The U.S. Supreme Court on Monday declined to hear a petition from Living Essentials, the maker of 5-Hour Energy, challenging a Ninth Circuit decision regarding price discrimination claims under the Robinson-Patman Act. The ruling allows a lawsuit brought by seven wholesalers against Living Essentials to proceed, with allegations that the company provided Costco Wholesale with illegal promotional funding, enabling it to sell 5-Hour Energy at a discounted price.
Ninth Circuit Ruling and Price Discrimination Claims
The case centers around whether the seven wholesalers are in direct competition with Costco Wholesale, a key requirement for price discrimination claims under the Robinson-Patman Act. The Ninth Circuit reversed a lower court decision, which had ruled that the wholesalers did not compete with Costco because they did not operate “at the same functional level.”
In reviving the suit, a Ninth Circuit panel applied a three-pronged test from its 1964 Tri-Valley Packing Association v. FTC decision, instructing the trial court to reconsider whether the wholesalers and Costco were indeed competitors. The appellate panel found that, economically, both Costco and the wholesalers function as distributors of 5-Hour Energy, and the district court erred in ruling otherwise.
