The Federal Trade Commission (“FTC”) is utilizing a 1936 law – the Robinson-Patman Act (RPA)¹ – to investigate pricing, discounting, and advertising practices by buyers, sellers, manufacturers, and distributors.² Specifically, the FTC is investigating whether sellers are providing preferential discounts and advertising services to large buyers and the role large customers play in extracting such favorable concessions.³ Critics argue that the RPA is outdated and does not account for the significant evolution of buyer/seller relationships since 1936 due to technological advancements, increased demand, and online shopping.

Private parties regularly bring suit under the RPA, but federal antitrust agencies stopped actively enforcing the RPA decades ago. However, the FTC began investigations last year in the food and drink industry,⁴ including most recently, in the alcohol distribution industry. The FTC is investigating the alcohol distributor Southern Glazer’s Wine & Spirits (and many expected the FTC to file suit in that matter in June 2024, although no suit has yet been filed).⁵ There is also ongoing bipartisan congressional pressure on the FTC to wield the RPA to reduce consumer costs.⁶

This Alert explores the elements of an RPA claim; the FTC’s recent investigations; and best practices for companies (both buyers and sellers) to evaluate their pricing and promotional policies.

I. The RPA’s Purpose & Prohibitions

The RPA was created to help small buyers compete against large buyers. The RPA aims to ensure “businessmen at the same functional level would start on equal competitive footing so far as price is concerned.”⁸ Thus, the RPA prevents a seller from contemporaneously providing discriminatory pricing or promotional deals on commodities of like grade and qualities between two competing customers where the effect of such price discrimination may substantially lessen competition.

The RPA prohibits two types of discrimination: (1) price discrimination and (2) advertising/promotional discrimination. The RPA only protects buyers who are in “actual competition” with each other (i) at the same functional level (e.g., distributor, retailer), (ii) in the same geographic market, (iii) during the same period of time, and (iv) as to the same goods.⁹

A. Price Discrimination Claims Under the RPA

The RPA applies only to the sale of commodities,¹⁰ not to the sale of intangible products¹¹ or services.¹² (It typically also does not apply to leases.)¹³ Mere offers, refusals to quote prices/sell, or negotiations do not qualify as completed sales. To assert an RPA price discrimination claim, a disfavored buyer must show:¹⁴

1. the seller completed two actual sales of a tangible commodity;
2. the commodity was of like grade and quality;¹⁵
3. the sales were to two or more different competing buyers¹⁶
4. the sales were at two disparate prices;¹⁷
5. the sales were across state lines for use, consumption, or resale within the US;¹⁸
6. the net price differential of the goods has a reasonable possibility of injuring competition (or “competitive injury”).¹⁹

B. Advertising & Promotional Discrimination Claims Under the RPA

A seller may be liable under the RPA for discriminating against a disfavored buyer in (a) providing advertising, promotional, or merchandising services; or (b) paying allowances in connection with the resale of the seller’s goods. For example, a seller cannot offer special packaging and marketing only to a favored buyer. To assert an RPA claim for such discrimination, a disfavored buyer must show that:

1. the disfavored buyer is in “actual competition” with the favored buyer(s)²⁰ for the same customers; and
2. the seller’s promotional services/allowances were not available on proportional terms to the competing buyers.²¹

II. Injury Under the RPA

Price discrimination generally means any price difference. The term “price” refers to “net price” – the invoice price minus any discounts, offsets or allowance. But only price differences that injure competition among the manufacturer’s competing buyers violate the Act.²² Competitive injury can be shown at the (1) “primary line” level of competition with the seller (e.g., predatory pricing), (2) “secondary line” injury to “actual competition” among the allegedly favored and disfavored customers; or (3) tertiary-line injury to competition of a customer’s customers (e.g., resellers).²³

III. The Four Affirmative Defenses to an RPA Price Discrimination Claim

1. “Meeting Competition” is a commonly-used defense where the seller’s actions were necessary to avoid losing a new or existing customer to a competitor, and the discriminatory price was made in good faith to meet (not undercut) an competitor’s offer in the same geographic market.²⁴ Evidence that a seller provided a substantial price differential for a substantial time to competing buyers is sufficient to establish a violation of the RPA.²⁵
2. “Cost Justification” applies where the price differential offered by the seller can be justified by some externality that accounts for the price differential provided to a favored buyer.²⁶ The actual cost savings from such externality must be equal to or greater than the price difference offered to the favored buyer. This defense is best used to justify an “functional discount,” but hardest to justify when different prices are provided to two competing customers.
3. “Changed Conditions” allow a seller to defend lower prices caused by some characteristic that accounts for the different prices, such as: (a) deterioration of perishable goods, (b) obsolescence of seasonal goods, (c) distressed sales, (d) discontinued products, or (e) changes to product models.²⁷
4. “Functional Availability” can be leveraged as a defense when the lower price was made known to, and is functionally (not merely theoretically) available to, competing buyers.²⁸ The seller must (a) take affirmative steps to make a discount program known; (b) offer the discount programs sufficiently in advance to allow participation, and (c) base participation on objective criteria. A discount is still functionally available where: the disfavored buyer failed to obtain the discount due to factors within the buyer’s control or outside the seller’s control,²⁹ or the program's requirements are costly or involves risks.³⁰

