
promotions, which consist of payments from Philip Morris to
the stores, either in the form of a product rebate or a price
rebate, seem potential § 2(a) violations as well as potential
§ 2(d) and (e) violations. Because each of these programs
aims at providing benefit to the retail consumer, and results
only in increased sales volume for the stores, rather than
greater profit on each individual sale through a decreased
wholesale price, I believe these programs are each best
considered as § 2(d) and (e) violations. Philip Morris
provides the free goods to the stores with the requirement that
they pass those goods on to the ultimate retail customer;
Philip Morris does not provide the free goods directly to the
stores to dispose of as they wish. Courts that find a § 2(a)
violation in the provision of free goods do so where free
goods are provided to a purchaser who is then free to sell each
good at any price she wishes. There the provision of free
goods makes the “actual price” paid by the retailer for each
individual good lower. See National Dairy Prods., 412 F.2d
at 608. Here, however, the profit the convenience stores
receive remains steady for each pack of cigarettes purchased,
as the benefit of the product rebate from Philip Morris is
always offset by the cigarettes given away. Philip Morris’s
decision to provide free goods does not result in an overall
increase in the profit received on each individual purchased
good. See id. I believe that the promotional programs are
therefore best analyzed under § 2(d) and (e). Cf. R.J.
Reynolds Tobacco Co. v. Premium Tobacco Stores, Inc.,
2000-1 Trade Cas. (CCH) ¶ 72,799 (N.D. Ill. 1999)
(discussing interaction of § 2(a) and (d) and (e) vis-à-vis
provision of free goods).

-- 17 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
35
2W hile the pro duct prom otions offered by Philip Mo rris and the
provision of free goods by Philip Morris may be violations of § 2(e) rather
than § 2(d), the statutory sections have long been considered as a cohesive
whole, and the meaning of “purchaser” in § 2(e) as coterminous with that
of “custom er” in § 2(d). Kirby v. P.R. Ma llory & Co., 489 F.2d 904, 909
(7th Cir. 19 73), cert. denied, 417 U.S. 911 (1974); see HO V EN K AM P,
supra, ¶ 2363b, at 241.
II. Under the Rule of Fred Meyer, Plaintiffs are Philip
Morris’s “Customers” for the Purposes of § 2(d) and (e)
Judge Rogers argues that FTC v. Fred Meyer, Inc., 390
U.S. 341 (1968), can be distinguished from the present case
on the basis that the favored customers in this case, the stores,
do not purchase directly from Philip Morris. However, Fred
Meyer’s holding that the word “customer” in § 2(d)
encompassed customers who purchased through a wholesaler,
as well as direct-buying customers, should be applied to every
use of the word “customer” in § 2(d) and not merely the third
use thereof.2 Section 2(d) states:
Payment for services or facilities for processing or
sale. It shall be unlawful for any person engaged in
commerce to pay or contract for the payment of
anything of value to or for the benefit of a customer of
such person in the course of such commerce as
compensation or in consideration for any services or
facilities furnished by or through such customer in
connection with the processing, handling, sale, or
offering for sale of any products or commodities
manufactured, sold, or offered for sale by such person,
unless such payment or consideration is available on
proportionally equal terms to all other customers
competing in the distribution of such products or
commodities.
In Fred Meyer, the Court held that § 2(d)’s reference to
“customers competing” with the favored customer included
36 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
retailers who purchased a supplier’s goods through a
wholesaler where the favored customer (respondent Fred
Meyer) purchased directly from the supplier. In that case,
respondent grocery store’s suppliers paid Fred Meyer in cash
or in kind to feature their products in an annual coupon book
without offering the same promotions to Fred Meyer’s
competitors, retailers who purchased through a wholesaler.
Id. at 344-45. In broadly defining “customers competing,”
the Court emphasized a functional analysis of the Act’s terms,
reasoning that “the proscription of § 2(d) reaches the kind of
discriminatory promotional allowances” at issue in the case,
but concluding that “Meyer’s retail competitors, rather than
the two wholesalers, were competing customers under the
statute.” Id. at 348. The Court specifically rejected the
“narrow definition of ‘customer’” offered by Fred Meyer,
“which becomes wholly untenable when viewed in light of
the central purpose of § 2(d) and the economic realities with
which its framers were concerned.” Id. at 349.
The usual presumption that “the same words used twice in
the same act have the same meaning,” 2A NORMAN J. SINGER,
STATUTES AND STATUTORY CONSTRUCTION § 46:06, at 193
(6th ed. 2000), operates with even greater force here, where
the same word is used twice within the same sentence within
the same subsection of the Act. See Gustafson v. Alloyd Co.,
513 U.S. 561, 568 (1995). Given the clear holding in Fred
Meyer that the third use of the word “customer” in § 2(d)
includes customers who purchase through a wholesaler, it
would take an extremely strong showing of Congressional
intent to defeat the conclusion that the first use of the word
“customer” in the same sentence carries the same meaning.
While the functional analysis used in Fred Meyer may not
weigh as heavily in favor of plaintiff-vendors’ claims here as
it did in favor of the FTC’s argument in that case, it provides
nothing near the showing necessary to establish that the
meaning of “customer” in § 2(d) is not uniform.

