PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

HOOVER COLOR CORPORATION,
Plaintiff-Appellant,

v.                                                                  No. 98-2238

BAYER CORPORATION,
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of Virginia, at Roanoke.
Jackson L. Kiser, Senior District Judge.
(CA-96-841-R)

Argued: September 22, 1999

Decided: December 3, 1999

Before WILKINS, WILLIAMS, and MOTZ, Circuit Judges.

_________________________________________________________________

Reversed and remanded by published opinion. Judge Motz wrote the
opinion, in which Judge Wilkins and Judge Williams joined.

_________________________________________________________________

COUNSEL

ARGUED: Dennis P. Brumberg, BRUMBERG, MACKEY &
WALL, P.L.C., Roanoke, Virginia, for Appellant. Thomas Demitrack,
JONES, DAY, REAVIS & POGUE, Cleveland, Ohio, for Appellee.
ON BRIEF: Mark A. Black, BRUMBERG, MACKEY & WALL,
P.L.C., Roanoke, Virginia, for Appellant. Susanne H. Deegan,
JONES, DAY, REAVIS & POGUE, Cleveland, Ohio; Michael F.
Urbanski, WOODS, ROGERS & HAZLEGROVE, Roanoke, Vir-
ginia, for Appellee.
OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

A buyer of synthetic iron oxide pigment brought this action assert-
ing that the company selling the pigment engaged in discriminatory
pricing in violation of the Robinson-Patman Act. The district court
found that the seller established an affirmative defense by demonstrat-
ing that it set its prices in a good faith attempt to meet competition
in the marketplace and, therefore, granted the seller summary judg-
ment. This "meeting competition" defense, however, requires proof of
a good faith response not just to general competition in the market-
place, but to the "equally low price of a competitor." Because dis-
puted facts remain as to whether the seller's prices were the result of
a good faith attempt to meet a competitor's prices, we reverse and
remand for further proceedings.

I.

Hoover Color Corporation is one of several primary distributors of
Bayferrox, a synthetic iron oxide pigment used to color paint, plastics,
and building and concrete products. Hoover filed this suit against the
producer of Bayferrox, Bayer Corporation, for price discrimination
under the Clayton Act, as amended by the Robinson-Patman Anti-
Discrimination Act, 15 U.S.C. § 13 (1994). Section 2(a) of the
Robinson-Patman Act provides in pertinent part:

          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 and quality, where either or any
          of the purchases involved in such discrimination are in com-
          merce, where such commodities are sold for use, consump-
          tion, or resale within the United States or any Territory
          thereof or the District of Columbia or any insular possession
          or other place under the jurisdiction of the United States,
          and where the effect of such discrimination may be substan-
          tially to lessen competition or tend to create a monopoly in
          any line of commerce, or to injure, destroy, or prevent com-
          petition with any person who either grants or knowingly

                    2
          receives the benefit of such discrimination, or with custom-
          ers of either of them . . . .

15 U.S.C. § 13(a) (emphasis added).

Hoover alleges that Bayer discriminated in favor of its large dis-
tributors of Bayferrox, in violation of the Robinson-Patman Act, by
implementing a volume-based incentive discount pricing system.
Under this system, the price each distributor paid for Bayferrox
depended on the total amount of the product it purchased. Hoover,
which purchased substantially smaller quantities of Bayferrox than
either of its two competitors--Rockwood Industries and Landers-
Segal Company (Lansco)--paid significantly more for the Bayferrox
than its competitors. For example, in 1992, Bayer discounted Hoo-
ver's comparatively small 2.6 million pound purchase of Bayferrox
by only 1% off the distributor market price; but Lansco, by purchas-
ing 13.3 million pounds of Bayferrox, received a 6% discount and
Rockwood, by purchasing 27.1 million pounds, received the equiva-
lent of an additional 4% discount beyond Lansco's. In addition, the
prices Bayer charged Rockwood also might be reduced if Rockwood
presented Bayer with lower price offers from other sellers and Bayer
chose to meet those offers. In fact, from 1985 until 1994, the
Rockwood-Bayer agreements required Rockwood to present to Bayer
any lower offers it received from other reputable producers; only if
Bayer did not match the price within 14 days did Rockwood have the
option of purchasing from the alternate producer. No distributor knew
of these or any other provisions in its competing distributors' con-
tracts.

