FTC Lawsuit Citing Robinson-Patman Act Unsealed

This week, The Wall Street Journal published a story about an attempted enforcement of the Robinson-Patman Act, the antitrust law designed to protect small businesses from national chain store domination of the marketplace. You see, when big retailers get so big that they dominate any particular marketplace, they tend to get far more favorable terms from suppliers. Buying at a much lower cost than a smaller business allows them to charge less, which, over time, puts smaller competitors out of business.

And that’s precisely what has happened in the century since chain stores began to expand across the country. These mega-retailers have rolled into communities with cheaper retail prices than local stores could buy at wholesale, threatening the existence of local pet stores, toy stores, clothing stores, and most of all, grocery stores. In instance after instance, we’ve seen those small family-owned businesses close, turning Main Street USA into ghost towns.

It was this exact fear that, 100 years ago, prompted IGA founder J. Frank Grimes to bring independent retailers together under the Independent Grocers Alliance (IGA), strengthening their brand and buying power. And it was the exact problem that, 10 years later, the Robinson-Patman Act intended to stop. Simply put, the law states that pricing should be fair at any level of volume. Buy a single case, and you will pay more. Buy a container load, and you can get a discount based on volume.

Today, we in the grocery industry do just that. Independent retailers band together to purchase through aggregated wholesalers who can buy at the same large volumes as the national chains. Maybe even bigger. Consider that Walmart has a 21% percent share of the U.S. grocery industry, while independents have 33%. Together, we are bigger than Walmart.

According to the law, we independents should be able to buy at the same prices as the biggest retailers. But askany retailer, and they will tell you the marketplace is unfair. Despite the combined purchasing power of our largest wholesalers, our wholesale prices are often higher than Walmart’s consumer-facing prices. For decades we have seen a widening price disparity between independents and the biggest national retailers. COVID-19 added inventory availability to the pricing injustice.

The simple truth is that the Robinson-Patman Act has not been enforced for decades, and recent attempts to change that have been squashed.

After years of lobbying from the National Grocers Association (NGA) on behalf of independent retailers, Former FTC Chair and Commissioner Lina Khan filed a lawsuit during the Biden administration against Pepsi. The lawsuit claimed that Pepsi was favoring Walmart with lower prices, specifically at the expense of their other customers. The FTC later dismissed the lawsuit under the Trump administration, but an advocacy group has successfully moved to unseal large portions of the original complaint to reveal the details publicly.

Based on company memos and the unsealed portions of the FTC report, it’s a black and white narrative of what independent owners know has been going on for decades. It’s grim reading. Seeing phrases like, “Let’s raise prices at regional retailers so we can keep prices low at Walmart” is like a punch in the gut (I have paraphrased the statement, but you can read the article here).

But it isn’t just Pepsi. Point to a big CPG company or bottler and you will see the same tug and pull between honoring the Robinson-Patman Act and keeping power retailers like Walmart happy.

Honestly, I feel for the big brands. When customers get so large you can’t afford not to sell to them, then what do you do? If Walmart drops a product, big brands might have to shutter an entire plant.

The issue with the lawsuit is that the “crime” doesn’t originate with the brand; it’s the big retailers themselves who use coercive tactics to tilt the playing field in their favor.

That’s where the federal government is supposed to come in. Monopolies are bad. In the long run they restrict consumer choice and raise prices.

We have a law on the books. It says these practices are unfair and illegal. Independent grocers will do what brands ask, cobble our purchases together to buy at the same scale, but we ask that the playing field be made fair. That is all we ask; it’s all we have ever asked.

While no one wants to see our great brand partners like Pepsi sued, in an ironic way, I think the brands themselves would secretly cheer if the FTC actually enforced the Robinson-Patman Act. The mega-retailers don’t want to earn market share, they want to steal it. We need to hold them accountable and level the playing field for small businesses in America.

Legislators, whether you’re a Democrat or Republican, and President Trump, I call on you to do the right thing. Demand the FTC do what it was established to do: enforce the law and prevent the grocery industry from being monopolized by behemoths like Walmart, which no American can afford.