Channel Price Discrimination Hurts Competition

NACS general counsel outlines need for Robinson-Patman Act enforcement in The Wall Street Journal.

January 03, 2022

Rows of cans

ALEXANDRIA, Va.—Doug Kantor, NACS general counsel, argues in a letter to the editor published in the December 31, 2021, edition of The Wall Street Journal, that an old antitrust rule can spur retail competition and help eliminate price discrimination in the supply chain that favors certain retail channels over others when it comes to packaged beverages.

NACS in November sent a letter to the House Agriculture Committee asking for better enforcement of the Robinson-Patman Act as the committee weighs information on supply chain issues. NACS sees serious issues with the state of the supply chain and how it affects small businesses, particularly how the convenience industry suffers from price and product discrimination imposed by some of its major suppliers.

The Robinson-Patman Act was added as an amendment to the Clayton Antitrust Act in 1936. It bans certain discriminatory prices, services, and allowances in dealings between merchants. The Robinson-Patman Act has been largely unenforced for decades, but President Biden’s July 2021 Executive Order on Competition directs federal agencies to enforce antitrust laws.

Kantor in his December letter to the editor of the Journal responds to a December 20 op-ed by Noah Phillips, a commissioner of the Federal Trade Commission, and Joshua Wright, executive director of the Global Antitrust Institute at Scalia Law School at George Mason University. Kantor agrees with Phillips and Wright that “antitrust laws protect competition” and “competition benefits society—and consumers” but disagrees with their view that the Biden Administration should not enforce the Robinson-Patman Act.

Kantor writes: “Price discrimination based on arbitrary retail ‘channels’ raises prices and hurts competition. Even when they are larger and more efficient, convenience retailers pay higher prices than competitors on a range of products, particularly sodas.

“Convenience retailers regularly find that competitors can sell sodas for less than they can buy them wholesale. This happens regardless of purchase volume. Suppliers also refuse to sell some products to the convenience channel. These limitations make products less fungible and add to supply-chain problems.

“This happens because the law that prohibits it hasn’t been enforced in decades. The answer is to enforce, not throw out, the law. This wouldn’t stop discounts, but it could stop price increases based on channel distinctions. Old channel distinctions no longer have meaning. Today, consumers can buy a cold bottle of soda at the grocery store, drugstore, hardware store or electronics store—not to mention online.

“Lack of enforcement means that suppliers can artificially undercut price competition and extract excess profit. Unfortunately, critics of Robinson-Patman have missed this. The law can and should be used to ensure more vibrant price competition,” Kantor says.