The Federal Trade Commission (FTC) withdrew the agency’s lawsuit against Pepsi Cola for allegedly violating the Robinson-Patman Act (RPA). The withdrawal was supported by all three members of the FTC’s board, which currently has two vacant seats since President Trump removed the board’s two Democrats. The RPA outlaws price discrimination—which is when a distributor offers a retailer a discount unavailable to other stores. The suit against Pepsi was the second suit brought by the FTC during the Biden years. The last suit from the federal government for violating the RPA was in 2000.
The FTC alleged that Pepsi violated the law by giving special discounts to retail giant Wal-Mart that it did not offer to smaller stores. In their joint statement on the dismissal, FTC Chair Andrew Ferguson and Commissioner Melisa Holyoak criticized their predecessors for filing the lawsuit on January 17th, 2025—3 days before Joe Biden left the presidency, thus putting the FTC under Republican control. They also criticized the filing for not providing specific instances of “price discrimination,” which they attributed to the fact that the complaint was filed before the FTC completed its investigation.
The third member of the FTC board, Commissioner Mark Meador, released his own statement. Meador denounced the FTC’s case for “the complete lack of intellectual rigor, reckless disregard for sound factual evidence, and nakedly political timing.” But he also endorsed efforts to “revive RPA enforcement.” This is not surprising since he previously wrote in support of the FTC bringing more cases for RPA violations.
One of Meador’s arguments is that the FTC’s abandonment of RPA violated the duty to uphold the rule of law. However, he also acknowledged that prosecutors should have some discretion in bringing cases. After all, prosecutors have finite time and resources. Enforcing RPA could divert resources from other actions that may be more beneficial to the American people. An examination of RPA not only shows why the FTC went over two decades without bringing an RPA case, but why Robert Bork called RPA “the Typhoid Mary of antitrust.”
RPA was passed as part of the New Deal to protect small mom and pop stores from large national chains like A&P (the Wal-Mart of its day). The law ignores the fact that there is a sound reason why a company like Pepsi would give big chains a discount. A larger store like Wal-Mart can take advantage of economies of scale to sell products at a lower price than smaller stores. This lower price means more consumers will patronize the bigger store—thus Pepsi and other companies can actually make more profits selling their products at the big stores even though they sell at a lower price. This arrangement benefits consumers, who pay lower prices, as well as businesses, who earn higher profits.
Commissioner Meador argues that Pepsi and other companies compensate for the discount they give to large stores by raising prices they charge smaller stores. This seems highly unlikely. It is more likely that the small stores are not offered the discount unless they can show they can move as much product and generate as much revenue as larger retailers.
Outlawing price discrimination may cause large stores to keep prices higher than they would if distributors could offer them a discount, offering lower prices than smaller stores. So, outlawing price discrimination will make consumers pay more than they otherwise would—which may cause them to reduce spending on other goods—thus harming the producers of those goods.
Progressive critics of the FTC’s decision to withdraw the Pepsi suit claim that the decision to stop bringing cases alleging violations of the RPA was responsible for the rise of Wal-Mart (and other large retailers) and the decline of small business. What these progressives (and their right-wing fellow travelers like Mark Meador) ignore is that it is harmful to both producers and consumers for the government to prop up companies that would not be able to exist in a free market. It also harms workers, management, and investors in the “protected” business by preventing them from seeking more profitable opportunities. Hopefully, Chair Ferguson and Commissioner Holyoak will not join Commissioner Meador in seeking to prosecute businesses for the “crime” of seeking to increase their profits while lowering prices for consumers.
