Alvaro Bedoya, one of Biden’s remaining progressives on the Federal Trade Commission, argued recently in The New York Times that the agency should expand enforcement of the often ignored Robinson-Patman Act to protect small retailers and especially small, independent grocers.
Congress enacted Robinson-Patman in 1936 out of alarm that small retailers had to compete with the Great Atlantic and Pacific Tea Company’s (A&P) stores and other national chains that had greater efficiencies and could therefore offer consumers lower prices and more choices. Robinson-Patman is not quite a zombie law, unenforceable like the Texas law mandating that cars have windshield wipers but not mandating windshields. But it is a law that courts and regulators have ceased to rigorously enforce because of judicial precedent—based on decades of experience in one case after another that often found this statute at odds with the main body of antitrust law. Courts often find there are no competitive and consumer benefits to keeping out the most efficient actors in the marketplace.
As this law fell by the judicial wayside in the 1980s, Walmart, Costco, and Target brought more choice and lower prices to consumers. The downward pressure on inflation from these big box stores was soon dubbed “the Walmart effect” by economists. There is no denying that effect has been a boon for millions of American consumers.
In a heart-tugging piece based on real people and their lived experiences, Bedoya appealed for full enforcement of Robinson-Patman to prevent big-box retailers and their distributors from putting small grocers out of business. The reason? Distributors offer discounts to the big stores while routinely denying them to small players. Bedoya describes the plight of small grocers, like the Lakota people’s grocer in the Pine Ridge Reservation, where grocer R.F. Buche says that his customers pay 30 to 50 percent more for eggs, lettuce, and cereal than they would at a big box store.
Bedoya writes: “This had nothing to do with buying in bulk, Mr. Buche explained. Even when his wholesaler bundled smaller orders to approximate the volume of the big boxes, it still couldn’t gain access to those lower prices. ‘Twenty years ago, if you shopped our coupons, we could meet or beat the big boxes,’ he added. ‘Not anymore.’” Bedoya describes the chief executive of a wholesaler serving a range of independents breaking down in tears of frustration “while he explained that no matter what he did, he simply couldn’t get the same prices from suppliers as buyers from big-box stores.”
Progressive antitrusters believe that food suppliers are making up for their big retail discounts on the backs of small grocers. If that is true, it is undeniably regressive and harmful to consumers. But there is something puzzling about this narrative. Why would suppliers deny a discount to a bulk purchase of the same size from any source? Suppliers are, after all, in business to make a profit.
When I inquired, distributors told me that to service smaller grocers, they must repeatedly shut down the line on which goods are sorted and labels attached. This idling of people and capital equipment burns cash. Some small grocers also add higher costs involving distance, credit risk, and other expenses.
A differential between orders of the same magnitude might deserve an FTC inquiry. If non-economic discrimination turns out to be true, as with the Lakota people of the Pine Ridge Reservation, wouldn’t that be a perfect opportunity to apply the Consumer Welfare Standard on their behalf instead of Robinson-Patman?
As for the ability to charge differential prices, contrary to Robinson-Patman, this has come to be recognized as a normal business strategy. This is the flaw in the FTC’s current case against Southern Glazer’s Wine and Spirits, a supplier that charges higher prices for small grocers than for large retailers. That is understandable. Small buyers buy less, and it costs more to arrange small pallets and deliveries. Discounts for a large purchase are a familiar feature to any customer who has put down money for a “buy 3, get one free” discount.
The real pain for all consumers (and workers and taxpayers) comes from the continuous harassment of business by the FTC. The agency’s fervent opposition to mergers has frozen business activity and prevented new efficiencies that drive economic growth. I hope that Andrew Ferguson and Mark Meador, Donald Trump’s FTC Chair and new commissioner, realize the dangers of enforcing Robinson-Patman, passed in a fit of New Deal-era hubris.
Above all, I hope they recognize that the great danger is this—a Robinson-Patman revival would put pricing in the hands of federal regulators who represent the behemoth that already controls almost 25 percent of the American economy. That’s the monopolist to be truly worried about.
Robert H. Bork Jr. is president of the Antitrust Education Project.