FTC Backs Clorox Against Small Grocery Chain

MADISON, Wisc. (CN) - The FTC filed an amicus brief at the Seventh Circuit, supporting Clorox's decision to sell large packages of its products exclusively to Costco and Sam's Club, and opposing a small supermarket's price discrimination claims.

Woodman's Food Market sued Clorox Co. last year for its decision to stop selling Woodman's large packages of Clorox products. Woodman's has 15 stores in Wisconsin and Illinois.

Clorox told Woodman's it would be placed in a different distribution channel and would no longer be able to buy the large packages, which now are available only at warehouse stores such as Costco and Sam's Club.

In addition to its cleaners, Clorox makes Glad plastic bags, Fresh Step cat litter, K.C. Masterpiece barbecue sauce, Hidden Valley salad dressing, and Kingsford charcoal.

Woodman's claims Clorox violated federal laws against price discrimination, making it impossible for Woodman's to offer customers large packages with a low per-unit price.

A district court judge agreed, and Clorox appealed to the Seventh Circuit.

The Federal Trade Commission filed an amicus brief Monday in support of Clorox's position.

The FTC says that Section 2(e) of the Robinson-Patman Act "does not generally require manufacturers to sell the same package sizes to all buyers who demand them."

Woodman's claims it is losing sales to Costco and Sam's Club because many customers prefer to buy large packages. But the FTC said Clorox's decision does not discriminate against the supermarket chain.

"For decades, courts have recognized that manufacturers may decide with whom they will deal and that such choice benefits consumers," the FTC says in its brief.

It says the law applies only if the special package size is primarily a promotional item, not when the package size meets a demand for a lower unit price.

For example, manufacturers may not sell Halloween-themed candy multi-packs to some retailers but not others, because the "primary purpose of adding a Halloween theme to the packaging is 'to promote customers' resale of the candy bars.'"

While package size could be promotional, it must convey a message - not simply meet market demand for lower unit prices, the brief states.

For example, a manufacturer could make a "Super Bowl Size" product that is larger than normal. But Woodman's claims do not center around promotional items, the FTC says.

Permitting the lower court's decision to stand "would radically expand the scope of Section 2(e), subvert efficient manufacturer-retailer relationships throughout the economy, and contradict the central principles of modern antitrust law," the FTC says.

After the district judge ruled, Clorox said it would stop selling any of its products to Woodsman's, in a bid to render the lawsuit moot.

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