Key Takeaways

Contents

Key Takeaways 1

Introduction. 2

Origins of the Robinson-Patman Act 3

Neo-Brandeisian Attempts to Revive the Robinson-Patman Act 5

How the Robinson-Patman Act Went Wrong. 6

The Robinson-Patman Act Is Not Needed to Address Anticompetitive Behavior 8

Procompetitive and Proconsumer Outcomes of Not Enforcing the Robinson-Patman Act 9

The Robinson-Patman Act Seeks the Wrong Goal 10

Policy Recommendations 12

Conclusion. 13

Endnotes 14

Introduction

The neo-Brandeisian attempts to revive antiquated antitrust policies that harm the economy and consumers will likely take a brief hiatus for at least the next two years while Republicans control the House and Senate and President-elect Donald Trump is in the White House. However, two years pass in a blink of an eye and neo-Brandeisians could once again attempt to revive old laws in 2027 if they take power again, which would harm the overall economy. Indeed, former Federal Trade Commission (FTC) commissioner Christine Wilson has stated that “instead of devising new solutions for their concerns, [the neo-Brandeisians] are resurrecting past policy mistakes.”[1] Specifically, neo-Brandeisians have embraced the interventionist antitrust regime of the progressive era, which has broadly resulted in higher prices for consumers and stunted innovation in the economy. But neo-Brandeisians do not seem worried about how bringing back these policies will affect consumers and the economy, as their goal is not to protect consumers, the economy, or competition, but rather competitors. The Information Technology and Innovation Foundation (ITIF) has previously stated that “for many of today’s neo-Brandeisians, the goal is a radical reconstruction of American society with most industries comprising thousands of small and mid-sized, independently owned businesses.”[2]

Although unlikely to occur in a Republican administration, neo-Brandeisians will likely become adamant about bringing back enforcement of the Robinson-Patman Act (RPA) as soon as they are put into office again. Current FTC Chair Lina Khan and commissioner Alvaro Bedoya have been explicit that they intend to initiate actions under this law.[3] This is partly because, as the neo-Brandeisian American Economic Liberties Project (AELP) has asserted, the “Robinson-Patman Act create[s] … a level playing field for businesses of all sizes.”[4] In the neo-Brandeisians’ view, the RPA is a key vehicle for protecting competitors because it prohibits large and more efficient firms from receiving discounts from sellers if smaller firms cannot receive the exact same discount. In other words, the RPA protects small competitors from the competitive process when they have to face larger, more efficient firms that can benefit consumers with lower prices. As such, like many other laws that focus on protecting competitors rather than consumers and competition, the RPA has grave consequences for the economy, consumers, and ultimately even the small businesses it is trying to protect.

As a result, policymakers should do the following:

1. Repeal the RPA to ensure that neo-Brandeisians cannot revive the legislation in the future as a means to target firms practicing pro-competitive price discrimination.

2. Continue to refrain from enforcing the RPA.

3. Actively counter the neo-Brandeisian narrative that the RPA is beneficial to the economy and consumers.

4. Prohibit the FTC from expanding its authority under Section 5 to include price discrimination.

5. Continue to police primary-line price discrimination under Section 2 of the Sherman Act.

This report contains seven sections that examine the RPA. The first section details the origins of the RPA while the second section elaborates on neo-Brandeisian attempts to revive the RPA. The third section examines the history of the major cases that have been brought under the RPA and the subsequent critiques of the RPA leveled by economists and antitrust lawyers. The fourth section highlights how the RPA is not necessary to address anticompetitive conduct. The fifth section examines the economic and consumer benefits of price discrimination and the harms that come from banning the practice. The sixth section gives reasons why the RPA is not justifiable as substantive equality (equity) or under Rawl’s theory of fairness. Finally, the report includes a seventh section that provides policy recommendations on how to proceed with the RPA.

