An Overview of The Robinson-Patman Act of 1936 With Notable Examples

11/23/2018 An Overview of the Robinson-Patman Act of 1936 With Notable Examples
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An Overview of the Robinson-Patman Act of 1936

With Notable Examples
The Robinson-Patman Act is a Depression-era law aimed at maintaining a healthy

level of competition in the market. This Historyplex post will give you all the details,
and even a few examples of the Robinson-Patman Act of 1936.
 Historyplex Staff  Last Updated: Dec 09, 2017
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Over 20 US states have price discrimination statutes which are similar to
the Robinson-Patman Act.
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 The Robinson-PatmanUpdate:
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1936 is a United
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one of the various antitrust laws prevalent. These antitrust laws are
concerned with protecting and maintaining a healthy competition in the
market, and to support consumer rights. The Robinson-Patman act was
passed as an amendment to the previous Clayton Antitrust Act of 1914, to
overcome its shortcomings. The main purpose of this act is to prohibit
price discrimination of commodities, which tends to edge out competitors
from the market.
'Price discrimination' is a term used to describe a situation where goods of

the same type and quantity are sold to two or more different purchasers at
different prices. This activity is generally done to draw buyers towards that
supplier, thus causing a loss to the other competing suppliers. Sometimes,
such discounted prices are 'induced' by large buyers like chain stores,
which may cause losses to smaller retailers.
So, the Robinson-Patman Act was passed to widen the scope of the
antitrust laws, and make both, the buyers and sellers of unfairly-priced
goods liable to be tried under the provisions of the act. From the time that
the act was passed, it had to face pressure from industry groups, because
of which it was not enforced for a period in the 1960s and '70s, until the
Federal Trade Commission (FTC) revived its use in the 1980s.
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Background
In the backdrop of the Great Depression in America, many large chain
stores began sprouting all over the country. Taking advantage of their
large numbers and high-quantity purchases, these stores began targeting
sellers by offering them discounted goods and other allowances, which
began to force the smaller stores out of business. The previous antitrust
act, the Clayton Act, did not have any provisions dealing with
discriminatory pricing based on purchases of more quantity, which made
it ineffective in such cases. After an agitation by smaller retailers, CongressLearn
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passed the Robinson-Patman Act in 1936 to support the Clayton Act.

What is the Robinson-Patman Act?
The Robinson-Patman Act is an Antitrust act that aims to check
discriminatory pricing offered to larger buyers, intending to push the
competitors out of business. The act applies not only to the seller who has
offered a discounted price, but also to the buyer who made the purchase
at this lower price. The act is only applicable to commodities and products,
and not to services such as electricity and telecommunication. The main
purpose of the act is to maintain competition in the market by helping
smaller retailers make purchases at the same prices as the larger retailers.
In short, no individual or business can charge different prices for the same
goods.
Conditions Laid Down by the Act

★ This act applies only if the discriminatory prices are levied on
commodities, and not services. It applies only to purchases and not leases.
★ The purchases must be of the same type and quantity of commodities.
★ The act requires a minimum of two sales of the same type and quantity
of goods by the same manufacturer to two or more different purchasers at
different prices.
★ The grade and quality of each commodity must be the same.
★ One of the sales should be across an American state boundary, but all
sales should have occurred within the country.
★ The intent of the defendant to cause injury to competitors should be

proven.
★ The victim of the discrimination should have suffered actual business

loss, which should fall within the purview of antitrust injury.
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★ The sales should be restricted to a speci c time interval.

Important Aspects of the Act
✤ The Robinson-Patman Act is enforced by the Federal Trade Commission
(FTC) in collaboration with the US Department of Justice.
✤ The act controls the sale of goods of the same type and quantity at
different prices to different purchasers, by the supplier.
✤ The act also controls the purchase of goods of the same type and
quantity, at a discounted price by any purchaser.
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✤ The act makes it illegal for any supplier or purchaser to give or accept
any brokerage, commission, or any other compensation, except in return
of some service which relates to the sale or purchase of goods.
✤ It prohibits suppliers from providing any allowances to the buyer, to

make the resale of the goods easier, unless these allowances are available
to all the buyers.
✤ Private businesses can sue the defaulting companies for an amount up

to a triple of the discriminating prices, if they tend to suffer competition
losses because of discriminatory pricing.
✤ The act allows the supplier to give certain discounts to those purchasers
who have performed some marketing task for the supplier.
When is This Act Not Applicable?

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✦ The act is not applicable to military sales and acquisitions. 
✦ If the discriminatory prices are applied by the seller to meet discounted

prices of a competitor, then it is not applicable.
✦ The act is not applicable in cases where the difference in prices is

because of variation in manufacturing techniques, sales, or delivery, which
helps the manufacturer cut down on his costs.
✦ If the price change is due to some variation in market conditions, then

the supplier is not liable to be prosecuted under this act.
✦ Any buyer who receives goods at discriminated prices, without any

knowledge, i.e. unknowingly, cannot be prosecuted.
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Notable Examples
❑ Fall City Industries Vs. Vanco Beverages
From the years 1972 to '78, Fall City Industries was involved in selling
beverages to its wholesale distributor in the state of Kennedy at a
discriminated price, as compared to the price at which it sold beverages to
its wholesale distributor in Indiana, Vanco Beverages. Vanco Beverages
sued Fall City Industries in 1982, under the provisions of the Robinson-
Patman Act, and the latter argued that the discriminatory prices were
levied to meet market competition. Ultimately, Fall City Beverages was
found guilty by both, the Burger court and the Court of Appeals.
❑ Perkins Vs. Standard Oil of California

Perkins was an independent wholesale and retail distributor of oil and
natural gas. Its sued Standard Oil in 1969, alleging that for several years,
Standard Oil Co. had charged Perkins a much higher price than its
competitors, and also that it suffered business damages due to
competition
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❑ FTC Vs. Morton Salt Co.
In 1948, during a hearing against Morton Salt Co., a distributor of salt, the
US FTC found that even though Morton claimed that it supplied its
premium brand of salt to all retailers at an equally-discounted price, in
reality, this discounted price was available only to those retailers who made
bulk purchases. So, FTC found Morton Salt Co. guilty of violating the
provisions of the act, and the verdict was upheld by the US Supreme Court.
While the main purpose of the Robinson-Patman Act was safeguarding

the rights of smaller retailers, it has been subjected to signi cant criticism.
The Supreme Court itself has said on several occasions that the language
used in the act was 'vague' and too complicated. It has also been argued
that the act was passed under pressure owing to retailer agitations, and it
does not take the consumer's rights into consideration.
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