IV. Recent FTC Investigations

Although private parties regularly bring suit under the RPA, the FTC has not enforced the RPA since 2000.³¹ However, the FTC has ramped up its scrutiny of the food and beverage industry, and RPA enforcement is one enforcement lever it is considering. In March 2024, the FTC released a report on grocery supply chain disruptions, revealing that the disruptions disproportionately impacted smaller firms. The FTC report reflects on-going inquiries into practices by a number of large food and beverage suppliers.³²

While many of these investigations are not public, information is available regarding the FTC’s recent investigation into the alcohol distributor Southern Glazer’s Wine & Spirits.³³ The FTC is examining whether Southern provided large buyers with (a) discriminatory price preferences³⁴ and (b) “discriminatory non-price services, such as shelf stocking and other forms of free labor and marketing support, that it does not provide to smaller independent retailers . . . .”³⁵ The FTC has requested a wide range of information from at least ten of Sothern’s largest buyers,³⁶ such as:

• negotiation strategies;
• product sales and purchase data;
• buyer’s monthly profits, income, and revenues;
• data on buyer’s customer base;
• spending by customers using loyalty cards and rewards programs;
• formal and informal agreements between buyer’s and their seller;
• buyer’s negotiation processes with seller;
• services provided to buyers by seller;
• buyer’s inventory and storage process; and
• buyer’s strategies, practices, or policies regarding buyer sales.³⁷

V. Best Practices

Given increased FTC activity and bipartisan congressional pressure, both sellers and buyers should consult antitrust counsel on their practices.

As a seller, the most efficient way to ensure RPA compliance is to consult antitrust counsel on creating a defensible pricing, discount, and trade term structure by:

• identifying which prices and discounts may be subject to RPA (given market-specific dynamics that may affect applicability of RPA elements);
• establishing clear justifications that meet RPA defenses for price differences that may be subject to RPA;
• establishing and documenting a clear and consistent structure for determining discounts for buyer partners within the parameters of RPA defenses;
• ensuring discount terms given to buyer partners are available, or proportionally attainable, across different customer groups;
• ensuring advertising and marketing services are offered and available to all buyers.

As a buyer, the most efficient way to ensure RPA compliance is to consult antitrust counsel on creating clear negotiation strategies with sellers and slotting fee structures by:

• negotiating discounts with sellers by emphasizing unique characteristics that justify receiving a “functional discount”;
• ensuring any substantial price difference received by a distributor is sufficiently warranted and such justification is documented; and/or
• pricing slotting fees on a store-by-store basis, as opposed to regional slotting fees.

Conclusion

As the FTC revives enforcement of the RPA, both sellers and buyers should evaluate pricing, discounting, and promotional policies, as well as broader negotiation strategies, to ensure RPA compliance. Dentons can help companies audit or revise existing compliance programs, train pricing/sales teams, or litigate an RPA action.

Dentons shareholder Matthew H. Clark, partners Ausra Deluard and Angelina Whitfield, associate Jessica F. Bartolacci, and summer associate Bryce Kowalczyk contributed to this article.

