Robinson-Patman Act

Key takeaways

• The Robinson-Patman Act (1936) prohibits certain forms of price discrimination for sales of tangible goods in interstate commerce.
• It aims to protect small-volume buyers from being disadvantaged by lower prices offered to large-volume purchasers.
• The law applies only to sales of like-grade goods, made within a close timeframe, and that substantially lessen competition.
• Enforcement has declined over time, and the Act has been widely criticized for potentially discouraging pro-competitive price reductions.

Overview

The Robinson-Patman Act is an amendment to the Clayton Antitrust Act intended to prevent suppliers from favoring some buyers with lower prices or more favorable terms when doing so would harm competition. It focuses on maintaining parity among buyers at the same level of trade (for example, two retailers) for the sale of tangible products.

What the Act covers

The Act applies when all of the following are true:
* Sales involve tangible goods (not services).
Sales cross state lines (interstate commerce).
The goods sold to different buyers are of like grade and quality.
The price discrimination occurs in at least two completed sales by the same seller to different purchasers.
The discriminatory pricing substantially lessens competition or tends to create a monopoly in a line of commerce.

Price is interpreted broadly to include net price and other forms of compensation, including rebates, allowances, or bundled goods and services that effectively reduce price.

The Act contains a specific exemption for bona fide cooperative associations.

How enforcement works

Violations can be prosecuted by the U.S. government or pursued through private civil lawsuits by injured parties. Over time, federal enforcement has fluctuated—intense in some periods, largely dormant in others—leaving many cases to private litigation, which can be complex and costly to pursue.

Example

If a wholesaler sells the same model television of equal quality to two retailers around the same time, charging Retailer A $250 and Retailer B $200, the lower price to Retailer B could trigger a Robinson-Patman claim if the price difference lessens competition and no legal defense applies. The Act does not require identical pricing across different sellers or across different levels of trade.

Criticisms and practical concerns

Critics argue the Act can be counterproductive:
* It can deter price competition and efficient volume discounts that benefit consumers through lower retail prices.
It may protect higher-cost resellers at the expense of consumers who would gain from lower prices offered to larger buyers.
Because differential pricing is common and antitrust resources are limited, enforcement choices are selective, increasing the risk of opportunistic or politically motivated suits.
* The law’s technical requirements make private enforcement difficult and costly.

These criticisms have led to reduced enforcement activity and periodic calls for reform or repeal, though the Act remains in force.

Practical implications for businesses

Businesses should:
* Document pricing policies, cost justifications, and promotional allowances.
Ensure contemporaneous sales of similar goods at different prices are defensible (e.g., cost savings, meeting competitors’ prices, or meeting a good-faith cost justification).
Consult antitrust counsel when designing rebates, discounts, or cooperative advertising programs that vary by buyer.

Conclusion

The Robinson-Patman Act remains a specialized antitrust statute aimed at preventing certain forms of price discrimination among buyers at the same level of trade. While its goal is to protect competition among resellers, its practical effect and enforcement have been controversial, and businesses must carefully structure pricing practices to avoid exposure.