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Monday, May 24, 2004

On May 20, 2004, in Blue Tree Hotels Investment (Canada), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., the Second Circuit dealt with issues involving section 2(c) of the Robinson-Patman Act. The plaintiffs owned certain hotels, which were managed by the defendants, which owned other competing hotels. The defendants, who were authorized to make purchases on behalf of the plainiffs' hotels, allegedly received kickbacks or rebates from some of the suppliers. The plaintiffs claimed that this violated section 2(c) of the Robinson-Patman Act.

The District Court dismissed the action, claiming that the plaintiffs lacked standing to assert the claim. It held that only competitors of the suppliers who were paying the kickbacks or rebates had such standing.

The Second Circuit disagreed with the District Court, but, nevertheless, agreed that the case should be dismissed. First, it held that the plaintiffs need not show "competitive injury," but rather "antitrust injury." The latter could be satisfied by showing that the defendants had violated the antitrust law and the plaintiffs had been injured as a result of the violation. Under this standard, the plaintiffs had standing to assert a claim.

The Court, however, held that the claim has pleaded could not stand. The issue of whether commercial bribery constituted a violation of the Robinson-Patman Act is an open one in the Second Circuit, and the Court did not resolve the issue in this case. It instead held that the plaintiffs had not set out a claim for commercial bribery. They had not alleged that the rebates or kickbacks were paid by the vendors with the intent to improperly influence the defendants' conduct on behalf of the plaintiffs. Unless someone intends to bribe a party, there can be no bribe. The absence of such an allegation, in the view of the Court, mandated dismissal.

The case can be found at the Second Circuit website.

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