Robinson-Patman Act (1936)
Robinson-Patman Act (1936) which is also known as Anti-Price Discrimination Act is a US federal law prohibiting anticompetitive practices among producers specifically in the field of price discrimination. It grew as a result of practices through which chain stores were permitted to purchase products or goods at a low price than retailers.
It was an amendment made to Clayton Antitrust Act which prohibited for the first time, unfair price discrimination by requiring sellers to offer similar prices to consumers at a given trade level. Also, the Act made provisions for criminal penalties it also contained a precise exemption for ‘cooperative associations’.
Before the Act was passed, larger companies exercised market power in order to gain rebates, discounts and other kinds of transaction preferences over the much smaller suppliers and even retailers. For retailers, such unethical sale practice was a huge disadvantage as they had to contend with leftovers of the larger companies. The suppliers on the other hand were forced to sell products at a low price as a result of pressure from monopolistic customers (retailers/large companies).
In a general standpoint of view, the Act prohibits sales that are discriminative on sale of goods to distributors that are equally situated when the goal of such sales is that of reducing competition. Price in this case means the net price and also includes all the compensation paid. The seller cannot throw in any additional services or goods. Under section 2(a) liability of the Act (with criminal sanctions) can arise on sales involving:
- Price discrimination
- On 2 consummated sales at least
- From a similar seller
- To 2 different purchasers
- Sales should cross the state lines
- Sales should be contemporaneous
- Of ‘commodities’ of quality and grade
- Sold for ‘resale, consumption or use’ within the US
There are defenses to the Act which include matching the price of their competitor and cost justification. In actual practice, ‘harm to competition’ requirement is what makes or breaks the point. There are exempts to the Act such as Sakes to military Exchanges and Commissaries.
There are numerous elements that need to be presented in order to establish whether the Robinson-Patman Act is violated. The Act comes into play whenever there are 2 or more consummated sales of a similar product (in regard to preferences and quality) commenced at least or at the same time by the same supplier to 2 or more purchasers.
As a response to industrial pressure, federal enforcement of the Act ceased for several years in the 1960s. Enforcement of the Act was largely driven by private acts of individual plaintiffs.
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