It’s time we have a national conversation about the Robinson-Patman Act and antitrust law. The little-known federal law celebrates its 90th birthday in June, and the reason you might not have heard of it is because it has been largely ignored over the last four decades.
Signed by President Franklin D Roosevelt on June 19, 1936, the antitrust law’s core tenet bans price discrimination, where a company charges a different price for the same commodity or product, usually based on how much the retailer purchases. For example, if a large grocery retail chain places a large order for a particular beverage, Robinson-Patman requires the company to pay the same price as a grocer with a single location.
The federal government’s refusal to enforce Robinson-Patman beginning in the 1980s has had devastating consequences in the US. Opening the floodgate of anticompetitive pricing has been among the biggest contributors to the decimation of independent businesses for nearly a half century, particularly in grocery.
While opponents of Robinson-Patman have argued that these economies of scale have helped lower prices for consumers, the complete lack of enforcement has led to rapid consolidation across the retail landscape as smaller players struggle to compete against rapidly growing retail juggernauts.
Independent grocers have been banging the drum on Robinson-Patman enforcement for years, and during the Biden Administration, Federal Trade Commission (FTC) Chair Lina Khan brought two enforcement actions under the act – one against Southern Glazer’s Wine & Spirits and the other against PepsiCo.
The Southern Glazer case, which is still pending, accused the company of discriminatory wholesale pricing favoring large chains over smaller retailers. The case against PepsiCo, which was abandoned last May by Trump-appointed FTC Chair Andrew Ferguson, accused the soda and snacks company of engaging in price discrimination with a big-box retailer.
“The Biden-Harris FTC rushed to authorize this case just three days before President Trump’s inauguration in a nakedly political effort to commit this administration to pursuing little more than a hunch that Pepsi had violated the law,” said Ferguson, calling the last-minute filing a “partisan stunt.”
The decision to file days before the close of the Biden-Harris administration was arguably not the best look for the FTC, but it shows, along with the case against Southern Glazer, a renewed interest in enforcing the law.
The Independent Grocers Alliance (IGA) and the National Grocers Association (NGA) have long argued that the weakening of antitrust authorities over the last half-century has largely empowered Walmart, the big-box retailer that was widely identified by news organizations as the recipient of PepsiCo’s price deals in Khan’s lawsuit.
In January, the NGA sent a letter to the FTC and Department of Justice urging them to enforce Robinson-Patman to curb “unchecked buying power” that is “raising rivals’ costs, accelerating consolidation and directly contributing to higher food prices for American consumers.”
“Buyer power abuses are no longer theoretical. They are showing up in higher prices, fewer competitors and shrinking food access, especially in smaller and rural communities,” said Chris Jones, NGA chief government relations officer and counsel. “When dominant retailers coerce suppliers into subsidizing their advantage, the costs do not disappear. They are pushed onto family-owned supermarkets and, ultimately, onto consumers.”
The association also cited a growing body of economic research showing that illegal pricing is leading to higher prices and more inflation pass-through to consumers, particularly during supply shocks.
IGA argues that the harms are not abstract but playing out in the market unchecked, citing the dismissed PepsiCo case.
“Unsealed court documents from a previously redacted and dismissed FTC complaint revealed a systematic ‘price gap’ strategy between PepsiCo and Walmart that subsidized lower prices at Walmart while intentionally raising wholesale costs for competing retailers and their customers,” the NGA letter stated. “Under this scheme, Pepsi monitored competitors’ pricing and, when rivals moved too close to Walmart’s price, responded not by lowering Walmart’s price but by reducing promotions and increasing costs for non-Walmart retailers, thereby enforcing Walmart’s structural advantage and suppressing competition.”
The complaint to the FTC notes that Food Lion was targeted by Pepsi, with the beverage maker internally identifying the grocery chain as the “worst offender” when its pricing threatened Walmart’s edge in the market.
“Pepsi allegedly implemented a multi-year plan to raise Food Lion’s wholesale costs, directly increasing retail prices paid by consumers in North Carolina. Consumers who did not shop at Walmart paid more, not because of inefficiency, but because competition was deliberately distorted,” according to the NGA letter.
The problems brought about by the nonexistent enforcement of Robinson-Patman are nonpartisan. In January, Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa) and Sen. Mike Rounds (R-SD) also urged the DOJ and FTC to enforce the act. The letter was signed by lawmakers from across the US, including Sens. Joni Ernst (R-Iowa), Thom Tillis (R-NC), Roger Marshall (R-Kan) and Tim Sheehy (R-Mont).
“Small and medium-sized businesses serve as the foundation for local communities from rural America to the inner city and have become the most effective source of new job creation. … We have heard concerns that it is increasingly difficult for ordinary Americans to access essential goods and services traditionally provided by local grocers and pharmacies, due to discriminatory behavior by firms or intermediaries with market power,” the lawmakers wrote.
In December, IGA penned a similar blog post, critical of the federal government’s inaction in Robinson-Patman Act enforcement, laying the blame squarely on big-box retailers
“Honestly, I feel for the big brands. When customers get so large you can’t afford not to sell to them, then what do you do? If Walmart drops a product, big brands might have to shutter an entire plant,” wrote IGA President and CEO John Ross.
He said the alleged crime “doesn’t originate with the brand” but rather the retailers themselves, using “coercive tactics to tilt the playing field in their favor.”
Ross speculates that big brands like Pepsi “would secretly cheer” if Robinson-Patman was enforced, noting that “mega-retailers don’t want to earn market share, they want to steal it.”
“We need to hold them accountable and level the playing field for small businesses in America,” he wrote.
I couldn’t agree more. Lawmakers eager to prove their worth in the fight to reduce grocery prices have a powerful tool in the toolbox, and constituents both public and private should start holding them accountable. It’s time for them to stand up to corporate interests that not only hurt consumers but also brands and the very supply chain that supports them.