For invoicing purposes, the prices paid by each distributor were
based on the volume purchased the previous year. If a distributor
bought more or less Bayferrox than it had the previous year (thus enti-
tling it to a different discount), Bayer did not charge or refund the dif-
ference to the distributor until the end of February of the following
year. Hoover claims that, particularly because of the year delay in
obtaining the benefit of a greater volume purchase, the lower prices
offered to its larger competitors were not functionally available to it
even if the same prices were theoretically available to all distributors.

Bayer instituted its system of volume-based incentive discounts in
1980. At that time, Bayer was building a large manufacturing plant

                     3
in New Martinsville, West Virginia, which it completed at the end of
1980. Hoover maintains that Bayer pursued its volume-based pricing
strategy, which assertedly substantially lessened competition among
Bayferrox distributors and unfairly injured Hoover, in order to obtain
the bulk orders necessary to make profitable the New Martinsville
plant, with its attendant high fixed costs.

The district court granted Bayer's motion for summary judgment.
The court found that the "uncontroverted evidence. . . establishe[d]
that Bayer offered its lower prices to Rockwood and Lansco out of
a good faith competitive necessity to meet competition for their busi-
ness," thus meeting the requirements for an affirmative defense under
§ 2(b) of the Robinson-Patman Act. Section 2(b) provides:

          [N]othing herein contained shall prevent a seller rebutting
          the prima-facie case thus made by showing that his lower
          price or the furnishing of services or facilities to any pur-
          chaser or purchasers was made in good faith to meet an
          equally low price of a competitor, or the services or facili-
          ties furnished by a competitor.

15 U.S.C. § 13(b).

Hoover appeals.

II.

Congress enacted the Robinson-Patman Act to prevent a large
buyer from "secur[ing] a competitive advantage over a small buyer
solely because of the large buyer's quantity purchasing ability." FTC
v. Morton Salt Co., 

, 43 (1948).

Originally, the Clayton Act had provided that "nothing contained
in it should prevent discrimination in price . . . on account of differ-
ences in . . . quantity of the commodity sold." 

marks omitted). The original Clayton Act had also"allowed as one
defense a demonstration that the price concession was `made in good
faith to meet competition.'" FTC v. Sun Oil Co., 

, 516
(1963) (quoting 38 Stat. 730 (1914)). After some years under this stat-

                     4
utory regime, Congress determined that the protection afforded small
buyers was "`inadequate, if not almost a nullity.'" Morton 

(quoting H.R. Rep. No. 74-2287, at 7 (1936)). Accordingly,
Congress passed the Robinson-Patman Act, which amended the Clay-
ton Act "to limit `the use of quantity price differentials to the sphere
of actual cost differences,'" 

Rep. No. 74-2287, at 9
(1936)), and to limit the meeting competition defense "to protect only
[price] discriminations made `to meet an equally low price of a com-
petitor.'" Sun 

.

The Robinson-Patman Act thus seeks to increase competition by
regulating large buyers' economic power. When one or a few large
buyers dominate a market in which many suppliers compete for sales,
these buyers can, if unrestrained, force the suppliers to sell at such
low prices as to prevent new buyers from entering the market. Section
2(a) of the Act prohibits this. But because § 2(a) does not confine its
ban on price discrimination to those situations in which the desire for
increased competition would justify legal constraints, Congress pro-
vided sellers with the § 2(b) "meeting competition" affirmative
defense (albeit in a more limited form than in the original Clayton
Act).

This scheme has not enjoyed wide approval. Indeed, professional
and academic opinion has "almost uniformly condemned" the
Robinson-Patman Act. See, e.g., Richard A. Posner, The Robinson-
Patman Act: Federal Regulation of Price Differences 1 (1976). Criti-
cism has ranged from its drafting, see Automatic Canteen Co. of
America v. FTC, 

, 65 (1953) (Frankfurter, J.) (noting that
"precision of expression is not an outstanding characteristic of the
Robinson-Patman Act"), to its underlying rationale, see Robert H.
Bork, The Antitrust Paradox 382 (1978) (describing the Robinson-
Patman Act as "the misshapen progeny of intolerable draftsmanship
coupled to wholly mistaken economic theory"). We must nonetheless
attempt to interpret and apply the Robinson-Patman Act, whatever its
faults, as written and intended by Congress.

