RJR promotes Doral.
The Sixth Circuit just concluded that R.J. Reynolds didn’t commit price discrimination under the Robinson-Patman Act by basing discounts to wholesalers on their sales of RJR’s "savings" (non-premium) brands. The discount program lowered prices on all RJR brands if wholesalers met targets for sales of the RJR savings brands versus non-RJR savings brands. The program aimed to further RJR’s goal of increasing sales of its key savings brand (Doral). Smith Wholesale Co., Inc. v. R.J. Reynolds Tobacco Co., No. 05-6053 (6th Cir. Feb. 27, 2007) (affirming summary judgment for RJR).
To Blawgletter, the interesting part of the opinion deals with the question of whether RJR made its deeper discounts "functionally available" to the complaining wholesalers. The court rejected the wholesalers’ argument against functional availability — that the nature of their clientele prevented them from taking full advantage of the RJR program. Quoting the magistrate judge who recommended dismissal, the court said too bad for you: "Defendant’s program is designed to promote its financial welfare at the expense of that of the wholesalers. Perhaps it is unfair, but it is not illegal."