Damages Rule of Thumb: 9,000 X 1 Day's Loss of Profits

Damages Rule of Thumb: 9,000 X 1 Day's Loss of Profits

This rule of thumb (of 9,000 times one day's pre-tax damages) is a convenient way for a businessperson to estimate his/her damages, but it is only a rough estimate. First of all, the rule of thumb presupposes that the business is being run seven days per week, such as a typical bookstore, pharmacy or gas station. If the business you have in mind is open only 6 days per week, then you should take 6/7ths of your answer, or 85.71%.

To start, calculate your average loss of profits for one day of business. If you are a bookseller, you might say to yourself, but for the higher book prices I am paying, I would have $500 more in business per day. [This gross amount is the most difficult amount to determine, and will probably require expert testimony, based on your past sales, industry trends, and other factors.]

If your average discount for the lost business would have been 43% (meaning, that for a hardcover book with a list price of $20, you would be buying it for $11.40, or $8.60 less than the $20 suggested retail price). On lost sales of $1,000, you would lose 43% of such amount in gross profits, or $430 for the day. If you have any sales commission payable to any clerks or others, you would have to deduct that amount. Anyway, if you calculate after direct expenses that your lost gross profit is $400 per day , let us see how $400 converts into a much larger figure, something about 9,000 times that amount, or $3,600,000.

When your store is open 365 days per year, this means a total of 1,460 days for the 4-year (statute of limitations) period, plus another 365 + 182 days for the estimated 1.5 years of litigation, plus another 2 years (or 730 days) of future damages beyond the date of trial. So far, the total number of days of damages is 2,737, and when trebled (for the treble damages award) the number of days amounts to 8,211.

Also, we can throw in another 789 days to cover the attorney's fees which the prevailing antitrust plaintiff is entitled to recover (a very rough estimate designed to create an even number of 9,000). This adds up to a total of 9,000 days of damage s.

Thus, for one day's loss of pre-tax profits (after deducting direct expenses), the Robinson-Patman Act plaintiff is entitled to recover about 9,000 times that amount, and in the case of a daily loss of $400, the plaintiff would be entitled to recover abou t $3,600,000 (or 9,000 times $400).

Most businesspersons are unaware of the value of their RPA claims, and when injured by these discriminatory pricing practices are throwing away the value of their business by not seeking relief in the courts.

Incidentally, the remedy is exclusively federal, in the sense that the treble damage recovery is for violation of the Robinson-Patman Act. State laws, where they exist to prohibit price discrimination, generally do not provide a treble-damage recovery.

Thus, when talking about price and service discrimination claims, we are talking federal claims, and this means that there must be some interstate movement of the goods in question, otherwise the requirements of the RPA cannot be met. Some of goods being sold at differing prices must have been sold in interstate commerce. This test is generally not hard to meet when major manufacturers are involved.

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Copyright © 1997 by Carl E. Person