Overview
The Robinson-Patman Act, also known as the Anti-Price Discrimination Act, is a United States federal law enacted in 1936 to address issues of price discrimination and ensure fair competition. The Act is aimed at protecting small retailers from unfair competition by large chain stores that receive volume discounts from suppliers.
Key Provisions
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Price Discrimination: The core of the Robinson-Patman Act deals with prohibiting discriminatory pricing practices. It forbids sellers from engaging in price discrimination between different purchasers of commodities of like grade and quality when the effect may be to lessen competition or create a monopoly.
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Allowances and Services: The Act also regulates allowances and services furnished by suppliers to their buyers. It requires that promotional allowances or services be made available on proportionately equal terms to all competing customers.
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Meeting Competition: A seller can defend against a charge of price discrimination if they lower prices in good faith to meet an equally low price of a competitor.
Examples
- Volume Discounts: A large retail chain receives a discounted price from a supplier due to purchasing in higher volume compared to a smaller competitor who buys less frequently. The Robinson-Patman Act may address this as discriminatory if the price difference harms competition.
- Promotional Allowances: A supplier offers advertising allowances to one retailer but not to its competitors. The Act requires such allowances to be offered on an equal basis to all retailers to prevent favoritism.
Frequently Asked Questions
What constitutes price discrimination under the Robinson-Patman Act?
Price discrimination occurs when different purchasers are charged different prices for the same goods, where these differences have the effect of reducing competition.
Does the Robinson-Patman Act apply to all transactions?
No, the Act primarily applies to sales involving goods and does not cover service-based transactions.
How can a business defend itself against a claim under the Robinson-Patman Act?
A business may defend against such a claim by showing that the price difference was justified by cost savings, the result of a good-faith effort to meet a competitor’s price, or justified by differences in the quality or the type of goods sold.
What are the penalties for violating the Robinson-Patman Act?
Violations of the Robinson-Patman Act can result in civil penalties including damages, attorney fees, and court injunctions. The Federal Trade Commission (FTC) can also bring enforcement actions.
Related Terms with Definitions
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Antitrust Acts: Laws designed to promote competition and prevent monopolies, such as the Sherman Act and Clayton Act.
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Federal Trade Commission (FTC): An independent agency of the United States government, established to protect consumers and ensure a strong competitive market by enforcing antitrust laws.
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Price Fixing: An illegal agreement between competitors to fix, raise, or lower prices or maintain price terms.
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Monopoly: The control of a market by one company, eliminating competition.
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Clayton Act: A federal law enacted to address specific practices that the Sherman Act does not cover, including certain forms of price discrimination.
Online References
- Federal Trade Commission on Price Discrimination
- Securities and Exchange Commission on Antitrust and Competition
Suggested Books for Further Studies
- “Antitrust Law in Perspective: Cases, Concepts and Problems in Competition Policy” by Andrew I. Gavil, William E. Kovacic, Jonathan B. Baker
- “The Antitrust Enterprise: Principle and Execution” by Herbert Hovenkamp
- “Federal Antitrust Policy: The Law of Competition and Its Practice” by Herbert Hovenkamp
- “The Economic Structure of Antitrust Law” by Richard A. Posner
- “Antitrust Analysis: Problems, Text, and Cases” by Phillip Areeda, Louis Kaplow, and Aaron Edlin
Fundamentals of the Robinson-Patman Act: Business Law Basics Quiz
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