Robinson-Patman Act
Encyclopedia
The Robinson–Patman Act of 1936 (or Anti-Price Discrimination Act, Pub. L. No. 74-692, 49 Stat. 1526 (codified at )) is a United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination
. It grew out of practices in which chain store
s were allowed to purchase goods at lower prices than other retail
ers. An amendment to the Clayton Antitrust Act
, it prevented unfair price discrimination for the first time, by requiring that the seller offer the same price terms to customers at a given level of trade. The Act provided for criminal penalties, but contained a specific exemption for "cooperative associations
".
In general, the Act prohibits sales that discriminate in price on the sale of goods to equally-situated distributors when the effect of such sales is to reduce competition. Price means net price and includes all compensation paid. The seller may not throw in additional goods or services. Injured parties or the US government may bring an action under the Act.
Liability under section 2(a) of the Act (with criminal sanctions) may arise on sales that involve:
"It shall be unlawful for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by this section."
Defenses to the Act include cost justification and matching the price of a competitor. In practice, the "harm to competition" requirement often is the make-or-break point.
Sales to Military Exchanges and Commissaries are exempt from the act.
The United States Department of Justice and the Federal Trade Commission have joint responsibilities for enforcement of the antitrust laws. Though the FTC has some overlapping responsibilities with the Department of Justice, and although the Robinson Patman Act is an amendment to the Clayton Act, the Robinson Patman act is not widely considered to be in the core area of the antitrust laws. The FTC is active in enforcement of the Robinson Patman Act and the Department of Justice is not.
This act is one in a category of regulatory enactments which attempt to control price discriminations—or different prices for identical products. Similar prohibitions on discrimination have been found in specialized regulatory systems, such as those relating to transportation and communications.
Such statutes typically have exceptions, or restrictions on range of application, similar to those set out in the Robinson Patman Act, to allow for differences in costs of output and distribution, and differences in the degree of competition facing a vendor.
In the late 1960s, in response to industry pressure, federal enforcement of the Robinson-Patman Act reduced considerably. Since then, enforcement of the law has been driven largely by private action of individual plaintiffs. In the mid-1970s, there was an unsuccessful attempt to repeal the Act. On the other hand, over 20 states have price discrimination statutes similar to Robinson-Patman.
Price discrimination
Price discrimination or price differentiation exists when sales of identical goods or services are transacted at different prices from the same provider...
. It grew out of practices in which chain store
Chain store
Chain stores are retail outlets that share a brand and central management, and usually have standardized business methods and practices. These characteristics also apply to chain restaurants and some service-oriented chain businesses. In retail, dining and many service categories, chain businesses...
s were allowed to purchase goods at lower prices than other retail
Retail
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...
ers. An amendment to the Clayton Antitrust Act
Clayton Antitrust Act
The Clayton Antitrust Act of 1914 , was enacted in the United States to add further substance to the U.S. antitrust law regime by seeking to prevent anticompetitive practices in their incipiency. That regime started with the Sherman Antitrust Act of 1890, the first Federal law outlawing practices...
, it prevented unfair price discrimination for the first time, by requiring that the seller offer the same price terms to customers at a given level of trade. The Act provided for criminal penalties, but contained a specific exemption for "cooperative associations
Cooperative
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
".
In general, the Act prohibits sales that discriminate in price on the sale of goods to equally-situated distributors when the effect of such sales is to reduce competition. Price means net price and includes all compensation paid. The seller may not throw in additional goods or services. Injured parties or the US government may bring an action under the Act.
Liability under section 2(a) of the Act (with criminal sanctions) may arise on sales that involve:
- discrimination in price;
- on at least 2 consummated sales;
- from the same seller;
- to 2 different purchasers;
- sales must cross state lines;
- sales must be contemporaneous;
- of "commodities" of like grade and quality;
- sold for "use, consumption, or resale" within the United States; and
- the effect may be "substantially to lessen competition or tend to create a monopoly in any line of commerce."
"It shall be unlawful for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by this section."
Defenses to the Act include cost justification and matching the price of a competitor. In practice, the "harm to competition" requirement often is the make-or-break point.
Sales to Military Exchanges and Commissaries are exempt from the act.
The United States Department of Justice and the Federal Trade Commission have joint responsibilities for enforcement of the antitrust laws. Though the FTC has some overlapping responsibilities with the Department of Justice, and although the Robinson Patman Act is an amendment to the Clayton Act, the Robinson Patman act is not widely considered to be in the core area of the antitrust laws. The FTC is active in enforcement of the Robinson Patman Act and the Department of Justice is not.
This act is one in a category of regulatory enactments which attempt to control price discriminations—or different prices for identical products. Similar prohibitions on discrimination have been found in specialized regulatory systems, such as those relating to transportation and communications.
Such statutes typically have exceptions, or restrictions on range of application, similar to those set out in the Robinson Patman Act, to allow for differences in costs of output and distribution, and differences in the degree of competition facing a vendor.
In the late 1960s, in response to industry pressure, federal enforcement of the Robinson-Patman Act reduced considerably. Since then, enforcement of the law has been driven largely by private action of individual plaintiffs. In the mid-1970s, there was an unsuccessful attempt to repeal the Act. On the other hand, over 20 states have price discrimination statutes similar to Robinson-Patman.
Notable cases
- In 1948, the Supreme Court upheld the Federal Trade CommissionFederal Trade CommissionThe Federal Trade Commission is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act...
