Question

4. The Utah Pie Company made and sold frozen pies in the Salt Lake City area. The company was an immediate success; in 1958, it had two-thirds of the frozen pie market in Salt Lake. In response to the loss of their market share, three large pie makers – Carnation, Pet, and Continental—cut their prices to try to regain a share of the market. Their strategy was partly successful, as their market share rose from 28% to 46% in 1961 (while Utah Pie’s share fell to 45% of the market.) Carnation, Pet, and Continental sold their pies for less in Utah, but not in other market areas such as California. The cost of producing and distributing the pies was nearly identical in all markets. Utah Pies sued the three competitors for violation of the Robinson-Patman Act. Did the competitors violate the Act and if so, what kind of injury did Utah Pies allege? Explain.

Answer 1

Q. Did the competitors violate the Act and if so, what kind of injury did Utah Pies allege? Explain.

Answer.

The Utah Pies alledged that due to the violation of the Robinson-Patman Act by Carnation, Pet, and Continental, its market share dropped from two third in 1958 to 45% in 1961 whereas the three competitors' market share rose to 46% in in 1961 from 28% in 1958.

Yes, it seems that Carnation, Pet, and Continental voilated the Robinson-Patman Act by lowering the price of Pie in the Salt Lake City area compared to California. The Supreme Court verdict that under the "Robinson-Patman Act, a national frozen pie seller that sought to enter a new geographical market could not charge a lower price in the new market than it charged in its existing markets", also clearly indicates that Carnation, Pet, and Continental violated the Robinson-Patman Act.