Origins of the Robinson-Patman Act

The history of the RPA confirms that it has always been a blatant attempt to protect small competitors at the expense of consumers. Passed in 1936, the RPA stemmed from independent retailers’ and merchants’ attempts to shackle large chain stores, their larger and more efficient rivals who could draw in more customers with their lower prices.[5] Specifically, independent retailers often eyed the Great Atlantic and Pacific Tea Company (A&P) with envy due to its ability to cut costs as a result of efficiencies and thus charge consumers lower prices.[6] Moreover, chain stores improved and diversified American diets by carrying refrigerated meat and dairy products and preserved foods. They made shopping less time consuming, particularly to the benefit of women.[7]

However, chain stores threatened the local small businesses in towns across the nation, drawing the ire of their owners. As Atkinson and Lind wrote, “[T]he chain stores threatened the local monopolies of general stores and drugstores owned by local elites, particularly in rural areas.”[8] As a result, these chain stores faced political attacks as they outcompeted an increasing number of small, locally owned businesses that failed due to their lower efficiencies. Indeed, these small businesses lobbied their local and state legislators to pass laws that would limit chain stores and their business functions. For example, by 1927, four states had passed anti-chain laws, including Maryland, which prohibited any chain from owning more than five stores in Alleghany County and taxed each chain-owned store in the county $500 (an amount equal to about half the profits of the average A&P store in that era).[9] Similarly, Georgia, North Carolina, and South Carolina also taxed chains when they operated more than one store.[10] And these political attacks only escalated during the Great Depression.[11]

As such, it didn’t take long for these concerns to reach the federal level, with Representative Wright Patman (D-TX) soon becoming the spokesperson for independent retailers in Congress.[12] As the head of a special investigative committee to examine the trade practices of retailers, chain stores—and particularly A&P—became Patman’s main target.[13] Funded by McKesson & Robbins, a drug wholesaler that was financing the anti-chain store campaign to gain support of independent drug stores, Patman went on a nationwide speaking tour in 1937 to draw more support for the anti-chain movement.[14] However, likely unbeknownst to Patman, McKesson & Robbins was secretly assembling its own retail drug store chain.[15] Moreover, Patman’s patron, the president of McKesson, had adopted the name David F. Coster to conceal his earlier life as a convicted gunrunner, smuggler, and bootlegger; the revelation of his crimes in 1938 led to his suicide.[16]

While Patman could not find any wrongdoing by A&P from a consumer standpoint, he became the main sponsor of a bill prohibiting price discrimination, which involved manufacturers offering retailers discounts and other promotions for purchasing at a large volume and advertising their products—an economically sound practice that large, efficient retailers such as A&P often participated in.[17] In what would ultimately become the RPA after Senator Joseph Robinson introduced it in the Senate, the bill would further target A&P and other chain retailers by requiring manufacturers to provide proportionate advertising allowances to all stores regardless of their purchase quantity and prohibiting retailers from owning a broker.[18] The idea was that these provisions would inevitably raise costs for chains, thereby leveling the playing field for these smaller retailers. Indeed, as a result of these provisions, A&P would have to pay $0.82 for 144 packs of Diamond matches instead of $0.75. Of course, consumers would ultimately make up the difference as chains raised prices due to these high costs.[19]

Despite being touted as pro-consumer by neo-Brandeisians today, the reality is the RPA was a prime example of what economists call “regulatory capture,” or policies that serve private interests at the expense of the public good.[20] Indeed, heavily influenced by inefficient retailers and middlemen that stood to lose, H.G. Teegarden, the general counsel of the United States Wholesale Grocers (USWG), a wholesaler organization opposing chain stores, drafted the RPA.[21] The USWG also organized support for the bill along with the National Association of Retail Druggists, an organization representing pharmacists who owned their stores.[22] As noted, the drug wholesaler McKesson & Robbins also played a role in the RPA and its passing.[23]

Nonetheless, Congress recognized that the RPA could harm consumers. Indeed, the Franklin Roosevelt administration had multiple consumer advisor councils and was aware that these groups opposed the RPA, arguing rightly that the bill essentially prohibited discount pricing that benefited consumers.[24] And yet, Congress would go on to amend and pass the bill in part to prevent even more radical anti-chain store actions. As Hatton Sumners, chairman of the Judiciary Committee during that period, feared, the failure to help small businesses by not passing the RPA could result in another activist demanding that the government take over large companies.[25] Taken in the context of the Great Depression, Marc Levinson, author of The Great A&P and the Struggle for Small Businesses in America, explained that “in 1936, a vote for the RPA had less to do with economics than trying to hold together a society that was fraying badly after six years of the Depression.”[26]

