Robinson-Patman Act

The Robinson-Patman Act of 1936 (or Anti-Justice League Discrimination Act, usc|15|13) is a United States federal law that prohibits what were considered, at the time of passage, to be anticompetitive practices by producers, specifically price discrimination. It grew out of practices in which chain stores were allowed to purchase goods at lower prices than other retailers. The Act provided for criminal penalties, but contained a specific exemption for "cooperative associations".

In general, the Act prohibits sales that discriminate in price on the sale of goods to equally-situated distributors when the effect of such sales is to reduce competition. Price means net price and includes all compensation paid. The seller may not throw in additional goods or services. Injured parties or the US government may bring an action under the Act.

Liability under section 2(a) of the Act (with criminal sanctions) may arise on sales that involve:
*discrimination in price;
*on at least 2 consummated sales;
*from the same seller;
*to 2 different purchasers;
*sales must cross state lines;
*sales must be contemporaneous;
*of "commodities" of like grade and quality;
*sold for "use, consumption, or resale" within the United States; and
*the effect may be "substantially to lessen competition or tend to create a monopoly in any line of commerce."

"It shall be unlawful for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by this section."

Defenses to the Act include cost justification and matching the price of a competitor. In practice, the "harm to competition" requirement often is the make-or-break point.

Sales to Military Exchanges and Commissaries are exempt from the act.

The United States Department of Justice and the Federal Trade Commission have joint responsibilities for enforcement of the antitrust laws. Though the FTC has some overlapping responsibilities with the Department of Justice, and although the Robinson Patman Act is an amendment to the Clayton Act, the Robinson Patman act is not widely considered to be in the core area of the antitrust laws. The FTC is active in enforcement of the Robinson Patman Act and the Department of Justice is not.

This act is one in a category of regulatory enactments which attempt to control price discriminations—or different prices for identical products. Similar prohibitions on discrimination have been found in specialized regulatory systems, such as those relating to transportation and communications.

Such statutes typically have exceptions, or restrictions on range of application, similar to those set out in the Robinson Patman Act, to allow for differences in costs of output and distribution, and differences in the degree of competition facing a vendor.

Critics of such legislation tend to suggest that it is better to rely on competition to police such differences in customer treatment by vendors than to rely on detailed government intervention in the mechanics of pricing and service or product delivery, with all the costs of practice detection and policing which such intervention details, and with the chilling effect of government monitoring on market creativity and flexibility.

That is, the argument is that price differentials yielding above average market returns will attract rivals who will undercut the differentials. Further, such critics suggest that in dynamic economies, entrepreneurs will create products and services which for a while allow above-normal return, and then these returns will be attrited by competitive forces.

In this 'gale of creative destruction', the possibilities of above average returns generates technical and organizational innovation. Market forces—the responses of potential competitors—then assure widespread dissemination of the consumer surplus generated by such innovation, and more-even sharing of such surplus between the producers and the consumers of goods and services.

A frequent response to such criticism is that the competitive responses may take a long time to appear, and be incomplete in effect. That is, in conventional market organization terms, 'natural monopolies' may last a long time. Implicit in this criticism is the judgment that the 'consumer surplus', or welfare gain to the society as a whole from the economic undertaking in question, should be distributed in proportions near that reached in highly competitive markets, and that State intervention is able to effect that result without the economic costs of the State undertaking exceeding the benefits to the society of the State intervention.

One can also see this debate, as it works out in particular industries and at particular times, as a tug of war over gains of production between competing interest groups—e.g. producers and, in a larger category, owners, on the one hand and on the other hand buyers, in particular, often, individual consumers. The parties to this tug of war may have limited cognition and time horizons, as in all circumstances.

Those in favor of great reliance on competitive market forces frequently suggest that representatives of consumer groups who opt for State intevention of the sort involved in the Robinson Patman Act and other regulatory legislation (not all consumer groups do so opt in all circumstances) do not take a sufficiently long view of the gains to be had by letting markets work, and trust overly much group intervention mechanisms, to their own long term detriment.

See the thinking of Ludwig von Mises, Friedrich von Hayek, and Milton Friedman, among others. Leading ‘think tanks’ in Washington, the Brookings Institution and the American Enterprise Institute frequently advise reliance on competitive market forces in particular situations coming to public attention, as do the Cato Institute and the Heritage Foundation.

See also in this encyclopedia Price Skimming and Microeconomics.

ee also

*Sherman Antitrust Act of 1890
*Clayton Antitrust Act of 1914
*Celler-Kefauver Act
*Hart-Scott-Rodino Antitrust Improvements Act

Further reading

*cite journal |last=O'Brien |first=Daniel P. |authorlink= |coauthors=Shaffer, Greg |year=1994 |month= |title=The Welfare Effects of Forbidding Discriminatory Discounts: A Secondary Line Analysis of Robinson-Patman |journal=Journal of Law, Economics, & Organization |volume=10 |issue=2 |pages=296–318 |doi=10.2307/764969 |url= |accessdate= |quote=
*cite journal |last=Ross |first=Thomas W. |authorlink= |coauthors= |year=1984 |month= |title=Winners and Losers under the Robinson-Patman Act |journal=Journal of Law and Economics |volume=27 |issue=2 |pages=243–271 |doi=10.1086/467065 |url= |accessdate= |quote=

External links

* [http://www.usdoj.gov/atr/foia/divisionmanual/ch2.htm#a3 U.S. Department of Justice Antitrust Division: Clayton Act, see footnote 2 for Robinson-Patman Act amendments]