Taking On Power Buyers: Expedient, High-Impact Enforcement of Federal and California Price Discrimination Laws
By Catherine Simonsen & Shaoul Sussman
In 1936, Congress passed the Robinson-Patman Act (RPA) following “[a] lengthy investigation” by the Federal Trade Commission (FTC), which found that large chain stores were exercising their buyer power to circumvent the spirit and intent of the Clayton Act. According to the FTC’s now near-century-old findings, “Because of their enormous purchasing power, these chains were able to exact price concessions … which far exceeded any related cost savings to the seller.” As a result, “small independent stores were at a hopeless competitive disadvantage.” Three years earlier, and to combat the same problem, the California legislature enacted a prohibition on the provision of certain secret rebates, unearned discounts, and services to favored purchasers under the Unfair Practices Act (UPA).
The RPA and UPA are powerful but underutilized laws in the antimonopoly toolkit that target suppliers and power buyers who distort the supply chains of entire industries to the disadvantage of small businesses. But following rigorous enforcement throughout the 1940s-1960s, enforcement of these laws fell off precipitously. The laws were, in effect, repealed through neglect and abandonment, and the unfair and discriminatory conduct outlawed by the RPA and UPA has only flourished as a result.
Under the Biden administration, the FTC began to dust off this important legal tool and once again started investigating and bringing cases against large distributors for allegedly favoring large, big-box retailers with unfair price advantages, while raising prices for competing retailers and consumers. Meanwhile, private litigators have recently demonstrated the ability of disfavored small businesses to take matters into their own hands, bringing price discrimination claims against Living Essentials, the maker of 5-Hour Energy; Prestige Brands, parent company to the maker of Clear Eyes Pocket Pals; PepsiCo and Frito-Lay; and Costco. In December 2023, counsel for various convenience store wholesalers based in California, New York, and New Jersey obtained a seven-figure jury verdict against Prestige Brands for violations of the RPA and UPA.
Acknowledging that antitrust litigation can be time-consuming and expensive, this document outlines potential expedient, high-impact paths for legal action by a disfavored retailer or retailer association against a favored buyer for certain forms of price discrimination under federal and California law. In other words, this document is not intended as a comprehensive guide to enforcement under the RPA or California law and focuses instead on more straightforward actions against power buyers. This practice guide also explains how private litigants can use California’s Unfair Competition Law (UCL) to bring an action against a power buyer for a per se violation of the RPA—a cause of action that may not be directly available under the RPA itself. Examples of actionable conduct include:
- Promotional allowances provided to a favored retailer—whether in the form of after-the-fact rebates or upfront discounts to the purchase price—not made available to competing retailers on proportionally equal terms;
- Secret price discounts given exclusively to the favored retailer; and
- Promotional signs, displays, or ads that benefit the favored retailer but are paid for or subsidized by the supplier and not offered on proportionally equal terms to competing retailers.