On the Robinson-Patman Act, the FTC Passes the Pepsi Challenge

The Federal Trade Commission’s drive to rewrite antitrust law and to reshape the economy appears to have ended. In the waning days of the Biden Administration, the FTC filed an irrational and highly political lawsuit against PepsiCo under the Robinson-Patman Act (RPA). Last summer, the FTC wisely dismissed the suit, but in late January of this year, Sen. Elizabeth Warren (D-Mass.) and other members of Congress questioned the dismissal. In light of this letter and some other renewed interest in the RPA, the lawsuit’s history can help remind policymakers of the Act’s numerous flaws.

The Choice of the Brandeisian Generation

In 1936, Congress enacted the Robinson-Patman Act to require businesses to offer the same price for goods to all purchasers, regardless of their size or purchasing power. At the time, Congress was responding to the concerns of small businesses, who complained they could not obtain the same discounts as chains, but policymakers quickly realized that the Act conflicted with the nation’s other antitrust laws because it sought to protect competitors rather than promote competition.

As a result, for many decades, the RPA remained largely unenforced, and in fact, bipartisan experts repeatedly sought to abolish the law. In the 1960s, a report commissioned by President Lyndon Johnson, and released under President Richard Nixon, recommended repeal due to the Act’s high costs, limited or non-existent benefits, and inconsistency with other antitrust laws. In 1977, President Jimmy Carter’s Justice Department concluded that “serious consideration” should be given to a repeal. In 2007, the bipartisan Antitrust Modernization Commission again recommended that “Congress should repeal the Robinson-Patman Act in its entirety.”

Nevertheless, on January 17, 2025, with just days left in the Biden Administration, the FTC accused Pepsi of engaging in illegal price discrimination by providing one customer, a big box retailer, with unfair pricing advantages. In a sharp dissent, then-Commissioner Ferguson lambasted the “gaping holes in the evidence that Commission staff collected in its limited investigation.” In particular, he pointed out that there was “no evidence that Pepsi denied to any firm the promotions or services it offered to the big-box store,” and that, in fact, “the Commission has not reviewed a single piece of evidence from the big-box store or obtained any evidence from its putative competitors.”

For these reasons, Commissioner Ferguson called the suit the “single most brazen assertion of raw political power I have witnessed during my time as a Commissioner.” The majority “filed a complaint without evidence precisely so that they can say they are ‘reviving’ the Act, thereby thrilling the sectors of their party that have demanded that the Act be revived.” Given the impending presidential transition, the majority was “leaving others to clean up their mess.”

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The Case Against Robinson-Patman Enforcement

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Cleaning Up the Mess

After the transition, the FTC voted unanimously to dismiss its lawsuit. In a statement, Chairman Ferguson and Commissioner Holyoak called the case “purely political” and “an insult to the Commission’s credibility.” Both acknowledged that the Commission could, in theory, bring an enforcement action under the RPA “after a thorough investigation has assured us that the defendant has violated the Act, that we are likely to prevail in litigation, and that we are maximizing the effect of our finite enforcement resources consistent with the purpose of the Act.” Commissioner Meador sounded similar themes.

In a letter, Senator Warren and others questioned the dismissal. They pointed to internal documents that purport to show that Pepsi provided one retailer with “special promotional payments and allowances,” in exchange for “preferential advertising and shelf placement.”

These concerns, however, fall flat. Commissioner Ferguson had pointed out that there was no evidence that Pepsi denied any firm promotional opportunities. Moreover, from the standpoint of consumers, the complaint highlights the RPA’s fundamental flaws: the Act discourages price cutting, and its enforcement likely would lead to higher prices. Even assuming that Pepsi had offered special promotions to one retailer, there is no reason to think that a heavily enforced RPA would have caused Pepsi to offer that promotion to all retailers. Instead, it is as likely, if not more likely, that Pepsi would have eliminated discounts for all retailers, leaving consumers to pay more at the checkout line. In short, the evidence did not justify the FTC’s continued use of scarce resources to enforce a statute that offered no relief to consumers.

History shows that the RPA leads to higher overall prices. According to a bipartisan study, by discouraging discounts, the Act has had the “unintended effect of limiting the extent of discounting generally and therefore has likely caused consumers to pay higher prices than they otherwise would.”

Even worse, the Act’s requirement of uniform prices “hit some of the poorest consumers the hardest.” According to USDA statistics, “the vast majority of food-stamp purchases are made at large retailers; more than half at big-box stores.” These retailers rely on their ability to negotiate discounts to keep prices low. Renewed enforcement of the Robinson-Patman Act likely would eliminate this flexibility, forcing prices upward and disproportionately impacting low-income families who depend on these savings.

Finally, the Act’s compliance requirements impose additional administrative costs on businesses, which are often passed on to consumers. Maintaining detailed records of pricing and sales practices, hiring specialized personnel, and investing in systems to ensure compliance all contribute to higher operational costs. These expenses ultimately find their way to consumers.

The Federal Trade Commission made the right choice when it walked away from this case, continuing to ignore political pressure to do otherwise.

Those who are calling for more vigorous enforcement of the Robinson-Patman Act are either naïve to think prices would inevitably fall or are motivated by self-interest and eager to promote less efficient competitors.

About the author

Sean Heather

Sean Heather is Senior Vice President for International Regulatory Affairs and Antitrust.

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