One of Joe Biden’s favorite campaign whipping boys is “corporate greed,” blaming corporate America for higher prices that government lockdowns and overspending caused.
At the same time, the Federal Trade Commission is looking to raise prices even further by resuscitating enforcement of a largely-defunct antitrust law from 1936. The FTC should leave the Robinson-Patman Act in the Great Depression.
The RPA bans suppliers, wholesalers, and manufacturers from selling “commodities of like grade and quality” to buyers at different prices. While RPA is an amendment to the Clayton Antitrust Act, it has functioned more like a tort law than an antitrust law. The RPA’s central commonality with other antitrust laws is that its sponsors designed it to prop up individual competitors at the expense of consumers.
Tortured logic animates the RPA. For example, let us say that Beretta has agreed to sell rifles to Cabela’s and Bob’s Gun Shop. Because Cabela’s benefits from economies of scale and a nationwide customer base, Beretta may choose to give Cabela’s a discounted price on bulk rifle orders. And since Bob’s Gun Shop has only one location and a far smaller customer base than Cabela’s, Beretta may choose to sell rifles to your local shop at a slightly higher price.
Under this arrangement, everyone wins. Beretta gets to sell rifles in businesses large and small. Cabela’s and your local gun shop make money from rifle sales, and compete aggressively to offer low prices to consumers. Shoppers can choose to support Cabela’s or Bob’s Gun Shop.
While the government claims to have a crystal ball that tells them how a market should function, the above example may not be how it always pans out. Beretta could choose to sell rifles to Cabela’s and Bob’s Gun Shop at the same price, or it could give Bob’s Gun Shop a special discount. The point here is that suppliers and buyers are able to enter into voluntary, mutually beneficial agreements without needing to obtain government approval.
Under a fully-enforced RPA regime, the government would sue Beretta for price discrimination between Cabela’s and your local gun shop. Instead of understanding that Beretta is charging both partners what the market will bear, the government views Beretta as colluding with Cabela’s to undercut local gun shops. RPA drafters argued that the law would “help” small businesses by putting pressure on suppliers to offer the same low prices to them that suppliers offer to larger retailers.
Like most government regulations, RPA harmed those it was designed to “help.” A 1977 Justice Department report showed that RPA enforcement chilled negotiations between buyers and suppliers, driving prices higher across the economy. The DOJ report also dismantled the notion that price discrimination uniformly benefits large buyers, and that RPA enforcement could materially impact the success or failure of a business. Overall, the report found that RPA enforcement harms consumers.
By the 1970s, RPA enforcement largely went the way of the do-do bird as antitrust enforcers began to target business activity that harmed consumers through higher prices, reduced quality, or slowed innovation. Since RPA enforcement actively harmed consumers by raising prices, antitrust cops stopped enforcing RPA.
Until FTC Chair Lina Khan came along, of course.
Media reports indicate that Khan’s FTC is planning to bring an RPA case against American alcohol distributor Southern Glazer’s Wine and Spirits. While Southern Glazer’s will soon have a “last rites” meeting with FTC bureaucrats in an attempt to stave off the lawsuit, the meeting is likely a mere formality. The FTC is also investigating Coca-Cola, Pepsi, and Kraft-Heinz for RPA violations.
Given RPA’s well-documented history of raising prices, why is the FTC interested in bringing RPA enforcement back from the grave? The answer is simple: Khan wants to expand the government’s power over the economy.
We have seen this story play out before. Aggressive RPA enforcement will once again chill negotiations between buyers and suppliers. Instead of charging large and small buyers different prices based on what the market will bear, suppliers will inevitably charge all buyers the same high price.
As we have seen in the past, taking away a supplier’s ability to price discriminate will chill competition and lead to higher prices for consumers. Then, progressives will argue for government price controls, taxpayer subsidies for retailers, and expanding welfare programs for families struggling to afford basic goods.
This story ends with three unelected FTC Commissioners having the power to set the price of every product sold in this country, replacing aggressive free market competition with government price controls. FTC bureaucrats will crawl all over businesses to ensure they are abiding by the government price controls, threatening costly litigation if they are not.
To avert this disaster, Congress should repeal the RPA entirely and take this dangerous tool out of the government’s hands. In the meantime, if Khan truly cares about consumers, she should banish the RPA to the ash heap of failed New Deal relics.
