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Solved: Bayer Corporation produced Bayferrox a synthetic iron oxide pigment used


Bayer Corporation produced Bayferrox, a synthetic iron oxide pigment used to color paint, plastics, and building and concrete products. Hoover Color Corporation was one of several primary distributors of this pigment. Hoover therefore purchased Bayferrox from Bayer on a regular basis. For a number of years, Bayer had employed a volume-based incentive discount pricing system. Under this system, the price a distributor paid depended on the total amount of Bayferrox purchased by that distributor during the previous year. The quantities of Bayferrox purchased by Hoover were significantly smaller than those purchased by Hoover’s competitors, Rockwood Industries and Landers-Segal Co. (Lansco). As a result, Hoover received smaller price discounts from Bayer than Rockwood and Lansco received. In 1992, for instance, Hoover received a 1 percent discount off Bayer’s distributor market price for Bayferrox, whereas Lansco and Rockwood were given 6 percent and 10 percent discounts, respectively. Hoover sued Bayer on the theory that Bayer’s volume-based incentive discount pricing system involved price discrimination, in violation of § 2(a) of the Robinson- Patman Act. Bayer contended that it set its prices in a good faith attempt to meet competition in the marketplace, and that it was thus entitled to the protection of the affirmative defense set out in § 2(b) of the statute. Holding that Bayer was entitled to the protection of the “meeting competition” defense, the district court granted summary judgment in favor of Bayer. Was the district court’s decision correct?


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