Citation[edit | edit source]

Robinson-Patman Act, 15 U.S.C. §§13, 13a, 13b, 21a.

Overview[edit | edit source]

The Act was enacted in 1936 with the specific purpose of creating and maintaining a market atmosphere in which small business could compete effectively, at least in the purchase of commodities, with its larger rivals. The immediate impetus for that Depression-era legislation was concern for smaller grocery store operators who complained that their businesses were suffering as the direct result of the activities of the chain grocery stores generally and the Great Atlantic & Pacific Tea Company (A&P) particularly.

In pertinent part, the statute states 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 sale within the United States . . ., and 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 the customers of either of them.[1]

The Act makes it unlawful, with certain exceptions, to knowingly sell goods of “like grade and quality”[2] “in commerce,” for use or sale within the United States, at differing prices to contemporaneous buyers of those goods. The Act applies only where each sale is of goods purchased for resale within the United States (i.e., it does not prohibit price differentials between goods sold for resale within the United States and those sold for export.)[3] The Act also does not apply to the sale of services.[4]

The “in commerce” language of the Act has been held to mean that the interstate commerce requirement is satisfied only when at least one of the two (or more) sales is made “in the stream of commerce” — i.e., across state lines.[5] The Act is the exception to the notion that the antitrust laws protect competition, not competitors in that it generally prohibits precisely the kind of price differentiation which would normally be thought to result from vigorous competition.

Enforcement[edit | edit source]

Since its enactment in 1936, the Robinson-Patman Act has been less than enthusiastically viewed by the Department of Justice, which believes that the act is not beneficial to consumers.[6] In its 1977 Report on the Robinson-Patman Act, the Antitrust Division noted that

It should not be surprising . . . that Robinson-Patman can be shown to have many adverse effects on the economy. To be sure, there are some who do not recognize these effects or who argue that they are outweighed by benefits to specific sectors of the economy, notably small business; to competition by preventing increased concentration in a line of commerce; and to public values in general by establishing as a legal norm the concept of ‘fair dealing’ in pricing. But any discussion of the benefits of Robinson-Patman can be made only with a clear understanding of the burdens that the statute places on American economic activity.[7]

Government enforcement of the Act, therefore, has always been entrusted to the Federal Trade Commission (FTC), which over the years has acted inconsistently with respect to Robinson-Patman Act actions. The bulk of the cases have been brought by disfavored buyers.

Disfavored buyers who prove a Robinson-Patman Act violation are not, however, automatically entitled to damages on that account. The Supreme Court has held that since, technically, Robinson-Patman Acr prohibits any price differential whose effect “may be substantially to lessen competition," (emphasis added), not all proven Robinson-Patman act violations actually damage those who prove them: “[t]o recover treble damages . . . a plaintiff must . . . make some showing of actual injury attributable to something the antitrust laws were designed to prevent” — i.e., a causal connection between the violation and the injury allegedly suffered.

Defenses and Exception[edit | edit source]

Allegations of Robinson-Patman Acrt violations may be defended by asserting and proving either that the differing prices reflect only the cost of the seller's manufacture or delivery (the “cost justification” defense); or, that the seller is attempting either (1) to meet the competition of another seller, or (2) enable the buyer to meet the competition of a competitor of the buyer ("meeting competition” defense).

In addition, there is also a broad exception to the prohibition against price discrimination when one of the sales is made to any of certain entities listed in the Nonprofit Institutions Act,[8] and the goods are purchased for the institution’s “own use" ("non-profit exemption"). Nonprofits may not, however, take advantage of their privileged Robinson-Patman Act status to purchase commodities at favorable prices in order to compete commercially with entities not so entitled. Further, lower courts have found that health maintenance organizations (HMOs) qualify as organizations entitled to take advantage of the Nonprofit Institutions Act, on the theory that they perform services that traditionally have been considered as “charitable”; the Supreme Court has not had occasion to rule on the status of HMOs.