Neo-Brandeisian Attempts to Revive the Robinson-Patman Act

In recent years, neo-Brandeisians and other anticorporate activists have advocated for the revival of the RPA to level the playing field for the small businesses they view as comprising the backbone of the American economy. As early as 2023, FTC Chair Khan asserted that the agency had every intention to resuscitate the act to tackle illegal kickbacks and rebates in the drug manufacturer market.[27] Moreover, the Institute of Local Self-Reliance (ISLR), an advocacy group closely aligned with the neo-Brandeisians, has stated that the RPA should be deployed in the food retailing market because doing so would help lower grocery prices and reduce costs for small food producers.[28] Reiterating these claims, the AELP similarly has argued that the antitrust agencies should generally utilize the act to prevent “consolidated markets” from harming small businesses, workers, and consumers.[29]

Despite claiming that the RPA will benefit consumers and the economy, the reality is neo-Brandeisians’ core justification for reviving the act is it aligns with their desire to protect small firms to supposedly promote fairness and democracy. Consumer welfare is at best an afterthought. Indeed as ITIF has written prior, neo-Brandeisians “view the consumer welfare standard as the major intellectual barrier to a more aggressive antitrust enforcement that would atomize markets and punish large firms.”[30] As such, it is no surprise that a vast proportion of briefs, reports, and related documents calling for the act’s revival focus on how its implementation in various industries can benefit small competitors. For example, an AELP factsheet blatantly states that price discrimination makes “it difficult for small and independent businesses to compete … RPA enforcement will … protect independent businesses by curbing price discrimination.”[31] Similarly, the ILSR has also concurred that the RPA will benefit small food producers.[32]

Members of Congress have also jumped on the bandwagon to support the re-enforcement of the RPA. In a letter to FTC Chair Khan, 16 lawmakers urged for renewed enforcement of the act.[33] They argued that a revival is long overdue, especially in the food and retail industry, as “nearly every step of the supply chain is highly concentrated, causing higher prices to consumers and harming farmers and small businesses.”[34] More specifically, Senator Warren, one of the signees, has made clear her view in a press release that the RPA is needed because the food industry is heavily consolidated with only four food retailers accounting for more than a third of national grocery sales.[35] As such, these lawmakers urged the FTC to use the act to prevent price discrimination, especially the “more [recent] creative, subtler forms of price discrimination,” and reduce concentration in this industry.[36]

Amidst these calls for action, the FTC has recently attempted to enforce the RPA with two, possibly three, investigations. First, the FTC initiated a preliminary investigation against Coca-Cola and PepsiCo in 2022 for potential price discrimination in the soft drink market.[37] Although information on the case is limited, the FTC is rumored to be gathering information from large retailers, such as Walmart, on how they purchase and price soft drinks.[38] More recently, the FTC is rumored to be investigating, and possibly ready to file a lawsuit against, Southern Glazer’s Wine and Spirits for pricing practices that violate the RPA.[39] Finally, according to individuals familiar with the FTC’s investigations, the agency is also examining the pricing practices of Kraft-Heinz, a large food manufacturer.[40]

How the Robinson-Patman Act Went Wrong

The passing of the RPA led to the Department of Justice (DOJ) filing a suit against A&P, the largest retailer of its time, for violations of the act. In United States v. New York Great Atlantic & Pacific Tea Co., DOJ claimed that A&P had used its buying and market power 1) to restrain interstate commerce in food product markets and 2) to create a partial monopoly in multiple food products.[41] Specifically, DOJ asserted that A&P engaged in a form of predatory buying because it received larger discounts from manufacturers, allowing it to lower prices and undersell competitors. As Judge Lindley wrote in the opinion, “[L]ower buying prices for A&P than those of its competitors, realized largely through discriminatory preferences to A&P from suppliers, enabl[es] A&P to undersell retail competitors, [resulting in A&P having] acquired and used tremendous power in such manner and employed such means as inherently involve unreasonable restraint of competition.”[42] In other words, A&P violated the RPA because it was more efficient; however, for this reason, it harmed competitors. What is more, Lindley’s opinion even expressly stated that DOJ considered business practices that led to lower prices for consumers and higher prices for producers could both be considered anticompetitive and a restraint of trade.[43]