The Supreme Court has provided us with substantial guidance in
this pursuit. The Court has explained that to establish a prima facie
case of price discrimination under § 2(a), a plaintiff must prove: (1)
a seller sold the same product at different prices to different purchas-

                     5
ers, see FTC v. Anheuser-Busch, Inc., 

, 550 (1960), and
(2) such differences in price reasonably may cause an injury to com-
petition. See Falls City Indus., Inc. v. Vanco Beverage, Inc., 

, 435 (1983). A plaintiff may demonstrate the first element--the
price difference--through evidence of volume-based discounts that
are theoretically, but not functionally, available to all buyers. See
Morton 

. The second element--possible injury to
competition--so obviously follows from the first that it "is estab-
lished prima facie by proof of a substantial price discrimination
between competing purchasers over time." Falls 

; see also Morton 

("It would greatly handicap
effective enforcement of the Act to require testimony to show that
which we believe to be self-evident, namely, that there is a `reason-
able possibility' that competition may be adversely affected by a prac-
tice under which manufacturers and producers sell their goods to
some customers substantially cheaper than they sell like goods to the
competitors of these customers.").

If a buyer makes out a prima facie case of price discrimination
under § 2(a), a seller can nonetheless avoid liability under § 2(b) if it
can demonstrate that it set its prices in a good faith attempt to meet
"an equally low price of a competitor." 15 U.S.C. § 13(b). This affir-
mative defense "requires more than a showing of facts that would
have led a reasonable person to believe that a lower price was avail-
able to the favored purchaser from a competitor." Falls 

. Rather, to establish the defense, a seller must also prove that
"the `lower price . . . was made in good faith to meet' the competitor's
low price." 

U.S.C. § 13(b)) (emphasis added by
Supreme Court). Good faith is at the heart of the defense, and good
faith "`is a flexible and pragmatic, not technical or doctrinaire, con-
cept. . . . Rigid rules and inflexible absolutes are especially inappro-
priate in dealing with the § 2(b) defense; the facts and circumstances
of the particular case, not abstract theories or remote conjectures,
should govern its interpretation and application.'" United States v.
United States Gypsum Co., 

, 454 (1978) (quoting
Continental Baking Co., 63 F.T.C. 2071, 2163 (1963)).

Because of this emphasis on intent and good faith and because the
seller has the burden of proving the affirmative defense, courts have

                     6
rarely granted a seller judgment as a matter of law on the basis of the
defense. As the Eleventh Circuit recently explained:

          [A] legal conclusion that the meeting competition defense
          has been established is rarely, if ever, reachable. . . . [I]n the
          normal course of affairs the summary judgment movant
          does not bear the burden of proof at trial. Here our movant
          does, for the statute places the burden of establishing the
          defense on the [defendant] not the [plaintiff]. As is well
          established, in a summary judgment proceeding the party
          against whom the burden of proof falls at trial faces a chal-
          lenge more difficult than otherwise. . . . Here the appellees
          must do more than put the issue into genuine doubt; indeed,
          they must remove genuine doubt from the issue altogether.
          Second, the test for establishing the section 2(b) defense
          makes the removal of genuine doubt well nigh impossible.
          The test for establishing the defense is particularly fact-
          bound. . . . As the standards suggest, these facts are more
          attuned with a jury's discovery capabilities than a judge's,
          particularly so in a complex antitrust context like the present
          one. Furthermore, the concept of good faith lies at the core
          of the defense. Like the concept of "good faith" in other
          legal standards, the concept here concerns itself with the
          belief of those invoking its protection. Thus, issues of credi-
          bility are inherently bound up with a decision on the section
          2(b) defense and in a summary judgment proceeding, of
          course, issues of credibility are beyond a judge's ken.

           Altogether, these factors weigh heavily against any
          attempt to dispose of section 2(b) issues on summary judg-
          ment.

