Reviving the Robinson-Patman Act is Bad for Consumers: In Response to Mark Meador

Among our nation’s antitrust laws, the Robinson-Patman Act of 1936 (RPA) is perhaps the most controversial and least admired.
Under the RPA, it is illegal to “discriminate in price between different purchasers of commodities of like grade and quality . . . where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them.” Both buyers and sellers may be found guilty.
The government brought several cases under the RPA in the early part of the 20th century, suing manufacturers for charging a lower wholesale price per unit to retailers that bought larger quantities even though those savings were passed on to consumers. But over the last several decades, both the Federal Trade Commission (FTC) and the Department of Justice (DOJ) have generally refrained from bringing RPA cases (although private plaintiffs have routinely brought claims over this period). And for good reason—the first-order expectation is that enforcement of the RPA is likely to result in higher prices for consumers.
This expectation is not a recent revelation. When Congress debated the RPA, Representative Emanuel Cellar (best known in antitrust for authoring the Celler-Kefauver Merger Act of 1950, expanding enforcement to non-horizontal deals) said it “strikes directly at the primary interest of the public by denying consumers the assurance of obtaining the benefits of the lowest prices the most efficient methods and equipment can bring about under free, but fair, competition.”
Yet with her expansive view of antitrust enforcement, FTC Chair Lina Khan reportedly is considering dusting off the RPA. Chair Khan recently signaled a possible action against Southern Glazer’s Wine and Spirits, the nation’s largest alcohol distributor, for giving larger retailers discounts on volume purchases.
In an essay recently published on the FedSoc Blog titled Not Enforcing the Robinson-Patman Act is Lawless and Likely Harms Consumers, former FTC and DOJ attorney Mark Meador makes two arguments in support of Chair Khan’s efforts.
First, Meador argues that we “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.”
Second, Meador argues that the evidence that enforcement of the RPA would harm consumers is sparse, citing Democrat FTC Commissioner Alvaro Bedoya’s claim that “there is not one empirical analysis showing that Robinson-Patman actually raised consumer prices.”
Let’s take these arguments in seriatim.
Meador’s first argument, as a general proposition, is not controversial: the RPA is the law, and the government is obliged to enforce it. At the same time, however, Meador concedes that the antitrust enforcement agencies “have prosecutorial discretion to choose which cases are the best use of enforcement resources.” His objection, therefore, is that the government has not sufficiently exercised this discretion with regard to the RPA. Meador is entitled to his opinion. But legislatures routinely enact odd or inefficient laws for which enforcement would be silly, and as the RPA generally is held in low regard among antitrust professionals, it is reasonable for the DOJ and FTC to avoid bringing cases they do not believe are meritorious.
Moreover, the reluctance of the antitrust agencies to bring suit under the RPA presumably reflects judicial precedent. RPA cases are notoriously difficult to win. In Volvo Trucks v. Reeder-Simco GMC, Justice Ruth Bader Ginsburg wrote for the majority that the RPA must be construed “consistently with broader policies of the antitrust laws.” As the goal of antitrust is to protect consumers, an RPA case should be brought only when the defendant’s conduct harms consumers. Besides, according to the FTC’s own website, volume discounting can be a legitimate defense, so the case against Southern Glazer for such activity seems to lack merit. RPA claims are a hard sell—high cost, low return.
As to Meador’s second argument—that there is no evidence that RPA enforcement can harm consumers—some context is required. Because RPA enforcement has been minimal for the last several decades and occurs on a case-by-case basis, the data required for empirical analysis regarding the effects of RPA enforcement are sparse. Thus, Meador’s argument stands on a thin reed; the absence of evidence is not evidence of absence. What little empirical evidence does exist suggests that enforcement of the RPA is nearly all harm and no benefit and, as noted above, bringing a successful case today is extremely difficult. Economic theory offers ambiguous predictions regarding the societal effects of enforcement, yet several peer-reviewed studies conclude that enforcement will raise prices, encourage inefficiency, reduce investment, and curtail innovation.
Significantly, the bipartisan 2007 Antitrust Modernization Commission Report recommended the repeal of the RPA, concluding the RPA is “antithetical to core antitrust principles,” “protects competitors over competition[,] punishes the very price discounting and innovation in distribution methods that the antitrust laws otherwise encourage,” has failed to “effectively protect[] the small business constituents that it was meant to benefit,” and “makes it difficult for the United States to advocate against the adoption and use of similar laws against U.S. companies operating in other jurisdictions.” Instead, the Report concludes “[s]mall business is adequately protected from truly anticompetitive behavior by application of the Sherman Act.” But while repeal of the RPA is certainly warranted, in these hyper-partisan times, opening up that legislative Pandora’s Box could produce even worse legislation.
Pursuing weak cases antithetical to core antitrust principles is a waste of limited FTC resources, which will likely be limited even further. Congress is in the process of using its power of the purse to rein in the FTC. Chair Khan is not thrilled with the proposed budget reduction, recently testifying that such budget cuts “will necessitate both furloughs and likely a reduction in force.” Reviving the RPA will give Congress further justification to curb Chair Khan’s power and also distract FTC staff from winning cases with better odds of helping consumers.
Robert Bork famously described the RPA as “antitrust’s least glorious hour.” Returning antitrust thinking back to the 1930s is thus an imprudent use of taxpayer dollars and a bad outcome for consumers.
Note from the Editor: The Federalist Society takes no positions on particular legal and public policy matters. Any expressions of opinion are those of the author. We welcome responses to the views presented here. To join the debate, please email us at [email protected].