According to people with knowledge of the matter, the Federal Trade Commission is conducting a preliminary investigation of soft drink companies to determine whether their pricing practices in the soft drink market segment violate the price discrimination prohibitions of the Robinson-Patman Act (the “RPA”). Section 2(a) of the RPA makes it unlawful for a supplier to discriminate in price between competing resellers of “commodities of like grade and quality” when the effect of such discrimination is to injure competition.
Enacted in 1936, the purpose of the RPA was to prevent suppliers from granting lower prices to high volume competitors to the detriment of small businesses. Although initially enforced by the FTC, the RPA has been criticized as a special interest law that, while benefitting small businesses, actually had the effect of increasing prices thereby harming consumers. The Department of Justice announced in 1977 that it would stop enforcing the law. Although the FTC never made a similar announcement, its last enforcement action was a March 2020 Settlement with spice supplier McCormick & Co. Private litigation has continued under the RPA.
Reinvigoration of the RPA has been advocated by FTC Chair Lina Kahn and new Commissioner Alvaro Bedoya. Commissioner Bedoya has asserted that there is a direct correlation between a lack of RPA enforcement and higher prices in rural areas and to lower income consumers.
The investigation is in its early stages, but it is another example of the antitrust agencies’ warning that they will use all of the tools available to them to vigorously enforce the antitrust laws. And while the soft drink market is a logical and tempting target for an RPA probe in view of the similarity of the products, many other sectors of the economy could be future targets of future investigations.