Enforcing the Robinson-Patman Act
The goals of restoring Robinson-Patman enforcement are clear: Restrict the use of buyer power as a competitive weapon and create and sustain more local economic opportunities.
Paper 1: The Robinson-Patman Act as a Fair Competition Measure
Paper 2: Controlling Buyer and Seller Power: Reviving Enforcement of the Robinson-Patman Act
On December 6, 2023, the Open Markets Institute released two new papers making the case for the U.S. government to revive enforcement of the Robinson-Patman Act (RPA) in order to help build a fairer, more open, and more decentralized economy.
The first paper, authored jointly by Open Markets Legal Director Sandeep Vaheesan, Senior Legal Analyst Daniel Hanley, and Chief Economist Brian Callaci, details 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“Far from being outdated or irrational, the Robinson-Patman Act is highly relevant to today’s economy, in which buyer power is pervasive,” the paper reads.
The 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.
Congress passed Robinson-Patman, which was successfully enforced in the 1940s, 50, and 60s, to prevent large corporate entities from using their sheer size to extort or coerce suppliers into granting them discriminatory discounts and other special favors. The law was primarily designed to target the use of buyer power as a competitive weapon.
Antitrust lawyers and economists often forget that business rivalry is not a free-for-all, where more is automatically better, but a process structured by law,” says Sandeep Vaheesan, Open Markets Legal Director and co-author of the first paper. “Our laws prohibit certain forms of competition, such as false advertising, paying workers subminimum wages, and industrial sabotage, because they are socially harmful.
Both papers from Open Markets offer detailed accounts of how both historically dominant retailers AND present-day retail behemoths like Walmart and Amazon have used their size and power to extort businesses to offer them lower prices in violation of the RPA. Both papers include Jeff Bezos and Amazon Books as a clear example of a large buyer squeezing the smallest and weakest publishers on its way to dominate the books market:
“Amazon’s demands for concessionary wholesale prices for the books it sold online supercharged its dominance over the publishing industry and, in the process, stripped out most of the value that had previously gone to compensating authors, publishers, and independent bookstores.”
Hanley’s paper provides a “Six Point Plan” for the FTC, DOJ and Congress to use to relearn and reapply the RPA:
The DOJ and FTC should create investigative groups to carefully research potential RPA violations and litigation opportunities, focusing their efforts on dominant corporations (specifically powerful buyers) rather than small businesses.
Congress, the DOJ, and the FTC should organize hearings to learn from the public and small businesses about problems deriving from the abuse of power by large buyers and large sellers.
The FTC should renew its historical practice of issuing advisory opinions concerning potentially violative conduct. In the past, this practice both increased communication channels between the public and the agency and helped the public and businesses understand the contours of what conduct is permissible.
The DOJ and FTC can jointly issue detailed policy statements and other guidance documents regarding the RPA. Policy statements can specify how the agencies will enforce the RPA and interpret some of its more ambiguous clauses.
Both the DOJ and FTC must initiate RPA lawsuits. Historically, FTC brought such suits, but the DOJ also has this authority. Further, federal litigation through DOJ can facilitate private litigation and increased compliance with the law and deterrence from committing violations in the first place.
Once the agencies have relearned and tested the law in practice, Congress should consider the use of legislation to strengthen RPA. Such amendments could include 1) implementing bright- line rules detailing precisely when dominant firms violate the RPA; 2) repealing the “meeting competition” defense, which has been widely used as a legal loophole for price discrimination; and 3) applying the RPA to services, not just commodities.
The papers come as the current FTC has opened investigations into practices at Coca-Cola and PepsiCo and Total Wine & More. These investigations follow comments from Chair Lina Khan in support of the FTC enforcing the RPA again and remarks from FTC Commissioner Alvaro Bedoya at our September 2022 Midwest Forum on Fair Markets event, during which he made a strong case for “returning to fairness” via Robinson-Patman enforcement.
Open Market’s Phillip Longman wrote in the Washington Monthly earlier this year that the decline in Robinson-Patman enforcement can be tied to “inflation, shortages, and inequality,” particularly for already-marginalized communities.