Alan's of Atlanta, Inc. v. Minolta Corp., 

, 1425-26
(11th Cir. 1990) (citations and quotation marks omitted); see also
William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 

, 1048 (9th Cir. 1981) (holding that even an "admittedly
small doubt" that a seller's price reductions were a good faith
response to competition required reversal of the district court's judg-
ment as a matter of law to the seller), cert. denied, 

(1982).

                     7
III.

Notwithstanding the heavy burden imposed on a seller attempting
to obtain summary judgment on the basis of the meeting competition
defense, the district court found that Bayer had met that burden here.
After assuming, without deciding, that Hoover had made out a prima
facie case of price discrimination under § 2(a), the district court con-
cluded that Bayer had established its entitlement to the affirmative
defense in § 2(b). The following footnote from the district court's
opinion reflects its approach:

          The meeting competition defense permits exactly what
          § 2(a) was amended to prohibit: large purchasers using their
          greater purchasing power to force sellers to sell their goods
          to the large purchasers at prices lower than the sellers sell
          to small purchasers. It seems to me, that in a case such as
          the one at bar, where the seller can document competition
          in the market and the threat of reduced sales as a result of
          that competition, Congress' goals in passing Robinson-
          Patman are effectively circumvented and the seller necessar-
          ily can not be held liable for price discrimination.

If a seller could prove the meeting competition defense under the
Robinson-Patman Act by "document[ing] competition in the market
and the threat of reduced sales as a result of that competition," as the
district court believed, we would agree that indisputably Bayer has
established the defense in this case. Such a standard, however, would
enable nearly all sellers to demonstrate that they price their goods or
services in response to competition in the market. Most markets are
competitive and pricing is therefore almost always driven by consid-
erations of competitive pressures, whether from direct competitors
who provide a highly similar good or from those who provide a suit-
able substitute.

Therefore, if § 2(b) of the Robinson-Patman Act provided a
defense to every seller who could document a good faith attempt to
meet general competition in the market place, then the defense would,
as the district court recognized, virtually obliterate the protection
Congress sought to provide buyers in § 2(a) of the Act. We need not
consider whether anything would be left of § 2(a)'s ban on discrimi-

                     8
natory pricing under such a statutory scheme because, although Con-
gress provided a generous defense in § 2(b), that defense is
considerably more limited than the district court acknowledged.
Indeed, as noted above, the original Clayton Act provided a broad
meeting competition defense very similar to that envisaged by the dis-
trict court; however, Congress specifically passed the Robinson-
Patman Act to amend the Clayton Act and circumscribe that defense.
See Sun 

.

In § 2(b), as amended, Congress provided sellers a defense when
that prohibition would have a direct anti-competitive effect. Sec-
tion 2(b) provides a seller no defense from § 2(a)'s ban on discrimina-
tory pricing when that pricing is based on general competition in the
market, but affords a seller an absolute affirmative defense when its
prices are set "in good faith to meet an equally low price of a
competitor or the services or facilities furnished by a competitor." 15
U.S.C. § 13(b) (emphasis added).

Moreover, the Supreme Court has made it plain that§ 2(b) must be
applied in accordance with its literal language and is not to be inter-
preted more expansively. The Court has repeatedly emphasized the
necessity of proof of a good faith attempt to match an individual com-
petitor's price. For example, in FTC v. A.E. Staley Mfg. Co., the Court
explained that to avoid liability under the § 2(b) "meeting competi-
tion" defense, the seller must "at least" show that its "price was made
in good faith to meet a competitor's" and that a reasonable person
would believe that "the granting of a lower price would in fact meet
the equally low price of a competitor." 

, 759-60 (1945);
accord Falls 

; Gypsum , 438 U.S. at 451. Hence,
the Court itself has recognized that § 2(b)"places emphasis on indi-
vidual competitive situations, rather than upon a general system of
competition." Staley 

.

To be sure, a seller can establish that it acted in good faith to meet
a competitor's price by "efforts falling short of interseller verifica-
tion." 

. For example, a seller can rely on evi-
dence that it received "reports of similar discounts from other
customers," or that it "was threatened with termination of purchases
if the discount were [sic] not met." 