's enforcement of the Act in the landmark case FTC v. Morton Salt. The Commission found that Morton SaltMorton SaltMorton Salt is a United States company producing salt for food, water conditioning, industrial, agricultural, and road/highway use. Based in Chicago, the business is North America's leading producer and marketer of salt. It is a subsidiary of the German company K+S.-History:The company began in...
violated the act when it sold its finest "Blue Label" salt, on a purportedly standard quantity discount available to all customers, but was really available only to five national chain stores who bought sufficient quantities of respondent's salt to obtain the discount price. According to the Court, "The legislative history of the Robinson-Patman Act makes it abundantly clear that Congress considered it to be an evil that a large buyer could secure a competitive advantage over a small buyer solely because of the large buyer's quantity purchasing ability."
- In 1976, a dozen Texaco retailers in Spokane, WashingtonSpokane, WashingtonSpokane is a city located in the Northwestern United States in the state of Washington. It is the largest city of Spokane County of which it is also the county seat, and the metropolitan center of the Inland Northwest region...
who sued TexacoTexacoTexaco is the name of an American oil retail brand. Its flagship product is its fuel "Texaco with Techron". It also owns the Havoline motor oil brand....
and won damages of $449,000, which were trebled under antitrust law. Texaco and other oil companies had made a practice of selling gasoline at one price to retailers, and a lower price to wholesalers. When some wholesalers went into the retail business, they obtained gasoline for their retail stations at the wholesaler discount: resulting in unlawful price discrimination. The Supreme Court unanimously affirmed this decision in 1990.
- In 1994, the American Booksellers AssociationAmerican Booksellers AssociationThe American Booksellers Association is a non-profit industryassociation founded in 1900 that promotes independent bookstores in the United States and Canada. The ABA and its members support freedom of speech, literacy, and programs that encourage reading...
and independent bookstores filed a federal complaint in New York against Houghton Mifflin Company, Penguin USAPenguin GroupThe Penguin Group is a trade book publisher, the largest in the world , having overtaken Random House in 2009. The Penguin Group is the name of the incorporated division of parent Pearson PLC that oversees these publishing operations...
, St. Martin's PressSt. Martin's PressSt. Martin's Press is a book publisher headquartered in the Flatiron Building in New York City. Currently, St. Martin's Press is one of the United States' largest publishers, bringing to the public some 700 titles a year under eight imprints, which include St. Martin's Press , St...
and others, alleging that defendants had violated the Robinson-Patman Act by offering "more advantageous promotional allowances and price discounts" to "certain large national chains and buying clubs." Later, complaints were filed against Random HouseRandom HouseRandom House, Inc. is the largest general-interest trade book publisher in the world. It has been owned since 1998 by the German private media corporation Bertelsmann and has become the umbrella brand for Bertelsmann book publishing. Random House also has a movie production arm, Random House Films,...
and Putnam Berkley Group, and these cases also were later settled with the entry of similar consent decrees. Eventually, seven publishers entered consent decrees to stop predatory pricing, and Penguin paid $25 million to independent bookstores when it continued the illegal practices. In 1998, the ABA (which represented 3500 bookstores) and 26 individual stores filed suit in Northern California against chain stores Barnes & NobleBarnes & NobleBarnes & Noble, Inc. is the largest book retailer in the United States, operating mainly through its Barnes & Noble Booksellers chain of bookstores headquartered at 122 Fifth Avenue in the Flatiron District in Manhattan in New York City. Barnes & Noble also operated the chain of small B. Dalton...
and Borders GroupBorders GroupBorders Group, Inc. was an international book and music retailer based in Ann Arbor, Michigan. The company employed approximately 19,500 throughout the U.S., primarily in its Borders and Waldenbooks stores....
, who had reportedly pressured publishers into offering these price advantages.
See also
- Sherman Antitrust ActSherman Antitrust ActThe Sherman Antitrust Act requires the United States federal government to investigate and pursue trusts, companies, and organizations suspected of violating the Act. It was the first Federal statute to limit cartels and monopolies, and today still forms the basis for most antitrust litigation by...
of 1890 - Clayton Antitrust ActClayton Antitrust ActThe Clayton Antitrust Act of 1914 , was enacted in the United States to add further substance to the U.S. antitrust law regime by seeking to prevent anticompetitive practices in their incipiency. That regime started with the Sherman Antitrust Act of 1890, the first Federal law outlawing practices...
of 1914 - Celler-Kefauver ActCeller-Kefauver ActThe Celler-Kefauver Act is a United States federal law passed in 1950 that reformed and strengthened the Clayton Antitrust Act of 1914 which had amended the Sherman Antitrust Act of 1890. The Celler-Kefauver Act was passed to close a loophole regarding asset acquisitions and acquisitions involving...
of 1950 - Hart-Scott-Rodino Antitrust Improvements ActHart-Scott-Rodino Antitrust Improvements ActThe Hart–Scott–Rodino Antitrust Improvements Act of 1976 is a set of amendments to the antitrust laws of the United States, principally the Clayton Antitrust Act. The HSR Act was signed into law by President Gerald R. Ford on September 30, 1976...
of 1976 - MicroeconomicsMicroeconomicsMicroeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...
- Price skimmingPrice skimmingPrice skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time. It is a temporal version of price discrimination/yield management...