Law & Courts

Justices Hear Case That Could Affect School Bus Market

By Andrew Trotter — November 08, 2005 3 min read
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School buses were not mentioned in oral arguments before the U.S. Supreme Court last week in an antitrust case involving heavy-truck sales, but the prices school districts pay for buses could be affected by the court’s eventual decision.

The National Association of State Directors of Pupil Transportation Services told the high court in a friend-of-the-court brief that upholding lower-court rulings being appealed in Volvo Trucks North America Inc. v. Reeder-Simco GMC Inc. (Case No. 04-905) would discourage school bus manufacturers from giving discounts to help their dealers win competitions for sales to districts.

Reeder-Simco, a dealer in Volvo trucks in Fort Smith, Ark., sued Volvo Trucks North America in 2000, claiming that the truck manufacturer unfairly favored other dealers by giving them bigger discounts, or price concessions, than it gave to Reeder, in violation of the federal Robinson-Patman Act, an antitrust law.

A jury awarded triple damages to the dealership based on Reeder-Simco’s alleged economic losses, a result that was upheld last year 2-1 by a panel of the U.S. Court of Appeals for the 8th Circuit, in St. Louis.

Volvo argues that the Robinson-Patman law, passed in 1936, has never applied to dealership arrangements typical for heavy truck and school bus sales, in which dealers do not technically purchase the product from the manufacturer until they have arranged a sale to a customer.

By then, Volvo argues, the competition for the customer is over. In addition, it says, Reeder-Simco was not in direct competition for many of the truck sales in which other dealers allegedly received favored treatment.

Heavy Commodity

Charles Gauthier, the executive director of the school transportation group, says that a school bus manufacturer, in helping one of its dealers win a school district contract, typically will offer a price concession that may reduce the manufacturer’s profits but enlarge its market share or make inroads into a new territory. Such selective discounting would not occur if the company was “looking over its shoulder” at the antitrust law because it was not giving the same concession to all its dealers, he said. Loss of selective discounts would “seriously impair the ability of local and state governments to purchase new school buses,” the group’s brief states.

In the Oct. 31 oral arguments, Justice Stephen G. Breyer suggested that the “continuous” relationship between Volvo and its dealers, as seller and buyers, and the fact that customers typically shop around among dealers, might be a form of sales competition under the antitrust law.

“Suppose that a case came up involving two Volvo dealers and specially ordered goods with competitive bidding,” and over time the favored dealer was given higher concessions, Justice Breyer wondered, and the other dealer was given lower concessions “and therefore is missing out of sales or getting lower profits.”

Roy T. Englert Jr., the lawyer for Volvo, disagreed with that broad view. He argued later that trucks ordered with custom features are not a commodity like salt, so truck sales could not be compared reliably with one another.

Thomas G. Hungar, the U.S. deputy solicitor general, who also argued on Volvo’s behalf, challenged Reeder’s method of judging its alleged losses by matching up sales of similar vehicles by other dealers who received larger discounts than Reeder did. Mr. Hungar described that “as picking and choosing” among sales to find ones that create a pattern.

Justices pressed the lawyer representing Reeder, Carter G. Phillips, about the dealership’s claims of loss because of the disfavor by Volvo. Mr. Phillips noted evidence that in 102 sales of “exactly the same vehicles,” other dealers had received a higher discount from Volvo than Reeder was given. He said that constituted “substantial price discrimination across time,” even if Reeder was not competing directly on those sales.

A version of this article appeared in the November 09, 2005 edition of Education Week as Justices Hear Case That Could Affect School Bus Market

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