Legal Definitions - Robinson–Patman Act

The Robinson–Patman Act is a United States federal law that prohibits certain types of price discrimination. Its main purpose is to prevent large businesses from using their buying power to secure unfair price advantages from suppliers, which could harm competition and potentially lead to monopolies. In essence, it makes it illegal for a seller to charge different prices to different buyers for the same goods if that price difference would significantly reduce competition or tend to create a monopoly.

Here are some examples to illustrate how the Robinson–Patman Act works:

• Example 1: Manufacturer Favoring a Large Retail Chain

  Imagine a major beverage manufacturer that sells its popular soda to various grocery stores. The manufacturer offers a significantly lower price per case to a large national supermarket chain compared to the price it offers to a smaller, independent regional grocery store, even though the cost of producing and delivering the soda to both is essentially the same. This preferential pricing allows the national chain to sell the soda at a much lower price to consumers, making it very difficult for the smaller independent store to compete and potentially driving it out of business.

  This scenario illustrates the Robinson–Patman Act because the manufacturer is engaging in price discrimination (charging different prices for the same product) that directly harms competition by putting the smaller grocery store at an unfair disadvantage.

• Example 2: Supplier Giving Preferential Pricing to a Specific Distributor

  Consider a company that supplies specialized industrial components to various distributors across the country. One particular distributor, which is also a subsidiary of a larger conglomerate, receives a substantial discount on bulk orders that is not available to other independent distributors, even when those independent distributors place orders of similar size and frequency. This discount allows the favored distributor to offer the components to its customers at prices that other distributors cannot match, giving it an unfair competitive edge in the market.

  Here, the supplier's discriminatory pricing gives one distributor an artificial cost advantage over others, potentially hindering fair competition among the distributors and allowing the favored one to dominate the market.

• Example 3: Wholesaler Offering Exclusive Rebates

  A large wholesaler of office supplies offers an exclusive, high-volume rebate program to one specific online office supply retailer. This rebate effectively lowers the online retailer's net cost for products significantly, a benefit not extended to other smaller, brick-and-mortar office supply stores that purchase similar quantities. As a result, the online retailer can consistently offer products at prices that the smaller stores cannot afford to match, regardless of their own operational efficiency.

  This situation demonstrates a violation of the Act because the wholesaler's exclusive rebate creates an uneven playing field, allowing the favored online retailer to gain market share through artificially lower costs rather than superior business practices, thereby stifling competition.