DOJ’s focus on protecting competitors rather than consumers betrayed sound economic reasoning. First, while DOJ claimed that A&P sold below costs, in reality, A&P did not suffer from a temporary loss. Indeed, MIT economist Moris Adelman asserted that “if there is no temporary loss suffered—as there is none in the A&P case—the defendants were still considered as selling below cost.”[44]

For this reason, leading antitrust legal mind Donald Turner similarly stated that the government did not sufficiently “draw the line between ‘predatory’ and ‘competitive’ price cutting.”[45] Furthermore, DOJ did not measure the impact of price discrimination in favor of A&P on individual buyers, but rather simply assumed that price differences automatically led to harm against competitors that did not receive them.[46] Finally, DOJ could not provide evidence that A&P had monopsony power or had intimidated competitors to prove that A&P had used its buying power to secure lower prices compared with competitors.[47]

In addition to the crusade against A&P, the RPA resulted in a slew of other cases—almost 1,400 RPA complaints that the FTC filed from 1937 to 1971—that had similar negative results.[48] These include Federal Trade Commission v. Morton Salt Co., Mid-South Distributors v. Federal Trade Commission, and Standard Motor Products, Inc. v. Federal Trade Commission.[49] In the Morton Salt Co. case, the FTC argued that Morton Salt Co.’s quantity discount system violated the RPA because it discriminated in price between competing wholesalers and retailers.[50] Specifically, the FTC asserted that Morton could not offer a higher discount rate to customers purchasing more than 50,000 cases of salt because only five chains could reasonably buy this amount.[51] In the two other cases against small firms, the FTC argued that small manufacturers and jobbers violated the RPA when they attempted to obtain lower prices by buying as an association.[52] For instance, in Mid-South Distributors v. FTC, the FTC filed suit against two cooperative buyer groups, Mid-South Distributors and Cotton States, Inc., and their 23 jobbers for buying automotive parts at a discount.[53] 

The Morton Salt case is worth special attention as a case study in RPA enforcement gone wrong. As the company argued, the FTC’s theory was flawed because the discounts were available to all buyers as long as they purchased the same large quantity.[54] More importantly, the FTC’s argument that the system favored large buyers was also problematic because, as Morton Salt Co. argued, its policy was one where a small buyer purchasing 50 cases of a carload receiving a 10 cents discount could get another 10 cents discount when they purchased 5,000 cases.[55] However, the large buyer that originally bought 5,000 cases would only get an additional 5 cents discount despite purchasing 10 times that of the 50-case buyers.[56] In other words, the large buyer received a lower discount and could arguably be seen as being discriminated against, rather than favored. Channeling these concerns, a dissenting opinion by justices Jackson and Frankfurter quipped, “The law of this case, in a nutshell, is that no quantity discount is valid if the Commission chooses to say it is not,” even if it benefits consumers.[57]

The Robinson-Patman Act Is Not Needed to Address Anticompetitive Behavior

As a legal matter, the RPA bans of primary-line (PL) and secondary-line (SL) price discrimination are unnecessary to police anticompetitive behavior, whether in the form of collusion or exclusionary conduct that antitrust laws are designed to combat. To begin, the alleged harms from price discrimination do not result in the “supreme evil of antitrust”: collusion.[58] Rather, PL price discrimination, or below-cost pricing, encourages firms to lower prices and outcompete their rivals to gain more customers. As a result, firms are constantly changing their prices when they reduce them, resulting in a lower probability that two firms can collaborate to reduce output and fix prices. Similarly, SL price discrimination, or the ability to offer varying discounts to buyers, can undermine a collusive pricing structure when sellers are allowed to offer discounts to certain downstream customers, leading to price differentiation. Commentators have observed that “the Act facilitated price discussion and price communications among sellers, fostering price stabilization if not collusion. For sellers could seek to legitimize such price discussion as necessary for their compliance with the Robinson-Patman Act.”[59] Other studies by Hovenkamp and Kaysen and Turner corroborate this view.[60] As such, the RPA’s prohibition of such price discrimination will not fail to fight collusion, but rather actually only increase the likelihood of the collusive behavior the antitrust laws are designed to prevent.[61]