-- 18 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
37
In Fred Meyer, the Supreme Court based its interpretation
of the Robinson-Patman Act on the functional reasons behind
passage of the Act. Specifically, the Court reasoned that
Congress had intended to protect smaller businesses, who
could not afford to purchase directly from suppliers, against
the concessions larger chains would be able to force as a
result of their greater market power and direct dealings with
the supplier. Fred Meyer, 390 U.S. at 350-53. Here, of
course, the favored purchasers (the convenience stores) are
not large chain stores buying directly from the supplier, but
stores purchasing instead through a wholesaler. This
intermediary cannot serve to distinguish the factual situation
from that in Fred Meyer where, as here, the allegedly
discriminatory supplier (Philip Morris) and the favored
purchasers (the convenience stores) have direct dealings that
are the allegedly unlawful behavior. That is, the functional
difference between a direct purchaser and one who purchases
through a wholesaler is only important where the passage
through an intermediary insulates the supplier from its
retailers, such as in typical price discrimination claims where
the wholesaler, not the supplier, sets the actual price for the
retailer. Here, the complained-of behavior consists only of
promotional services rendered by Philip Morris directly to the
favored stores, without any involvement of the wholesaler.
Each of these promotions involves sustained contact and
exchange of goods, services, and cash between Philip Morris
and the stores. While the wholesaler sets the price of
cigarettes that the store purchases, discrimination in that
wholesaler-set price is not at issue in this case; the price
discount provided by the promotions is. Philip Morris sets
the terms of each promotion, monitors compliance with that
promotion, and provides the benefit of each promotion
directly to the convenience stores. See Judge Rogers’s op. at
5; Plaintiffs’ Brief at 5-7; Defendant’s Brief at 7-8.
Given the strong presumption in favor of unitary meaning
of terms in the same statutory provision, and the Supreme
Court’s decision in Fred Meyer, where the complained-of
38 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
services are provided directly to the retailer by the supplier,
I conclude that “customer” includes those favored customers
(the convenience stores in this case) who purchase through a
wholesaler, and accordingly conclude that all plaintiff-
vendors have statutory standing to challenge these promotions
as violations of § 2(d) and (e) of the Act.
III. If Plaintiffs’ Claims are Considered Under § 2(a),
the Proper Application of the Indirect-Purchaser
Doctrine Would Confer Statutory Standing on All
Plaintiffs
Although the promotional programs at issue are best
considered as alleged violations of § 2(d) and (e) for the
reasons noted above, even if they are considered as alleged
violations of § 2(a) of the Act, all vendors still have standing.
The meaning of “purchaser” in § 2(a) has been held to be
the same as that of “customer” in § 2(d) and “purchaser” in
§ 2(e). See American News Co. v. FTC, 300 F.2d 104, 109
(2d Cir.), cert. denied, 371 U.S. 824 (1962). That same court,
however, was doubtful when faced with the applicability of
Fred Meyer to § 2(a), expressing concern over requiring
vertical price maintenance that might run afoul of the
Sherman Act. See FLM Collision Parts, Inc. v. Ford Motor
Co., 543 F.2d 1019, 1026 & n.8 (2d Cir. 1976), cert. denied,
429 U.S. 1097 (1977). At least one other court has rejected
the application, choosing instead to apply the “indirect buyer”
rule of § 2(a) that predated Fred Meyer. See Iams Co. v.
Falduti, 974 F. Supp. 1263, 1271-72 (E.D. Mo. 1997). Other
courts, however, have chosen to apply Fred Meyer to § 2(a).
See White Indus., Inc. v. Cessna Aircraft Co., 657 F. Supp.
687, 701-03 (W.D. Mo. 1986), aff’d, 845 F.2d 1497 (8th
Cir.), cert. denied, 488 U.S. 856 (1988); Julius Nasso
Concrete Corp. v. DIC Concrete Corp., 467 F. Supp. 1016,