A seller can also dem-
onstrate its good faith by showing that it acted to"corroborate the

                    9
reported discount by seeking documentary evidence or by appraising
its reasonableness in terms of available market data," or that it relied
on "past experience with the particular buyer in question." 

proof of "[a] good faith belief, rather than absolute certainty" is
all that is necessary. 

But, in order to avail itself of the
defense a seller must, in the final analysis, demonstrate to the satisfac-
tion of "a reasonable and prudent person" that it offered a lower price
with a good faith belief that "the granting of a lower price would in
fact meet the equally low price of a competitor." Staley 

.

The question before us then is whether the uncontroverted evidence
establishes that Bayer set its volume-based discount prices in a good
faith effort to meet an equally low price offered by a competitor.

IV.

Bayer claims that undisputed evidence does establish that the vol-
ume discounts "were a good faith response to competitive offers that
were available to [its] distributors." Brief of Appellee at 38. Bayer
relies on three kinds of evidence to support its assertion of the
defense.

First and principally, Bayer relies on evidence that the market for
iron oxides was apparently very competitive. For example, in 1992
Rockwood's parent company purchased a potential competing sup-
plier of synthetic iron oxides, thereby decreasing Rockwood's
demand for Bayferrox and increasing its market power against Bayer.
Moreover, imported goods from China, Mexico, India, Austria, and
elsewhere provided distributors with lower-cost alternatives to Bay-
ferrox. Given these available alternatives and the competitive market
for iron oxides, Bayer argues that Rockwood and other distributors
would purchase more iron oxide pigments from Bayer if the price
were lower, and less if the price were higher. This evidence undoubt-
edly demonstrates the generally competitive nature of the iron oxide
market, but it says nothing about actual or imminent lower price
offers made by Bayer's competitors and matched by Bayer with its
volume discount pricing structure. The fact that a market may have
been "intensely competitive" in no way precludes a determination that

                     10
the seller may have violated the Robinson-Patman Act. See William

.

Bayer also relies on two specific instances in which Rockwood and
Lansco presented it with lower prices from a competitor and asked
Bayer to meet those prices. This evidence also fails to prove Bayer's
entitlement to the meeting competition defense. Although it may well
establish that Bayer's distributors twice received lower price offers
from other suppliers and sought to have Bayer match such offers, the
evidence cannot establish that Bayer set its prices"to meet" a compet-
itor's lower price because Bayer expressly refused to meet the com-
petitor's lower prices on both occasions. Because Bayer did not match
either offer, Bayer cannot rely on these threats to establish incontest-
ably that its volume discounts constituted a "good faith" attempt "to
meet an equally low price of a competitor." 15 U.S.C. § 13(b).

Finally, Bayer presents statements from Rockwood and Lansco that
they would purchase less Bayferrox if Bayer did not reduce its prices.
Such evidence may well establish the existence of a competitor's
offer, or threatened offer, to which Bayer reasonably responded by
increasing its prices. See Great Atl. & Pac. Tea Co. v. FTC, 

, 74, 83-84 (1979) (holding that seller proved meeting competition
defense by producing evidence during FTC factfinding hearing that
it lowered its price in response to a statement by a large, long-time
buyer that seller's bid was far "out of line" with "a [competitor's] bid
in [the buyer's] pocket.").

Bayer's evidence, at least at this juncture, however, is considerably
less compelling than that in the case on which Bayer so heavily relies
--Reserve Supply Corp. v. Owens-Corning Fiberglass Corp.--one of
the very few instances in which a court has upheld summary judg-
ment to a seller on the basis of the meeting competition defense. 

(7th Cir. 1992). In Reserve Supply, the defendant sellers
offered substantial evidence that a customer, or potential customer,
asked them to match a price offered by one of the sellers' competi-
tors. See 

Furthermore, the sellers demonstrated that, pursu-
ant to their established practices, they had compared the lower price
offers to other reports of competitive prices in the marketplace to sub-
stantiate the bona fides of these offers before acting to meet the com-

                    11
petitors' prices. See 

has offered no evidence
equivalent to that offered by the sellers in Reserve Supply.