What is more, the RPA’s prohibition of SL price discrimination is unnecessary to address anticompetitive behavior because this practice does not result in exclusionary conduct. As Professor Hovenkamp has explained, exclusionary conduct constitutes behavior that creates, enlarges, or helps maintain monopoly power by excluding rivals.[62] However, SL price discrimination clearly fails this criterion. In the upstream market, SL price discrimination is not exclusionary because offering discounts to buyers promotes greater price competition with other sellers. In the downstream buyer market, SL price discrimination also does not result in exclusionary conduct but, at worse, reflects the exploitation of buyer power, which, as noted, can be a result of efficiencies. That is, SL price discrimination involves larger, more efficient buying firms simply using their existing market power to obtain discounts from sellers rather than using anticompetitive methods to obtain market power.[63] As a result, this practice should not be considered illegal under antitrust laws because, as the Supreme Court has stated, the possession and exercising of market power is not illegal.[64]

To be sure, critics may argue that SL price discrimination facilitates exclusionary conduct because the large quantities buyers purchase when they receive discounts could be viewed as predatory overbuying. First, predatory overbuying could be done to achieve or maintain monopsony power in the input market, or the market in which the manufacturer is selling. Of course, this behavior is already covered by antitrust laws, as the Supreme Court made clear in the Weyerhaeuser case.[65] Alternatively, predatory overbidding could be done to raise the costs of downstream rivals.[66] However, as before, this was precisely the sort of behavior the Supreme Court condemned long ago in United States v. Aluminum Co. of America, again confirming why the RPA is unnecessary to address anticompetitive behavior.[67] At the bottom, in cases where overbuying practices do result in exclusionary conduct that also harms consumers, the Sherman Act already makes it unlawful.

A similar story applies to PL price discrimination, which can be a form of exclusionary conduct when a dominant firm prices below its costs to undercut competitors and is able to recoup its losses by charging high prices once its competitors exit.[68] Of course, Section 2 of the Sherman Act already has provisions in place to tackle this practice. Indeed, the Supreme Court in Brooke Group Ltd v. Brown & Williamson Tobacco Corp held that PL price discrimination cases should usually be brought under Section 2 when they set forth prerequisites for claims of predatory pricing under Section 2, which include showing a reasonable likelihood of recoupment—as opposed to a per se ban under the RPA .[69] As the Court explained, “Congress did not intend to outlaw price differences that result from or further the forces of competition. Thus, ‘the Robinson-Patman Act should be construed consistently with broader policies of the antitrust laws.’”[70]

Procompetitive and Proconsumer Outcomes of Not Enforcing the Robinson-Patman Act

In addition to being unnecessary as a matter of law, as an economic matter, price discrimination is generally beneficial to society because it increases consumer and total welfare. First, a ban on PL price discrimination will raise consumer prices because firms will be prohibited from lowering their prices to below the cost of doing business (even when recoupment is not feasible) and thus be unable to compete vigorously on prices. As a result, consumer prices will rise. Similarly, a ban on SL price discrimination will also raise prices for consumers because buying firms will be prohibited from receiving price concessions from manufacturers despite their efficiency. As a result, these buying firms pass on the higher cost of purchasing goods down to consumers in the form of higher prices.

This theory is consistent with the empirical evidence. For example, a paper by Blair and DePasquale summarizes previous research by Hovenkamp, which concludes that the RPA results in higher consumer prices, as well as findings by Carlton and Perloff that the RPA inhibits buyers’ benefits of scale economies, thereby raising consumer prices.[71] Moreover, according to a paper by O’Brien and Shaffer analyzing SL price discrimination, while firms may benefit from the RPA because their rivals cannot gain a cost advantage due to the RPA provision prohibiting sellers from charging buyers different prices, this is usually at the expense of consumer and total welfare because buying firms are unable to bargain for lower prices that are subsequently passed on to consumers.[72] They explained that “since lower marginal payments subsequently translate into lower retail prices, consumers stand to gain, and on balance social welfare rises … our model implies that, ceteris paribus, Robinson-Patman unambiguously reduces welfare.”[73] Corroborating this, another study by Inderst and Valletti also concludes that when buying firms have access to more than one supplier—which is the case in many industries—prohibiting price discrimination could reduce consumer surplus and welfare because it is likely to stifle downstream firms’ incentive to enhance efficiency.[74]

