THE ROBINSON-PATMAN ACT
Restricting the use of buyer power as a competitive weapon can promote fair market competition and a more prosperous economy
As lawmakers look to tame pervasive concentration and monopolization across the economy, they should consider reviving enforcement of a long dormant antitrust law designed to solve one of the leading problems we face today: rampant abuses of buyer power.
Once a pillar of U.S. antitrust strategy, Congress enacted the Robinson-Patman Act (RPA) in 1936 to restrict the ability of powerful buyers like the Great Atlantic & Pacific Tea Company to extract special discounts and other concessions from suppliers. By using their power in such a fashion, these large retailers obtained a significant and unfair competitive edge over smaller rivals that did not have the power to get such favorable prices and terms.
Since the 1970s, however, federal enforcement of the RPA has been non-existent. As a result, present-day retail behemoths like Walmart and Amazon have used their size and power to extort businesses to offer them lower prices in order to best their competitors. This has given them an unfair cost advantage over smaller rivals who lack such buying clout.
Amazon’s sale of books is a clear example of a dominant buyer squeezing large and small publishers on its way to successfully dominating the book market (and putting hordes of publishers and locally-owned bookstores alike out of business as a result of depressed revenue).
The Robinson-Patman Act was successfully enforced in the 1940s, 50, and 60s, to prevent large corporate retailers from exactly this: using their sheer size to extort or coerce suppliers into granting them discriminatory discounts and other special favors. Without RPA enforcement, giants like Amazon continue to accumulate wealth and power through unfair methods of competition, while small and medium-sized businesses struggle.
On September 22, 2022, at our Midwest Forum on Fair Markets event, we brought together farmers, ranchers, local grocers and pharmacists, who shared how large grocery and other retail brands leave them no choice but to cut unfair deals in order to get their wares onto store shelves. This puts pressure on their businesses and their employees’ wages. It means revenue that could be reinvested in local businesses and communities instead goes to giant corporations and shareholders.
At the same event and in one of his first speeches as FTC Commissioner, Alvaro Bedoya made a strong case for “returning to fairness” by reviving Robinson-Patman enforcement at the FTC.
The Open Markets Institute has written extensively on the benefits of the RPA. On December 6, 2023, we released two papers that make the case for the U.S. government to revive enforcement of the RPA in order to help build a fairer, more open, and more decentralized economy.
Open Markets Legal Director Sandeep Vaheesan, Senior Legal Analyst Daniel Hanley, and Chief Economist Brian Callaci, write about how, in passing the RPA, “Congress sought to channel competition away from the use of buyer and financial power and toward economies of scale, fair prices and fair wages, and investment in new capacity.
“Far from being outdated or irrational, the Robinson-Patman Act is highly relevant to today’s economy, in which buyer power is pervasive,” the paper reads.
A second, complementary paper by Daniel Hanley is a forthcoming publication in the Hofstra Law Review and further elucidates how Robinson-Patman enforcement strengthens economic liberties and democracy. The paper recommends six concrete steps federal agencies, including the Federal Trade Commission (FTC) and Department of Justice (DOJ) can take to gear up and once again enforce the RPA, including by carefully investigating potential violations and hearing directly from smaller producers and the public.
Open Markets Policy Director Phillip Longman wrote in The Washington Monthly that the decline in Robinson-Patman enforcement can be tied to “inflation, shortages, and inequality,” particularly for already-marginalized communities.
In addition to Commissioner Bedoya, FTC Chair Lina Khan has also spoken out about the value of reviving the RPA and the agency recently opened investigations into buyer practices at Coca-Cola and PepsiCo and Total Wine & More.
We hope to see these and other investigations culminate in lawsuits soon.
Open Markets senior legal analyst Daniel Hanley called for the enforcement of the all-but-lapsed Robertson-Patman Act (RPA), enacted in the 1930s by discussing RPA’s ability to level the playing field for small retailers competing against the likes of Walmart and Amazon.