Moreover, and perhaps more importantly, Hoover has proffered
significant and direct evidence which, if believed, could rebut Bayer's
assertion of the § 2(b) defense. This evidence also distinguishes the
present case from Reserve Supply, in which the plaintiffs proffered no
direct evidence to rebut the sellers' proof that they matched specific
competitive offers. Hoover first points to evidence related to a possi-
ble alternative motive for Bayer's volume-based discount pricing sys-
tem. Hoover offered undisputed evidence that Bayer wanted to
maintain a high volume of business in Bayferrox to make cost effec-
tive its large plant in New Martinsville. Indeed, several of Bayer's
own executives so testified. For example, one explained that "the
spirit behind all of these volume-based contracts was to begin to load
the facility that we had just built" and affirmed that this goal contin-
ued through 1997. Another executive similarly testified that "the
intent [of the volume-based discounts] . . . was to offer a structure that
would give [Bayer] the volume utilization of the [New Martinsville]
plant." Hoover maintains that this evidence demonstrates that Bayer's
sole motive in using volume discount pricing was not to meet a com-
petitor's price, but rather to develop the large volume of sales neces-
sary to utilize the New Martinsville plant profitably.

Bayer acknowledges, as it must, that one of the reasons it engaged
in volume discount pricing was to keep the New Martinsville plant
increasingly active. Bayer asserts, however, that"[t]here is . . . no
inconsistency" between its need to increase volume for the New Mar-
tinsville plant and its claim that volume discount pricing was simply
a "respon[se] to the competitive offers." Although this assertion is
true, it lends little support to Bayer's § 2(b) defense. Although
increasing volume and responding to competitive offers are poten-
tially consistent, they are not necessarily consistent. A seller's attempt
to set prices in order to satisfy the high volume necessary to operate
its plant successfully certainly does not establish that it also set prices
in a good faith effort to meet a competitor's prices, and Bayer must
prove the latter. On the present record, in view of the evidence as to
the New Martinsville plant and its impact on Bayer's business, a fact-
finder could reasonably conclude that Bayer engaged in volume dis-
count pricing not to match a competitor's prices but simply to grow

                     12
its business with the kinds of "aggressive price reductions condemned
by the Robinson-Patman Act." William Inglis , 668 F.2d at 1047.

Hoover also proffered evidence that the threats Bayer received
from its larger distributors--that they would purchase less Bayferrox
if no price reduction was forthcoming--may not have played a role
in motivating Bayer's volume discounts. In his deposition testimony,
Rockwood's president stated that Bayer "minimized" Rockwood's
repeated general warning about the availability of lower-priced alter-
natives to Bayferrox and "didn't give [the warning] a lot of credibil-
ity." Bayer "basically said [substitution of lower priced imported iron
oxide pigments] wasn't that big a concern." Hoover also points to the
fact that Bayer, not Lansco, initiated negotiations for the 1994 Bayer-
Lansco agreement. A possible inference from this uncontroverted fact
is that Lansco did not have a lower offer from a competitor to moti-
vate renegotiation of its contract with Bayer to obtain more favorable
terms. A factfinder need not, but reasonably could, conclude that this
undisputed evidence indicates that the threats of Bayer's distributors
to change suppliers did not influence Bayer's pricing structure.

Furthermore, provisions in the 1985 and 1990 Rockwood-Bayer
agreements lend additional support for the possible conclusion that
Bayer did not create the volume-based discount pricing system to
match the offers of a competitor. These agreements contain, in addi-
tion to the provision for volume discounts, a separate express require-
ment that Rockwood provide Bayer the opportunity to match any
lower price offer before Rockwood accepted such an offer. Thus,
wholly apart from the volume-based discounts, the contracts provide
an explicit mechanism for Bayer to receive and match competing
offers. Given this evidence, a factfinder could reasonably determine
that Bayer did not need or intend the volume discounts to match com-
peting offers.

For the foregoing reasons, we must conclude that at this juncture
Bayer has not demonstrated its entitlement as a matter of law to the
"meeting competition" defense. Accordingly, we reverse the district
court's grant of summary judgment to Bayer on this basis. We note
that because the district court assumed without deciding that Hoover
made out a prima facie case of price discrimination under § 2(a), it

                    13
did not reach any of Bayer's alternative arguments. We similarly do
not reach those arguments and express no opinion as to their validity.

REVERSED AND REMANDED

                    14