Moreover, banning SL price discrimination also harms the very small businesses that the RPA is trying to protect and the competition that these firms bring to the market. Indeed, in some cases, the RPA does not so much protect small competitors as it does prevent them from reducing costs, lowering prices, and competing efficiently.[75] For example, in the Standard Motor Products, Inc. v. FTC, the Second Circuit court affirmed the FTC’s order arguing that Standard Motor Products Inc. violated the RPA for making rebates to its distributors, many of which were small businesses.[76] Indeed, as the court opinion wrote, “Commission’s order is directed against Standard’s practices of making rebates to its distributors based on volume sales … petitioner sells a substantial portion of its output to distributors who have joined together in cooperative buying groups.”[77] As a result of cases such as this one, small businesses could not form associations to buy at a discount, thereby increasing their costs and affecting their ability to compete on price. This meant that many of these small businesses were likely forced to exit the market, reducing overall competition. Moreover, the prohibition of price discrimination also harmed consumers because these smaller businesses faced higher costs and could not pass cost savings to consumers in the form of lower prices.

The Robinson-Patman Act Seeks the Wrong Goal

Rather than sound law and economics, the neo-Brandeisian desire to revive the RPA in order to achieve substantive equality, or equity. As Atkinson and Lind wrote, despite higher productivity when price discrimination is allowed, “the Brandeisians’ main objection relates to equity rather than efficiency.”[78] Indeed, neo-Brandeisians strive to level the playing field for small businesses, which are generally less efficient than their larger rivals, and less likely to succeed in the market—the outcome that would indicate equity. As Wilson highlighted, neo-Brandeisians view scale economies, lower costs, and productivity as an indication that the competitive process is rigged against small businesses.[79]As a result, in neo-Brandeisians’ eyes, the RPA’s provisions are an excellent tool to promote equity because they prohibit more efficient firms from using scale economies, lower costs, and greater efficiency to gain discounts—a competitive advantage—against less-efficient, small firms.

However, reviving the RPA will not invariably result in equity because small firms will face the same prohibitions that can lower their costs and boost their market competitiveness, thereby harming their chance of succeeding in the market (or equity). Indeed, although the act was passed to prevent large buyers from receiving discounts that small competitors did not get, it also had the unintended effect of preventing associations of small merchants from obtaining lower prices when making large-volume purchases.[80] For example, in Mid-South Distributors v. FTC, the FTC filed suit against two cooperative buyer groups, Mid-South Distributors and Cotton States, Inc., and their 23 jobbers for buying automotive parts at a discount. In ruling against the co-ops, the court found that the co-ops “must, as would any other organization of comparable size, respect the prohibitions against discriminatory price differentials.”[81] In other words, the RPA served to hurt small buyers that tried to organize against big business but as a result of the act could not receive discounts based on their combined power. Thus, the RPA did not help small businesses succeed against their larger rivals in the competitive market, but rather hindered their chances and thereby paradoxically contradicted the goal of empowering small businesses and achieving equity. And nor was this sort of harm to small business exceptional: In fact, F.M. Scherer and David Ross found in a 1990 research paper that of the 564 companies in violation of the RPA, only 6.4 percent had annual sales of $100 million or more while more than 60 percent had sales below $5 million.[82]

Unlike the neo-Brandeisians, other proponents of the RPA may try to justify the act’s revival through a liberal-progressive Rawlsian philosophy, a more moderate or “formal equality” approach which stipulates that a just society will have social and economic inequalities only if they benefit the least-advantaged member of society.[83] As Atkinson wrote, Rawlsians ��reject an economy where everyone gains, but where those on the bottom gain less.”[84] On this view, known as the “difference principle” or Rawls’s second principle of justice, the RPA makes sense as a way to ensure that price discrimination does not harm small businesses or less-advantaged firms compared with their larger rivals that generally have greater efficiency and lower costs.

