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Antitrust: Price Discrimination

The Federal Robinson-Patman Act prohibits manufacturers and suppliers from providing price discounts and other forms of preferential treatment to some buyers and not to others, if the effect of such discrimination is to lessen competition or injure individual competitors. Volume discounts are allowed only to the extent that they reflect actual differences in the cost of manufacture or sale of the product.

The law was enacted in 1936 amid growing concerns that large retail firms were using their market power to exact special deals from manufacturers not made available to small, independent businesses. As federal District Court Judge Abner Mikva noted in 1988, "Congress was convinced that, by protecting small businesses, it was also protecting the operation of a competitive economy."

In recent years, the Robinson-Patman Act has fallen into disfavor with many antitrust scholars and enforcers. They view its focus on maintaining a decentralized economy as inconsistent with the current approach to antitrust, which focuses more narrowly on consumer prices.

Neither the Federal Trade Commission nor the Justice Department have had the impetus or the resources to fully investigate and pursue allegations of Robinson-Patman Act violations. Injured businesses may bring private lawsuits under the act, but such litigation is costly.

See also the Home Town Advantage News Archive:

• Antitrust - News on court cases and regulatory actions dealing with the abuse of market power by large retail chains.

RULES:

• Fixed Price Book Laws
  Laws in some European countries, most notably Germany, require all bookstores, including online sellers, to sell books at fixed prices. Supporters say outlawing discounts protects independent bookstores and small publishers, which in turn ensures that a broader variety of books are available and that there is less focus on best-sellers. That seems to be the case in Germany, where there are 14,000 book publishers, over 4,000 bookstores, and twice as many titles per capita published each year as in the United States. Moreover, with greater competition and a more stable market, book prices in Germany have actually fallen. France has a similar regulation, known as the Lang Law, which was adopted in 1981 and prohibits discounts of more than 5 percent on books. Amazon.com has tried, so far unsuccessfully, to have the law overturned. For more, see this New York Times article and this piece in Publishing Trends.
• Robinson-Patman Act
  The Robinson-Patman Act is actually an amendment to the Clayton Act. It says that it shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States..."

More:

• For an in-depth discussion of antitrust issues related to mega- retailers, see Chapter Seven, "Uncle Sam's Invisible Hand," in Big-Box Swindle
• Mr. Magoo Visits Wal-Mart: Finding the Right Lens for Antitrust - by Albert A. Foer, American Antitrust Institute, Working Paper No. 06-07, Nov. 2006.
• The American Booksellers Association, which represents independent bookstores, settled a price discrimination claim against Barnes & Noble and Borders Books. For more on that litigation, see the ABA's Fair Trade page
• See Chapter Three, "Reviving Antitrust," in The Hometown Advantage