Attempts to Amend/Repeal the Act[edit | edit source]

Although there have been some attempts at amending or repealing the Act, none has been successful. The Antitrust Division of the Department of Justice has always believed the statute to be inflationary; that it artificially deprives consumers of the advantages of the lower prices that are the aim of the antitrust laws; and that, inter alia, it “reduces pricing flexibility [and] discourages the development of efficient distribution systems.” Small businesses, and others, have contended, on the other hand, that their survival depends on the prevention of unjustified price differentials.

References[edit | edit source]

  1. 15 U.S.C. §13(a) (emphasis added).
  2. There has been a great deal of litigation concerning the definition of “like grade and quality,” with the conclusion that, at the least, the phrase does not necessarily dictate that brand-name and private-label goods are not comparable. In Federal Trade Comm'n v. Borden Co., 383 U.S. 637 (1966), for example, the Court indicated that the proper test for determining whether commodities are of “like grade and quality” is a “physical comparison” of the goods as opposed to consumer or marketplace acceptance of them. 383 U.S. at 639-41. See also Morning Pioneer, Inc. v. Bismarck Tribune Co., 493 F.2d 383 (8th Cir. 1974), cert. denied, 419 U.S. 836 (1974).
  3. Fimex Corp. v. Barmatic Products Co., 429 F. Supp. 978 (E.D.N.Y. 1977), aff'd without published opinion, 573 F.2d 1289 (2d Cir. 1977); C.E.D. Mobilephone Communic'ns, Inc. v. Harris Corp., 1985 WL 193,*2 (S.D.N.Y. 1985)(“Th[e] plain statutory language exempts exports from the prohibition against price discrimination.”); but see Raul Int'l Corp. v. Sealed Power Corp., 586 F. Supp. 349, 354 (D.N.J. 1984), which uses the words “next immediate resale” to explain its reasoning that the exemption is generally applied too broadly — that the statutory language creating the exemption applies only to sales by U.S. entities either directly to entities outside the country or to exporters: that indirect sales — those made in domestic commerce, albeit on the way to either a sale in export commerce or to a U.S. exporter — do not qualify for the exemption.
  4. TV Signal Co. of Aberdeen v. American Tel. & Tel. Co., 462 F.2d 1256, 1259 (8th Cir.1972); Windsor Auctions, Inc. v. eBay, Inc., 2008 WL 2622791, at *4 (N.D. Cal. 2008); Ventimiglia v. AT&T Yellow Pages, 543 F.Supp.2d 1038 (E.D. Mo. 2008). The Department of Justice pointed to Act’s nonapplication to “the offering of services — a growing sector in which small business is especially significant,” as further reinforcement of its conclusion that “the Robinson-Patman is not a key factor in preserving efficient small business.” U.S. Department of Justice, Report on the Robinson-Patman Act 260 (1977)("Report").
  5. Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 200 (1974), quoting from Hiram Walker, Inc. v. A&S Tropical, Inc. 407 F.2d 4, 9 (5th Cir. 1969), cert. denied, 396 U.S. 901 (1969). The plaintiff in Copp had argued that because the product involved in the challenged price (paving tar) could be used for interstate roads, despite the fact that the subject sales were entirely intrastate, the jurisdictional “commerce” requisite for a Robinson-Patman Act challenge had been met. The Court easily distinguished between the broader commerce requirement of Sherman Act §1 (15 U.S.C. §1), which is satisfied by conduct which merely affects commerce, and the more specific and rigid commerce requirement of the Robinson-Patman Act, which is satisfied “only [by] persons or activities within the flow of interstate commerce — the practical, economic continuity in the generation of goods and services for interstate markets and their transport and distribution to the consumer.” 419 U.S. at 195.
  6. According to the Department, “Under existing liaison agreements between the Department of Justice and the Federal Trade Commission, the FTC has taken primary responsibility for civil enforcement of the Act [despite the fact that, theoretically at least, it is equally enforceable by both agencies], leaving the Department of Justice with responsibility for criminal prosecutions under Section 3 [which provides for a $5,000 fine and/or imprisonment for not more than one year]. That section, never intended as a substantive addition to the Act [and not codified], has rarely been invoked.” Report, at 3. In fact, most price-discrimination activity involves only private litigants.
  7. Report, at 8.
  8. 15 U.S.C. §13c.
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