Primary-Line Injury
- Primary-line injury refers to the injury suffered by direct competitors of the firm practicing price discrimination
- We can illustrate it with an example:
- Eaton, Inc. is an established seller of bicycles in the Eugene bicycle market
- Houston Asterisks, LLC offers only the established customers of Eaton a lower price for bicycles, thus taking them away from Eaton
- The primary-line injury is suffered by Eaton
Utah Pie Co. v. Continental Baking Co. (1967)
- In the 1950’s, frozen fruit pies were becoming increasingly popular
- As a result of lower costs relative to its California competitors, Utah Pie had a commanding market share in Salt Lake City
- The California companies lowered their prices below Utah Pie’s and gained market share in SLC
- Utah Pie filed suit claiming primary-line injury, alleging that the California companies sold their products at different prices in different markets
- Market shares of the various competitors in SLC market
| Utah Pie |
67 |
34 |
46 |
45 |
| Pet |
16 |
36 |
28 |
29 |
| Carnation |
10 |
9 |
12 |
9 |
| Continental |
1 |
3 |
2 |
8 |
| All others |
6 |
19 |
13 |
8 |
| Utah Pie |
$4.15 |
$2.75 |
| Pet |
$4.92 |
$3.46 |
| Carnation |
$4.92 |
$3.30 |
| Continental |
$5.00 |
$2.85 |
- The Supreme Court decided (controversially) that the California firms were guilty of illegal price discrimination
- The Court saw the falling price pattern and feared lessening competition from fewer competitors in the market
- No firms had to exit the market, so this resembles competitive behavior rather than predatory pricing
- At the end of the case, Utah Pie still had a dominating market share
- The case seemed to oppose the idea of “protecting competition, not the competitors”