However, a Rawlsian justification of the RPA overlooks how price discrimination can also help small firms become more competitive in the market. Indeed, Atkinson provided a clear analogy, explaining that although tolled lanes enable higher-income travelers to commute at a faster speed than their lower income counterparts, the lower-income travelers will nevertheless benefit at no extra cost when they experience lower travel times because the roadways are less crowded, given that the high-income travelers have moved to the tolled lanes.[85] Similarly, while price discrimination enables larger firms to receive larger discounts than do smaller firms due to their greater efficiency, small firms could also be better off from price discrimination because manufacturers that, without price discrimination, may not have been able to sell to them at all can now do so—even if it is not at a price as low as those for large firms—rather than removing them from the list of companies they sell to (when these small firms cannot afford the products without discounts).[86]

Moreover, the RPA is also in tension with Rawls’s first principle of justice that “each person is to have an equal right to the most extensive scheme of equal basic liberties compatible with a similar scheme of liberties for others.”[87] That is, according to the Rawlsian conception of fair equality of opportunity, an individual (or in this case, a firm) should have a fair chance of success in attaining a social (or economic) position based on their talents and willingness to use them.[88] For example, a small but dynamic manufacturer that wants to compete based on its ability to offer price reductions to certain key customers should be allowed to do so. Yet, it is exactly this practice that the RPA prohibits: Such a firm must charge all customers the same, which may end up hindering its ability to compete against its larger rivals. In other words, the RPA may effectively place limits on entrepreneurial behavior and competition on the merits, which is in tension with the idea of basic economic liberty.

Policy Recommendations

Policymakers should ignore the neo-Brandeisian advocacy efforts to revive the RPA and actively prevent any attempts to reenforce the act. This is because, contrary to neo-Brandeisians’ claims that the act will benefit the economy and its actors, the reality is the enforcement of the RPA has only harmed the economy, consumers, and businesses both large and small. Indeed, as the 1977 DOJ report on the act asserted, the RPA is a form of governmental tampering that “can lead to unforeseen results which have an adverse effect on workers, businesses, and the consuming public.”[89] This is the real reason why the act’s enforcement has halted—and not because it was too friendly to big business.

Nevertheless, policymakers should fight price discrimination whenever it constitutes legitimate anticompetitive conduct. However, as we have seen, these anticompetitive forms of price discrimination are already policed under the Sherman Act. For example, as noted, the Sherman Act actively prohibits predatory pricing, or a form of PL price discrimination, when firms can recoup their losses from below-cost pricing. Similarly, SL price discrimination can also be condemned when it takes the form of predatory overbuying.

For this reason, in view of activist antitrust enforcers, a second step toward protecting the economy from the negative implications of the RPA is for Congress to repeal the act before neo-Brandeisians have the opportunity to revive it. As we have seen, the RPA serves no real purpose in antitrust laws since the Sherman Act already covers the exclusionary conduct encompassed by the act that was passed to serve private interests, not consumers. As such, the RPA has no reason to remain law and Congress should repeal it as soon as possible. By doing so, consumers and businesses alike will not have to worry about neo-Brandeisians antitrust enforcers reviving and weaponizing the act to protect certain competitors by harming others.

In addition to ceasing new enforcement of the RPA, policymakers should also prohibit the FTC from expanding Section 5 of the FTC Act to include price discrimination. In 2022, the FTC released a new policy statement asserting that it intended to broaden its enforcement under Section 5 of the FTC Act to include a list of practices that included price discrimination.[90] The statement notes that “a non-exclusive set of examples of conduct that have been found to violate Section 5 include … price discrimination claims such as knowingly inducing or receiving disproportionate promotional allowances.”[91] However, just because price discrimination is enforced under Section 5 does not change the reality that doing so will harm consumers and the economy.

Conclusion

Neo-Brandeisians are attempting to revive the RPA to protect small competitors from competition. However, as economics and history have long made clear, the act has grave consequences for the economy, consumers, and firms, including the small firms that it is trying to protect. Indeed, historically, the act likely raised prices for a vast proportion of American consumers when it prohibited large retail stores, such as A&P, from receiving discounts from manufacturers. If revived, the act will likely raise prices for consumers again, reducing overall economic welfare. Moreover, the act’s prohibition of price discrimination also historically harmed small firms when it prohibited them from buying in bulk as an association to receive discounts. As such, if policymakers do not want a repeat of these economic consequences, they should prevent the act’s revival and have Congress repeal it.

Endnotes