-- 19 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
39
3Julius Nasso inexplicably fails to distinguish FLM Collision Parts;
it is worth noting, ho wever, that FLM dealt with price differentiation
intra-purchaser — each customer of Ford was charged a different price
based on the identity of the ultimate purchaser, and FLM attempted to use
Fred Meyer to argue that Ford was required to equalize the price
ultimately charged to competing wholesalers. FLM Collision Parts, Inc.
v. Ford Motor Co., 543 F.2d 1019, 102 6-27 (2d Cir. 19 76), cert. denied,
429 U.S. 1097 (1 977). Ford sold its parts to its franchised dealers,
charging them less when they resold the part to an indep endent auto repair
shop than when they sold the part to an independent wholesaler such as
FLM, effectively p ricing FLM out of the wholesaling business. Id. at
1023-24. The key point for the FLM court was that Ford did not
discriminate between different purchasers, but instead betwe en its
purchasers in o ne guise — that of retailer — and another — that of
wholesaler. Ultima tely, FLM’s rejection of Fred Meyer’s applicability to
§2(a) seems very much confined to the facts of that case. Id. at 1026.
1019-20 (S.D.N.Y. 1979);3 see also Checker Motors Corp. v.
Chrysler Corp., 283 F. Supp. 876, 887 (S.D.N.Y. 1968),
aff’d, 405 F.3d 319 (2d Cir.), cert. denied, 394 U.S. 999
(1969) (treating Fred Meyer as a particular application of
indirect-purchaser rule). Appellee Philip Morris argues and
Judge Rogers accepts that this court’s case Barnosky Oils,
Inc. v. Union Oil Co. of California, 665 F.2d 74 (6th Cir.
1981), forecloses the application of Fred Meyer to § 2(a).
Barnosky dealt with a price-discrimination claim by an
independent jobber (Barnosky), who claimed that the
supplier’s (Union Oil) sales to its own branded retail outlets
at a lower price than Barnosky could afford to charge to its
retail customers violated § 2(a). Id. at 83. In rejecting that
claim, this court relied exclusively on the indirect-purchaser
doctrine and did not cite Fred Meyer in doing so. While I
doubt that this serves to preclude our application of Fred
Meyer to the potential § 2(a) violations in this case, and
Barnosky is in any event distinguishable as the more typical
case where the supplier exercises no control over the price or
the discount offered to the purchaser through the wholesaler,
I believe it is unnecessary to decide the question, because the
40 Lewis et al. v.
Philip Morris, Inc.
Nos. 01-6174/6502
4See, e.g., Barnosky Oils, Inc. v. Union Oil Co. of Ca l., 665 F.2d 74
(6th Cir. 19 81). In that case, Union was actually selling to Barnosky at
a lower price than to Union’s retail outlets; Barnosky’s claim on behalf of
its retail customers was that the price wasn’t “lower enough” to allow its
customers to compete. Courts have consistently rejected attemp ts to use
Robinson-Patman to preserve a particular level in a distribution system
into perp etuity, see Conoco Inc. v. Inman Oil Co., 774 F.2d 895 , 904 (8th
Cir. 1985); see also Barnosky, 665 F.2d at 83-84; FLM Collision Parts,
543 F.2d at 1025-26.
indirect-purchaser doctrine adopted in Barnosky properly
applies in this case.
The indirect-purchaser doctrine was adopted primarily to
stop suppliers from setting up dummy wholesalers to evade
the Act; in its simplest terms, the doctrine applies when the
supplier of a product so closely controls the terms of that
product’s resale through a wholesaler that the supplier can be
said to be the actual seller to the purchaser. HOVENKAMP,
supra, ¶ 2311b; see Purolator Prods., Inc. v. FTC, 352 F.2d
874, 883 (7th Cir. 1965), cert. denied, 389 U.S. 1045 (1968).
In the usual § 2(a) claim, the complained-of price
discrimination consists of prices set by the actual seller,
whether a direct seller or a supplier in control of its
wholesaler, that differ between one purchaser and another.
The price and the discrimination constitute an integrated
whole, and where retailers attempting to use the indirect-
purchaser rule cannot establish that suppliers control the price
set by the wholesaler, the suppliers are immune from
discrimination claims. Plaintiffs attempting to assert
themselves as indirect purchasers are usually the customers of
a wholesaler, competing with direct-purchasing customers,
and are hamstrung by their purchase from an intermediary
that sets the price and therefore perpetrates the complained-of
“discrimination.”4 Here, however, the complained-of price
discrimination is not the price set by the wholesaler, but the
discount set directly by Philip Morris. Inasmuch as the
provision of free goods constitutes a violation of § 2(a) as

-- 20 of 21 --

Nos. 01-6174/6502 Lewis et al. v.
Philip Morris, Inc.
41
indirect price discrimination, the provision of free goods to
certain retailers by Philip Morris is the § 2(a) violation — not
the price set by the wholesaler. Therefore, the extension of
that discount to certain retailers (the stores) and not to others
(the vendors), where Philip Morris controls entirely the terms
of that discount, constitutes price discrimination under the
Act.
IV. Conclusion
Because I believe the district court erred in granting
summary judgment to defendant with respect to the vendors
who do not purchase directly from Philip Morris, I would
reverse the judgment in its entirety and allow all plaintiffs to
proceed on both Counts I and II.

-- 21 of 21 --