1. Robinson-Patman Antidiscrimination Act, ch. 592, 49 Stat. 1526 (1936).↩
2. Petition of the Fed. Trade Comm’n for a Show Cause Hearing & an Ord. Enforcing Civ. Investigative Demand at 1, Fed. Trade Comm’n v. Retail Services & Systems, Inc., No. 1:23-mc-00028 (E.D. Va. Oct. 20, 2023) (investigating Southern Glazer’s Wine & Spirits).↩
3. Id. at 1-2.↩
4. Josh Sisco, Pepsi, Coke Soda Pricing Targeted in New Federal Probe, POLITICO (Jan. 10, 2023, 1:45 PM), https://www.politico.com/news/2023/01/09/pepsi-coke-soda-federal-probe-00077126 [https://perma.cc/AWK4-AWYW] (last viewed July 11, 2024).↩
5. Josh Sisco, FTC Preparing Lawsuit Over Alcohol Pricing, POLITICO (Jun. 3, 2024, 6:00 PM), https://www.politico.com/news/2024/06/03/ftc-lawsuit-southern-glazer-wine-spirits-00161323.↩
6. Letter from Elizabeth Warren et. al., to Lina Khan (Mar. 28, 2024), https://www.warren.senate.gov/imo/media/doc/2024.03.28%20Letter%20to%20 FTC%20re%20Robinson%20Patman%20Act1.pdf.↩
7. Fed. Trade Comm’n v. Sun Oil Co., 371 U.S. 505, 520 (1963).↩
8. See Stelwagon Mfg. Co. v. Tarmac Roofing Sys., Inc., 63 F.3d 1267, 1271 (3d Cir. 1995) (citing Best Brands Beverage, Inc. v. Falstaff Brewing Corp., 842 F.2d 578, 585 (2d Cir.1987)).↩
9. Stan Koch & Sons Trucking, Inc. v. Lau, No. 21-cv-01338, 2021 BL 470024, at *4 (D. Minn. Dec. 9, 2021).↩
10. Id.↩
11. May Dep't Store v. Graphic Process Co., 637 F.2d 1211, 1214 (9th Cir. 1980) (citing Rangen, Inc. v. Sterling Nelson & Sons, Inc., 351 F.2d 851 (9th Cir. 1965), cert. denied, 383 U.S. 936 (1966)).↩
12. Exp. Liquor Sales, Inc. v. Ammex Warehouse Co., 426 F.2d 251, 252 (6th Cir. 1970) (paraphrasing Gaylord Shops, Inc. v. Pittsburgh Miracle Mile Town & Country Shopping Center, Inc., 219 F. Supp. 400 (W.D. Pa.1963)).↩
13. 15 U.S.C. § 13(a).↩
14. Goods that have bona fide physical differences affecting consumer preferences are not of “like grade and quality.” See Utah Foam Products Co. v. The Upjohn Co., 154 F.3d 1212, 1217 (10th Cir. 1998).↩
15. Stelwagon Mfg. Co., 63 F.3d at 1271.↩
16. See generally Conoco Inc. v. Inman Oil Co., 774 F.2d 895, 901-02 (8th Cir. 1985).↩
17. Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 200 (1974).↩
18. See Volvo Trucks N. Am., Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164, 176 (2006).↩
19. Fed. Trade Comm’n v. Simplicity Pattern Co., 360 U.S. 55, 65-68 (1959).↩
20. 15 U.S.C. §§ 13(d)-(e).↩
21. Stelwagon Mfg. Co., 63 F.3d at 1271.↩
22. Id.↩
23. Water Craft Mgmt. LLC v. Mercury Marine, 457 F.3d 484, 488 (5th Cir. 2006) (citing 15 U.S.C. 13(b)).↩
24. Bargain Car Wash, Inc. v. Standard Oil Co., 466 F.2d 1163, 1174 (7th Cir. 1972) (quoting Nat’l Dairy Prods. Corp. v. Fed. Trade Comm’n, 395 F.2d 517, 521 (7th Cir. 1968)).↩
25. United States v. Borden Co., 370 U.S. 460, 461 (1962).↩
26. 15 U.S.C. § 13(a).↩
27. Mathew Enter. Inc. v. Chrysler Grp. LLC, 250 F. Supp. 3d 409, 414 (N.D. Cal. 2017).↩
28. Edward J. Sweeny & Sons Inc. v. Texaco, Inc., 637 F.2d 105, 121 (3d Cir. 1980).↩
29. Brentlinger Enters. v. Volvo Cars of N. Am., LLC, Case No. 2:14-CV-360, 2016 BL 277759, at *8 (S.D. Ohio Aug. 25, 2016).↩
30. World's Largest Manufacturer of Spice and Seasoning Products Agrees to Settle Price Discrimination Charges, FED. TRADE COMM’N (Mar 8, 2000), https://www.ftc.gov/news-events/news/press-releases/2000/03/worlds-largest-manufacturer-spice-seasoning-products-agrees-settle-price-discrimination-charges (the last time the FTC enforced the RPA).↩
31. Feeding America in a Time of Crisis: The United States Grocery Supply Chain and the COVID-19 Pandemic, FED. TRADE COMM’N (March 21, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/p162318supplychainreport2024.pdf.↩
32. See supra note 1, at 1-2.↩
33. Id. at 2.↩
34. Id. at 5.↩
35. Id.↩
36. In re CID Issued to Retail Servs. & Sys., Inc., No. 211-0155, at 22-29 (F.T.C. Apr. 7, 2023).↩