Secondary-Line Injury

• Secondary-line injury refers to the injury occuring in the second stage of price discrimination
  • Occurs when the alleged price discrimination alters competition among customers of the firm.
• We can illustrate it with an example:
  • Suppose two retailers buy a product from the same firm
  • The firm charges a different price to each of the retailers
  • The retailer who bought the product at the higher price is at a competitive disadvantage and is eligible for secondary-line injury

FTC v. Morton Salt Co. (1948)

• Morton sold salt to all of its buyers on a standard quantity discount system
  • The only stores that could afford to buy the quantity that qualified for the largest discount were five large grocery store chains
  • These five chains could then resell the salt at a much lower price
• The FTC filed a suit to recoup the damages to all of the small retailers that were harmed
  • Morton tried to argue that the revenue from the salt was negligible
• The Supreme Court (easily) decided that Morton was guilty
  • This case established the precedent that even if a price is theoretically available to everyone, it must also be “functionally” available to everyone as well