Ocean Spray Case Delves Into
Robinson-Patman And PACA Violations
Jim Prevor’s Perishable Pundit, June 1, 2007
Our coverage of the dispute between Jim & Theresa Nolan and The Nolan Network with Ocean Spray began with an article in Pundit sister publication, PRODUCE BUSINESS, entitled Special Report: Ocean Spray Sued By Longtime Associates. We followed that up with our first piece in the Pundit, which we called Ocean Spray Trial Will Shed Light On Business Practices. We then asked Will Retailers Wait For A Trial To Act On Ocean Spray Controversy?
There is not much controversy over the fact that Ocean Spray offered lower prices to Costco and HEB than it did to other warehouse clubs and supermarkets. Our point has been, forget the legalities, every supermarket and club store is going to be lined up at Ocean Spray’s door demanding recompense.
One of the main legal issues though is whether, in fact, Ocean Spray’s offering of a lower price to Costco than it did to Sam’s, BJs or other clubs was a violation of the Robinson-Patman Act. A law that, generally speaking, requires that vendors offer identical prices to those in an identical class of trade.
Ocean Spray defends itself on the basis that its price to Costco was a response to a price from Northland. This would, apparently, be legal under Robinson-Patman.
Sharlene Taylor, who was the cranberry buyer for Costco dealing with Ocean Spray, gave a deposition for the case. You can read excerpts from it right here.
The Pundit is neither judge nor jury here, but we have a Dickens of a time reading Ms. Taylor’s deposition and getting from it that Ocean Spray’s pricing was “in response” to any offer from Northland.
First, Ms. Taylor explains that whatever it was Northland was presenting, Costco had no interest in it:
Question: “…What, if anything, can you recall about your discussions with Northland with regard to the three-pound pack?”
Answer: They had created this pack. They had given me a specific price that was, my understanding, somewhat negotiable; but the pack that they had created essentially turned out to be something that, after showing it off to my superiors, we were not interested in pursuing”
This itself seems to weaken Ocean Spray’s argument. If there was no other item on the table, how could Ocean Spray’s price be a response? Besides, Ms. Taylor is later asked specifically about the issue of Ocean Spray responding to a Northland offer:
Question: Do you have any recollection of whether the price with Ocean Spray was a negotiated based on the offer from Northland?….
Answer: No, it was not based on the offer from Northland that I recall.
This seems pretty much as clear as one can get in these complicated cases. We read all these depositions and come away saying that Ocean Spray wanted the business, Costco wanted a good price and Northland doesn’t seem to us to even enter into the matter.
A lot of the lawsuit has to do with Robinson-Patman and similar issues on the retail side. We wonder about violations of the Perishable Agricultural Commodities Act and other laws protecting growers.
The question is how did Ocean Spray, as a cooperative, pay its growers? And there are two issues:
First, how was business assigned between growers? If Sam’s Club is paying $25 and Costco is paying $21 for the same thing — how was it decided who got the cheap Costco order and who got the rich Sam’s Club order — and wouldn’t this allocation affect grower returns?
The complaint also contains an allegation that when C&S, as the buyer for BJs, objected and demanded compensation, C&S was told to claim bad quality on a few loads.
If this happened, wouldn’t it have impacted the returns of the growers who supplied this falsely labeled “poor quality” fruit?
Shouldn’t the USDA be investigating this matter?