Antitrust

On December 12, 2024, the Federal Trade Commission (“FTC”) filed a Robinson-Patman Act (“RPA”) enforcement action against Southern Glazer’s Wine and Spirits, LLC (“Southern”), one of the largest U.S. wine and spirits distributors, alleging it charges small businesses significantly higher prices than large chains. This was the first government enforcement action brought under the RPA in nearly a quarter century. Two commissioners dissented from the Majority’s statement to issue a complaint. Some of the broad takeaways from the 160-plus-pages between the complaint, majority statement, and dissenting statements, include:

From the Democratic-led Majority:

• In its statement on the matter, the Majority states that the RPA was intended by Congress to prevent price discrimination that harms small businesses, attributing the decline in market shares of small businesses to lax enforcement of the RPA.
• The Majority takes issue with the conservative view that enforcing the RPA generally harms consumers. Specifically, they argue that there are no empirical studies demonstrating that RPA enforcement raises prices for consumers.
• The Majority’s statement is centered on large retail chains, with some specific references to grocery stores.

From the Republican-led Dissents:

• Both dissenting statements, written by Republican commissioners, recognize the validity of (and even endorse enforcement of) the RPA.
• But they emphasize that the purpose of the RPA is to condemn injury to competition, not competitors, and that competitor injury alone is insufficient to show harm to competition.
• They note that economic theory holds that differential pricing can both benefit and harm consumers, so a factual, industry-specific analysis is required to determine whether competition is injured in a particular case.
• Here, neither believe that the facts support the RPA claim.

RPA Overview

In 1936, Congress passed the RPA, amending Section 2 of the Clayton Act, to prevent large retail chains from receiving lower prices from suppliers than the prices offered to small independent businesses. While Section 2 of the Clayton Act was originally intended to address predatory pricing, the goal of the RPA was protectionism—specifically, protecting small, independent retail stores from large chains.[1] This Great Depression–era piece of legislation has been controversial since its creation since the policy goals it was intended to advance are very different than the policy goals of the other U.S. antitrust laws.

Broadly speaking, Section 2(a) of the RPA prohibits sellers from offering discriminatory prices to favored customers,[2] while Section 2(f) prohibits buyers with the requisite knowledge from inducing or receiving a discriminatory price.[3] Sections 2(c), 2(d), and 2(e) prohibit sellers and buyers from using brokerage, allowances, and services to accomplish indirectly what Sections 2(a) and 2(f) prohibit directly.[4]

The RPA protects a seller’s competitors from “primary line” injury, which occurs when a seller harms its competitors in the same market by reducing prices in a specific geographic area for a sustained period.[5] It also protects disfavored buyers from “secondary line” injury, which occurs when a discriminatory seller gives price advantages to favored customers over competing customers.[6] RPA enforcement actions and private suits have most commonly alleged secondary-line injuries under Section 2(a), which is the RPA claim the FTC asserted in its complaint against Southern.

Complaint

The FTC’s complaint alleges that Southern, the largest coast-to-coast distributor of wine and spirits in the U.S., violated the RPA by selling products to small businesses at prices “drastically higher” than those charged to large national and regional chains. Southern allegedly offered large, national chains (1) substantial volume-based discounts, (2) cumulative discounts that allow large retailers to aggregate purchases over time, and (3) scan rebates. These pricing advantages were either not disclosed to smaller businesses or were functionally unavailable to them due to their inherently limited purchasing power and resources. The FTC claims these practices harmed smaller independent retailers by disadvantaging them in competition with larger chains in the same geographic markets, leading to lost sales and customers.

Majority Opinion- Statement of Commissioner Alvaro M. Bedoya Joined by Chair Lina M. Khan and Commissioner Rebecca Kelly Slaughter

The Majority supports the filing of the complaint, arguing that Southern’s pricing was discriminatory, and not the result of bona fide, justifiable price differences. The Majority Statement delves into a deep history of the RPA, concluding that Congress intended the RPA to prevent larger market players from dominating and to protect small retailers. In their view, the Act only permits differential pricing if it derives from greater efficiency and when there is a legitimate cost savings to the supplier, but suppliers are prohibited from rewarding size and power with lower prices or letting larger retailers “bully” them into providing them discounts unavailable to smaller competitors.

