Not Enforcing the Robinson-Patman Act is Lawless and Likely Harms Consumers

News reports that the Federal Trade Commission is about to bring its first enforcement action under the Robinson-Patman Act in over two decades has commentators scrambling to preemptively denounce the case as well as the law itself.

The Robinson-Patman Act (“RPA”) is a 1936 law that amended the Clayton Act to prohibit certain forms of discriminatory pricing behavior that was believed to advantage large buyers and harm their smaller competitors. Critics of the law have long alleged that enforcing it would prevent suppliers from offering discounts for volume purchasing, resulting in higher prices for consumers. FTC Commissioner Alvaro Bedoya, however, has pointed out that “there is not one empirical analysis showing that Robinson-Patman actually raised consumer prices”—a proposition for which he cites the bipartisan 2007 Antitrust Modernization Commission report that acknowledged this dearth of evidence while nonetheless recommending to repeal the law.

While Congress has yet to take up repeal of the RPA, FTC and DOJ have constructively done so for the last several decades through a deliberate policy of non-enforcement, premised on the assumption that enforcement would harm consumers. This non-enforcement has even been applauded by some on the right.

Setting aside for a moment the merits of the law, conservatives and others who believe in our constitutional order and the rule of law should be deeply troubled by the suggestion that federal law enforcers can decide not to enforce a law simply because they disagree with the policy or outcomes it advances. That policy prerogative is reserved to Congress alone under Article I of the Constitution.

Conservatives and Republicans were absolutely right to criticize President Obama for this behavior, and they are right to criticize President Biden for following suit. Whether drug laws or our immigration system, the executive branch is not allowed to ignore the laws passed by Congress because it prefers a different policy.

It is no different with the Robinson-Patman Act, and it would be hypocritical for conservatives to support flouting the law in this case while opposing it in others. It is entirely appropriate to question whether the RPA is good policy, but it remains the binding policy of the federal government. The only way to change that is for Congress to pass new legislation. Until that happens, it remains the duty of federal law enforcers to enforce the law as written.

A better question is how best to enforce the RPA. While enforcers cannot simply choose not to enforce a constitutionally enacted law, they do have prosecutorial discretion to choose which cases are the best use of enforcement resources.

Here, critics should concede that not all RPA enforcement is harmful to consumers. The 1977 DOJ report criticizing RPA enforcement implicitly acknowledges this when discussing the “waterbed effect,” the market distortion where offering a discount demanded by one buyer drives a seller to increase prices for or deny discounts to other buyers.

The DOJ report observed that it made sense that the RPA was originally supported by grocers since the grocery sector is

traditionally characterized by high turnovers and low margins. Sales prices, for the most part, reflect the cost of goods purchased plus ‘rule of thumb’ markups for particular types of items. In industries, then, where unit prices for goods sold were in the tens of cents, a three or four percent discount may have seemed unreasonable unless justified, if at all, by extraordinary circumstances. But Robinson-Patman is not limited to the grocery business.

In other words, according to DOJ, it’s reasonable to expect that the waterbed effect will occur in the grocery space, but that won’t be the case in every other industry. Fair enough. But that is also an admission that enforcing the RPA actually makes sense in the grocery space and other industries with similar cost and pricing dynamics.

There may be other cases worth bringing as well. Anti-RPA arguments are premised on the assumption that enforcing the law would force suppliers to revoke discounts given to larger chains. But one antitrust expert has observed that, “Of the hundreds of private-enforcement RPA cases where the plaintiff seeks prospective relief, the plaintiff appears to have always demanded to be given the lower, favored price.” As noted above, the belief that RPA enforcement leads to higher prices is oft-repeated but lacks empirical support. Consumers should not suffer because of economic speculation.

A blanket refusal to enforce RPA not only offends the rule of law, it throws the baby out with the bathwater and leaves helpless those consumers who are harmed. The FTC should exercise its prosecutorial discretion to investigate and bring RPA cases where it has evidence that consumers are harmed by price discrimination.

The views contained herein are those of the author and do not necessarily represent those of his clients or firm.