The Robinson-Patman Act should be repealed

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The proposed merger of Kroger and Albertson’s was recently put on hold pending a ruling in a Colorado court case.

While this case is in the court system, there are actions that lawmakers concerned about food prices can take to limit the impact of the Big-is-Bad narrative on the rising cost of living. Lawmakers should repeal bad laws like Robinson-Patman before it’s too late.

The Colorado attorney general wasn’t the only government body to raise concerns. The Federal Trade Commission filed a complaint against the proposed merger of Kroger and Albertsons. The complaint focuses in part on the effects on consumers, but a significant portion of the complaint concerns labor, specifically unions.

The shift away from consumer focus in the food market may not end with mergers. A lesser-known law, the Robinson-Patman Act, has been sidelined by concerns about competitors over consumers. While it is an unused tool in the FTC’s toolbox, it may not stay that way for long.

Politico reported that the agency plans to use the law to target soda makers and alcohol distributors. While no lawsuits have been filed, consumers should be concerned that the law has been sidelined due to its negative impact on their well-being.

The Robinson-Patman Act prohibits charging different prices to different buyers of the same goods. The act fell out of favor after a 1977 Justice Department report concluded that “unfortunately, the Robinson-Patman Act, so fair in principle, cannot be considered a net benefit to the American public because its actual effects as an economic regulation act are, on balance, more costly than they are beneficial to society.”

In 2007, the Antitrust Modernization Commission recommended repeal of the Robinson-Patman Act based on its protection of “competition over competition.” Even evaluating the act according to its intended purpose of protecting small businesses is a failure.

As noted in the Mercatus Center analysis, a 1990 study found that most of the businesses subject to Robinson-Patman complaints were small and medium-sized, indicating that the companies the law was intended to protect are victims of its flawed enforcement.

The focus on competitors, not consumers, is why some argue the bill should be used to stem the tide of Dollar Stores, which are increasingly acting as low-cost competition for traditional grocery stores. While these advocates argue that consumer welfare could suffer if Dollar Stores put grocery stores out of business, it is more certain that eliminating or restricting a low-cost option would harm consumer welfare, especially among the lowest-income consumers.

A common defense of the law by its supporters is that there is no evidence that it raises consumer prices. The criticism is the lack of quantitative studies measuring the law’s impact on prices. However, the Supreme Court’s decision in Utah Pie vs. Continental Baking Co.. found a violation of the Robinson-Patman Act, although no competitor was forced out of business and consumers benefited from lower prices.

This decision confirms the allegation that the problem is that the purpose of the Act is fundamentally at odds with the purpose of the Antitrust Act, which is to promote competition.

But Congress has yet to act, meaning the FTC has additional tools it can use to distort markets at the expense of consumers.

Rather than rely on courts to throw out unfavorable FTC cases, lawmakers should take action to protect consumers by repealing the Robinson-Patman Act rather than hoping it will continue to be ignored.

Tirzah Duren is vice president of policy and research at the American Consumer Institute. She wrote this for InsideSources.com.