They note that the complaint represents the first RPA action filed by any federal agency in a quarter century—a neglect that they claim has led to a decline in independent retailers in the U.S. They attribute non-enforcement to claims that the RPA protects inefficient smaller businesses and disincentivizes cost-cutting by larger businesses, to the detriment of consumers. The Majority assails this argument as “stunningly untethered to any empirical research,” and counters that the RPA prevents large companies from abusing their power to exploit legal loopholes and secret discounts, rebates, and advertising allowances unavailable to their competitors.

On the facts of this case, the Majority argues that neither the “cost-justification” defense nor the “meeting competition” defense apply.  The cost-justification defense allows passing cost savings associated with transacting with a specific buyer, that is, when it is cheaper to make, sell, or deliver products in bulk to that buyer. Here, they conclude that the discounts are simply incentives for Southern to sell more products, with no relation to any efficiencies associated with those transactions. The meeting competition defense can be invoked if the differential pricing represents a good-faith response to a competitor’s low price. The majority argues this defense doesn’t apply here, stating that Southern was not responding to offers by rival suppliers, only to “upstream supplier pressures.”

Dissenting Opinion by Commissioner Andrew N. Ferguson

Commissioner Ferguson opposed filing the complaint for two reasons. First, he argues the FTC is unlikely to prevail because Southern can justify its pricing practices as cost-based, which are expressly permitted under the RPA. When Southern sells alcohol to a retailer at a level sufficient to trigger a discount or as part of a bulk order, its costs of selling to that retailer are lower than the costs of selling the same products in smaller quantities to retailers who do not qualify for the discount. The RPA permits Southern to pass along those lower costs to the larger retailer. 

More fundamentally, Commissioner Ferguson takes issue with what he perceives as the complaint’s (and the Majority’s) lack of attention to the harm that Southern’s pricing strategy causes to competition. He claims that in this case, there is insufficient evidence to prove significant harm to competition, as required by the statute. Though he acknowledges that the RPA remains valid law, he believes that the FTC should focus its enforcement resources on cases in which favored buyers hold significant market power, since large buyers that have market power can inflict harm on both upstream suppliers and downstream competition. He argues that targeting those situations for RPA enforcement would both address Congress’ concern in passing the RPA and serve as the best use of the FTC’s limited resources.

Dissenting Opinion by Commissioner Melissa Holyoak

Commissioner Holyoak’s 88-page dissent argues, first and foremost, that the RPA, like other antitrust laws, is concerned solely with harm to competition. Her core criticism is that the complaint does not articulate a specific harm to competition, and that Southern’s pricing strategy is “plainly innocuous or even procompetitive.” Her opinion details the evolution of the text of the act and its requirements to show that there are two ways in which the RPA envisions competition could be harmed by differential pricing: first, it can harm competitors of the firms that receive the differential pricing (or, in the words of the RPA, “injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of [discriminatory pricing]).” A second way in which competition can be harmed under the RPA is if the price discrimination “lessens competition or tends to create a monopoly” in the market in which the provider of the discriminatory pricing operates.

The first category of harm to competition—harm to the competitors of large retailers who received the favorable pricing—is the focus of the complaint. With respect to that claim, Holyoak argues that the complaint does not articulate price discrimination between “paired” retailers: i.e., a favored one and a disfavored one, and instead makes only a generalized claim that large chains receive discounts unavailable to smaller retailers. Thus, for example, there is no allegation that Costco competes with a specific disfavored retailer and that its more favorable pricing from Southern harms that competition. That generalized claim is insufficient to make out a claim under the RPA, since in her view the RPA requires proof that the price discrimination has lessened competition.

Holyoak argues moreover that the complaint’s approach to antitrust harm—elevating the interests of competitors over competition—is at odds with the plain text of the RPA. Drawing on the economic literature relating to price discrimination, she concludes that price differences, even price discrimination, does not automatically harm competition and consumers. Because it can have both positive and negative effects on competition and consumers, price discrimination must be assessed in the context of the market in question, a fact-intensive exercise that requires an analysis of the market realities. She criticizes the complaint as eschewing such a fact-specific analysis in favor of relying solely on the price differences, which does not grapple with why those price differences arise or how they may impact consumers or the competitive process. In doing so, she concludes, the Commission effectively adopts what amounts to a per se illegality of differential pricing, which is not what Congress authorized under Section 2(a).

The Current State of RPA Enforcement Actions and Private Litigation

This is the FTC’s first enforcement action under the RPA in more than two decades.[7] During this time, the only RPA actions have been brought by private plaintiffs. These private RPA actions have generally been unsuccessful, although they have often involved extensive litigation.

