Robinson-Patman Act (1936)

The Robinson-Patman Act (RPA) was signed into law by President Roosevelt on June 19, 1936 [1].  The RPA amended the Clayton Antitrust Act of the Theodore Roosevelt era.  The most significant of its provisions is to prohibit “a seller of commodities from selling comparable goods to different buyers at different prices, except in certain circumstances” [2].

The RPA came into being in dramatic fashion, with congressional hearings and widespread public discussion about the impact of large chain stores on American retailing.  The first chain stores came into being around the time of the First World War and had become a major force over industry, distribution and marketing.   The vanguard of the new chain retailers were the grocery chains, led by A&P, Safeway, and Kroger, and a new type of giant store, the ‘supermarket’, was invented in the early 1930s [3].  This posed a new challenge to the long-standing idea of a nation of independent business owners and unleashed a strong reaction in the tradition of late 19th century farmer populism (particularly in the South) and Progressive Era trust-busting.

The problem is that chains can use their superior purchasing power to buy goods at bulk discounts and then undercut the prices offered by small distributors and retailers.  This was driving many such competitors out of business, adding to the losses incurred during the Great Depression.  The harmed businesses lobbied Congress for action, and Wright Patman (D-TX) held a long series of hearings that captured national attention.  The RPA was the result.  Its goal was to maintain competition in the marketplace.  But, like its predecessor antitrust laws, RPA failed to stop the long march of large corporate dominance over most sectors of the economy.

The RPA is still the law, but has been markedly weakened over the years by corporate strategy, diminished regulatory action and evolving jurisprudence.  First, to avoid the appearance of pricing favoritism towards large retailers, suppliers can make minor changes to goods to differentiate their transactions.  As one group of scholars write: “Managers are well aware of [RPA] and take care to avoid the appearance of offering discounts to favored retailers.  For instance, large retailers such as Walmart obtain specialized labeling and packaging to ensure that the product sold to these retailers is not the same products sold to other retailers” [4].

Second, the Federal Trade Commission has been intentionally weakened since the Reagan Administration.  One legal commentator notes that, “Up until the 1980s, the FTC brought numerous civil actions under the RPA.  Since that time, however, the FTC rarely has brought RPA actions” [5].  Third, decisions by the conservative Supreme Court majorities of the last few decades, such as Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. (509 U.S. 209 (1993), have meant “winning an [RPA] case has become significantly tougher for plaintiffs…” by making it harder to prove damage to marketplace competition [6].

As a result, the dominance of large chain stores still prevails in the United States.  Today, Walmart is the world’s largest retailer, just as A&P was in the 1930s.  Walmart’s devastating impact on mom & pop stores and small town retailing has dominated news headlines for many years [7].  The RPA is still on the books, however, and private suits utilizing the law have the potential to collect treble damages [8], while a revived FTC could enforce the law through oversight and injunctions [9].

Sources: (1) Kenneth G. Elzinga, “The Robinson-Patman Act: A New Deal for Small Business” (1980).  In Gary M. Walton (ed.), Regulatory Change in an Atmosphere of Crisis: Current Implications of the Roosevelt Years, Academic Press, pp. 63-64.  (2) “Robinson-Patman Act,” West’s Encyclopedia of American Law, edition 2, 2008, http://legal-dictionary.thefreedictionary.com/Robinson-Patman+Act, accessed July 25, 2015. (3) Richard Tedlow. New and Improved: The Story of Mass Marketing in America. New York: Basic Books, 1990.  (4) Ryan Luchs et al., “The End of the Robinson-Patman Act? Evidence from Legal Case Data,” Management Science, Vol. 56, No. 12, December 2010, pp. 2123-2124 http://www-bcf.usc.edu/~dukes/Papers/Dukes13_EndofRP_MgtSci_10.pdf, accessed July 25, 2015.  (5) Ross E. Elfand, “The Robinson-Patman Act,” American Bar Association, http://www.americanbar.org/groups/young_lawyers/publications/the_101_201_practice_series/robinson_patman_act.html, accessed July 25, 2015. (6) See note 4, at pp. 2130-2131. (7) See, e.g., Brad Tuttle, “What Small Businesses Are Doing to Woo You from Walmart and Amazon at Holiday Time,” Time, November 28, 2014, http://time.com/money/3609752/small-business-walmart-amazon/, accessed July 25, 2015, and Tim Worstall, “Of Course Walmart Destroys Retail Jobs: That’s The Darn Point Of It All,” Forbes, March 31, 2013, http://www.forbes.com/sites/timworstall/2013/03/31/of-course-walmart-destroys-retail-jobs-thats-the-darn-point-of-it-all/, accessed July 25, 2015. (8) Douglas L. Wald and John A Rackson, “Recent Changes to the FTC’s Robinson-Patman Act Guidance,” Arnold & Porter LLP, October 6, 2014, http://www.arnoldporter.com/publications.cfm?action=advisory&u=RecentChangestotheFTCsRobinsonPatmanActGuidance&id=1189&p=-1, accessed July 25, 2015.  (9)  See note 5.