A California federal judge agreed this week that 5-Hour Energy maker Living Essentials LLC created an unfair competitive environment for family-owned wholesalers by offering “disproportionate promotions” to Costco, but stopped short of ruling it an antitrust violation.
The seven-year-long case accused 5-Hour Energy’s parent company of illegal price discrimination, favoring Costco with “discriminatory advertising and rebate promotions,” as well as lower wholesale pricing, in violation of the Robinson-Patman antitrust law.
The case was first filed in February 2018 by U.S. Wholesale Outlet & Distribution Inc., who were soon joined that summer with additional plaintiffs Trepco Imports & Distribution Ltd., Eashou Inc., Sanoor Inc., YnY International Inc., California Wholesale and L.A. International Corp.
An initial jury verdict in 2019 ruled in favor of Living Essentials, with the court finding that Costco and the wholesalers “operate at different levels,” according to a Law360 report. The has since gone through a lengthy appeals process.
In 2003 the plaintiffs ultimately won a favorable ruling from the Ninth Circuit, which determined that the original jury verdict “did not necessarily find that the wholesalers and Costco were not competing.”
The lawsuit even nearly made it to the U.S. Supreme Court, where Living Essentials claimed that the appeals order threatened to “expose more companies to liability over price discounts,” according to a Reuters report. However, the court declined in October to hear the case.
This latest decision found that the wholesalers did prove there is competition between themselves and Costco, and ruled against Living Essentials’ claim that its promotions offered to Costco are “proportionally equal” to less beneficial offers it made to the plaintiffs.
However, Judge Consuelo B. Marshall said the offense did not rise to the status of a Robinson-Patman Act violation, as the plaintiffs did not prove Living Essentials forced them to lower prices to unprofitable levels or entirely prevent them from competing with Costco.
The wholesalers bid for an injunctive relief was denied.
The ruling may not be the final say for this case. Attorney Mark Poe, who represents the wholesalers, told Law360 yesterday that they believe the court “erred again” and they “will again seek a reversal.”