The case of Bookends & Beginnings LLC v. Amazon.com, Inc.[8] is an illustrative example of one such action. In Bookends, a putative class of independent bookstores brought an RPA claim against Amazon and five major book publishers, including one book publisher that Weil represented. The plaintiff alleged that the publishers offered Amazon discriminatory discounts on print books that were not available to small independent bookstores, in violation of the RPA. After extensive briefing and oral arguments, in August 2023, the court granted with prejudice the defendants’ motion to dismiss the complaint on numerous grounds, including that (i) the meeting competition defense applied because based on the plaintiff’s allegations, the publishers may have been offering discounted prices to Amazon simply to meet the competing prices offered by other publishers; and (ii) the materially different contracts defense applied, because the plaintiff alleged that Amazon purchased books from the publishers pursuant to long-term contracts, but did not allege that the plaintiff had any negotiated contract at all with the publishers.

Another recent example is Card v. Ralph Lauren Corp.[9] In that case, the owner of an independent high-end furniture store that sells Ralph Lauren Home products brought a price discrimination action against Ralph Lauren Corporation and its allegedly favored purchaser, the large online furniture retailer One Kings Lane, which also sells Ralph Lauren Home products. The court granted summary judgment in favor of the defendants, in part because the plaintiff did not show an injury to competition.[10] Specifically, the court found that the plaintiff did not prove it was in “actual competition” with One Kings Lane, because the plaintiff operated an independent brick-and-mortar store that did not have the “capability” to operate like One Kings Lane. Crucially, One Kings Lane routinely liquidated large quantities of discontinued and excess furniture at deep discounts, whereas the plaintiff mostly sold furniture at full price, and Ralph Lauren did not permit the plaintiff to sell its products at more than a 30% discount without prior authorization.[11] The Ninth Circuit affirmed, finding no “actual competition” between the plaintiff and One Kings Lane, because they had different business models and served distinct markets.[12]

Key Takeaways

The FTC’s enforcement action against Southern is the first government enforcement action under the RPA in nearly a quarter century, but we do not expect it to signal a significant resurgence of RPA enforcement actions by the FTC. In addition to the difficulty of bringing a successful RPA action (as shown by the dissenting opinions discussed above, the numerous potential defenses, and the lack of successful private actions in recent years), the RPA applies only to sales of tangible goods, and not markets for services or technology licensing. The RPA therefore is largely inapplicable to tech companies—a sector which has been and likely will continue to be a significant focus for the FTC in the coming years. We also expect the FTC may dismiss its complaint against Southern after the FTC transitions to a Republican majority under the new Trump administration. However, we do not expect the RPA to become obsolete, even after the FTC switches to a Republican majority. Both dissents recognize the validity of the RPA, and suggest that even the Republican commissioners may support bringing an enforcement action if different facts were present. Moreover, we may continue to see private enforcement actions brought by the plaintiffs’ bar, which can be expensive to litigate even if they are not ultimately successful. 

[1] Roger D. Blair & Christina DePasquale, “Antitrust’s Least Glorious Hour”: The Robinson-Patman Act, 57 J.L. & Econ. S201, S202 (2014).

[2] 15 U.S.C. § 13(a).

[3] Id. § 13(f).

[4] Id. §§ 13(c)-(e).

[5] Fed. Trade Comm’n, Price Discrimination: Robinson-Patman Violations, available at https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/price-discrimination-robinson-patman-violations.

[6] Id.

[7] There have also been no recent enforcement actions brought by DOJ. DOJ announced in 1977 that it would cease all enforcement of the RPA, based on its conclusion that the RPA harms competition. See Report on the Robinson-Patman Act, U.S. Dep’t of Just. (1977), available at https://babel.hathitrust.org/cgi/pt?id=pur1.32754060681834&view=1up&seq=275.

[8] No. 1:21-CV-2584-GHW-VF, 2022 WL 4586213 (S.D.N.Y. Sept. 29, 2022).

[9] No. 18-CV-02553-JSC, 2021 WL 4427433 (N.D. Cal. Sept. 27, 2021), aff’d, No. 21-16788, 2022 WL 14936344 (9th Cir. Oct. 26, 2022).

[10] Id. at *7-8.

[11] Id. at *1, 7-8.

[12] Card v. Ralph Lauren Corp., No. 21-16788, 2022 WL 14936344, at *1 (9th Cir. Oct. 26, 2022).