The American Conservative (TAC) may need to change its name to The American Khanservative — referring to those of the right whose view of antitrust policy is closer to those of Federal Trade Commission Chair Lina Khan than Ron Paul. For example, TAC recently ran a piece entitled Enforce the Robinson-Patman Act for a Better Economy by Daniel Hanley, senior legal analyst at the pro-regulation Open Markets Institute. As the title suggests, Hanley supports Lina Khan’s efforts to revive the Robinson-Patman Act.
This New Deal-era law forbids “price discrimination.” Specifically, the law forbids large retailers from requiring manufacturers to provide discounts to the retailer in order to sell their products in the retailer’s stores. The law was enacted to protect local “mom and pop” stores from large retailers like JC Penny’s, Woolworths, and A&P. Hanley. Lina Khan and her allies on the left and right think the government needs to return to the days when it vigorously enforced Robinson-Patman.
They believe this is necessary because of the power of big box and internet retailers like Amazon and Wal-Mart. He calls those firms “bullies” because they use their power to “force” retailers to offer their products at a lower price than they offer to smaller stores. This is a seriously flawed analogy since bullies use force to take what they want from those weaker than them without providing any benefit in return. Wal-Mart and Amazon do not force manufacturers to pay them a discount. They simply use their size as leverage to get a better deal from the manufacturers. This is how businesses are expected to operate in the free market.
Hanley’s first example of Wal-Mart’s bullying is their 2017 demand that suppliers reduce their costs by 15%. His example of a company that was “forced” to submit to this bullying is Kraft-Heinz, maker of some of the most popular food products on the market. Kraft-Heinz obviously can find other sites to sell their products, but the reason they, and other big brands like Coke and Pepsi, agree to Wal-Mart’s terms, have to do with it being more profitable in a volume sense for them to sell their products at Wal-Mart. Even if they have to accept a discounted fee, it’s more beneficial than to refuse to sell their products at the world’s largest retailer.
The main beneficiaries of this system are consumers who are able to obtain products — both popular and new — cheaper than they could at other retailers. Hanley claims Robinson-Patman benefits small business and consumers by forcing large corporations to look for attentive ways to increase profits that do not harm their suppliers. For instance, he says large companies can operate on lower profit margins (ignoring how this will affect the workers at big companies like Amazon and Wal-Mart) or operate more efficiently, as if all it takes for a company to increase efficiency is a command from a government bureaucrat or politician. Hanley advises firms to devote more resources to producing more “store brand” products. This is ironic since many of Hanley's fellow antitrust crusaders want to impose new laws and regulations on Amazon that would essentially outlaw any attempt by the company to effectively promote its own products.
Hanley claims that limiting competition will benefit consumers because then “…other channels of competition, such as, increasing product quality, or offering additional marketing services become more viable and meaningful.” Hanley never considers that the reason retailers primarily compete on price is that price is the most meaningful quality to most consumers. Higher prices at Wal-Mart means consumers will be forced to change their spending habits, reducing consumers’ well-being and depriving other retailers of income they can use to not just pay their workers, but possibly expanding or creating new jobs and efficiently serving more consumers.
Hanley admits that “the drafters of the RPA explicitly stated that higher prices were worth it if they facilitated fairness in the economy and restrained undue corporate power.” So, this bill raises prices in an attempt to make the market conform to the ideal of a view politicians and bureaucrats. This is not only incompatible with classical liberalism but with traditional conservatism, and is a perfect example of the dangers of abounding constitutional and free market conservatism to join Lina Khan in bullying successful businesses, their workers, and consumers.
